-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oTiKplHJrYQnZQFDKUHliNq7mopMLDPRWIgg9w10rW+bQNjPcsqPZfJiV22A9aqn RIBvRtGEAYhq2Bu1Pkm4BQ== 0000950149-95-000452.txt : 19950803 0000950149-95-000452.hdr.sgml : 19950803 ACCESSION NUMBER: 0000950149-95-000452 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950802 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: 95558465 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 THE PERIOD ENDED JUNE 30, 1995 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 June 30, 1995 / / 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. 13,181,737 and 20,426,348 shares of Class A and Class B common stock, respectively, outstanding as of July 21, 1995. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GENEVA STEEL COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) ASSETS
June 30, September 30, 1995 1994 ------------ ------------ Current assets: Cash and cash equivalents $ 6,786 $ -- Accounts receivable, net 34,877 47,907 Inventories 85,566 86,009 Prepaid expenses and other 1,282 2,838 Deferred income taxes 7,325 6,407 -------- -------- Total current assets 135,836 143,161 -------- -------- Property, plant and equipment: Land 1,931 1,931 Buildings 16,092 16,092 Machinery and equipment 560,173 521,729 Mineral property and development costs 8,425 8,425 -------- -------- 586,621 548,177 Less accumulated depreciation (122,607) (94,891) -------- -------- Net property, plant and equipment 464,014 453,286 -------- -------- Other assets 11,384 10,368 -------- -------- $611,234 $606,815 ======== ========
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
June 30, September 30, 1995 1994 -------- ------------- Current liabilities: Accounts payable $ 55,343 $ 57,021 Accrued payroll and related taxes 11,355 9,178 Accrued liabilities 20,986 14,471 Production prepayments 10,000 10,000 Accrued interest payable 12,750 4,580 Accrued pension and profit sharing costs 1,935 1,114 -------- -------- Total current liabilities 112,369 96,364 -------- -------- Long-term debt 333,092 357,348 -------- -------- Deferred income taxes 10,713 6,407 -------- -------- Redeemable preferred stock 48,934 43,032 -------- -------- Stockholders' equity: Preferred stock -- -- Common stock: Class A 87,324 87,193 Class B 10,784 10,896 Warrants to purchase Class A common stock 5,360 5,360 Retained earnings 21,199 19,266 Class A common stock held in treasury, at cost (18,541) (19,051) -------- -------- Total stockholders' equity 106,126 103,664 -------- -------- $611,234 $606,815 ======== ========
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 JUNE 30, 1995 and 1994 (Amounts in thousands, except per share data) (Unaudited)
1995 1994 -------- -------- Net sales $175,196 $113,195 Cost of sales 152,137 114,050 -------- -------- Gross margin 23,059 (855) Selling, general and administrative expenses 6,132 5,475 -------- -------- Income (loss) from operations 16,927 (6,330) -------- -------- Other income (expense): Interest and other income 114 331 Interest expense (7,296) (5,409) Other expense (660) - -------- -------- (7,842) (5,078) -------- -------- Income (loss) before provision (benefit) for income taxes 9,085 (11,408) Provision (benefit) for income taxes 3,389 (4,334) -------- -------- Net income (loss) 5,696 (7,074) Less redeemable preferred stock dividends and accretion for original issue discount 2,029 1,788 -------- -------- Net income (loss) applicable to common shares $ 3,667 $ (8,862) ======== ======== Net income (loss) per common share $ .24 $ (.59) ======== ======== Weighted average shares outstanding 15,232 15,144 ======== ========
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 NINE MONTHS ENDED JUNE 30, 1995 and 1994 (Amounts in thousands, except per share data) (Unaudited)
1995 1994 -------- -------- Net sales $496,832 $361,409 Cost of sales 442,018 348,892 -------- -------- Gross margin 54,814 12,517 Selling, general and administrative expenses 18,214 16,801 -------- -------- Income (loss) from operations 36,600 (4,284) -------- -------- Other income (expense): Interest and other income 303 1,471 Interest expense (24,012) (13,396) Other expense (1,667) - -------- -------- (25,376) (11,925) -------- -------- Income (loss) before provision (benefit) for income taxes and extraordinary item 11,224 (16,209) Provision (benefit) for income taxes 3,389 (6,165) -------- -------- Income (loss) before extraordinary item 7,835 (10,044) Loss on early extinguishment of debt (net of benefit for income taxes of $5,675) - 9,258 -------- -------- Net income (loss) 7,835 (19,302) Less redeemable preferred stock dividends and accretion for original issue discount 5,902 5,200 -------- -------- Net income (loss) applicable to common shares $ 1,933 $(24,502) ======== ======== Income (loss) per common share before extraordinary item $ .13 $ (1.01) Extraordinary item per common share - (.61) -------- -------- Net income (loss) per common share $ .13 $ (1.62) ======== ======== Weighted average shares outstanding 15,437 15,120 ======== ========
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 NINE MONTHS ENDED JUNE 30, 1995 AND 1994 (Dollars in thousands) (Unaudited) Increase (Decrease) in Cash and Cash Equivalents
1995 1994 -------- -------- Cash flows from operating activities: Net income (loss) $ 7,835 $ (19,302) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation and amortization 29,345 21,308 Deferred income taxes 3,388 (12,798) Loss on sale of equipment 5 - (Increase) decrease in current assets-- Accounts receivable, net 13,030 8,914 Inventories 443 (16,015) Prepaid expenses and other 1,556 (7,199) Increase (decrease) in current liabilities-- Accounts payable (1,678) 4,493 Accrued payroll and related taxes 2,177 2,468 Accrued liabilities 4,173 2,276 Production prepayments - (2,316) Accrued interest payable 8,170 10,423 Accrued pension and profit sharing costs 821 120 -------- --------- Net cash provided by (used for) operating activities 69,265 (7,628) -------- --------- Cash flows from investing activities: Purchases of property, plant and equipment (52,122) (138,281) Proceeds from sale of property, plant and equipment 15,966 - Increase in other assets (995) - -------- --------- Net cash used for investing activities $(37,151) $(138,281) -------- ---------
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) NINE MONTHS ENDED JUNE 30,1995 AND 1994 (Dollars in thousands) (Unaudited)
1995 1994 -------- -------- Cash flows from financing activities: Proceeds from long-term debt $16,724 $190,000 Payments on long-term debt (40,980) (89,991) Payments for deferred loan costs and other assets (1,600) (5,514) Proceeds from exercise of options to purchase Class A common stock - 274 Issuance of Class A common stock to employee savings plan 528 525 ------- -------- Net cash provided by (used for) financing activities (25,328) 95,294 ------- -------- Net increase (decrease) in cash and cash equivalents 6,786 (50,615) Cash and cash equivalents at beginning of period - 64,267 ------- -------- Cash and cash equivalents at end of period $ 6,786 $ 13,652 ======= ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $17,521 $ 12,643 Income taxes - 1,600
Supplemental schedule of noncash financing activities: For the nine months ended June 30, 1995 and 1994, the Company increased the redeemable preferred stock liquidation preference by $5,377 and $4,686, respectively, in lieu of paying a cash dividend. In addition, for the same periods, redeemable preferred stock was increased by $525 and $514, respectively, for the accretion required over time to amortize the original issue discount on the redeemable preferred stock incurred at the time of issuance. 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:
June 30, September 30, 1995 1994 -------- -------- Raw materials $28,962 $31,608 Semi-finished and finished goods 48,560 46,302 Operating materials 8,044 8,099 ------- ------- $85,566 $86,009 ======= =======
(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 as the Class B common stock is convertible to Class A common stock at this same rate. The net income (loss) for the three and nine-month periods ended June 30, 1995 and 1994 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 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 with respect to the Company:
Three Months Ended Nine Months Ended June 30, June 30, ------------------ ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 86.8 100.8 89.0 96.5 ----- ----- ----- ----- Gross margin 13.2 (0.8) 11.0 3.5 Selling, general and administrative expenses 3.5 4.8 3.6 4.7 ----- ----- ----- ----- Income (loss) from operations 9.7 (5.6) 7.4 (1.2) ----- ----- ----- ----- Other income (expense): Interest and other income 0.1 0.3 0.1 0.4 Interest expense (4.2) (4.8) (4.9) (3.7) Other expense (0.4) - (0.3) - ----- ----- ----- ----- (4.5) (4.5) (5.1) (3.3) ----- ----- ----- ----- Income (loss) before provision (benefit) for income taxes and extraordinary item 5.2 (10.1) 2.3 (4.5) Provision (benefit) for income taxes 1.9 (3.8) .7 (1.7) ----- ----- ----- ----- Net income (loss) before extraordinary item 3.3% (6.3)% 1.6% (2.8)% ===== ===== ===== =====
The following table sets forth the sales product mix as a percentage of net sales for the periods indicated with respect to the Company:
Three Months Ended Nine Months Ended June 30, June 30, ------------------ ------------------ 1995 1994 1995 1994 ---- ---- ---- ---- Sheet 36.9% 64.5% 44.6% 67.3% Plate 35.1 25.3 34.5 22.5 Pipe 7.0 6.8 6.0 6.7 Slab 18.7 - 12.1 0.4 Non-Steel 2.3 3.4 2.8 3.1 ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
Page 9 of 17 10 THREE MONTHS ENDED JUNE 30, 1995 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1994 The steel industry is cyclical in nature. Pricing for hot-rolled sheet and slab products has weakened during the past several months as a result of efforts by service centers to reduce high inventory levels and of other market factors. Plate prices have, to date, remained essentially flat. The Company's bookings for hot-rolled sheet and slab orders reflect additional price reductions, with plate pricing remaining steady. The Company intends to react to price increases or decreases in the market as justified by competitive conditions. During the past year, the domestic market has experienced high levels of imports of steel. The rate of such imports appears to be declining, which may have a positive impact on the domestic market. 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. Moreover, the Company has reduced its backlog of orders. Consequently, the Company may be affected by price increases and decreases more quickly than many of its competitors. Net sales increased 54.8% due to increased shipments of approximately 156,300 tons and increased average selling prices for the three months ended June 30, 1995 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 pipe products increased by 8.1%, 10.8% and 22.5%, respectively, in the three months ended June 30, 1995 compared to the same period in the previous fiscal year. The overall average selling price realization per ton also increased between the periods as a result of a shift in product mix to higher-priced plate and pipe products. This increase was offset, in part, by the Company's increased sales of lower-priced slab products. Consistent with the Company's strategic objectives, plate shipments have increased as various upgrades to plate processing and finishing equipment have been completed and implemented. The Company intends to continue shifting its product mix toward plate. The Company has increased slab shipments in response to favorable slab pricing and to maximize production from the continuous caster. The Company anticipates that slab sales will continue as a means of maximizing throughput so long as slab pricing remains attractive. Shipped tonnage of plate, pipe and slabs increased approximately 74,200 tons or 93.5%, 5,900 tons or 29.2% and 119,400 tons, respectively, while shipped tonnage of sheet decreased approximately 43,200 tons or 18.0% between the two periods. 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, decreased to 86.8% for the three months ended June 30, 1995 from 100.8% for the same period in the previous fiscal year as a result of higher average selling prices and lower operating costs. The average cost of sales per ton shipped decreased approximately $29 per ton between the two periods. The decreased cost per ton resulted from lower operating costs as well as from increased sales of lower-cost slab products, offset, in part, by a shift in product mix to higher-cost plate and pipe products. Costs decreased primarily as a result of reduced production costs associated with completed capital projects, increased production throughput and other operating improvements offset, in part, by higher depreciation expense, higher wages and benefits as required by the union labor agreement and increases in certain other operating costs. The Company expects that certain raw material costs will increase in future periods. The Company's consumption of purchased coke will be higher, Page 10 of 17 11 thereby increasing the Company's average cost of coke used in the manufacturing process. World coke prices are increasing as cokemaking capacity declines. The Company also anticipates higher iron ore pellet costs. During the quarter, the Company finalized a five-year iron ore pellet supply agreement with USX Corporation. Pricing under the agreement is generally based upon an index and will result in an initial increase in finished product cost of approximately $3 per ton effective in September 1995. Despite rising raw material costs, the Company expects that its overall operating costs will continue to decline in future quarters as a result of reduced labor costs, increased production efficiencies and higher yields. During the quarter, the Company began implementing a labor cost reduction program with the goal of achieving a 15-20 percent reduction in Company-wide man hours by December 1995. The first phase was completed in June 1995 and involved work-force reductions, overtime reductions and other man hour reductions. The Company has just completed the installation of a new 42-megawatt induction slab heating furnace, which is located in-line with the Company's caster and rolling mill. The new heating facility is designed to increase slab temperature by approximately 300 degrees fahrenheit prior to rolling. The Company expects the furnace to achieve full operational status during the fall of 1995. The Company continues to evaluate its slab heating requirements and may elect to install additional heating capacity. The primary benefit of the induction furnace will be to substantially increase the Company's production of large coils. At the end of the second fiscal quarter, the Company completed installation of its wide coiler, which allows the Company to produce coiled plate up to 126-inches in width and 1-inch in thickness. As the Company continues to implement both the new coiler and the 126-inch cut-to-length line, it expects to shift production of heavier and wider plate to the more efficient coiled plate production process. Moreover, the Company expects the efficiency and yields of this process to increase in future quarters. Construction is continuing on a new plasma-fired cupola ironmaking facility. The Company expects the facility to become available for operation during the fourth calendar quarter of 1995. 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 back-up ironmaking capacity. As the Company continues implementation of its ongoing capital projects, including the rolling mill finishing stand improvements and the other projects discussed above, the start-up costs associated with these projects may temporarily affect the Company's operating results. The Company has implemented measures designed to minimize transition costs and other start-up difficulties with respect to its capital projects. There can be no assurance, however, that such conditions will not be greater than currently expected or extend beyond the anticipated start-up periods. Depreciation costs included in cost of sales increased approximately $3.3 million for the three months ended June 30, 1995 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 increase due to implementation of the Company's capital projects. Page 11 of 17 12 Selling, general and administrative expenses for the three months ended June 30, 1995 increased approximately $0.7 million as compared to the same period in the previous fiscal year. The higher expenses resulted primarily from increased wages and salaries. The Company implemented a labor cost reduction program in June 1995 and has further efforts underway to reduce overall selling, general and administrative expense and anticipates that selling, general and administrative expense will decline in future periods. Interest and other income decreased approximately $0.2 million during the three months ended June 30, 1995 as compared to the same period in the previous fiscal year as a result of a decrease in the amount of invested cash and cash equivalents. Interest expense increased approximately $1.9 million during the three months ended June 30, 1995 as compared to the same period in the previous fiscal year. Interest expense increased due to higher levels of borrowing and decreases in capitalized interest during the three months ended June 30, 1995. Other expense was $0.7 million during the three months ended June 30, 1995. Other expense reflects the costs incurred in connection with the Company's receivables securitization facility, which was established by the Company in November 1994. NINE MONTHS ENDED JUNE 30, 1995 COMPARED WITH NINE MONTHS ENDED JUNE 30, 1994 Net sales increased 37.5% due to increased shipments of approximately 306,600 tons and increased average selling prices for the nine months ended June 30, 1995 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 increased by 7.2%, 11.7%, 9.6% and 15.3%, respectively, in the nine months ended June 30, 1995 compared to the same period in the previous fiscal year. The overall average selling price realization per ton also increased between the periods as a result of a shift in product mix to higher-priced plate products. This increase was offset, in part, by the Company's increased sales of lower-priced slab products. The increase in plate shipments resulted from the completion and implementation of various upgrades to plate processing and finishing equipment. The Company increased slab shipments in response to favorable slab pricing and to maximize production from the continuous caster. Shipped tonnage of plate, pipe and slabs increased approximately 205,300 tons or 88.2%, 7,500 tons or 11.8% and 214,400 tons or 3,432.8%, respectively, while shipped tonnage of sheet decreased approximately 120,600 or 15.1% between the two periods. The Company's cost of sales, as a percentage of net sales, decreased to 89.0% for the nine months ended June 30, 1995 from 96.5% for the same period in the previous fiscal year as a result of higher average selling prices and lower operating costs. The average cost of sales per ton shipped decreased approximately $3 per ton between the two periods. The decreased cost per ton resulted from lower operating costs, as well as increased sales of lower-cost slab products, offset, in part, by a shift in product mix to higher-cost plate products. Costs decreased primarily as a result of reduced production costs associated with completed capital projects, increased production throughput and other operating improvements offset, in part, by higher depreciation expense, higher wages and benefits as required by the union labor agreement and increases in certain other operating costs. Page 12 of 17 13 Depreciation costs included in cost of sales increased approximately $9.7 million for the nine months ended June 30, 1995 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 nine months ended June 30, 1995 increased approximately $1.4 million as compared to the same period in the previous fiscal year. The higher expenses resulted primarily from increased wages and salaries and increased outside services. Interest and other income decreased approximately $1.2 million during the nine months ended June 30, 1995 as compared to the same period in the previous fiscal year as a result of a decrease in the amount of invested cash and cash equivalents. Interest expense increased approximately $10.6 million during the nine months ended June 30, 1995 as compared to the same period in the previous fiscal year. Interest expense increased due to higher levels of borrowing and decreases in capitalized interest during the nine months ended June 30, 1995 offset, in part, by a reduction in interest rates as a result of restructuring the Company's debt. Other expense was $1.7 million for the nine months ended June 30, 1995. Other expense reflects the costs incurred in connection with the Company's receivables securitization facility. The Company recognized a provision for income taxes at an effective tax rate of approximately 30.2% for the nine months ended June 30, 1995 as a result of utilizing approximately $2.4 million in 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 payments. The Company has met these requirements over the past three years principally from the incurrence of additional long-term indebtedness, including borrowings under the Company's revolving credit facility (the "Revolving Credit Facility"), fundings under its accounts receivable securitization facility (the "Receivable Facility") and cash provided by operations. As of June 30, 1995, the Company had borrowings of approximately $8.1 million and letters of credit of approximately $5.7 million outstanding under its Revolving Credit Facility and fundings under its Receivables Facility of $34.7 million. The debt instruments governing 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") contain 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 current ratio maintenance requirement, a leverage ratio maintenance requirement, an interest coverage requirement, a cumulative cash flow 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 Page 13 of 17 14 a limitation on liens. In June 1995, the Company entered into an amendment modifying the financial covenants and tests contained in the Revolving Credit Facility. The Company may be required to seek additional amendments of the Revolving Credit Facility in the future based on actual operating results or capital spending. Besides these and other financing activities, the Company's major source of liquidity has been cash provided by operations. Net cash provided by operating activities was $69.3 million for the nine months ended June 30, 1995, compared with net cash used for operating activities of $7.6 million for the same period in the previous fiscal year. The $69.3 million provided by operating activities during the nine months ended June 30, 1995 was generated primarily as a result of fundings under the Company's Receivable Facility of $34.7 million, depreciation and amortization of $29.3 million, an increase in accrued liabilities of $14.8 million and net income of $7.8 million. These sources of cash flow were offset, in part, by a $21.7 million increase in accounts receivable primarily associated with higher shipment levels. The Company also increased its cash flow during the period through $16.0 million in sale-leaseback transactions of manufacturing equipment. The Company expects its capital expenditures to require significant cash resources over the next several years. The Company anticipates that capital expenditures for the fiscal year ending September 30, 1995 will be approximately $60 million (net of sale leaseback transactions totaling approximately $16.0 million). The Company has budgeted $35 million for capital spending, including a blast furnace reline, during fiscal year 1996. Depending on market, operational, liquidity and other factors, the Company may, however, elect to adjust the design, timing and budget of its capital plan. The Company anticipates that, in any event, it may incur significant start-up and transition costs as planned capital projects are implemented. 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, together with interest on any additional funding necessary for the additional capital expenditures and other working capital needs. Currently, the Company's annual cash interest expense is approximately $34.0 million and its annual preferred stock dividends are approximately $7.5 million. Dividends not paid in cash before April 1996 will be added to the liquidation preference of the redeemable preferred stock. The Company currently intends to continue to add the dividends to the liquidation preference through March 1996. In addition, the Company will incur costs based on the yield applicable to funded amounts under the Receivable Facility. During the first nine months of fiscal year 1995, the Company's operations improved significantly. The Company expects additional improvement due to the further decline of certain transition costs and production inefficiencies and the realization of additional operating cost savings. There can be no assurance, however, that the decline in transition costs and production inefficiencies or the increase in operating cost savings will continue, that sufficient product demand will exist for the Company's additional throughput capacity, or that the projected benefits of the modernization and other capital projects will be fully achieved. The Company's ability to meet its anticipated cash needs, including capital spending, is highly dependent on cash provided by operations, which Page 14 of 17 15 includes the effect of changes in working capital. To improve liquidity and operating cash flow, the Company has efforts underway to reduce administrative and operating labor costs as well as other Company costs. The Company has previously entered into an arrangement with one of its major customers whereby the customer makes a production prepayment of up to $10 million upon the entry of new orders. As an additional means of enhancing the Company's liquidity, the Company may negotiate an increase in the maximum amount of production prepayments to $20 million. As of July 25, 1995, the Company had $0.7 million in cash and cash equivalents. Based on the Company's current receivables balance and inventories base as of July 25, 1995, the Company's Receivable Facility and Revolving Credit Facility provide up to $76.4 million in working capital. As of that date, the Company had $34.7 million in amounts funded under the Receivables Facility, as well as $9.7 million in borrowings and $6.4 million in outstanding letters of credit under its Revolving Credit Facility. The short-term and long-term liquidity of the Company is dependent upon several factors, including the Company's ongoing operations, 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, fundings under the Receivables Facility 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 leverage situation, its financial flexibility is also 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 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits.
Exhibit Filed Number Exhibit Herewith ------ ------- -------- 10.1 Collective Bargaining Agreement between X Geneva Steel Company and the United Steel- workers of America dated March 1, 1995. 10.2 Taconite Pellet Sales Agreement between USX Corporation and Geneva Steel dated May 31, 1995 X 10.3 Industrial Gas Supply Agreement between Air Liquide America Corporation and Geneva Steel dated June 8, 1995. X 10.4 First Amendment to Amended and Restated Revolving Credit Agreement among the Registrant, the Lender Parties named therein Citibank, N.A., and Citicorp U.S.A., Inc., dated as of November 4, 1994. X 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 June 30, 1995. 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: August 2, 1995 Page 17 of 17 18 EXHIBIT INDEX Exhibit Number Exhibit - ------- ------- 10.1 Collective Bargaining Agreement between Geneva Steel Company and the United Steelworkers of America dated March 1, 1995. 10.2 Taconite Pellet Sales Agreement between USX Corporation and Geneva Steel dated May 31, 1995 10.3 Industrial Gas Supply Agreement between Air Liquide America Corporation and Geneva Steel dated June 8, 1995. 10.4 First Amendment to Amended and Restated Revolving Credit Agreement among the Registrant, the Lender Parties named therein Citibank, N.A., and Citicorp U.S.A., Inc., dated as of November 4, 1994. 27 Financial data schedule EX-10.1 2 COLLECTIVE BARGAINING AGREEMENT 1 COLLECTIVE BARGAINING AGREEMENT BETWEEN GENEVA STEEL COMPANY AND THE UNITED STEELWORKERS OF AMERICA MARCH 1, 1995 2 TABLE OF CONTENTS
PAGE ---- ARTICLE 1: APPLICATION OF AGREEMENT . . . . . . . . . . . . . . . . . 1 ARTICLE 2: RECOGNITION AND UNION MEMBERSHIP . . . . . . . . . . . . . 3 ARTICLE 3: RATES OF PAY . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE 4: HOURS OF WORK AND OVERTIME . . . . . . . . . . . . . . . . 6 ARTICLE 5: HOLIDAYS . . . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE 6: VACATIONS . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE 7: PRIOR USS SERVICE . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 8: SENIORITY . . . . . . . . . . . . . . . . . . . . . . . . . 15 ARTICLE 9: PROBATIONARY PERIOD . . . . . . . . . . . . . . . . . . 23 ARTICLE 10: JURY AND WITNESS SERVICE . . . . . . . . . . . . . . . . 23 ARTICLE 11: BEREAVEMENT PAY . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 12: MILITARY SERVICE . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 13: SAFETY AND HEALTH . . . . . . . . . . . . . . . . . . . . 25 ARTICLE 14: PENSIONS AND PROFIT SHARING . . . . . . . . . . . . . . . . 31 ARTICLE 15: INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . 32 ARTICLE 16: ADJUSTMENT OF GRIEVANCES . . . . . . . . . . . . . . . . 32 ARTICLE 17: DISCHARGE AND DISCIPLINE OF EMPLOYEES . . . . . . . . . . . 36 ARTICLE 18: PROHIBITION OF STRIKES OR LOCKOUTS . . . . . . . . . . . . 37 ARTICLE 19: MANAGEMENT RIGHT . . . . . . . . . . . . . . . . . . . . . 38 ARTICLE 20: SCOPE OF AGREEMENT . . . . . . . . . . . . . . . . . . . . 38 ARTICLE 21: LOCAL WORKING CONDITIONS, PAST PRACTICES, WORK RULES AND PRIOR AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 39
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PAGE ---- ARTICLE 22: SHORT WORK WEEK FUND . . . . . . . . . . . . . . . . . . 39 ARTICLE 23: MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 40 APPENDICES APPENDIX A: HOURLY WAGE SCALE . . . . . . . . . . . . . . . . . . . . 43 APPENDIX B: INSURANCE BENEFITS . . . . . . . . . . . . . . . . . . . . 44 APPENDIX C: COVERED SALARIED CLERICAL AND TECHNICAL EMPLOYEES . . . . . . . . . . . . . . . . . . . . 47 APPENDIX D: PROFIT SHARING PLAN . . . . . . . . . . . . . . . . . . . 48 APPENDIX E: TURN COORDINATORS . . . . . . . . . . . . . . . . . . . . . 51 APPENDIX F: SUCCESSORSHIP LANGUAGE . . . . . . . . . . . . . . . . . 52 APPENDIX G: DRUG AND ALCOHOL TESTING . . . . . . . . . . . . . . . . . 53 APPENDIX H: PERFORMANCE DIVIDEND PLAN . . . . . . . . . . . . . . . . 60 APPENDIX I: 401(K) PLAN . . . . . . . . . . . . . . . . . . . . . . . . 69 APPENDIX J: VEBA TRUST . . . . . . . . . . . . . . . . . . . . . . . . 70 APPENDIX K: LETTER AGREEMENT - RIGHT TO MAKE OFFER ON SALE OF FACILITIES . . . . . . . . . . . . . . . . . . . 71
-ii- 4 AGREEMENT AGREEMENT dated March 1, 1995 between GENEVA STEEL (the "Company") and UNITED STEELWORKERS OF AMERICA, on behalf of Local Union 2701 hereinafter referred to as the "Union", providing for industrial relations at the Company's Geneva, Utah steel operations (the "Geneva Plant"). ARTICLE I APPLICATION OF AGREEMENT SECTION 1 - PURPOSE AND INTENT OF THE PARTIES. A. Matters of Employment: It is the intent and purpose of the parties hereto to set forth herein the agreement between them in respect to rates of pay, hours of work, and other conditions of employment in the Geneva Plant. B. Basis of Claims: The provisions of this Agreement constitute the sole procedure for the processing and settlement of any claim by an Employee (as defined below) or the Union of the violation by the Company of this Agreement. As the representative of the Employees, the Union may process grievances through the grievance procedure, including arbitration, in accordance with this Agreement, or adjust or settle the same. C. Administration: The representatives of the Company and the Union shall continue to provide each other with such advance notice as is reasonable under the circumstances on all matters of importance in the administration of the terms of the Agreement, including changes or innovations affecting relations between the parties. D. Nondiscrimination: It is and shall be the policy of the Company and the Union that the provisions of this Agreement shall be applied to all Employees and applicants without regard to race, color, religious creed, national origin, sex, age, disability, Veteran or special disabled Veteran status, or membership in the Union. SECTION 2 - UNIT COVERAGE. -1- 5 A. Membership: The bargaining unit at the Geneva Plant, and the term "Employee(s)" as used herein, shall include all production, maintenance, pipe mill, quarry and certain salaried clerical and technical employees of the Company for whom the Union is currently certified by the National Labor Relations Board as the exclusive collective-bargaining representative, and shall exclude all executives, office employees, managers, division managers, area managers, foremen, shift managers, supervisors, draftsmen, timekeepers, watchmen and guards, full-time first-aid and safety employees, and all similar or other jobs not currently included in the bargaining unit. The term "Geneva Plant" shall not include the 40" blooming mill, and the structural mill which have been shut down. B. Dispute of Coverage: Any difference which shall arise between the Company and the Union as to whether or not any individual Employee is or is not included within the bargaining unit shall be handled as a grievance in accordance with the procedures set forth in Article 16 hereof. C. Contracting Out: The Company will not bring contractors into the Geneva Plant to perform work normally performed by Employees, unless the work requires special skills, special equipment or time considerations. This provision shall not be used to erode the work performed by the Employees. D. Supervision: Supervisors at the plant shall not perform work on a job normally performed by an Employee; provided, however, this provision shall not be construed to prohibit supervisors from performing the following types of work: 1. Experimental work. 2. Demonstration work performed for the purpose of instructing and training employees. 3. Work required of the supervisors by emergency conditions which if not performed might result in interference with operations, bodily injury, or loss or damage to material or equipment; and 4. Work which under the circumstances then existing, would be unreasonable to assign to an Employee. Work which is incidental to supervisory duties on the job normally performed by a supervisor, even though similar to duties found in jobs in the bargaining unit, shall not be affected by this provision. If a supervisor performs work in violation of this Subsection D. and the Employee -2- 6 who otherwise would have performed this work can reasonably be identified, the Company shall pay such Employee the applicable Regular Hourly Wage for the time involved or for four (4) hours, whichever is greater. ARTICLE 2 RECOGNITION AND UNION MEMBERSHIP SECTION 1 - EXCLUSIVE BARGAINING AGENT. Subject to the provisions of the National Labor Relations Act, the Company recognizes the Union as the exclusive representative of all of the bargaining unit Employees for the purposes of collective bargaining with respect to rates of pay, hours of employment, or other conditions of employment. SECTION 2 - UNION MEMBERSHIP AND CHECKOFF. A. The Company will checkoff monthly dues, assessments and initiation fees each as designated by the International Treasurer of the Union, as initiation or membership dues in the Union, on the basis of individually signed voluntary checkoff authorization cards on forms agreed to by the Company and the Union. B. At the time of employment, new Employees will be provided the opportunity to voluntarily execute an authorization for the checkoff of Union dues, as they may or may not elect, on the form agreed upon. A copy of such authorization card for the checkoff of Union dues shall be forwarded to the Financial Secretary of the Local Union along with the membership application of such employee. C. New checkoff authorization cards other than those provided for by Paragraph B above will be submitted to the Company on summary lists through the Financial Secretary of the Local Union as executed by new employees. D. Deductions on the basis of authorization cards submitted to the Company -3- 7 shall commence with respect to dues for the month in which the Company receives such authorization card or in which such card becomes effective, whichever is later. Dues for a given month shall be deducted from the first pay closed and calculated in the succeeding month. E. In cases of earnings insufficient to cover deduction of dues, the dues shall be deducted from the next pay in which there are sufficient earnings, or a double deduction may be made from the first pay of the following month, provided, however, that the accumulation of dues shall be limited to two months. The International Treasurer of the Union shall be provided with a list of those employees for whom a double deduction has been made. F. The Union will be notified of the reason for non-transmission of dues in case of layoff, discharge, resignation, leave of absence, sick leave, retirement, death, or insufficient earnings. Unless the Company is otherwise notified, the only Union membership dues to be deducted for payment to the Union from the pay of the employee who has furnished an authorization shall be the monthly Union dues. The Company will deduct initiation fees when notified by notation on the lists referred to in Paragraph C of this Section, and assessments as designated by the International Treasurer. G. The Company will implement the dues checkoff provisions of this collective bargaining agreement in accordance with the Constitution of the International Union pursuant to reasonable instructions to be supplied by the Union. H. The Union shall indemnify and save the Company harmless against any and all claims, demands, suits or other forms of liability that shall arise out of or by reason of action taken or not taken by the Company for the purpose of complying with any of the provisions of this Section, or in reliance on any list, notice or assignment furnished under any of such provisions. ARTICLE 3 RATES OF PAY SECTION 1 - STANDARD HOURLY WAGE SCALE. A. Wage Rates: The standard hourly wage scale rate for each job shall be as set forth in Appendix A of this Agreement and is recognized as the established regular -4- 8 rate of pay for all hours of work. As used in this Agreement, the term "Regular Hourly Wage" shall mean the regular hourly wage rates set forth in Appendix A, without adjustment for overtime, premiums or shift differentials. B. Apprentice Training: At such time as all trade and craft job descriptions are agreed to and installed, a joint committee not to exceed four members, two each from the Company and the Union, shall be formed to develop an apprentice training program. The committee will be responsible for such things as composing the course curriculum, defining training periods, and coordinating with educational institutions. Apprentice vacancies will be posted at the step 3 level and awarded consistent with Article 8, Seniority. C. Job Classifications: All jobs shall be described and classified by Management. The job description and classification for each job in effect shall continue in effect unless (1) Management changes the job content (requirements of the job as to the training, skill, responsibility, effort and working conditions) to the extent of one full job class or more; (2) the job is terminated or not occupied during a period of one year; or (3) the description and classification are changed by the mutual agreement of the officially designated representative of the Company and the Union. The Local Union Rate Committee will be involved in the development and implementation of all new job classifications and job descriptions. The Plant Union Committee and Management shall discuss and determine the accuracy of all job descriptions. The Union shall be responsible for the filing of grievances in a timely fashion (30 days). SECTION 2 - SHIFT DIFFERENTIALS. A. Wage Differential: For hours worked on the afternoon shift, there shall be paid a premium rate of $.18 per hour. For hours worked on the night shift, there shall be paid a premium rate of $.27 per hour. B. Applicable Hours: For purposes of applying the aforesaid shift differentials, all hours worked by an Employee during the workday shall be considered as worked on the shift on which he is regularly scheduled to start work. 1. An employee regularly scheduled for the day or afternoon shift who completes his regular eight-hour turn and continues to work into the afternoon or night shift in excess of four hours shall be paid the afternoon or night shift differential (as the case may be) for all hours worked in excess of four on the afternoon shift. 2. An Employee regularly scheduled for the day or afternoon -5- 9 shift who completes his regular eight-hour turn and after leaving the Company's premises is called out for the afternoon or night shift within the same workday shall be paid the applicable shift differential for the hours worked on the afternoon or night shift (as the case may be). 3. Shift differential shall be paid for allowed time or reporting time when the hours for which payment is made would have called for a shift differential if worked. 4. An Employee who is scheduled for a shift which commences outside the starting times as described in Paragraph C below shall be paid the shift differential for those hours which are worked on the afternoon shift at the afternoon shift differential rate or the night shift at the night shift differential rate (as the case may be). C. Shifts: Shifts shall be identified in accordance with the following: 1. Day Shift includes all turns regularly scheduled to commence between 6:00 a.m. and 8:00 a.m., inclusive. 2. Afternoon Shift includes all turns regularly scheduled to commence between 2:00 p.m. and 4:00 p.m., inclusive. 3. Night Shift includes all turns regularly scheduled to commence between 10:00 p.m. and 12:00 midnight, inclusive. SECTION 3 - SUNDAY PREMIUM. An Employee shall be paid a premium of 1 1/4 times his Regular Hourly Wage as defined in Paragraph 1A. above for all hours worked on Sunday which are not paid for on an overtime basis. For the purpose of this provision, Sunday shall be deemed to be the 24 hours beginning with the shift-changing hour nearest to 12:01 a.m. Sunday. ARTICLE 4 -6- 10 HOURS OF WORK AND OVERTIME SECTION 1 - NORMAL HOURS OF WORK. A. The normal workday shall be 8 hours of work in a 24-hour period. The hours of work shall be consecutive. The normal work pattern shall be 5 consecutive workdays beginning on the first day of any 7-consecutive-day period. The 7-consecutive-day period is a period of 168 consecutive hours and may begin on any day of the calendar week and extend into the next calendar week. On shift changes, the 168 consecutive hours may become 152 consecutive hours depending upon the change in the shift. A work pattern of less or more than 5 workdays in the 7-consecutive-day period shall not be considered as deviating from the normal work pattern provided the workdays are consecutive. The Company and the Union may agree to a regular work schedule which is not in accordance with this Paragraph 1A, however, any such schedule shall be deemed as normal hours of work. B. Schedules: All employees shall be scheduled on the basis of the normal work pattern except where; (a) such schedules regularly would require the payment of overtime; (b) deviations from the normal work pattern are necessary because of breakdowns or other matters beyond the control of Management; or (c) schedules deviating from the normal work pattern are established by agreement between plant management and the grievance committee. Schedules showing employees' workdays shall be posted or otherwise made known to employees in accordance with prevailing practices but not later than Thursday of the week preceding the calendar week in which the schedule becomes effective unless otherwise provided by local agreement. Management will establish a procedure, where such does not already exist, affording any employee whose last scheduled turn ends prior to the posting of his schedule for the following week, an opportunity to obtain information relating to his next scheduled turn. This procedure will also be applicable with respect to employees returning from vacation. Schedules may be changed by Management at any time provided, however, that any changes made after Thursday of the week preceding the calendar week in which the changes are to be effective shall be explained at the earliest practicable time to the grievance committeeman of the employee affected; and provided further that, with respect to any such schedules, no changes shall be made after Thursday except for breakdowns or other matters beyond the control of Management. Should changes be made in schedules contrary to this paragraph so that an Employee is laid off and does not work on a day that he was scheduled to work, he shall be deemed to have reported for work on such day and shall be eligible for reporting allowance in accordance with the provisions of Section 5 of this Article 4. C. Definition of Terms: The payroll week shall consist of 7 consecutive days beginning at 12:01 a.m. Sunday or at the turn-changing hour nearest to that time. The -7- 11 workday for the purposes of this Section is the 24-hour period beginning with the time the employee begins work, except that a tardy employee's workday shall begin at the time it would have begun had he not been tardy. The regular rate of pay shall mean the hourly rate which the employee would have received for the work had it been performed during nonovertime hours. D. Guarantee of Hours: The above provisions of this Section shall not be construed as guaranteeing to any Employee any number of hours of work per day or per week. Employees shall not be guaranteed any number of hours of work except to the extent provided in Section 5 of this Article 4. SECTION 2 - STARTING TIME. The starting time of regular turns at the Geneva Plant shall be determined from time to time by Management, and Management shall make a positive effort to give notice of any change in any such starting time. SECTION 3 - CONDITIONS UNDER WHICH OVERTIME RATES SHALL APPLY. Overtime at the rate of one and one-half times the regular rate of pay shall be paid for in the following order: A. Hours worked in excess of 8 hours in a workday except as provided in "E" below. B. Hours worked in excess of 40 hours in a payroll week. C. Hours worked on the sixth or seventh workday in a payroll week during which work was performed on 5 other workdays. D. Hours worked on the sixth or seventh workday of a 7-consecutive-day period during which the first five days were worked, whether or not all of such days fall within the same payroll week, except when worked pursuant to schedules mutually agreed to as provided for in Subsection A; provided, however, that no overtime will be due under such circumstances unless the employee notifies his foreman of a claim for overtime within a period of one week after such sixth or seventh day is worked and provided further that on shift changes the 7-consecutive-day period of 168 consecutive hours may become 152 -8- 12 consecutive hours depending upon the change in the shift. Payment of overtime rates shall not be duplicated for the same hours worked, but the higher of the applicable rates shall be used. Hours compensated for at overtime rates shall not be counted further for any purpose in determining overtime liability. E. Employees may be provided with an opportunity to work a nontraditional schedule of four twelve-hour days on and four twelve-hour days off or four ten-hour days on and four ten-hour days off (or such other nontraditional schedule as the Company and Union may mutually agree to). In such cases, employees who are to be covered by such a schedule may request a vote to determine whether the schedule proposed by Management is to be implemented. Should two-thirds of employees vote to approve the schedule, it will be implemented, subject to thirty days written notice of cancellation by the Union. Nothing in this Section 3E. shall be construed as restricting Management's right at any time to replace these schedules with a schedule based on the normal work pattern. The following rules shall apply to the payment of overtime, holiday and premium pay to Employees: 1. Overtime compensation at the rate of one and one-half times the regular rate of the job worked shall be paid for hours worked in excess of the agreed to hours scheduled on any work day, but in any event overtime shall be paid for hours worked over forty in a payroll week. 2. Shift differential shall be paid based on the shift where the majority of the hours were actually worked. 3. Funeral and jury/witness pay shall be paid according to the hours of work scheduled on the eligible days. 4. An unworked Holiday that falls on one of the Employee's regularly scheduled days shall generate the equivalent number of hours of pay as was scheduled on the Holiday. An unworked Holiday that falls on an unscheduled day shall generate eight (8) hours of pay at the Regular Hourly Wage Rate. All hours actually worked on a Holiday shall be compensated in accordance with Article 5, Section 2B of the Agreement. -9- 13 5. Employees working a nontraditional schedule will not be required to work more than sixteen (16) hours in a 24-hour period. To aid in this commitment, covered employees will make every effort to cover vacancies created by sickness or absenteeism. 6. Covered employees will be permitted to schedule their vacations from days off to days off rather than on a calendar week basis. Except as expressly provided for above, all other rules and procedures relating to the payment of overtime, holiday and premium pay, as contained in this Agreement shall apply regardless of whether an Employee is working an eight (8) hour shift or more than eight (8) hours. SECTION 4 - HOLIDAY LIABILITY. Hours compensated at overtime rates shall not be counted further for any purpose in determining overtime liability under the same or any other provision of this Agreement; provided, however, that a holiday whether worked or not, shall be counted for purposes of computing overtime liability under this Article. SECTION 5 - REPORTING PAY. If an Employee shall be required by Management to report for regularly-scheduled or call-out work on any day and he shall report at the time and place he was required to report, he shall be paid a minimum of four (4) hours pay at the Regular Hourly Wage which would have been applicable had he worked such four (4) hours in the assignment for which he was required to report. If there is no work available on the job for which the Employee was scheduled or called out, the Employee shall be paid at such Regular Hourly Wage for which the Employee was scheduled or called out, provided such Employee shall accept other job assignments for which he is qualified or forfeit the reporting pay provided herein. -10- 14 SECTION 6 - ABSENTEEISM. Whenever an employee has just cause for reporting late or absenting himself from work, he shall, whenever practicable, give notice as far in advance as possible to his supervisor or through another person or system to be designated by the Company to receive such notice. ARTICLE 5 HOLIDAYS SECTION 1 - DAYS. Whenever used in this Agreement the term "holiday" means one of the following days:
1995 1996 ---- ---- New Year's Day New Year's Day Memorial Day Memorial Day July 4th July 4th July 24th July 24th Labor Day Labor Day Thanksgiving Thanksgiving Christmas Eve Christmas Eve Christmas Day Christmas Day
1997 1998 ---- ---- New Year's Day New Year's Day Memorial Day July 4th July 24th Labor Day Thanksgiving Christmas Eve Christmas Day
-11- 15 If any of such holidays shall fall on a Sunday, the following Monday (and not such Sunday) shall be observed as such holiday. For purposes of this Article, a holiday shall be deemed to be the 24 hours beginning with the shift-changing hour nearest to 12:01 a.m. on the day of the holiday. SECTION 2 - HOLIDAY PAY. A. An eligible Employee who does not work on a holiday shall be paid eight (8) times the Employee's Regular Hourly Wage, which shall mean the hourly rate which the Employee would have received for the work had it been performed during regular, non-overtime hours; provided, however, that if an eligible Employee is scheduled to work on any such holiday, but fails to report and perform his scheduled or assigned work, he shall become ineligible to be paid for the unworked holiday, unless he has failed to report or perform such work because of verified sickness or because of a death in the immediate family (father, mother, father-in-law, mother-in-law, son-in-law, daughter-in-law, children, brothers, sisters, spouse or grandparents) or similar good cause approved in advance by the Company. B. An Employee who has worked thirty (30) shifts since his last hire and who actually works on a holiday shall be paid for all time worked at an overtime rate of 2 1/4 times the Regular Hourly Wage of the job worked. C. As used in this Article, an eligible Employee is one who: 1. Has worked thirty (30) shifts since his last hire; 2. Performs work or is on vacation in the pay period in which the holiday is observed; and 3. Works both on his last scheduled work day prior to and on his first scheduled work day following the day on which the holiday is observed, unless excused. SECTION 3 - VACATION AND HOLIDAY PAY. An eligible Employee who would otherwise be entitled to pay for an unworked holiday and who shall be scheduled pursuant to the provisions of Article 6 to take a vacation during a period when the holiday occurs, shall be paid for the unworked holiday -12- 16 in addition to his vacation pay. ARTICLE 6 VACATIONS SECTION 1 - VACATION BENEFITS. An eligible Employee who has attained the years of continuous service indicated in the following table in any subsequent calendar year during the continuation of this Agreement shall receive a vacation corresponding to such years of continuous service, as shown in the following table:
YEARS OF SERVICE WEEKS OF VACATION - ---------------- ----------------- 1 yr. but less than 3 1 3 yrs. but less than 10 2 10 yrs. but less than 17 3 17 yrs. but less than 25 4 25 yrs. or more 5
SECTION 2 - EMPLOYEE ELIGIBILITY. To be eligible for a vacation in a calendar year during the term of this Agreement, the Employee must: A. Have one year or more of continuous service; and B. Not have been absent from work for six consecutive months or more in the preceding calendar year; except that in the case of an Employee who completes one (1) year of continuous service in the vacation calendar year, he shall not have been absent from work for six consecutive months or more during the twelve months following the date of his original employment; provided, that an Employee with more than one year of -13- 17 continuous service who, in any year, shall be ineligible for a vacation by reason of the provisions of this paragraph as a result of an absence on account of layoff or illness shall receive one week's vacation with pay in such year if he shall not have been absent from work for six consecutive months or more in the twelve consecutive calendar months next preceding such vacation. The period of a scheduled vacation taken by an Employee while he is on layoff shall be deducted in determining the length of the period of absence from work during such layoff for the purposes of this paragraph B. Any employee, even though otherwise eligible under this Article, forfeits the right to receive vacation benefits under this Article if he quits, retires, or is discharged prior to January 1 of the vacation year. For purposes of calculating vacation benefits, continuous service shall include credit for previous employment by United States Steel Corporation ("USS") at the Geneva Plant and shall date from the later of (1) the date of first employment or (2) date of re-employment following a break in continuous service. Should an active employee die on or before June 30 in any calendar year his estate will be compensated for any unexpended vacation earned in that year in addition to half of the succeeding year's vacation entitlement. Should the death occur after June 30, his estate will again be entitled to any unexpended vacation as well as full vacation entitlement for the succeeding year. SECTION 3 - SCHEDULING OF VACATIONS. Vacations will, so far as practicable, be granted at times most desired by employees (longer service employees being given preference as to choice); but the final right to allot vacation periods and to change such allotments is exclusively reserved to the Company in order to insure the orderly operation of the plant. As soon as possible after January 1st of each year, the Company shall post a vacation schedule. In case the Company desires to schedule regular vacations for Employees eligible during a shutdown period instead of in accordance with the previously established vacation schedule, the Company will give affected Employees not less than forty-five (45) days notice of such intent; in the absence of such notice, an affected Employee shall have the option to take his regular vacation during the shutdown period, or to be laid off during the shutdown and to take his regular vacation at the previously scheduled time. SECTION 4 - VACATION PAY COMPUTATION. Each employee granted a vacation will be paid at his average rate of earnings per hour for the prior calendar year. Average rate of earnings per hour shall be computed by: -14- 18 A. Totaling (1) pay received for all hours worked (total earnings excluding premium for overtime, holiday, Sunday, and shift differential), (2) vacation pay including pay in lieu of vacation, and (3) pay for unworked holidays, and B. Dividing such earnings by the total of (1) hours worked, (2) vacation hours paid for, including hours for which pay in lieu of vacation was paid, and (3) unworked holiday hours which were paid for. Hours of vacation pay for each vacation week shall be the average hours per week worked by the employee in the prior calendar year. Any weeks not having 32 hours of actual work shall be excluded from the calculation. Average hours per week worked shall be computed by dividing such hours by the number of such weeks in which 32 or more hours were worked. The minimum number of hours paid for each week of vacation shall be 40 and the maximum number of hours paid for each week of vacation shall be 48. ARTICLE 7 PRIOR USS SERVICE Except as otherwise provided in this Agreement, in calculating continuous service under any provision of this Agreement, prior United States Steel Corporation ("USS") continuous service shall be counted. ARTICLE 8 SENIORITY SECTION 1 - UNITS. Seniority shall be applied in the following departments: COKE PLANT DEPARTMENT - Coke and Coal Chemicals Products - Coke and Coal Chemicals Maintenance BLAST FURNACE DEPARTMENT -15- 19 - Iron and Sinter Production - Blast Furnace Maintenance Q-BOP DEPARTMENT - Steel Producing - Steel Producing Maintenance - Foundry ROLLING MILL DEPARTMENT - 45" & 132" Rolling Mills, Pipe Mill and Finishing - Rolling Mill Maintenance CENTRAL MAINTENANCE AND TRANSPORTATION - Central Maintenance - Transportation and Yards UTILITIES DEPARTMENT - Utilities - Utilities Maintenance CASTER DEPARTMENT - Caster Production - Caster Maintenance KIEGLEY QUARRY - Kiegley Quarry Products - Kiegley Quarry Maintenance CLERICAL AND TECHNICAL - Accounting - Business Planning - Quality Assurance - Geneva Maintenance Each seniority unit shall have its own seniority listing. All lines of progression including identification of entry level positions shall be established by mutual agreement. Should the Company and the Union fail to agree at the department level, the disputed line of progression will be referred to the parties responsible for grievance resolution at the second step. Should they be unable to agree, the Union may process the dispute to arbitration. -16- 20 SECTION 2 - SENIORITY COMPUTATION. For the purposes of this Article 8, seniority shall be based upon Geneva Plant continuous service, which shall include prior continuous service with USS, and with the Company, at the Geneva Plant. In the event of a tie, the Employee with the lowest badge number will be given the highest seniority standing. SECTION 3 - FACTORS AFFECTING SENIORITY. In the promotion of Employees to nonsupervisory positions, and for the purpose of demotions or layoff in connection with decreasing the work force, and for the purpose of recalling to work of Employees so laid off, the following factors shall be considered, and if factors B and C are relatively equal, length of continuous service shall govern: A. Length of continuous service; B. Ability to perform the work; C. Physical fitness. Determination of these factors shall be subject to grievance. SECTION 4 - PROMOTION TO SUPERVISORY POSITIONS AND UNION LEAVE OF ABSENCE. A. Supervisory Position: An Employee who removes himself from the bargaining unit by accepting a permanent job outside the bargaining unit shall lose all seniority status in the bargaining unit. B. Temporary Assignment: An Employee who accepts a temporary job assignment or temporary management position outside the bargaining unit shall not lose any seniority status in the bargaining unit provided such assignment does not exceed a total of one (1) year and such additional days as may be mutually agreed to by the Company and the Union. If such Employee has not returned to the bargaining unit within the above period, he will at the expiration of said period lose all seniority status in the bargaining unit. C. Union Leave: Leave of absence for a maximum of four (4) years will be granted to members of the Union selected to work full time for the Union in an official -17- 21 capacity, and the seniority of such employee shall be unbroken by such leave of absence. Upon written request by the District Director, United Steelworkers of America, and approval of the equivalent of the Company's Vice President for Human Resources, or their respective designated representative, leave of absence without loss of seniority will be granted. SECTION 5 - BREAK IN SERVICE. An Employee's continuous service shall be broken and prior employment not counted when: A. The Employee voluntarily quits; B. The Employee is discharged with just cause; C. The Employee is terminated because he fails to promptly return when recalled from layoff or to respond within three (3) working days of the date a recall notice is delivered by (certified) mail to the Employee's last address of record. In the event the recall involved an anticipated continuous employment period of two (2) weeks or less, the Employee upon execution of a written waiver with the Company may refuse recall and remain on layoff. The recall waiver shall remain in effect until such time as either the Employee revokes the waiver or he is recalled by the Company for an anticipated continuous employment period greater than two (2) weeks. D. The Employee is absent due to layoff or disability for more than forty-eight (48) months; provided, however, absence due to a compensable disability incurred during the course of employment shall not break continuous service if such Employee returned to work within 30 days after final payment of statutory compensation for such disability or after the end of the period used in calculating a lump-sum payment, as the case may be. SECTION 6 - SENIORITY OF UNION OFFICERS. -18- 22 Each member of the Grievance Committee and each Employee who at the time shall be the President or Vice President of the Union shall, for their respective terms of office, have top seniority rights within his seniority unit for the purposes of layoffs in connection with decreasing the work force within such unit; provided, however, that such person shall not be retained in the employ of the Company unless work which such person can perform is available in such unit. Retention at work in accordance with this Section shall not enable such Employee to claim relative seniority status in excess of that which he otherwise would have had prior to such retention. The local President and Chairman of the Grievance Committee shall have top seniority rights within the Plant to work which they can perform. SECTION 7 - INCUMBENCY. An Employee who bids and has been assigned and regularly worked on a permanent vacancy, and who has not voluntarily relinquished his rights to such job, has incumbency rights on that job over other Employees who have not held and regularly worked that job on a permanent basis. When an employee is displaced from his incumbent position due to a reduction in force and bids and accepts another job within the plant, he does not waive his rights to the incumbent position he held prior to being force reduced. At the time the incumbent position from which he has been force reduced becomes available, he must elect to return to that position when scheduled or give up all rights of incumbency on that job. If the employee elects to return to his previous incumbency, he waives all rights to the second position. The only time an employee will be allowed to hold two incumbencies is when he is force reduced from his original incumbency. At no time will an employee be allowed to hold incumbency rights on more than two positions. For training purposes, Management may reassign employees to their former incumbent positions for up to ninety (90) days during which time the employee will be paid the higher rate of the job he held when recalled or his former incumbent position. SECTION 8 - REDUCTION IN FORCE. Demotions, layoffs and other reductions in force shall be made in descending job sequence recognizing current and former incumbency rights within each seniority unit, starting with the highest affected job, and with the Employee on such job having the least length of Plant service. The Company shall not be obliged to provide training (other than deminimus re-orientation) to Employees in a reduction of force in order to continue retention rights. Sequence on recall of Employees so laid off shall be in the reverse order. SECTION 9 - PERMANENT VACANCY AND TRANSFER RIGHTS. -19- 23 When a permanent vacancy exists, the following procedures shall apply: A. STEP 1: Permanent vacancies within a seniority unit shall be filled from within the first step of competition in the line of progression below or above the job being filled. Each succeeding vacancy in the line of progression shall be filled in the same manner. B. STEP 2: Any vacancy not filled in accordance with the Step 1 bidding procedure shall be posted in the department for a period of ten (10) days. The employees of the department shall be eligible to bid for said vacancy with first preference given to employees in the seniority unit of the vacancy. An employee who transfers under this step shall have the right to return to the position from which he transferred or the Company may return him to his former job because he cannot meet the requirements of the job, within five (5) days from the date of transfer. When an eligible employee accepts the position, he shall be ineligible to bid again for a period of nine (9) months. The Company will send a copy of the notice to the Union and will also provide the names of the bidders and the person receiving the job. If an employee accepts the position, he shall be ineligible to transfer again within nine (9) months. If an employee rejects the position at the time he is notified that he is a successful bidder, the nine (9) month ineligibility period will not apply. Should he initially accept the position and subsequently reject the bid, exercises his five (5) day return right or refuse transfer, the nine (9) month transfer restriction shall apply from the date of return or rejection. Prior to notification, an employee may at any time remove their name from the bid sheet. If after being awarded and accepting a position, a vacancy is posted during the nine (9) month ineligibility period and such position would represent a promotion of two job classes or more over the employee's current incumbent position, the employee may bid on such position consistent with the provisions of this paragraph. C. STEP 3: A step 3 notice of an available job opening(s) will be posted on a plant-wide basis simultaneously with the step 2 posting. The step 3 posting will inform employees of the job(s) which may be available if not filled at the step 2 level. The job posting will provide employees with an opportunity to place their names on the step 3 bid sheet prior to the time the step 3 bid is closed. The step 3 bid sheets located in the Human Resources Building will be closed at the time the step 2 bid expires. If the position(s) is not filled at the step 2 level, the resulting vacancy shall be filled on a plant-wide basis from the step 3 bid sheet. When a vacancy is to be filled from the step 3 bid sheet, the designated human resources representative will notify the appropriate employee and inform his of their selection. An employee who transfers under this step shall have the right to return to the seniority unit from which he transferred or the Company may return him to his former unit because he cannot meet the requirements of the job, within fourteen (14) days from the date -20- 24 of transfer. If an employee is selected and accepts the position he shall be ineligible to transfer again within one (1) year. If an employee elects not to transfer at the time he is notified that he is a successful bidder, the one (1) year ineligibility period will not apply. Should he initially accept the position and subsequently reject the bid, exercise his fourteen (14) day return right or refuse transfer, the one (1) year transfer restriction shall apply from the date of return or rejection. The Company will send a copy of the notice to the Union and will also provide the names of the bidders and the person receiving the job. D. An Employee who is absent because of vacation, sickness, or Union business for the bidding period shall be allowed to bid on a vacancy that was posted during such period; however, such bid must be registered within seven (7) days of the date the employee returns to work, and provided further that an employee who is awarded such vacancy will be deemed to have permanently accepted such bid. E. Temporary Assignments: Permanent vacancies may be filled by temporary assignment until such time as the prevailing bidder is selected and assigned. During the Step 1 bidding procedure, the Company will make every effort to assign the senior employee who most likely would be the successful bidder. Such temporary assignment shall not result in the creation of any rights of incumbency. F. Temporary Increases: All vacancies resulting from anticipated increases in operating levels for a period of 60 days or more, or vacancies created by promotion, death, discharge, voluntary termination, retirement or transfer out of the seniority unit shall be treated as permanent; provided, however, that in the event an increase in operating levels is not expected to continue, and does not, in fact, continue for more than 60 days, any vacancies created shall be deemed temporary and not permanent for the purposes of this Article. The period of 60 days or more will not be considered interrupted or abbreviated due to work interruptions caused by equipment failures, breakdowns, lack of material for processing and product flow problems adversely affecting the feed stock required to maintain a level of operations. G. Consent Decree: The Company agrees to be bound by Decree 1 filed in the United States District Court for the Northern District of Alabama, Southern Division, dated April 12, 1974, if, to the extent, and for so long as it is applicable to the Company. SECTION 10 - TEMPORARY VACANCY. -21- 25 Scheduled temporary vacancies of more than three (3) weeks shall be filled by the Employee with the greatest length of plant continuous service in the seniority unit from the line of progression below the job being filled, provided such Employee has the necessary physical fitness and ability to perform the work. SECTION 11 - LABOR POOL. A. Purpose: The purpose of this Section is to increase intra-Plant job security for longer service Employees. The application of seniority provisions other than those established under this Section to jobs in a seniority unit shall not be affected by the inclusion of such jobs in the pool except to the extent necessary to comply with the provisions of this Section. B. Establishment of Labor Pool: There will be one (1) labor pool. C. An Employee who has two (2) or more years of Plant continuous service and is laid off for more than twenty-one (21) consecutive calendar days shall be assigned to the pool job if the Employee is qualified and if such job is held by an Employee having less plant continuous service, provided, however, that the Company shall not be required to assign any such job prior to the first day of the work week following the expiration of the twenty-one (21) day period. D. An Employee who at the time he is, or otherwise would be laid off, has two (2) or more years of Plant continuous service and, in the opinion of the Company will not be recalled within twenty-one (21) days, shall be assigned to the pool job if he is qualified and if such a job is held by an Employee having less Plant continuous service; provided, however, that the Company shall not be required to assign him to such job prior to the first day of the calendar week following the first full calendar week following the date of the Employee's layoff. E. The Company may, at its discretion, assign Employees to the pool job in less than the twenty (21) day minimum requirement outlined in paragraphs (C) and (D) above. F. If the Company lays off or recalls from a layoff the wrong Employee, it will not be liable for any retroactive pay to such Employee with respect to any period prior to the day thirty (30) days before receipt by the Company of specific written notice from the affected Employee of its alleged error. G. An Employee assigned under the pool arrangement to a seniority unit for purposes of retention shall have no seniority or incumbency rights for promotional purposes in that unit, but such Employee may fill temporary vacancies. -22- 26 ARTICLE 9 PROBATIONARY PERIOD A new Employee and one who is reemployed after a break in his continuous service, shall not acquire seniority until the expiration of seven hundred sixty (760) hours of actual work following his employment, at which time he shall receive credit for continuous service during such period. If said Employee is terminated or discharged during the first seven hundred sixty (760) hours of actual work, said termination or discharge shall not be the subject of any claim, complaint, grievance or arbitration against the Company; provided, however, that this will not be used for purposes of discrimination because of race, color, religious creed, national origin, sex, age, disability, Veteran or special disabled Veteran status or because of membership in the Union. If said Employee is rehired within six (6) months from the date of his first employment, any prior hours worked shall count toward the seven hundred sixty (760) hours of probation. ARTICLE 10 JURY AND WITNESS SERVICE An Employee who is called for jury service or subpoenaed as a witness, except on his own behalf, shall be excused from work for the days on which he testifies or serves, up to and including twenty (20) business days. Service shall include reporting for jury duty. Such Employee shall receive for each day of service on which he otherwise would have worked, the difference between the payment he receives for such service and the pay for each day of service at eight (8) times the Regular Hourly Wage that such Employee would have received had he worked. The Employee will present proof that he served as a juror or witness, or reported, and the amount of pay, if any, received therefor. An Employee shall not receive such juror or witness pay when it duplicates pay received for time not worked for any other reason, and such pay shall not be computed as hours worked for purposes of determining overtime or premium pay liability. ARTICLE 11 BEREAVEMENT PAY When death occurs to an Employee's legal spouse, mother, father, mother-in-law, -23- 27 father-in-law, son-in-law, daughter-in-law, son, daughter, brother, sister, grandparents or grandchildren (including stepfather, stepmother, stepchildren, stepbrother, or stepsister when they have lived with the Employee in an immediate family relationship), an Employee, upon request will be excused and paid for up to a maximum of three (3) scheduled shifts (or such fewer shifts as the Employee may be absent) which fall within a three (3) consecutive calendar- day period; provided, however, that one such calendar day shall be the day of the funeral and it is established that the Employee attended the funeral, payment shall be at eight (8) times the Employee's Regular Hourly Wage. "Funeral" is defined as a service recognized by any organized religion, creed, or culture to which the employee or decedent belongs as the standard ceremony to observe the interment, cremation or similar disposition of remains of the family members set forth above. An Employee will not receive funeral pay when it duplicates pay received for time not worked for any other reason, and such bereavement pay shall not be computed as hours worked for purposes of determining overtime or premium pay liability. ARTICLE 12 MILITARY SERVICE The Company shall provide each Employee who enters the Armed Services of the United States from employment with the Company all rights required to be given to said Employee upon his return to the Company provided in the laws of the United States and the laws of the State of Utah. An Employee with one or more years of continuous service who is required to attend an encampment of the Reserve of the Armed Forces or the National Guard shall be paid, for a period not to exceed two weeks in any calendar year, the difference between the amount paid by the government (not including travel, subsistence or quarters allowance) and the amount calculated by the Company in accordance with the following formula. Such pay shall be based on the number of days such Employee would have worked had he not been attending such encampment during such two weeks (plus any holiday in such two weeks which he would not have worked) and the pay for each such day shall be eight (8) times the Employee's Regular Hourly Wage (as defined in Section 2A of Article 5 of this Agreement) during the last payroll period worked prior to the encampment. If the period of such encampment exceeds two weeks in any calendar year, the period on which such pay shall be based shall be the first two weeks he would have worked during such period. -24- 28 ARTICLE 13 SAFETY AND HEALTH SECTION 1 - OBJECTIVE AND OBLIGATIONS OF THE PARTIES. A. Cooperation: The Company and the Union will cooperate in the objective of eliminating accidents and health hazards. The Company shall make reasonable provisions for the safety and health of its Employees at the Geneva Plant during the hours of their employment. The Company, the Union and the Employees recognize their obligations and/or rights under existing federal and state laws with respect to safety and health matters. B. Radiation: Where devices which emit ionizing radiation are used, the Company will continue to maintain safety standards with respect to such devices not less rigid than those adopted from time to time by the Nuclear Regulatory Commission and will maintain procedures designed to safeguard Employees and will instruct them as to safe working procedures involving such devices. C. Toxic Materials: Where the Company uses toxic materials, it shall inform the affected Employees what hazards, if any, are involved and what precautions shall be taken to insure the safety and health of the Employees. Upon the request of the Union Co-chairman of the joint safety and health committee (the "Joint Committee"), the Company shall provide in writing requested information from material safety data sheets or their equivalent on toxic substances to which Employees are exposed in the workplace; provided that when the information is considered proprietary, the Company shall so advise the Union Co-chairman and provide sufficient information for the Union to make further inquiry. D. Sampling and Testing: The Company will continue a program of periodic in-plant air sampling and noise testing under the direction of qualified personnel. Where the Union Co-chairman alleges a significant on-the-job health hazard due to in-plant air pollution, noise, or chemical or physical agents, the Company will also make such additional tests and investigations as are necessary and shall notify the Union Co-chairman when such a test is to take place. A report based on such additional tests and investigations shall be reviewed and discussed with the Joint Committee. For such surveys conducted at the request of the Union Co-chairman, a written summary of the sampling and testing results and conclusions of the investigation shall be provided to the Joint Committee. E. First Aid: The Company shall provide adequate first aid for all -25- 29 Employees during their working hours, and as required, provide for prompt emergency transportation to an appropriate treatment facility for Employees who become seriously ill or are injured on the job. Where necessary, the Company shall also provide or arrange for suitable transportation from such facility back to the Geneva Plant or the Employee's home, as appropriate. An Employee who, as a result of an industrial accident, is unable to return to his assigned job for the balance of the shift on which he was injured will be paid for any wages lost on that shift. SECTION 2 - PROTECTIVE DEVICES, WEARING APPAREL AND EQUIPMENT. Protective devices, wearing apparel and other equipment necessary to properly protect Employees from injury shall be provided by the Company. The Company shall provide at the Company's cost one (1) pair of prescription safety glasses at the time of hire and will replace damaged prescription safety glasses which create an unsafe condition for the employee. Damaged safety glasses will not be replaced where the damage is due to employee negligence. Goggles, gas masks, face shields, respirators, special purpose gloves, fireproof, waterproof or acid proof protective clothing when necessary and required shall be provided by the Company without cost, except that the Company may assess a fair charge to cover loss or willful destruction thereof by the Employee. Proper heating and ventilating systems shall be installed where needed and maintained in good working condition. The Company shall provide, at the Company's cost, two pairs of safety shoes to each Employee. The first safety shoe allowance will be after March 1, 1995 and the second allowance will be after March 1, 1997. SECTION 3 - DISPUTES CONCERNING UNSAFE CONDITIONS. An Employee or group of Employees who believe that they are being required to work under conditions which are unsafe or unhealthy beyond the normal hazard inherent in the operation in question shall have the right to: (1) file a grievance in the second step of the complaint and grievance procedure for preferred handling in such procedure and arbitration and/or (2) relief from the job or jobs, without loss to their right to return to such job or jobs, and, at Management's discretion, assignment to such other employment as may be available in the Geneva Plant; provided, however, that no Employee, other than communicating the facts relating to the safety of the job shall take any steps to prevent another Employee from working on the job. If an Employee has exercised his right to relief from the job under this Section, and the existence of such unsafe condition is in dispute, the Chairman of the Grievance Committee and the Division Manager, or their designees, shall investigate immediately. The Chairman of the Grievance Committee shall -26- 30 have the right to have a Union member of the Joint Committee present as an advisor. Should either Management or the Board conclude that an unsafe condition within the meaning of this Section 3 existed and should the Employee not have been assigned to other available equal or higher-rated work, he shall be paid for the earnings he otherwise would have received. It is recognized that emergency circumstances may exist, and the local parties are authorized to make mutually satisfactory arrangements for immediate arbitration to handle such situations in an expeditious manner. SECTION 4 - JOINT SAFETY AND HEALTH COMMITTEE. A. Committee: A safety and health committee consisting of not more than one Employee from each department designated by the Union and an equal number of Management members, if Management so desires, shall be established (the "Joint Committee"). The Union and the Company shall designate their respective Co-chairmen and shall certify to each other in writing such Co-chairmen and committee members. The Joint Committee shall hold monthly meetings at times determined by the Co-chairmen who may also agree to hold special meetings. Each Co-chairman shall submit a proposed agenda to the other Co-chairmen at least five days prior to the monthly meeting. The Company Co-chairman shall provide the Union Co-chairman with minutes of the monthly meeting. Prior to such monthly meetings, the Co-chairmen or their designees may engage in an inspection of mutually selected areas of the Geneva Plant. At the conclusion of the inspection, a written report shall be prepared by the Company setting forth their findings, and a copy of the report shall be furnished to the Union Co-chairman. Time consumed on Joint Committee work by Joint Committee members designated by the Union shall not be considered hours worked to be compensated by the Company. The function of the Joint Committee shall be to advise with plant management concerning safety and health and to discuss legitimate safety and health matters but not to handle complaints or grievances. In the discharge of its function, the Joint Committee shall: consider existing practices and rules relating to safety and health, formulate suggested changes in existing practices and rules, recommend adoption of new practices and rules, encourage cooperation with safe job procedures and safety rules by all parties, review proposed new safety and health programs developed by Management and review accident statistics, trends and disabling injuries which have occurred in the Geneva Plant and make appropriate recommendations. When the Company introduces significant changes in technology or operations which may affect the safety or health of Employees, the matter will be discussed in advance by the Joint Committee with the objective of reviewing necessary safety equipment, safe job procedures and safety training. B. Time Off for Committee Business: The Union Co-Chairman or his designee will be afforded time off without pay as may be required to visit departments at -27- 31 all reasonable times for the purpose of transacting the legitimate business of the Joint Committee, after notice to and receiving the permission of, the head of the department to be visited or his designated representative and, if the Co-chairman or his designee is then at work, permission (which shall not be unreasonably withheld) from his own department head or his designated representative. If the Union Co-chairman or his designee is not at work, he shall be granted access to the plant at all reasonable times for the purpose of conducting the legitimate business of the Joint Committee after notice to, and receiving the permission of, the head of the department to be visited or his designated representative. C. New Equipment: When the Company introduces new personal protective apparel or extends the use of protective apparel to new areas or issues new rules relating to the use of protective apparel, the matter will be discussed with the members of the Joint Committee in advance with the objective of increasing cooperation. Should differences result from such discussions, a grievance may be filed in the Second Step by the Chairman of the Grievance Committee within 30 days thereafter. In the event that the grievance progresses through the complaint and grievance procedure to arbitration, the Board shall determine whether such rule or requirement is appropriate to achieve the objective set forth in Section 1. D. Advice: Advice of the Joint Committee, together with supporting suggestions, recommendations and reasons shall be submitted to the Vice President of Operations for his consideration and for such action as he may consider consistent with the Company's responsibility to provide for the safety and health of its Employees during the hours of their employment and the mutual objective set forth in Section 1. E. Testimony and Investigations: In the event the Company requires an Employee to testify at the formal investigation into the causes of a disabling injury or death or accidents which could have resulted in disabling injury or death, the Company shall notify the Employee that he, the Employee, may arrange to have the Union Co-chairman or his designee present as an observer at the proceedings for the period of time required to take the Employee's testimony. The Union Co-chairman will be furnished with a copy of such record as is made of the Employee's testimony. In addition, in the case of accidents which resulted in disabling injury or death or accidents which could have resulted in disabling injury or death and require a fact-finding investigation, the Company will within four (4) hours after such accident, notify the Union Co-chairman or his designee, who shall have the right to visit the scene of the accident promptly upon such notification, if he so desires, accompanied by the Company Co-chairman or his designee and the Company will add the Union Co-chairman or his designee to the notification list for such accidents. After making its investigation, the Company will supply to the Union Co-chairman a statement of the nature of the injury, a description of the accident, and any recommendations available at that time, and will consider any recommendations he may wish to make regarding the report. In such cases, when requested by the Union Co-chairman, the -28- 32 Company Co-chairman or his designee will review the statement with the Union Co-chairman. Also, in such cases, the Company Co- chairman or his designee, when requested by the Union Co-chairman, will visit the scene of the accident with the Union Co-chairman or his designee. F. Reports to International Union: The Company will provide the International Union Safety and Health Department notification of any accident resulting in a fatality to a Union member within seventy-two (72) hours of the fatality. This notification shall be either oral or written and include the date of the fatality, the unit location of the fatality and, if known, the cause of the fatality. The Company will provide the International Union Safety and Health Department with a copy of the fatal accident report that is given to the local Joint Committee when such report becomes available. Any necessary discussion or other communication on this data between the Company and the International Union will be with the individual designated to provide such information. Once each year the Company will, from the same source described in F above, provide to the International Union Safety and Health Department the OSHA Form 200 Summary of Occupational Injuries and Illnesses or its equivalent, the lost workday accident incidence frequency rate and the fatality frequency rate. SECTION 5 - DISCIPLINARY RECORDS. Written records of disciplinary action against an Employee involved for the violation of a safety rule but not involving a penalty of time off will not be used by the Company in any arbitration proceeding where such action occurred one or more years prior to the date of the event which is the subject of such arbitration. When an Employee has completed twenty-four (24) consecutive months of work without discipline involving a penalty or time off for violation of a safety rule, prior disciplinary penalties for such offenses not exceeding four days suspension shall not be used for further disciplinary action. When a written safety observation report is made involving a violation of a safety procedure or rule by an Employee which does not involve discipline, a copy of that report will be given to the Employee. SECTION 6 - ALCOHOLISM AND DRUG ABUSE. Alcoholism and drug abuse are recognized by the parties to be treatable conditions. Without detracting from the existing rights and obligations of the parties recognized in the other provisions of this Agreement, the Company and the Union agree to cooperate in encouraging Employees afflicted with alcoholism or drug abuse to undergo -29- 33 a coordinated program directed to the objective of their rehabilitation. It is the policy of Geneva Steel and the Union to make every reasonable effort to provide a safe work environment free of drugs and alcohol. Employees using, consuming, selling, transferring, or possessing alcohol or illegal drugs on the Company's premises shall be subject to immediate discipline following appropriate investigation and review by the Company. Use of alcohol or illegal drugs prior to reporting for work which results in negative work performance or erratic conduct in the workplace is also grounds for discipline. In order to implement this policy, the Company may test all applicants for employment for drugs and alcohol and employees recalled from layoff after absences from work in excess of ninety (90) days. In addition, the Company may require current employees to undergo drug and alcohol testing, in order to investigate accidents, safety incidents in the workplace and possible individual employee impairment. Such testing shall be done promptly after the incident utilizing the more reliable procedures available and under the supervision of qualified medical personnel. Should an Employee test positive as to any illegal drug and a confirming test supports the positive result, he shall be offered rehabilitation in the first such case only. All programs will be carried out with due regard to the Employee's right to privacy. The Company will not require Employees to submit to random or blanket drug screening. SECTION 7 - SAFETY AND HEALTH TRAINING. A. General: The Company recognizes the special need to provide appropriate safety and health training to all Employees. The Company will develop safety and health training that provides either the training described below or the basis for such training as it relates to the needs of the Company and the Employee. Training programs shall recognize that there are different needs for safety and health training for newly hired Employees, Employees who are transferred or assigned to a new job and Employees who require periodic retraining. B. Training of New Employees: Newly hired Employees shall receive training in the general recognition of safety and health hazards, their statutory and basic labor contract rights and obligations with respect to health and safety and the purpose and function of the Company's Safety, Health and Medical Departments, the Joint Committee and the International Union Safety and Health Department. In addition, upon initial assignment to a job, such Employees shall receive training on the nature of the operation or process, the safety and health hazards of the job, the safe working procedures, the -30- 34 purpose, use and limitations of personal protective equipment required, and other controls or precautions associated with the job. The Union Co-Chairman and the International Union Safety and Health Department or a designee shall, upon request, be afforded the opportunity to review the training program for newly hired Employees at the plant level. C. Training of Other Employees: The training of Employees other than those newly hired by the Company shall be directed to the hazards of the job or jobs on which they are required to work. Such training shall include hazard recognition, safe working procedures, purpose, use and limitations of appropriate specialized instruction. D. Retraining: As required by an Employee's job and assignment area, periodic retraining shall be given on safe working procedures, hazard recognition, and other necessary procedures and precautions. SECTION 8 - MEDICAL RECORDS. The Company shall comply with all applicable federal (OSHA) and/or state (UOSH) regulations concerning the confidentiality of and access to Employee medical records. ARTICLE 14 PENSIONS AND PROFIT SHARING A. The Company shall pay into the pension plan a sum equal to 4 1/2% beginning March 1, 1995, of all wages paid to each full-time, permanent Employee. The payment to the pension plan will be increased to 5% beginning March 1, 1996. B. Employees shall be entitled to share 10% of the Company's net profits before taxes (subject to certain adjustments) from its Geneva Plant steel operations as more fully described in Appendix D to this Agreement. -31- 35 Notwithstanding any contrary provision in any Pension Plan description or plan document, the Company will not reduce the level of benefit called for in the plan provided under this contract during the term of this agreement, unless such change in the benefit is agreed to by the Union or is required by applicable law. ARTICLE 15 INSURANCE The insurance benefits which shall become effective upon the effective date of this Agreement are set forth in Appendix B to this Agreement which is incorporated herein. In the event legislation is enacted creating a system of national or state health benefits coverage, either party shall have the right to reopen this provision of this Agreement. If the parties are unable to reach agreement, the matter should be submitted to binding arbitration for resolution. Notwithstanding any contrary provision in any Summary Plan Description and/or plan document, the Company will not reduce the level of benefits called for in the various health and benefit plans provided under this contract during the term of this agreement, unless such reduction in the level of benefits is agreed to by the Union or required by applicable law. ARTICLE 16 ADJUSTMENT OF GRIEVANCES SECTION 1 - PURPOSE. A. Should any differences arise between the Company and the Employees as to the meaning and application of the provisions of this Agreement, there shall not be any suspension of work on account of such differences, but an earnest effort shall be made to settle them promptly and in accordance with the provisions of this Agreement in the manner hereinafter set forth. B. Failure to Appeal: If any decision is not appealed within the time limits -32- 36 to the next step, it shall be considered settled on the basis of the prior step, and the Employee or Employees covered by such complaint or grievance shall not have any further right or remedy with respect to any matter or claim covered by such complaint or grievance. SECTION 2 - DEFINITIONS. A. "COMPLAINT" shall mean a request or complaint. B. "GRIEVANCE" shall mean a complaint of an Employee which involves the interpretation or application of, or compliance with, the provisions of this Agreement. C. "DAY" shall mean calendar day, but shall not include any Saturday, Sunday, or Holiday unless otherwise indicated herein. SECTION 3 - PROCEDURE. A. Oral. An Employee shall take any complaint to his foreman, with or without his Union representative as he may decide, within five (5) working days of the event or the time he reasonably should have known of the event. The matter shall be answered by the foreman within two (2) working days from the day it is presented. B. Step 1. If the complaint is not settled at the Oral Step, the Department Area Manager, Manager Labor Relations (if appropriate) and Union Grievance Committeeman, with the Employee and any other necessary witnesses present, shall discuss the matter within seven (7) working days from the foreman's answer in paragraph (A) above, and attempt to resolve the matter. At this level, the grievance form shall be filed by the Union Grievance Committeeman and the disposition of the grievance shall be noted on the grievance form. Disposition of the grievance at this level shall occur within five (5) working days following the completion of the discussion. If the disposition of the grievance is not satisfactory to the Union Grievance Committeeman, a written statement shall be prepared by the Union Grievance Committeeman attached to the grievance form which shall be submitted to the Labor Relations Department within seven (7) working days of the disposition of the grievance at Step 1. The Company will provide a written response to the Union within seven (7) working days of receipt of the Union's written statement. Written statements shall be brief and factual. They shall state what provisions of the Agreement are relied upon, the Company's response to Union reliance on these provisions, as well as the remedy sought. -33- 37 C. Step 2. If the Union Grievance Committeeman is not satisfied with the disposition in Step 1 and the Union continues to maintain that the grievance is meritorious, the Labor Relations Department shall, within ten (10) working days of the receipt of the Union's written statement (or at such other time as shall be mutually agreed to by the Company and the Union), cause a discussion between the Chairman of the Grievance Committee and the Union Grievance Committeeman and himself, together with the Employee and such other persons as either side may reasonably wish to have in order to dispose of the matter. It shall be answered within seven (7) working days of the date of such meeting. The Chairman of the Grievance Committee shall have the authority to settle, withdraw, or continue processing the grievance. The Company Representative shall have the authority to settle the grievance. D. Step 3. If the Chairman of the Grievance Committee is not satisfied with the disposition in Step 2, the Union must appeal the grievance to Step 3 of the procedure within thirty (30) days of receipt of the disposition of the grievance from Step 2. The Union and the Company will meet in an effort to resolve the grievance prior to an Arbitration hearing date being set. The parties involved in this review shall include the International Union Representative, the Local Union President, the Grievance Committee Chairman, the Company's Vice President of Human Resources, and the Manager of Labor Relations or his designated representative. The International Union Representative and the Local Union President shall have the authority to settle, withdraw, or continue processing the grievance. The Vice President of Human Resources shall have the authority to settle the grievance. The review meeting shall be limited to the International Union Representative, the Local Union President, the Grievance Committee Chairman, the Company's Vice President of Human Resources, and the Manager of Labor Relations or his designated representative. No other attendees will be permitted unless mutually agreed upon in advance of the meeting. All settlements arrived at in this procedure will be in written form and signed by the aforementioned individuals. Whenever either party concludes that further discussions cannot contribute to the settlement of the grievance, the grievance may be appealed to arbitration. E. Arbitration. If the grievance is not resolved at the Step 3 level, then within thirty (30) working days from the disposition of the grievance at Step 3 the International Union may appeal the complaint to arbitration. The Company and the Union shall agree to an arbitration panel consisting of a maximum of five arbitrators. If the Company and the Union cannot agree on an arbitrator from such list, the Union shall strike a name from the list and the Company shall do likewise and the process shall be repeated until one name remains which shall then be the arbitrator. The arbitrator shall be furnished with the written statements from both parties outlining the pertinent facts in Step 1. Thereafter, the arbitrator shall hear the complaint within twenty-one (21) days from the date he was selected, or upon a date jointly agreed to by the parties. The arbitrator will be asked to issue a decision within twenty (20) days from the date of the hearing, or fifteen -34- 38 (15) days from receipt of the transcript, whichever is later. The parties may mutually agree to have the arbitrator issue a decision on the basis of the written record submitted to him by the parties. The arbitrator shall assure himself that all necessary facts and consideration have been placed before him by both sides, and he shall have the authority to interpret and apply the provisions of this Agreement, but he shall not have the authority to alter any of its provisions. The parties shall share equally the compensation and expenses of the arbitration. The decision of the arbitrator shall be final and binding on the parties. SECTION 4 - MISCELLANEOUS. A. Union Representation: Any Employee who is summoned to meet in an office with a supervisor other than his own immediate supervisor for the purpose of discussing possible disciplinary action shall be entitled to be accompanied by a Union representative if he requests such representation, provided such representation is then available or if not then available, the Employee's required attendance at such meeting shall be deferred only for such time during that shift as is necessary to provide opportunity for him to secure the attendance of such representative. The Union shall be entitled to a maximum of eleven (11) Grievance Committeemen, and any officer who is also a Grievance Committeeman will be counted toward that maximum number. B. Group Grievances: All grievances shall be on an individual basis unless mutually agreed upon by the parties, which agreement shall not be unreasonably withheld. C. The complaint and grievance procedure may be utilized by the Union in processing complaints or grievances which allege a violation of the obligations of the Company to the Union as such. In processing such complaints or grievances, the Union shall observe the specified time limits in appealing and the Company shall observe the specified time limits in answering. The Union may not, pursuant to this provision, initiate a grievance absent a signed complaint form from an affected employee which alleges a violation of any individuals rights under this Agreement. In the event an employee dies, the Union may process on behalf of his legal heirs any claim he would have had relating to any monies due under any provision of this Agreement. D. Acceleration: The Grievance Committee Chairman can sign and process a grievance directly into Step 2 if the issue involves two or more departments. If the Company's discussion or answer to a complaint or a grievance is not given within the prescribed time requirements in any Step, the Union, after notifying the Company, may refer or appeal to the next Step. E. Extensions: The time limits set forth in this Article may be extended by the written mutual agreement of the parties. -35- 39 F. Employee Disciplinary Record: Disciplinary records shall not be used after two (2) years from the date of the event which was the subject of the discipline, if the Employee has been subject to no intervening disciplinary action. G. Prior Grievances: Any grievance or complaint existing or arising out of events which occurred prior to the date that the Company begins operation of the Geneva plant shall have nothing to do with the Company or this Agreement. H. When possible, proceedings under this grievance procedure shall take place during the off-shift hours. I. The Company's liability shall be limited to one hundred twenty (120) days prior to the filing of any grievance. J. When a grievance has been appealed to Step 3, a written summary developed from the Step 2 meeting shall be prepared by the Company. The record shall be jointly signed by the Company Representative and the Chairman of the Grievance Committee. If the Chairman of the Grievance Committee shall disagree with the written summary prepared by the Company, he shall set forth and sign his reasons for such disagreement, and the written summary, except for such disagreement, shall be regarded as agreed to. ARTICLE 17 DISCHARGE AND DISCIPLINE OF EMPLOYEES SECTION 1 - DISCHARGE. The Company may at any time suspend or discharge any Employee for just cause. If such Employee believes he was suspended or discharged without just cause, that Employee or the Union may submit such complaint or grievance to the adjustment of grievances procedure contained in Article 16. SECTION 2 - JUSTICE AND DIGNITY ON THE JOB. The following understandings have been reached for a Procedure for Justice and Dignity on the Job applicable to suspension cases only. A. During the period this Procedure is in effect at the Geneva Plant, -36- 40 Management, after imposing a suspension, shall not remove the affected Employee from active work on the job to which his seniority entitles him upon such imposition prior to a final determination of the merits of the suspension in accordance with the applicable provisions of this Agreement should the Employee elect to file a complaint or grievance protesting Management's decision. For purposes of the operation of the option not to be removed from the job pursuant to this Procedure, a complaint or grievance protesting a suspension must be filed within two (2) calendar days after notice of the imposition of the suspension. In the event no complaint or grievance is filed within such time limit, the Company will not suspend the affected Employee from active work on the job to which his seniority entitles him prior to the day following the expiration of the time limit set forth in this paragraph. For any purpose other than operation of the option set forth above, the time limits for filing a complaint or grievance protesting a discharge or suspension shall continue to be those set forth in Article 16 of this Agreement. B. The Parties recognize that it is essential that a proper balance be maintained between the right of an Employee to be retained under this procedure and the right of Management to manage the plant. Accordingly, to insure that balance, this procedure will be inapplicable to suspensions involving any offenses which endanger the safety of other persons or the plant and its equipment. Such offenses shall include, but are not limited to: theft; use and/or distribution on Company property of drugs, narcotics, and/or alcoholic beverages; possession of firearms on Company property; destruction of Company property; threatening bodily harm to, and/or striking, a member of supervision; fighting; and insubordination which subverts the authority of Management or interferes with the completion of work. In addition, this Procedure will be inapplicable to a discharge or suspension involving activity prohibited by the provisions of this Agreement. C. When an Employee is retained pursuant to Paragraph A, and the Employee's suspension is finally determined in the grievance procedure or in arbitration to be for just cause, the removal of the Employee from the active employment rolls shall be effective for all purposes the day following the date of final resolution of the grievance. D. Nothing in this Procedure shall restrict or expand Management's right to relieve an Employee for the balance of such Employee's shift under the terms of this Agreement. ARTICLE 18 PROHIBITION OF STRIKES AND LOCKOUTS During the term of this Agreement, neither the Union nor any Employee shall: (a) engage in or in any way encourage or sanction any strike or other action which shall -37- 41 interrupt or interfere with work or production at the Geneva Plant; or (b) prevent or attempt to prevent the access of Employees to the Geneva Plant. During the term of this Agreement, the Company shall not engage in any lockout of the Employees of the Geneva Plant. ARTICLE 19 MANAGEMENT RIGHTS The Management of operations and the direction of the working forces and operations of the Geneva Plant, including, without limitation, the hiring, promoting and retiring of Employees, the suspending, discharging or otherwise disciplining of Employees for just cause, the laying off and calling to work of Employees in connection with any reduction or increase in the working forces, the scheduling of work, and the control and regulation of the use of all equipment and other property of the Company, are the exclusive functions of the Management; provided, however, that in the exercise of such functions the Management shall observe the provisions of this Agreement. Neither Management nor the Union shall discriminate against any Employee or applicant for employment because of his membership or lack of membership in, or lawful activity on behalf of or in connection with, the Union. ARTICLE 20 SCOPE OF AGREEMENT The Parties expressly declare that they have bargained between them on all phases of wages, hours and working conditions, and that the specific terms of this Agreement and any addenda thereto represent their full and complete understanding without reservation or unexpressed understanding. Any aspect of wages, hours or working conditions not covered by this Agreement is declared to have been expressly eliminated as a subject of grievance, bargaining or arbitration, and may not be raised for further bargaining or arbitration without the specific written consent of both parties. In accepting the considerations and limitations herein agreed to by the Company, the Union unqualifiedly waives all present and/or future rights during the term of this Agreement to require the Company to bargain collectively on any other aspect of wages, hours of work or working conditions affecting employment, whether specifically contained herein or not, this giving the Company the right to manage the business in all respects subject only to the express terms of this Agreement. -38- 42 ARTICLE 21 LOCAL WORKING CONDITIONS, PAST PRACTICES, WORK RULES AND PRIOR AGREEMENTS SECTION 1 - LOCAL WORKING CONDITIONS, PAST PRACTICES, AND WORK RULES. All local working conditions, past practices, and work rules, whether written, oral, or established by custom, habit or agreement prior to the effective date of this Agreement (or during the time the Geneva Plant had been operated by USS), except grievance settlements resolved at the third step or higher since September 1, 1987, are hereby terminated and no such conditions, practices, or rules shall be established except in writing by mutual agreement of the Union and the Company. Such conditions, practices, or rules established in writing must be signed by the Vice President of Human Resources for the Company and by the Union and shall include all Local Issues and any grievance settlements resolved at the second step or higher during the term of this Agreement. Provided further that any such conditions, practices, or rules heretofore or hereafter established shall not be in conflict with the express terms of this Agreement. SECTION 2 - PRIOR AGREEMENTS. Any prior agreements between the Union and USS shall have no force or effect between the parties hereto except as provided in Article 7 of this Agreement. ARTICLE 22 SHORT WORK WEEK FUND The Company shall establish a fund into which it will contribute $.10 for each hour worked by Employees, to be known as the "Short Work Week Fund". The Fund shall be used to pay any Employee for any week for which he is -39- 43 scheduled to work an amount equal to the product of his Regular Wage Rate times the difference between (1) 32 hours, and (2) the sum of the hours he actually worked, plus the hours he did not work but for which he was paid by the Company (excluding the first eight hours for which he received pay for unworked Holidays in any week), plus the hours he was scheduled to work but did not work because of his failure to report for work as scheduled. The Company's obligation shall be limited to the prompt payment of the $.10 per hour into the Fund. Funds in excess of $600,000 may be used by the Company to offset costs as associated with the Long Term Disability Plan and the continuance of medical insurance benefits to Employees on layoff. ARTICLE 23 MISCELLANEOUS SECTION 1 - TERMINATION. This Agreement shall terminate at the expiration of sixty (60) days after either party shall give notice of termination to the other party, but in no event shall it terminate prior to March 31, 1998. SECTION 2 - MAILING OF NOTICES. Any notice to be given under this Agreement shall be given by registered or certified mail; be completed by and at the time of mailing; and if by the Company, be addressed to the Union at the following addresses: United Steelworkers of America District 38 360 West 5300 South, #350 Murray, UT 84123 United Steelworkers of America Local Union 2701 1847 Columbia Lane -40- 44 Orem, UT 84058 United Steelworkers of America Jack R. Golden Director, District 12 12821 Industrial Road Houston, TX 77015 and if by the Union to the Company at: Vice President, Human Resources Geneva Steel P. O. Box 2500 Provo, UT 84603 Either party may, by like written notice, change the address to which registered mail notice to it shall be given. SECTION 3 - RATIFICATION. This Agreement shall be binding on the parties hereto only after affirmative ratification by Local 2701 and approval of the Board of Directors of the Company. IN WITNESS WHEREOF we have hereunto set our hands the day and year first above written.
UNITED STEELWORKERS GENEVA STEEL OF AMERICA - ------------ ------------------- Joseph A. Cannon George Becker CEO and President Chairman of the Board Leo W. Gerard Carl E. Ramnitz Secretary, Treasurer
-41- 45 V.P. of Human Resources Richard H. Davis V.P. of Administration Leon Lynch V.P. Human Affairs Robert J. Petris District Director Dallas Alexander Subdirector, District 38 Subdistrict 12 Dennis Kujala President Local 2701 Michael Vincent Chairman, Grievance Committee Lionel Camara Secretary, Grievance Committee Jim Christensen Grievanceman
-42- 46 APPENDIX A HOURLY WAGE SCALE EFFECTIVE DATES
JOB CLASS MARCH 1, 1995 MARCH 1, 1996 MARCH 1, 1997 1 $ 9.85 $ 9.85 $ 9.85 2 $12.08 $12.44 $12.82 3 $12.24 $12.60 $12.98 4 $12.39 $12.76 $13.15 5 $12.55 $12.92 $13.31 6 $12.70 $13.08 $13.47 7 $12.85 $13.24 $13.64 8 $13.01 $13.40 $13.80 9 $13.16 $13.56 $13.97 10 $13.32 $13.72 $14.13 11 $13.47 $13.88 $14.29 12 $13.63 $14.04 $14.46 13 $13.78 $14.19 $14.62 14 $13.94 $14.35 $14.78 15 $14.09 $14.51 $14.95 16 $14.24 $14.67 $15.11 17 $14.40 $14.83 $15.28 18 $14.55 $14.99 $15.44 19 $14.71 $15.15 $15.60 20 $14.86 $15.31 $15.77 21 $15.02 $15.47 $15.93 22 $15.17 $15.63 $16.10 23 $15.33 $15.79 $16.26
-43- 47 24 $15.48 $15.95 $16.42 25 $15.64 $16.10 $16.59 26 $15.79 $16.26 $16.75 27 $15.94 $16.42 $16.92 28 $16.10 $16.58 $17.08 29 $16.25 $16.74 $17.24 30 $16.41 $16.90 $17.41 31 $16.56 $17.06 $17.57 32 $16.72 $17.22 $17.73 33 $16.87 $17.38 $17.90 34 $17.03 $17.54 $18.06
APPENDIX B INSURANCE BENEFITS MEDICAL INSURANCE The medical insurance which shall become effective upon the effective date of this agreement is contained in a booklet entitled Geneva Steel Health Plan, a copy of which will be provided to each employee. Such booklet constitutes a part of this Appendix as though incorporated herein. LIFE INSURANCE Group life insurance in the amount of $25,000 per Employee shall be provided by the Company. DEPENDENT LIFE INSURANCE Life Insurance for eligible dependents shall be provided by the Company in the amount of $5,000 for spouse and $2,000 for each child. ELIGIBILITY -44- 48 Full-time, permanent Employees become eligible for the above benefits on the first day of the month thirty (30) days after hire. Pre-existing conditions will be excluded from coverage for a period of nine (9) months. CONTINUANCE In the event of reduction in force, the above-described benefits for full-time, permanent Employees will continue according to the following schedule:
YEARS OF SERVICE INSURANCE CONTINUANCE - ---------------- --------------------- 0 To 5 End of month plus 2 months 5 to 10 End of month plus 4 months 10 or more End of month plus 6 months
In all other cases, the benefits cease on the last day worked. SICKNESS AND ACCIDENT Employees who become totally disabled as a result of sickness or accident, as certified by a licensed physician, will be eligible to receive weekly sickness and accident benefits. Benefits will not be payable for any period during which an employee is not under the care of a licensed physician. The weekly sickness and accident benefits will commence on the 8th day following an illness and on the first day following an accident and continue in accordance with the following schedule: -45- 49
YEARS OF SERVICE WEEKS ---------------- ----- 1st (after probation) 13 1-20 years 26 Over 20 years 52
The amount of the weekly benefit during the term of this agreement will be $300.00. In order for the Company to process claims in a timely fashion and to determine eligibility for benefits, a claim must be received by the Company within 21 days of the commencement of the disability. If the Employee exceeds 21 days, and the Employee demonstrates a good reason that he was unable to file the claim within the 21 days, an Employee's benefits shall commence on the date of filing if the Company is able to establish the medical and other factual aspects of the claim and determines that the Employee is eligible for benefits. If the Employee is physically unable to comply with this procedure, he should have someone notify the Geneva Steel Benefits Office in writing of his disability before the end of the twenty-one (21) day period. Sickness and accident benefits will be administered according to the Company's processing procedures, and weekly benefits will be reduced under the following circumstance where other benefits are payable: Workers' Compensation. If an employee is otherwise entitled to sickness and accident benefits and he is making claim for Temporary Total Disability benefits pursuant to any workers' compensation or occupational disease law, the sickness and accident benefits will be paid only after satisfactory arrangements are made to assure that any payment of sickness and accident benefits shall be reimbursed by the employee if the claim for Workers' Compensation benefits is successful. Such arrangements shall include the employee's execution of necessary documents authorizing the deduction of any such overpayment from any payments becoming due as a result of such claim or from any amount payable the employee by or on behalf of the Company, including benefits, wages and pension payments. Long-Term Disability. If an eligible employee becomes permanently and totally disabled defined as the inability to perform a bargaining unit job after one (1) full year of disability, he shall be eligible to receive a long-term disability benefit in the amount of $400 per month for a maximum of forty-eight (48) months. In order to be -46- 50 eligible for such benefit, an employee must (a) have 15 years or more of continuous service at the commencement of disability; and (b) be actively at work at the commencement of disability. APPENDIX C COVERED SALARIED CLERICAL AND TECHNICAL EMPLOYEES 1. It is understood that the Clerical and Technical Employees represented by USWA Local Union 2701 are covered by this Agreement between Geneva Steel and the United Steelworkers of America. 2. The Employees of this Clerical and Technical Unit will be paid on a wage hourly pay scale as set forth in Appendix A. 3. The C&T positions will have a guarantee of 40 hours work per week, which includes unworked hours which are paid on holidays. The Company will pay the employees of the C&T unit 40 hrs. per week except if the employee is absent without leave. If an employee is ill, is involved in an accident which precludes him from working, or has a personal family emergency during their scheduled week and, if otherwise qualified, he shall be paid for 40 hours that week. A supervisor may require certification of an illness by a licensed physician when they feel such verification is necessary. After an employee is absent from work due to sickness, for a period of seven (7) days, he becomes eligible to apply for S&A Benefits commencing on the eighth (8th) day of illness (see Appendix B). -47- 51 APPENDIX D PROFIT SHARING PLAN FOR GENEVA STEEL BARGAINING UNIT EMPLOYEES A Profit Sharing Plan for eligible Geneva Steel Bargaining Unit Employees (the "Profit Sharing Plan") will be in effect for the duration of the contract commencing March 1, 1995. The Profit Sharing Plan will be calculated and paid annually based on the Company's fiscal year accounting records. The Company's fiscal year ends on the last day of September of each year. A. The Profit Sharing Plan shall be based on the Company contributing to a pool (the "Profit Sharing Pool") ten percent of Geneva Steel's adjusted earnings before taxes and excluding extraordinary items ("A.E.B.T.") for the fiscal year if A.E.B.T. is positive. A.E.B.T. shall mean earnings before taxes excluding profit sharing, reduced by Allocated Capital Expenditures. Allocated Capital Expenditures shall mean twenty-five percent (25%) of all Capital Expenditures up to $50 million and thirty percent (30%) of all Capital Expenditures in excess of $50 million. Capital Expenditures shall mean the aggregate of all of the Company's actual capital expenditures (in accordance with generally accepted accounting principles) for the fiscal year, including capital maintenance. If for any fiscal year the Company's Capital Expenditures exceed $85 million or the Company does not have sufficient cash (before payment of dividends) and/or the ability to borrow funds against its working capital line to pay profit sharing and have sufficient funds available to cover any then forecasted negative cash flow in the six months following the scheduled payment of the profit sharing, the Company shall at its option have the right to pay its Profit Sharing Pool obligation in the form of shares of the Company's common stock at a value then agreed to by the Company and the Union, or if they can't agree, at a value determined by an independent appraiser acceptable to the Company and the Union, or to defer the obligation for up to two (2) years with interest at 8% per annum. If the parties are unable to agree on an independent appraiser, they shall select an appraiser in the manner set forth in paragraph E below, substituting five qualified appraisers for the five auditors. -48- 52 B. All bargaining unit employees shall be eligible to participate in the Profit Sharing Plan if they were actively at work at any time during the subject fiscal year. Employees, other than employees who die or retire, whose employment is terminated, voluntarily or involuntarily, during the fiscal year shall not be eligible to participate in the Profit Sharing Plan for the subject year. Probationary employees during their probationary employment period shall not be eligible to participate in the Profit Sharing Plan under any circumstances nor shall the first 760 hours of work be considered as eligible hours of work under this Plan. C. The Profit Sharing Pool for each fiscal year, if any, as calculated pursuant to paragraph A above shall be allocated to each eligible bargaining unit employee on the basis of each Employee's Profit Sharing Plan Hours as compared to total Profit Sharing Plan Hours. An Employee's Profit Sharing Plan Hours shall mean the lesser of (a) the sum of the hours the employee actually worked for which the employee is paid during the fiscal year plus the hours for which the employee receives vacation pay, or (b) 2080 hours. Total Profit Sharing Plan Hours shall mean the total of all the eligible bargaining unit Employee's Profit Sharing Plan Hours. D. The fiscal year Profit Sharing Plan payments to employees, if any, will be reduced by PDP payments made during the period for which the profit share is calculated. Profit Sharing Plan payments shall be made to eligible employees in a separate check during December following the fiscal year in which they were earned, unless payment is delayed pursuant to paragraph F below or deferred pursuant to paragraph A above. On or before October 31 of each year, the Company will issue to each eligible bargaining unit employee a summary of the Employee's Profit Sharing Plan Hours for the subject fiscal year and the report to the Union referred to in paragraph E below. On or before November 10 following the fiscal year any employee who objects to the number of hours set forth on his or her summary shall file a written statement setting forth the basis for the objection. The Union and the Company shall resolve any disputes promptly. If an individual written objection is not filed on or before November 10 following the fiscal year any such objection will be barred from thereafter being filed. No employee may object on behalf of any other employee, nor may any employee object to the amount of the Profit Sharing Pool or the overall allocation thereof. E. Not later than 15 days before the anticipated payment date, the Company will provide the Union with a report of the Company's independent certified public accountants certifying to the A.E.B.T. and Allocated Capital Expenditures as set forth above, all in accordance with generally accepted accounting principles. In addition, reasonable information to support the report will be furnished upon request. The Union shall have the right to retain, at its own expense, an independent -49- 53 certified public accountant for the purpose of verifying the report described above. In the event that the Company's CPA and the Union's CPA cannot resolve their differences, the Company and the Union shall select a third independent certified public accountant to resolve the matter. If the Company and the Union are unable to agree to an acceptable independent public accountant, the parties agree to select an independent accounting firm from a list of five major independent accounting firms, by a process of elimination through alternate striking of the firms until only one remains. The list of major independent accounting firms shall be agreed to in a separate letter of agreement. The accounting data supplied to the independent accounting firm shall be limited to data that are essential to verify the Profit Sharing Plan, which shall include PDP payment deductions, Adjusted Earnings Before Taxes, Actual Capital Expenditures, profit sharing hours, and, if applicable, cash flow justification. All confidential or proprietary information supplied or otherwise made available to the independent accounting firms any union representatives pursuant to this agreement shall be held in the strictest confidence and used only for the purpose of verifying amounts to be distributed to employees under this plan. The cost of any such audit shall be shared equally by the Company and the Union. If the Union does not request an independent third audit within forty-five (45) days of its receipt of the report from the Company's CPA described above, such report shall be deemed accepted, and the Union shall thereafter have no right to challenge the report to make a request for any audit for the subject fiscal year. F. The Company shall not make any Profit Sharing Plan payments to any person until all employee objections described in paragraph D above have been resolved. G. Under no circumstances other than defined below shall the Company be required to contribute to the Profit Sharing Plan Pool, for any fiscal year more than the total amount calculated pursuant to paragraph A above. To the extent that the Company, for any reason, over-funds the Profit Sharing Plan Pool for any fiscal year, the Company shall deduct the amount of such over- funding from the Profit Sharing Plan Pool for the next fiscal year or years in which the Profit Sharing Plan makes a payment until all the over-payment is recovered. If for any reason the Company should under-fund the Profit Sharing Plan Pool, the under-funding shall be repaid and distributed in accordance with this plan. H. Payments under the Profit Sharing Plan shall be included as compensation for income tax, F.I.C.A., union dues and pension purposes, but shall not be a part of an employee's pay for any other purpose and shall not be used in the calculation of any other Company payment, allowance or benefit. -50- 54 APPENDIX E TURN COORDINATORS The Union and the Company recognize a need for proper manning and the -51- 55 efficient utilization of turn coordinators. A turn coordinator is a true working member of the crew, who has the responsibility to direct the activities of others. In order to address and resolve differences concerning this position, the parties have discussed and agreed to the following: 1. The Company will identify to the Union, turn coordinator assignments and current personnel who are working as turn coordinators. Future turn coordinator vacancies in those positions will be filled on a seniority basis from within the line of progression. Employees awarded those positions will be paid three job classes above the highest job they supervise. If, due to an increase in operations or to fill for temporary vacancies, additional turn coordinators are needed, they will be assigned in seniority order from a list of employees who have expressed an interest in being trained as turn coordinators and who have satisfactorily completed a voluntary leadership training program established by the Company at the Company's expense. Employees electing to train as a turn coordinator will (1) have the requirements and responsibilities (i.e. personnel and crew attendance, safety, work performance, etc.) reviewed with them; (2) have their training period outlined; (3) have the evaluation system explained and their performance reviewed with them a minimum of once every two weeks. If an employee is removed from the turn coordinator position, either voluntarily or at the discretion of Management, he will return to his former incumbent position. Should the Employee feel that his/her removal from that position was unwarranted, they may initiate a grievance consistent with Article 16 of the Agreement. APPENDIX F SUCCESSORSHIP LANGUAGE The Company agrees that it will not sell, convey, assign or otherwise transfer the Geneva Plant or any significant part thereof covered by this Agreement unless prior to the closing date of the sale the Buyer shall have entered into a collective bargaining agreement -52- 56 with the Union establishing the terms and conditions of employment to be effective as of the closing date, or the Buyer shall have agreed to abide by the terms and conditions of this Agreement. APPENDIX G MEMORANDUM OF AGREEMENT In order to better implement and apply the provisions of Article 13, Section 6 - Alcoholism and Drug Abuse, and to comply with existing state and federal laws, the -53- 57 Company and the Union have discussed and agree to the following terms and conditions as an addendum to Article 13, Section 6, and as such it is not intended to change or alter any other provisions of the Collective Bargaining Agreement. 1. The initial cutoff levels for the following six drugs or classes of drugs shall be used when screening specimens to determine whether or not they are negative: Marijuana Metabolites 50 ng/ml Cocaine Metabolites 300 ng/ml Opiate Metabolites 300 ng/ml Phencyclidine 25 ng/ml Amphetamines 1,000 ng/ml Alcohol 80 mg/dl Any results at or above the foregoing levels will be considered a positive test result. In the event NIDA lowers the cutoff level for any of the substances listed above, the parties agree to lower the level accordingly. 2. When an employee is discharged following a positive drug or alcohol test, a Step 1 meeting will be held with appropriate Management and Union representatives within five (5) working days of the date of discharge. If it is determined in the Step 1 meeting that the discharged employee is to be offered a "Last Chance Agreement", the Company representative from Human Resources will explain the differences in the two types of Last Chance Agreements which may be offered. The Company representative and the Union Grievance Committeeman will work together to impress upon the employee his/her requirements to strictly comply with the terms of the Last Chance Agreement which is offered. 3. The two Last Chance Agreements to be used are attached as Exhibit I and II of this Agreement. The first Agreement (Exhibit I) is to be offered in situations where the discharged employee recognizes that he/she may have a drug and/or alcohol abuse problem. Consequently, the employee will be required to go to the Employee Assistance Program for an evaluation, and if required, complete a rehabilitation program. The second type of Agreement (Exhibit II) will be used when the employee maintains that he/she does not have an abuse problem and that the drug and/or alcohol problem can be corrected without the assistance of a rehabilitation program. At a minimum, however, an employee who is offered the second type of Agreement must attend a drug and alcohol awareness class. 4. The Company and the Union agree to establish a "Company/Union Drug and Alcohol Abuse Committee." The Committee will consist of two members from the Union (the President and the Grievance Committee Chairman), and two -54- 58 members of management. In the event an employee discharged for drugs or alcohol is from the Grievance Committee Chairman's home department, the Secretary of the Grievance Committee will replace the Grievance Committee Chairman in that one instance. The two Company members will be from Human Resources or one member may be a Management representative from a department other than the one in which the discharged employee works. The Committee will function as outlined in the provisions of this Agreement. 5. In addition to testing an employee for drugs and alcohol consistent with the provisions of Article 13, Section 6, the Company may also test an employee who has signed a Last Chance Agreement at any time for a period of one year following the signing of either type of Last Change Agreement. Further, the Company may also test the employee who is working under the terms of a Last Chance Agreement any time he/she returns from any absence from work in excess of seven (7) days (excluding vacations) for a period of up to five (5) years after the signing of the Last Chance Agreement. The Last Chance Agreement will expire after a period of five (5) years after the signing of the agreement, provided there are no further infractions of this type in that period of time. 6. If an employee tests positive for drugs or alcohol after signing a Last Chance Agreement, he/she will be immediately suspended from work. The employee will remain on suspension until the Company/Union Drug and Alcohol Abuse Committee have an opportunity to meet with the suspended employee. The meeting will be held within seven (7) working days of the date of the employee's suspension. The intent of the meeting will be to hear and discuss the employee's explanation for his/her second positive drug and/or alcohol test. If the Committee determines that the employee had extenuating circumstances which led to legitimate and documented reasons for his/her actions (i.e. recent divorce, death in the immediate family, etc.), the employee may be reinstated with an extended suspension and a reinstruction that any additional positive drug or alcohol tests will result in discharge. If the Committee determines that the employee did not have a legitimate reason for a second positive test (i.e. the deer hunt, poker game, etc.), the employee's suspension will be converted to discharge. 7. The Company will supply the Union and the Employee with a release of information form which an employee may elect to sign. The release will allow the appropriate Company Representative to supply the Employee with the drug and/or alcohol test results (including the level at which the employee tested), and to supply that information to the Union. 8. This Agreement will become effective on the date of the Collective Bargaining Agreement, and it will have no bearing or affect on any drug and/or alcohol -55- 59 related cases which occurred prior to June 14, 1993. EXHIBIT I MEMORANDUM OF AGREEMENT The following agreement provides John Doe #00000 with the opportunity to resolve any and all issues related to his discharge of (date) for reporting to the plant and/or working under the influence of illegal drugs (or alcohol). Mr. Doe has had the following conditions reviewed with him by the Company and the Union and agrees that he must comply with the following: 1. Mr. Doe must meet with a professional counselor from the Employee Assistance Program in order to evaluate the extent of his condition and a recommendation for treatment. If a treatment program is recommended, Mr. Doe must successfully complete the drug (or alcohol) rehabilitation program and supply management with proof of attendance to and successful completion of said program. Mr. Doe will be returned to employment provided he is medically certified as competent to do so by both a qualified representative of the rehabilitation institution and a -56- 60 physician. 2. If a treatment program is recommended and at any time Mr. Doe fails to comply with the requirements of that rehabilitation program, such that the intent of the rehabilitation effort cannot be met, the agreement to return grievant to work will become null and void with his status as an employee being converted to discharge. Further, if the rehabilitation effort is complete and after having returned to work, he again returns to an alcoholic or drug afflicted state or tests positive for illegal drugs or is found working in a condition unfit for work, he understands he will be suspended pending a review by the Company/Union Drug and Alcohol Abuse Committee. If the Committee determines that Mr. Doe was clearly responsible for his actions, the suspension will be converted to a discharge. If Mr. Doe fails to comply with the terms of this agreement and is subsequently discharged, he understands he will not be eligible to be rehired as an employee of Geneva Steel. 3. The discharge issued to Mr. Doe will be converted to a suspension to cover a period of time from (date) until the day he returns to work at Geneva Steel. 4. Management has complied fully with Article 13, Section 6--Alcoholism and Drug Abuse by allowing the employee to return to active employment following his evaluation and, if required, involvement in a drug (or alcohol) rehabilitation program. With the signing of this agreement, Mr. Doe acknowledged he is not entitled to any further consideration under Section 6. 5. Mr. Doe understands that he must report off in a timely fashion and properly substantiate any absences as required by Management consistent with department report off and absenteeism policies. 6. Mr. Doe agrees to submit to a drug or alcohol test at any time during the next year from the signing of this agreement, solely at Management's discretion, as a condition of his continued employment with Geneva Steel. 7. Mr. Doe agrees to submit to a drug or alcohol test any time he returns from an absence from work in excess of seven days (excluding vacations) for a period of five years from the signing of this Agreement. 8. This agreement is without prejudice or precedent and shall not be referred to in the handling of similar issues should they arise. -57- 61 ------------------------------ ------------------------------ Union Representative Management Representative ------------------------------ ------------------------------ Date Date I have read, understand, and agree with the terms of this agreement. ------------------------------ ------------------------------ Signature Date EXHIBIT II MEMORANDUM OF AGREEMENT The following agreement provides John Doe #00000 with the opportunity to resolve any and all issues related to his discharge of (date) for working under the influence of illegal drugs (or alcohol). Mr. Doe has had the following conditions reviewed with him by the Company and the Union and agrees that he must comply with the following: 1. Management has complied fully with Article 13, Section 6--Alcoholism and Drug Abuse by returning the employee to active employment following his positive drug (or alcohol) test on (date) . With the signing of this agreement, Mr. Doe acknowledges he is not entitled to any further consideration under Section 6. 2. Mr. Doe has informed the Company and the Union that he is physically able to perform the full scope of his job duties and does not require any form of rehabilitation. Such being the case, if at any time in the future, Mr. Doe is again found to be working in an unfit condition or tests positive for illegal drugs (or alcohol), he understands he will be suspended pending a review by the Company/Union Drug and Alcohol Abuse Committee. If the Committee determines that Mr. Doe was clearly responsible for his actions, the suspension will be converted to a discharge. If Mr. Doe fails to comply with the terms of this agreement and is subsequently discharged, he understands he will not be eligible -58- 62 to be rehired as an employee of Geneva Steel. 3. The discharge issued to Mr. Doe will be converted to a suspension to cover the period of time from (date) until the day he returns to work at Geneva Steel. 4. Mr. Doe understands that he must report off in a timely fashion and properly substantiate any absences as required by Management consistent with department report off and absenteeism policies. 5. Mr. Doe agrees to submit to a drug or alcohol test at anytime during the next year from the signing of this agreement, solely at Management's discretion, as a condition of his continued employment with Geneva Steel. 6. Mr. Doe agrees to submit to a drug or alcohol test any time he returns from an absence from work in excess of seven days (excluding vacations) for a period of five years following the signing of this agreement. 7. This agreement is without prejudice or precedent and shall not be referred to in the handling of similar issues should they arise. ------------------------------ ------------------------------ Union Representative Management Representative ------------------------------ ------------------------------ Date Date I have read, understand, and agree with the terms of this agreement. ------------------------------ ------------------------------ Signature Date -59- 63 APPENDIX H PERFORMANCE DIVIDEND PLAN FOR GENEVA STEEL BARGAINING UNIT EMPLOYEES INTRODUCTION The Performance Dividend Plan (PDP) is designed to provide incentive payments to bargaining unit employees which recognize their contribution to increased productivity as compared to base levels. The PDP provides a dividend for increased prime shipped tons. The PDP will be calculated each month and a performance dividend for the month will be included in the employee's pay in the following month consistent with the calculations set forth below. DEFINITIONS Shipped Tons Shipped Tons include every ton of steel which is produced at the Geneva Plant, as defined in the Collective Bargaining Agreement, as hot roll product through the 132" mill facility, slabs shipped and sold in slab form to commercial customers and not further processed in any form at Geneva, and cast foundry merchant products for merchant sales, and is actually shipped to any customer during the month for which the calculation is being made. Secondary Shipped Tons Seconds include any steel product which when produced is defective in relation -60- 64 to the order or specification for which it was made (such as defects in chemistry, gauge, width, length, shape or surface) or which is damaged in the course of production, handling or shipping, regardless of when or where that defect or damage is discovered. Prime Shipped Tons Prime Shipped Tons are defined as Shipped Tons minus Secondary Shipped Tons. Base Prime Shipped Tons Because this program is designed to pay a dividend, for performance above stated levels, a "base" has been defined for Prime Shipped Tons. The actual base number for each month will vary, depending on the number of days in the month. A table showing the Base Prime Shipped Tons for each month is set forth in Determinants and Base Quantities below. Fixed Dividend Percent A fixed dividend of 2.5% will be paid for the month when the Actual Prime Shipped Tons exceeds the Base Prime Shipped Tons established for that month. Incremental Prime Shipped Tons Incremental Prime Shipped Tons are the tons calculated by subtracting the Base Prime Shipped Tons from the Actual Prime Shipped Tons. Incremental Prime Shipped Tons Determinant The PDP is designed to pay an increasing dividend for each Prime Shipped Ton above the monthly base. To determine how much each Incremental Prime Shipped Ton above the Base Prime Shipped Ton is worth, there is a "Determinant", which, when applied to the incremental tons above the base, will produce a PDP%. The PDP% when applied to the individual base rate will determine the dollar per hour for the PDP payment. The following table shows the incremental Prime Shipped Tons Determinant. -61- 65 PERFORMANCE DIVIDEND PLAN DETERMINANTS AND BASE QUANTITIES PRIME SHIPPED TONS 1. Fixed Dividend %: Prime Shipped Tons over Base Prime Shipped Tons for the month = 2.5% 2. Incremental Prime Shipped Tons Determinants:
DIVIDEND % PER INCREMENTAL MONTH PRIME SHIPPED TON ----- ----------------- February .00016657% February (Leap Year) .00016082% April, June, September, .00015546% November January, March, May, July, .00015045% August, October, December
3. Base Prime Shipped Tons Quantities:
BASE PRIME SHIPPED MONTH TONS PER MONTH ----- -------------- February 103,562 February (Leap Year) 107,260
-62- 66 April, June, September, 110,959 November January, March, May, July, 114,657 August, October, December
RULES 1. The PDP will go into effect on the effective date of the Collective Bargaining Agreement and will remain in effect for the duration of the Agreement. Eligible employees will be those defined as participants under the Profit Sharing Plan for Geneva Steel Bargaining Unit Employees, Appendix D, paragraph B. 2. The PDP will be calculated each month and a performance dividend for the month will be included in the employee's pay in the following month consistent with the calculations set forth in the Determinants and Base Quantities shown above. 3. PDP payments under this plan shall be included as compensation for income tax, FICA, union dues, pension purposes, and as otherwise required by law, but shall not be a part of employees' pay for any other purpose. 4. For purposes of calculating an individual's PDP payout, the Performance Dividend will be applied to the lesser of the first 173.3 hours worked or the number of hours the employee actually worked during the month. 5. The fiscal year Profit Sharing Plan payments to employees, if any, will be reduced by PDP payments made during the period for which the profit share is calculated. 6. If an employee's PDP payment is less than $.33/hr based on the Company's plan, the Company pays the employee $.33/hr on the PDP hours determined for the month. 7. The PDP contribution to the VEBA Trust Fund will be determined by applying the calculated VEBA Contribution dollar per hour to each employees PDP hours for the month. 8. The employees VEBA contributions will reduce PDP payments applied to any -63- 67 profit sharing calculations. EMPLOYEE VEBA CONTRIBUTION FUND GENEVA STEEL BARGAINING UNIT EMPLOYEES INTRODUCTION The Employee VEBA Contribution Fund is designed to allocate a portion of each employees monthly PDP payment into the VEBA Trust Fund. The calculated dollar per hour resulting from the application of the below defined determinants and quantities, will be used to determine an amount to be deducted from each employees' monthly PDP payment. The resulting amount deducted from the employee's PDP pay will be contributed to the VEBA Trust Fund. Exhibit I illustrates several examples of how the VEBA contributions will be calculated. DEFINITIONS Applicable definitions used in the Employee VEBA Contribution Fund are the same as described in the preceding performance dividend plan. -64- 68 EMPLOYEE VEBA CONTRIBUTION FUND DETERMINANTS AND BASE QUANTITIES Incremental Prime Shipped Tons Determinants:
VEBA CONTRIBUTION $/HR.PER INCREMENTAL MONTH PRIME SHIPPED TON PER MONTH ----- --------------------------- February $0.000002414 February (Leap Year) $0.000002331 April, June, September, $0.000002253 November January, March, May, July $0.000002180 August, October, December
Base Prime Shipped Tons Quantities:
BASE PRIME SHIPPED MONTH TONS PER MONTH ----- -------------- February 110,466 February (Leap Year) 114,411 April, June, September, 118,356 November January, March, May, July 122,301 August, October, December
-65- 69 EXHIBIT I VEBA PDP CONTRIBUTION EXAMPLE ASSUME PDP @ 1995 LEVEL 8.47% VEBA CONTRIBUTION $/HR BASED ON NOV. TONNAGE $0.07 - -------------------------------------------------------------------------------- JOB CLASS 10 BASE RATE MARCH 1995 $13.32 X % PDP 8.47% PDP HOUR = $1.13 ASSUME X PDP HOURS FOR MONTH 173.3 REG. PDP PAYMENT = $195.52 LESS VEBA CONTRIBUTION $0.07 X 173.3 *ADJ. REG. PDP PAYMENT = $12.13 LESS ------ $183.39 EQUALS CONTRIBUTION TO VEBA TRUST $12.13 - -------------------------------------------------------------------------------- JOB CLASS 20 BASE RATE MARCH 1995 $14.86 X % PDP 8.47% PDP HOUR = $1.26 ASSUME X PDP HOURS FOR MONTH 173.3 REG. PDP PAYMENT = $218.12 LESS VEBA CONTRIBUTION $0.07 X 173.3 *ADJ. REG. PDP PAYMENT = $12.13 LESS ------ $205.99 EQUALS CONTRIBUTION TO VEBA TRUST $12.13 - -------------------------------------------------------------------------------- *ADJ. REG. PDP PAYMENT WILL BE USED TO ADJUST ANY PROFIT SHARE ALLOCATION. -67- 70 JOB CLASS 34 BASE RATE MARCH 1995 $17.03 X % PDP 8.47% PDP HOUR = $1.44 ASSUME X PDP HOURS FOR MONTH 173.3 REG. PDP PAYMENT = $249.98 LESS VEBA CONTRIBUTION $0.07 X 173.3 *ADJ. REG. PDP PAYMENT = $12.13 LESS ------ $237.84 EQUALS CONTRIBUTION TO VEBA TRUST $12.13 - -------------------------------------------------------------------------------- *ADJ. REG. PDP PAYMENT WILL BE USED TO ADJUST ANY PROFIT SHARE ALLOCATION. -68- 71 APPENDIX I 401(K) PLAN Effective March 1, 1996, the Company will provide a twenty-five percent (25%) match to employee contributions of up to four percent (4%) to the 401(k) Plan. The matching contribution may be made in cash or in Company stock. Example: If an employee contributes $100 of his or her gross pay, the Company will add an additional $25 in cash or Company stock. -69- 72 APPENDIX J VEBA TRUST VOLUNTARY EMPLOYEE BENEFICIARY ASSOCIATION TRUST The Company agrees to establish a tax-exempt trust under Section 501(c)(9) of the Internal Revenue Code ("VEBA Trust") to fund post-retirement medical benefits for future retirees from the USWA bargaining unit. The Company's contributions to the VEBA shall consist of, and be limited to: 1. The amount by which forfeitures have reduced or will reduce the Company's pension contributions to the Geneva Steel Union Employees Savings and Pension Plan from January 15, 1990 through March 31, 1998. 2. $.10 for each hour of work performed by Union employees for the Company from March 1, 1995 through March 31, 1998. 3. A one-time only contribution of $50,000 to be made upon establishment of the VEBA. 4. Revision of the Performance Dividend Plan (PDP) slope, effective March 1, 1995 through March 31, 1998 to provide, e.g., a VEBA payment of $.05 per hour at 1.9 million total shipped tons or 1.71 million prime shipped tons, $.10 per hour at 2.2 million shipped tons or 1.98 million prime tons, $.15 per hour at 2.5 million shipped tons or 2.25 million prime tons, etc. The resulting VEBA contribution will be deducted from the employees' PDP monthly payment and contributed to the VEBA Trust. The VEBA contribution amount will reduce the PDP payment amount applied to any profit sharing calculations. No benefits will be paid from the VEBA Trust prior to March 31, 1998. The parties will meet during the 1998 labor negotiations to negotiate the establishment of -70- 73 eligibility requirements and related matters, including the possibility of providing life insurance benefits. APPENDIX K -71- 74 LETTER AGREEMENT March 10, 1995 Mr. Dallas Alexander United Steelworkers of America Subdistrict 5 5300 South 360 West, Suite 350 Murray, UT 84123 Re: Right to make Offer on Sale of Facilities Dear Mr. Alexander: In connection with the recently completed negotiations between the United Steelworkers of America ("USWA") and Geneva Steel Company (the "Company"), the parties have reached the following understandings applicable in the event of the sale by the Company of substantially all of the physical properties constituting the Geneva Plant covered by the basic labor agreement (hereinafter the "Facilities"): 1. a. Should the Company decide to sell or otherwise transfer substantially all of the Facilities, it will consider the USWA and its members as a potential buyer therefor. The Company will advise the USWA in writing of its intent to sell such Facilities. The tendering to the Company of an unsolicited offer to purchase the Facilities shall only be considered a decision to sell or otherwise transfer ownership of such Facilities if the Company commences substantive negotiations with such offeror or its representatives. In no case, however, shall the Company enter into any agreement or understanding to sell the Facilities without first complying with the provisions of this letter unless compliance with such prohibition would, based upon an opinion of counsel, constitute a breach by any director of such director's obligations to the Company or its shareholders. -72- - - 75 b. Subject to the USWA and the Company entering into a Confidentiality Agreement, the Company will provide the USWA with information and access to Company personnel and facilities needed to determine whether it wishes to make an offer. Such information and access shall be of the type customarily provided to similarly situated prospective purchasers for such Facilities. c. During the first thirty (30) days from the date the Company notifies the USWA pursuant to paragraph 1.a above, the Company will not enter into a contract for sale of the Facilities unless compliance with such prohibition would, based upon an opinion of counsel, constitute a breach by any director of such director's obligations to the Company or its shareholders. The USWA shall be entitled to submit a written offer to purchase the Facilities at any time during such thirty (30) day period. d. During the next sixty (60) day period, the Company will be free to accept offers from other entities for the Facilities, and the USWA will be entitled to submit an offer during such period if submitted prior to acceptance by the Company of such other entity's offer. During such period, the Company shall provide the USWA five business days notice prior to accepting an offer from an entity other than the USWA. e. In the event the thirty (30) day period referred to in paragraph 1.c has elapsed, the Company shall be entitled, subject to this paragraph 1.e and paragraph 1.f, to enter into an agreement to sell such Facilities to any purchaser, including the USWA, provided that such a transaction must close within one year after the end of such period. If the Facilities have not been sold during such one-year period, the Company must comply again with the provisions of this letter agreement before selling such Facilities. f. In the event that the USWA submits an offer within the time periods set forth in paragraphs 1.c or 1.d above and prior to the Company's acceptance of an offer during the period set forth in 1.d above, the terms of this paragraph shall apply. The Company shall be entitled to enter into a binding purchase agreement with regard to the Facilities with an -73- 76 entity other than the USWA provided that the transaction contemplated by such purchase agreement is, in the reasonable business judgment of the Board of Directors of the Company, more favorable to the Company than the USWA offer. In evaluating such offers, the Board of Directors of the Company may take into account any relevant factors, such as, without limitation, the purchase price, form of consideration, down payment, break up fees, security, structure, timing, identity of the offeror, risk of non-consummation, impact on the business of the Company, other obligations of the Company and other relevant legal, contractual, financial and political considerations. Nothing contained herein shall require the Company to accept any offer by an entity, including the USWA, for the purchase of the Facilities. In the event that the Company elects to accept an offer, the Company shall not be under any obligation to accept an offer from the USWA if it is not the most favorable offer or to negotiate with the USWA concerning such offer. 2. The rights granted the USWA under this letter agreement may not be transferred or assigned by the USWA except that its rights may be assigned to and exercised by an acquisition entity established by or for the USWA-represented employees covered by the above-referenced labor agreement; and, further provided, that said employees shall own directly or indirectly through an employee stock ownership (or similar) plan, not less than fifty-one percent (51%) of the voting equity interests in such acquisition entity. 3. Notwithstanding the foregoing, the Company's failure to abide by the provisions of this agreement shall not be the basis of preventing the sale of assets; rather, the remedy of the USWA shall be limited to actual damages which the Company and the USWA agree shall be limited to not more than $10 million. 4. This agreement shall remain in effect for the term of the Agreement between the USWA and Geneva Steel Company, dated March 1, 1995 (the "Collective Bargaining Agreement") and shall expire at the termination date of said Collective Bargaining Agreement. 5. Notwithstanding any other term of this agreement, the provisions of this agreement shall be of no legal effect to the extent such terms are inconsistent with the duties and obligations of the Company under any financing agreement -74- 77 previously entered into in good faith by the Company. 6. "Confidentiality Agreement" as used herein shall mean a written agreement which is reasonably acceptable to the Company and entered into between the Company and a prospective purchaser (including, if applicable, the USWA) governing the furnishing, confidential treatment and use of any non-public, proprietary and/or confidential information, whether written or oral, which the Company may provide to a prospective purchaser regarding the Company and/or Facilities the Company may offer for sale. In the event the Company and the USWA are unable to agree upon, and execute, such a Confidentiality Agreement, the Company shall not be obligated to deliver to the USWA any of said non-public, proprietary and/or confidential information. If the foregoing confirms our mutual understandings and agreements, please sign and return to me the duplicate original copy of this letter agreement at your earliest opportunity. Sincerely yours, GENEVA STEEL COMPANY By: /sig./ Ken Johnsen ACKNOWLEDGED AND AGREED TO this _____ day of __________________, 1995. -75- 78 UNITED STEEL WORKERS OF AMERICA By: /sig./ Dallas Alexander -76- EX-10.2 3 TACONITE PELLET SALES AGREEMENT 1 TACONITE PELLET SALES AGREEMENT THIS AGREEMENT is entered into as of the 31 day of May, 1995, but effective as of September 1, 1994 (the "Effective Date"), by and between GENEVA STEEL COMPANY, a Utah corporation ("Buyer"), with offices at 10 South Geneva Road, Vineyard, Utah 84058, and USX CORPORATION, a Delaware corporation ("Seller"), with offices at 600 Grant Street, Pittsburgh, Pennsylvania 15219. RECITALS: A. Buyer owns and operates the Geneva steel mill at Vineyard Utah (the "Geneva Works") which requires taconite pellets. B. Seller produces taconite pellets meeting the specifications set forth in the Pellet Specification Sheet, as defined herein. C. Buyer desires to obtain from Seller, and Seller desires to sell to Buyer, such taconite pellets on the terms and conditions set forth herein. AGREEMENT: NOW, THEREFORE, in consideration of the agreements, terms and provisions hereof, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows: I. TERM The term of this Agreement shall commence as of the Effective Date and shall expire August 31, 1999, subject to earlier termination as provided herein. II. QUANTITY A. During the term of this Agreement, and subject to the terms and conditions of this Agreement, Seller shall sell and deliver to Buyer, and Buyer shall purchase and receive from Seller, fluxed pellets ("Fluxtac pellets") and non-fluxed pellets ("standard pellets") (hereinafter collectively referred to as "Product") in quantities as defined hereafter. Seller shall not be obligated to sell or deliver to Buyer an amount in excess of the maximum natural net tons set forth as follows for each Contract Year (the "Maximum Tons") of Product hereunder or portions of a year pro-rata, or any specific quantity of standard pellets unless, in either case, by mutual agreement of the parties. Buyer is obligated to purchase and accept delivery of not less than the minimum natural net tons set forth below for each Contract Year (the "Minimum Tons") unless by mutual consent of the parties: 2
Minimum Tons Maximum Tons ------------ ------------ September 1, 1994 through August 31, 1995: 2,700,000 3,000,000 September 1, 1995 through August 31, 1996: 2,400,000 3,000,000 September 1, 1996 through August 31, 1997: 2,160,000 2,640,000 September 1, 1997 through August 31, 1998: 1,890,000 2,310,000 September 1, 1998 through August 31, 1999: 1,890,000 2,310,000
B. For each calendar year during the term of this Agreement, Buyer shall, no later than September 1 prior to the commencement of such calendar year, provide Seller with a written statement which specifies the quantities of Product that Buyer chooses to purchase and the calendar quarter during which delivery is requested. Buyer shall make its declarations hereunder in good faith. The election statement shall become the "Annual Declaration" of quantities of Product to be purchased hereunder during said calendar year, plus or minus ten percent (10%), provided, however, that in no event on an annual basis shall Seller be obligated to provide more than the Maximum Tons nor will Buyer be relieved of its obligation to purchase the Minimum Tons. In any event, the quantity of standard pellets nominated by Buyer shall be subject to Seller's approval. If Seller declines to supply the quantity of standard pellets elected by Buyer in the Annual Declaration, it shall give written notice to Buyer within fifteen (15) days after receipt of the Annual Declaration. Such notice shall contain the quantity, if any, of standard pellets that Seller has available for supply hereunder. Within fifteen (15) days after receipt of such notice, Buyer shall have the right to submit a revised Annual Declaration which specifies the quantities of Product to be purchased hereunder consistent with the quantity of standard pellets available for purchase from Seller. C. On or before the first day of each December, March, June and September during the term hereof, Buyer shall submit to Seller a written requested delivery schedule specifying quantities of Fluxtac pellets and standard pellets to be delivered in the next succeeding calendar quarter, which quantities shall be the same as the quantities stated for said calendar quarter in the Annual Declaration pursuant to Article II.B. above, plus or minus ten percent (10%), provided, however, that no increase shall be made pursuant to this clause which would cause Buyer's purchases to exceed the Maximum Tons or be less than the Minimum Tons. Buyer agrees to use reasonable efforts to schedule deliveries at as uniform a rate as practicable throughout the calendar quarter. The quantities scheduled as set forth in this Article II.C. shall be -2- 3 the binding purchase and sale commitments of Buyer and Seller hereunder. D. If Buyer determines at any time during a calendar year that it requires Product in excess of its Annual Declaration, Buyer may, but is not required to, notify Seller in writing of such requirements and offer to fill said requirements by purchasing additional Product under this Agreement at the Product Price applicable to such Product at the time of delivery. Seller shall either accept or reject any such offer to purchase, in whole or in part, in writing within seven (7) business days. No such offer shall be a binding purchase and sale commitment hereunder of Buyer and Seller, respectively, unless confirmed in a writing executed by both Buyer and Seller. III. DELIVERY A. Subject to Article III.B. hereof, Seller shall deliver Product to Buyer F.O.B. rail car at Seller's Minnesota Ore Operations at or near Mountain Iron, Minnesota. If Seller supplies Product produced by third parties pursuant to Section IV.F hereof, such Product may be delivered F.O.B. rail car at any point on the Duluth, Missabe & Iron Range Railway that is mutually agreed upon by the parties hereto. Buyer shall arrange transportation, provide rail cars suitable for each cargo, and accept deliveries according to the Delivery Schedules. B. Weights used for railroad billing purposes shall be the basis upon which Buyer shall pay Seller for Product delivered hereunder, and said weights shall be presumed to be accurate as to the volumes of Product purchased hereunder unless and until either party demonstrates that they are inaccurate; provided, however, that if railroad car tare weights are used to calculate the weight used for railroad billing purposes, then Buyer shall use reasonable efforts to ensure that cars dedicated to moving Product hereunder are light weighed at least once per year. C. For any individual railroad cars that are loaded at Seller's Minnesota Ore Operations for Buyer as part of a unit train that do not arrive at Buyer's facility at the same time as the unit train, Seller shall assign the straggler railroad cars a weight equal to the average weight of the balance of the railroad cars within the unit train and shall invoice Buyer for the entire unit train based upon the actual weight of the railroad cars arriving at Buyer's facility and the assigned weights for the straggler railroad cars. IV. QUALITY -3- 4 A. Product delivered hereunder shall conform to the specifications set forth in the document entitled "Quality Specifications for Minntac USS Fluxtac Pellets 060 Grade" issued by Seller for the relevant calendar year (the "Pellet Specification Sheet"). The Specification Sheet for the First Calendar Year is attached hereto and incorporated herein by reference, and the Specification Sheet for each Subsequent Calendar Year shall be attached and incorporated herein by reference when issued by Seller. In the event Seller fails to issue the Pellet Specification Sheet for any relevant calendar year, the Product delivered hereunder shall conform to the specifications in the most recently issued version the Pellet Specification Sheet. Should Seller from time to time change the quality or specifications of Product produced at its Minnesota Ore Operations for use at Seller's own steel production facilities so that Product of the specifications then being sold hereunder will no longer be produced at Seller's Minnesota Ore Operations, Seller will notify Buyer of said circumstances and make available to Buyer the pellets of revised specifications; provided, however, if the silica content of Product as specified in the Pellet Specification Sheet and being supplied hereunder is reduced below 3.6% or if any other change is made which has a material adverse effect on Buyer's operations, Buyer may, within twenty (20) days of receipt of notification of such reduction, terminate this Agreement on ninety (90) days prior written notice to Seller. Seller shall give Buyer not less than ninety (90) days written notice of any such change of quality or specifications. B. Seller shall retain samples of Product delivered hereunder as per standard practice of Seller and shall furnish Buyer with chemical analyses for each unit train lot shipped to Buyer and physical analyses as reasonably requested by Buyer but in no event less than on a monthly composite average basis. In the event the chemical or physical analyses performed from time to time by Buyer show a variation from the analyses furnished by Seller or from the expected analyses, and such variations cannot be reconciled on the basis of differences in moisture content or other factors, then a sample from the relevant delivery or deliveries shall be submitted to a mutually acceptable commercial testing laboratory for an independent analysis, the results of which shall be accepted as final by Seller and Buyer. Expenses related to an analysis by such commercial testing laboratory shall be shared equally by Seller and Buyer. C. If any delivery of Product hereunder does not conform to one or more of the minimum, maximum or range requirements of the specifications set forth in the Pellet Specification Sheet, as issued from time to time, the parties shall meet to discuss the reasons for nonconformity and a procedure for correcting the problem. -4- 5 D. The results of chemical and physical analyses to be furnished by Seller to Buyer shall be faxed and/or transmitted electronically to such persons or places as Buyer may from time to time direct within three (3) business days following loading of the rail cars at Mountain Iron to which the analyses relate. E. The physical quality, size, tumble index, and compressions of Product sold hereunder will be sampled at the 041 conveyor and reported as a plant composite by train shipment from Minntac. Low temperature breakdown and reducibility of Product sold hereunder will be reported from weekly plant composites sampled at the 041 conveyor. F. Seller shall have the right to deliver Product produced by third parties if (1) Buyer has approved the specifications for such Product, and (2) Buyer determines that such third party Product could have no adverse consequences to Buyer's operations, financial or otherwise. V. PRICE The purchase price to be paid by Buyer for each net ton (consisting of 2,000 pounds avoirdupois) of Product delivered hereunder (the "Product Price") shall be determined as follows: A. First Contract Year: From September 1, 1994 through August 31, 1995, the Product Price for Fluxtac pellets shall be $______ per natural net ton iron unit. B. Second Contract Year: From September 1, 1995 through the date by which Seller has shipped to Buyer 50% of the quantity of Product specified in the Annual Declaration for the Second Contract year, the Product Price for Fluxtac pellets shall be $______ per natural net ton iron unit; thereafter, through August 31, 1996, the Product Price per natural net ton iron unit for Fluxtac pellets shall be the dollar amount derived by adding the Cartier Pellets Price for 1996 to $______ and then dividing the sum by two [(1996 Cartier Price + $______)/2]. C. Third Contract Year: From September 1, 1996 through the date by which Seller has shipped to Buyer 50% of the quantity of Product specified in the Annual Declaration for the Third Contract year, the Product Price per natural net ton iron unit for Fluxtac pellets shall be the dollar amount derived by adding the Cartier Pellets Price for 1996 to $______ and then dividing the sum by two [(1996 Cartier Price + $______)/2]; thereafter, until August 31, 1997, the Product Price per natural net ton iron unit for Fluxtac pellets shall be the dollar amount derived by adding the Cartier Pellets Price for 1997 to $______ and then dividing the sum by two [(1997 Cartier Price + $______)/2]. -5- 6 D. Fourth Contract Year: From September 1, 1997 through the date by which Seller has shipped to Buyer 50% of the quantity of Product specified in the Annual Declaration for the Fourth Contract Year, the Product Price per natural net ton iron unit for Fluxtac pellets shall be the dollar amount derived by adding the Cartier Pellets Price for 1997 to $______ and then dividing the sum by two [(1997 Cartier Price + $______)/2]; thereafter, until August 31, 1998, the Product Price per natural net ton iron unit for Fluxtac pellets shall be the dollar amount derived by adding the Cartier Pellets Price for 1998 to $______ and then dividing the sum by two [(1998 Cartier Price + $______)/2]. E. Fifth Contract Year: From September 1, 1998 through the date by which Seller has shipped to Buyer 50% of the quantity of Product specified in the Annual Declaration for the Fifth Contract Year, the Product Price per natural net ton iron unit for Fluxtac pellets shall be the dollar amount derived by adding the Cartier Pellets Price for 1998 to $______ and then dividing the sum by two [(1998 Cartier Price + $______)/2]; thereafter, until August 31, 1999, the Product Price per natural net ton iron unit for Fluxtac pellets shall be the dollar amount derived by adding the Cartier Pellets Price for 1999 to $______ and then dividing the sum by two [(1999 Cartier Price + $______)/2]. F. Reconciliation: Within 30 days after the end of any contract year in which the quantity of Product actually shipped at the lower of the two Product Prices in effect during the year varies from the quantity of Product shipped at the higher Product Price, Buyer shall, in the event that more Product was shipped at the lower Product Price, pay to Seller an additional amount equal to the difference between the amount actually paid and the amount that would have been paid had 50% of the quantity of the Product been shipped at the higher Product Price, and in the event that more Product was shipped at the higher Product Price, Seller shall credit to Buyer against future purchases an amount equal to the difference between the amount actually paid and the amount that would have been paid had 50% of the quantity of Product been shipped at the lower Product Price. G. Definition: For the purpose of this Section V, the term "Cartier Pellets Price" means the iron ore price for Cartier Pellets (of the grade and quality for which the price is currently published) F.O.B. Port Cartier converted to net tons, as such price is set forth in the first issue of the Skillings' Mining Review following Quebec Cartier Mining Company's price settlement with its European Customers during said Contract Year. In the event that the Skillings' Mining Review ceases to be published or the Cartier Pellets Price ceases to be published therein, the Product Price for Product delivered pursuant to this Agreement for the Contract Year in question shall be that price for such Product as is reasonably determined and agreed upon by the parties hereto. -6- 7 H. Standard Pellets: The Product Price for standard pellets delivered hereunder shall be the Product Price per net ton iron unit for Fluxtac pellets for the applicable portion of the then current Contract Year multiplied by a factor of ____ rounded to four (4) decimal places. For example, the price of standard pellets on September 1, 1994 is $______ x ___ = $______ per net ton iron unit. VI. PAYMENT A. Seller shall invoice Buyer semi-monthly for each shipment of Product hereunder. Invoices shall be faxed to Buyer. Each invoice shall be for all unbilled Product that has been delivered to Buyer prior to such invoice date. Buyer shall pay Seller by wire transfer of funds due hereunder to Seller within twenty-three (23) days following receipt of such invoice. Such wire transfers shall be made to an account to be designated by Seller from time to time by written notice to Buyer. Invoices sent during any Contract Year before the Product Prices are available shall reflect the Product Prices in effect immediately preceding the date in which a new Product Price would become effective. When the Product Prices for such Contract Year become available, Seller shall issue an invoice for any balance due as a result of a price increase or issue a credit for any overpayment due to a price decrease. Interest shall accrue on all past due payments daily at the rate of twelve percent (12%) per annum. B. Buyer agrees to furnish to Seller such publicly released financial information pertaining to Buyer as may be reasonably requested from time to time by Seller, such as monthly and quarterly balance sheets and profit and loss statements and audited year-end financial statements to reasonably assure Seller of Buyer's continuing ability to comply with its payment obligations under this Agreement. If reasonable grounds exist that Buyer does not have the ability to comply with its payment obligations hereunder, Seller may in writing demand and Buyer shall provide to Seller adequate assurance of due performance of such obligations. VII. USE OF PRODUCT Buyer represents that the Product purchased hereunder is intended primarily for consumption at a plant which it owns or in which it or one of its subsidiaries has an interest and not for resale to third parties. VIII. FORCE MAJEURE Each of the parties hereto shall be relieved of its obligations hereunder to the extent that it is unable to comply herewith for any cause beyond its reasonable control, including, -7- 8 without in any way limiting the generality of the foregoing, fires, explosions, acts of God, changes in environmental rules and regulations, acts of the public enemy, insurrections, riots, strikes, lockouts, labor disputes, concerted refusals to work, labor or material shortages, interruptions to transportation, shortages of transportation equipment, breakdowns of or damage to plants, equipment or facilities, or legislation. Should Seller be the party so affected, it shall have the right to apportion any available production among its customers and its needs for internal consumption in proportion to levels of deliveries in time of normal operations. Should a period of force majeure continue for more than three months, the party not asserting force majeure may then terminate this Agreement. IX. WAIVERS AND REMEDIES A. The failure of Buyer and Seller either to insist in any one or more instances upon strict performance of any of the provisions of this Agreement or to take advantage of any of its rights hereunder shall not be construed as a waiver of any such provision or the relinquishment of any such right, but the same shall continue and remain in full force and effect. B. In no event shall either Buyer or Seller be liable to the other, by reason of a default in the performance of any of its obligations hereunder, for special damages of any kind or for consequential damages relating to damage to property, personal injury, disruptions in production, lost profits or business opportunities. X. DEFAULT A. Except with respect to any termination rights expressly provided for herein, no default by either Buyer or Seller in the performance of any of its obligations hereunder which, except for this provision, would be a legal basis for rescission or termination of this Agreement by the other party shall give or result in such right unless and until the party in default shall fail to correct the default within thirty (30) days after receiving written notice of such default from the other party or fail within said thirty (30) days to commence and diligently pursue actions to correct such default, provided that in the event diligent efforts to correct said default do not result in the default being corrected within ninety (90) days from the date written notice of the default is received, the party not in default may terminate this Agreement. B. In the event of default of Buyer in payment, Seller may suspend further deliveries hereunder until such default has been corrected. If such default is not corrected in a timely manner, then Seller may terminate this Agreement. -8- 9 XI. ASSIGNMENT This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. XII. TERMINATION This Agreement shall be terminated automatically upon Buyer permanently discontinuing operation of its Geneva Works or upon Seller permanently discontinuing operation at its Minnesota Ore Operations. XIII. NOTICES Except as otherwise provided in this Agreement, all notices under this Agreement shall be in writing and shall be deemed to have been duly given if sent postage prepaid by first class registered or certified mail, or if sent via overnight delivery service which provides confirmation of delivery, or if faxed with a duplicate copy, sent by first class mail, postage prepaid, addressed as follows: SELLER: USX Corporation 600 Grant Street - Room 2382 Pittsburgh, Pennsylvania 15219 Attention: Director - Raw Materials Planning, Procurement, Distribution and Sales Phone: (412) 433-3620 Facsimile No.: (412) 433-3624 BUYER: Geneva Steel Company 10 South Geneva Road Vineyard, Utah 84058 Attention: Max E. Sorenson, Senior Vice President, Engineering and Technology Phone: (801) 227-9000 Facsimile No.: (801) 227-9198 With a required copy to: Kimball, Parr, Waddoups, Brown & Gee 185 South State Street, Suite 1300 Salt Lake City, Utah 84111 Attention: Roger D. Henriksen, Esq. Phone: (801) 532-7840 Facsimile No.: (801) 532-7750 or to any subsequent address of which either party may notify the other in writing. -9- 10 XIV. CHOICE OF LAW This Agreement shall be construed in accordance with the laws of the State of Utah, without regard to the principles therein pertaining to the conflicts of law. XV. FINAL AGREEMENT This Agreement constitutes the final and complete agreement between the parties with respect to the subject matter hereof and supersedes all prior documents, negotiations, agreements, and other communications between the parties with respect thereto, including, but not limited to, that certain Taconite Pellet Sales Agreement dated as of February 6, 1991 effective as of September 1, 1990. This Agreement may not be modified or amended except by written amendment executed by authorized representatives of both Buyer and Seller. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above-written by their duly authorized corporate officers. GENEVA STEEL COMPANY, a Utah corporation By: /s/ Max E. Sorenson --------------------------------- Max E. Sorenson Senior Vice President Engineering and Technology USX CORPORATION, a Delaware corporation By: /s/ C. C. Gedeon --------------------------------- Executive Vice President Raw Materials & Diversified Businesses -10- EX-10.3 4 INDUSTRIAL GAS SUPPLY AGREEMENT 1 INDUSTRIAL GAS SUPPLY AGREEMENT BETWEEN GENEVA STEEL COMPANY AND AIR LIQUIDE AMERICA CORPORATION June 1995 2 TABLE OF CONTENTS ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE 2 - NEW FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.1 New Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.2 Tie-In With Oxygen Distribution System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3 Completion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3.1 Completion Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3.2 Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3.2.1 Delays by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3.2.2 Other Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2.3.2.3 Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.4 Engineering Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.5 Used Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.6 Facility Site . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.7 Safety Standards; Restricted Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.8 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.9 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.10 Existing Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.10.1 Termination of Contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.10.2 Removal of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.10.3 Use of Storage Tanks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 3 - UTILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3.1 Site Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 ARTICLE 4 - QUANTITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1 Oxygen Quantities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1.1 Oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 4.1.2 Excess Produced Gaseous Oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.1.3 Supplemental Liquid Oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.2 Argon Quantities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.3 Operation Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4 Liquid Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 4.4.1 Liquid Oxygen and Liquid Nitrogen Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.4.2 Argon Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.5 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4.6 Inventory Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE 5 - PRICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.1 Monthly Facility Charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.2 Supplemental Liquid Oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.3 Argon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
i 3 5.4 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 5.5 Price Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.5.1 Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.5.2 Supplemental Liquid Oxygen and Argon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.5.3 Required Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.5.4 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 5.6 Delay and Early Completion Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.6.1 Delay Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.6.2 Early Completion Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5.7 Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ARTICLE 6 - PRODUCT SPECIFICATIONS AND POWER CONSUMPTION GUARANTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.1 Product Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.1.1 Oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.1.2 Argon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.2 Non-conforming Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.2.1 Non-conforming Oxygen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.2.2 Non-conforming Argon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.3 Power Consumption Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.3.1 Power Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 6.3.2 Penalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 6.3.3 Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 6.4 Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 7 - DELIVERY PRESSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 8 - SELLER'S SHUTDOWN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 8.1 Ordinary Downtime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 8.2 Vaporization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 8.3 Right to Alternate Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 9 -METERING EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 9.1 Gaseous Oxygen Metering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 9.1.1 Calibration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 9.1.2 Buyer Tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 9.2 Liquid Weights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 9.3 Electric Metering Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE 10 - TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 10.1 Sales and Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 10.2 Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ii 4 ARTICLE 11 - CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 11.1 Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 11.2 Reduced Delivery or Taking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 11.3 No Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 11.3 Extension of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE 12 - LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.1 Acknowledgement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 12.2 Indemnity by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 12.3 Indemnity by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE 13 - ATMOSPHERIC CONTAMINANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 ARTICLE 14 - ENVIRONMENTAL CONDITIONS AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.1 Site Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 14.2 Permitting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 15 - FAIR LABOR STANDARDS ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 16 - DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 16.1 Default by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 16.2 Default by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 ARTICLE 17 - ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 18 - APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 19 - RESOLUTION OF DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE 20 - TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 20.1 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 20.2 Early Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 21 - ECONOMIC HARDSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 22 - NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 ARTICLE 23 - ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE 24 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 24.1 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 24.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 24.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 24.4 Power Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
iii 5 INDUSTRIAL GAS SUPPLY AGREEMENT THIS INDUSTRIAL GAS SUPPLY AGREEMENT (the "Agreement") is entered into this 8th day of June, 1995 effective as of June 6, 1995 (the "Effective Date"), between AIR LIQUIDE AMERICA CORPORATION, a Delaware corporation ("Seller") and GENEVA STEEL COMPANY, a Utah corporation ("Buyer"). RECITALS: A. Buyer is presently supplied certain quantities of oxygen from two (2) air separation facilities at its steel mill located in Vineyard, Utah (the "Geneva Works"), one of which is owned and operated by Seller and has a rated capacity of 282 tons per day of oxygen production (the "Existing Facility") and the other of which is owned and operated by Praxair, Inc. and has a rated capacity of 550 tons per day of oxygen production (the "Praxair Facility"). B. Buyer requires additional substantial quantities of oxygen for use at Buyer's iron and steel making facilities in Vineyard, Utah. C. Buyer has requested that Seller replace and supplement products from the Existing Facility with those obtained from an 850 ton per day oxygen plant to be constructed, owned and operated by Seller. D. Seller is willing to retire the Existing Facility and to construct, own and operate an air separation plant at the Geneva Works from which Seller will supply certain industrial gases to Buyer. AGREEMENT: NOW, THEREFORE, in consideration of the foregoing, the promises set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller, intending to be legally bound, agree as follows: ARTICLE 1 - DEFINITIONS When used in this Agreement, each term below or defined elsewhere herein shall have the indicated meaning unless such meaning is clearly precluded by the context in which the term is used. Unless the context otherwise expressly requires, the words "herein," "hereto," "hereunder," and other words of similar import refer to this Agreement as a whole and not to a particular Article or portion thereof. 1 6 1.1 "ARGON" means liquid argon produced at the New Facility meeting the specifications set forth in Section 6.1 hereof. 1.2 "COMPLETION" means the New Facility has been completed and is ready and capable of supplying Products to the specifications set forth in Article 6 at the quantities specified herein. 1.3 "COMPLETION DATE" shall have the meaning set forth in Section 2.3.1 hereof. 1.4 "DATE OF FIRST DELIVERY" means the date following Completion when Oxygen is first delivered to Buyer from the New Facility. 1.5 "FACILITY SITE" means that parcel of real property at the Geneva Works depicted on Exhibit 1.6 hereto to be leased to Seller pursuant to the Ground Lease and upon which the New Facility shall be located. 1.6 "GASEOUS OXYGEN" means oxygen produced at the New Facility meeting the specifications for oxygen set forth in Article 6 and delivered in gaseous form hereunder up to the applicable maximum respective production rates specified in Article 4. 1.7 "GENEVA WORKS" means Buyer's plant located in Vineyard, Utah, and any additions or modifications thereto. 1.8 "GROUND LEASE" means that certain Ground Lease of even date herewith executed by Seller and Buyer attached hereto as Exhibit 1.9, and any modifications or amendments thereto. 1.9 "LIQUID NITROGEN" means nitrogen in liquid form produced at the New Facility. 1.10 "LIQUID OXYGEN" means oxygen in liquid form produced at the New Facility meeting the specifications for oxygen set forth in Article 6. 1.11 "MONTHLY FACILITY CHARGE" shall have the meaning set forth in Article 5 hereof. 1.12 "NEW FACILITY" means the air separation facility to be constructed, owned and operated by Seller at the Geneva Works, and all modifications, improvements and expansions made to such facilities during the term hereof, for the production, compression, storage and vaporization of Oxygen and the production and storage of Liquid Oxygen, Liquid Nitrogen and Argon. 1.13 "NITROGEN" means gaseous Nitrogen and Liquid Nitrogen. 1.14 "OXYGEN" means Gaseous Oxygen and Liquid Oxygen. 2 7 1.15 "OXYGEN DELIVERY POINT" means the location on the battery limits of the Facility Site depicted on Exhibit 1.6 hereto. 1.16 "OXYGEN DISTRIBUTION SYSTEM" means the system of trunk and service pipelines currently existing at the Geneva Works to transport Gaseous Oxygen from the Oxygen Delivery Point to the various use points within the Geneva Works. 1.17 "PRODUCT(S)" means either singularly or collectively: Oxygen and Argon. 1.18 "PSIG" means pounds per square inch gauge. 1.19 "SCF" used as a measure of Oxygen, Nitrogen and Argon means that quantity of Oxygen, Nitrogen or Argon which in gaseous form would occupy a volume of one cubic foot at 70 degrees Fahrenheit temperature and 14.696 pounds per square inch absolute pressure. 1.20 "SUPPLEMENTAL LIQUID OXYGEN" means Liquid Oxygen produced at the New Facility which is owned by Seller and all oxygen in liquid form which is hauled in from off-site production facilities by Seller. 1.21 "TON" means 2,000 pounds avoirdupois or 24,160 SCF, 27,605 SCF and 19,342 SCF of Oxygen, Nitrogen or Argon, respectively. ARTICLE 2 - NEW FACILITY 2.1 New Facility. Seller, at its sole expense, shall construct, operate, own, maintain and repair the New Facility on the Facility Site during the term hereof pursuant to the Ground Lease. The New Facility shall be and remain the personal property of Seller at all times. The New Facility shall include, but not be limited to, the equipment, systems and facilities set forth on Exhibit 2.1 hereto. During the term of this Agreement, Buyer shall not cause the New Facility or the Facility Site to be sold, seized or encumbered in any way whatsoever, and Buyer shall cooperate with Seller in any reasonable manner, without cost or expense to Buyer, including the making of public filings or recordations, to ensure that no such sale, seizure or encumbrance of the New Facility or the Facility Site takes place; provided, however, that Buyer shall have the rights to encumber the Facility Site as set forth in the Ground Lease. Seller reserves the right to make changes, modifications, improvements, or expansions of the New Facility, at any time during the term hereof provided that (i) Seller's obligations hereunder are not diminished, (ii) the production capacities of the New Facility as set forth herein are not diminished, (iii) the costs or taxes to be paid or utilities to be furnished by Buyer hereunder are not increased by such changes, modifications, improvements or expansions, and (iv) such changes, modifications, improvements, or expansions do not adversely affect Buyer, the Geneva Works or Buyer's operations. 3 8 2.2 Tie-In With Oxygen Distribution System. Seller, at its expense, will perform and provide all work, piping, valves, controls, racks and supports necessary to connect the New Facility to the Oxygen Distribution System, all pursuant to specifications prepared by Seller and approved by Buyer. Subject to Section 2.3.2 hereof, such connections shall be made in a manner so as to minimize any downtime to Buyer's operations. 2.3 Completion. 2.3.1 Completion Date. Seller shall achieve Completion of the New Facility, interconnection with the Oxygen Distribution System, and make the first delivery of Products from the New Facility to Buyer on or before the date occurring 548 calendar days after the Effective Date, as such date may be adjusted as provided in this Section 2.3 (the "Completion Date"). Notwithstanding the foregoing, Buyer shall have the right upon at least one (1) month's written notice to Seller, such notice to be received by Seller prior to June 1, 1996, to extend the Date of First Delivery for a period of up to nine (9) months, in which event Seller shall be entitled to an increase in the Monthly Facility Charge equal to the product of Twenty-Eight Dollars ($28.00) multiplied by the number of calendar days that the Date of First Delivery is extended pursuant to this Section 2.3.1. Notwithstanding the provisions of sections 5.6.1 and 5.6.2, in the event that Buyer extends the Date of First Delivery pursuant to this section 2.3.1 by more than 60 days, no delay adjustment or early completion adjustment shall apply under either of those sections. 2.3.2 Delays. 2.3.2.1 Delays by Buyer. In the event Completion of the New Facility is materially delayed or interfered with exclusively by acts of Buyer such that Seller is unable to achieve Completion by the Completion Date, Seller shall be entitled to an extension of time in an amount equal to the actual unavoidable delay to such completion. The extension provided for in this Section 2.3.2.1 shall be Seller's exclusive remedy with respect to any such occurrences. No damages or additional compensation as a consequence of such delay or hinderance shall be allowed. No allowance or extension of the Completion Date shall in any event be granted to Seller for delay by Seller in preparing drawings, when such drawings are not properly prepared, or when Seller by the exercise of reasonable diligence and judgment could have anticipated or avoided the delay. Unless otherwise agreed in writing, no extension of the time for any cause whatsoever shall be claimed by Seller unless Seller shall have made a specific written request to Buyer for such extension within a reasonable time (not in any event to exceed ten (10) calendar days) after Seller obtained notice that cause for such extension has occurred. Such written request shall detail the reasons for, and anticipated length of, the delay. 2.3.2.2 Other Delays. Subject to Article 11, if a delay occurs in the critical path performance to timely achieve Completion through other than the fault of Buyer, Buyer shall allow Seller a period of ten (10) calendar days, or such other time period as the parties may agree, to either present a plan for approval by Buyer to bring the work back to schedule or, at Seller's option, to bring the work back to schedule. In the event such cure is not timely effected or 4 9 if such plan is not approved by Buyer, such delay shall be a material default by Seller and shall entitle Buyer to the remedies provided in Section 5.6 hereof. Seller shall not improperly threaten to delay the progress or performance of the work. 2.3.2.3 Contingencies. If a contingency covered by Article 11 or Section 14.1 hereof occurs and prevents Seller from achieving Completion by the Completion Date, the Completion Date shall be extended on a day-for-day basis until such contingency is resolved. Seller shall use its best commercially reasonable efforts to remove or resolve such contingency at the earliest possible date. 2.4 Engineering Services. At Buyer's written request, Seller shall provide to Buyer at no charge all necessary preliminary engineering services for the interconnection of the New Facility and the Oxygen Distribution System, provided, however, that (a) final approval of such design is the responsibility of Buyer, and (b) any construction costs (not including engineering services) caused by changes by Buyer from prior approvals by Buyer of such layout and design shall be borne by Buyer. 2.5 Used Equipment. Seller warrants that, unless otherwise agreed in writing by Buyer, the only used equipment or components that Seller will incorporate into the initial design of the New Facility are the (a) Existing Gaseous Oxygen Receiver Tanks (as hereinafter defined), (b) Liquid Nitrogen storage tanks, and (c) Argon storage tanks. 2.6 Facility Site. Pursuant to the Ground Lease but subject to the immediately following sentence, Buyer will provide a filled and level site, free from overhead and underground obstructions as of the date of this Agreement, with a soil bearing capacity of 2,000 psf. Seller shall coordinate the design and installation of the New Facility to minimize any relocation or rerouting by Buyer of utilities located on or under the Facility Site; provided, however, that if subsurface conditions are encountered at the Site which differ materially from those indicated on Buyer's drawings and differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the type contemplated hereby, then Seller shall give prompt written notice to Buyer of such conditions before such conditions are disturbed. Buyer shall promptly investigate such conditions and shall either (a) authorize Seller to proceed with work to remedy or adjust such conditions with an equitable adjustment in the Completion Date and the Monthly Facility Fee whereupon Seller shall be obligated to complete such work, or (b) remedy such conditions and allow an equitable adjustment in the Completion Date. 2.7 Safety Standards; Restricted Access. Seller shall comply with all of Buyer's safety and security standards and rules applicable generally to the Geneva Works; provided, however, that such standards and rules shall not relieve Seller of its responsibility for the safety of the Facility Site. Buyer will use reasonable efforts to prevent Buyer's employees from entering the Facility Site or altering, repairing, adjusting or otherwise tampering with the New Facility without the prior consent of Seller. Notwithstanding the foregoing, Buyer shall have the right to unrestricted access for emergency remediation and/or required maintenance on the Plant. Buyer will prohibit smoking and 5 10 the use of open flames by its employees within fifty (50) feet of the New Facility; provided, however, that Seller shall be and remain responsible for all emergency response fire protection required for the New Facility. 2.8 Liens. In express consideration of the terms, covenants and undertakings set forth herein, and for other valuable consideration, Seller knowingly and intentionally waives any and all rights it may have, now or in the future, to assert liens or claims of liens against the Facility Site or the Geneva Works; provided, however, that the foregoing shall not be a waiver of Seller's right to payment hereunder but only the right to assert liens against Buyer's property related thereto. Seller will cause all persons providing equipment, materials or labor for the New Facility to similarly waive their lien rights prior to performing any work on or for the New Facility. Buyer shall indemnify, defend and hold Seller harmless from and against liens against the New Facility due solely to its location on Buyer's premises. Seller shall indemnify, defend and hold Buyer harmless from and against liens and claims arising from the acts or omissions of Seller or its subcontractors, employees, agents and invitees or due to the failure of Seller or its contractors to timely pay amounts owed to contractors, subcontractors, suppliers, materialmen or others. 2.9 Compliance with Law. The New Facility shall at all times during the term hereof conform with all applicable statutes, regulations, ordinances, rules, standards and codes (including the Uniform Building Code requirements for zone 4 seismic activity) including, but not limited to, OSHA requirements related to noise levels. 2.10 Existing Facility. Buyer and Seller agree as follows with respect to the Existing Facility: 2.10.1 Termination of Contract. That certain Oxygen Supply Agreement dated September 27, 1988, as amended (the "Existing Agreement"), between Buyer and Seller, as successors in interest, shall be terminated at the Date of First Delivery; provided that certain Lease dated April 17, 1968, as amended (the "Existing Lease") shall continue in full force and effect modified as provided in Section 2.10.2 hereof. 2.10.2 Removal of Improvements. Notwithstanding anything in the Existing Agreement to the contrary, except as provided below, for a period of two (2) years after the Completion Date Seller shall not remove or cause to be removed from the Geneva Works the Existing Facility, or any part thereof (other than the Existing Gaseous Oxygen Receiver Tanks), without the prior written consent of Buyer, and the terms and conditions of the Existing Lease shall be of full force and effect during such period. During such two (2)-year period, Seller shall, if requested by Buyer, supply to Buyer industrial gases from the Existing Facility pursuant to a mutually acceptable agreement. During such period, Buyer at no cost to Seller shall (a) provide limited steam, Nitrogen and electrical power (480 volt) to the Existing Facility to keep the Existing Facility in an idle condition necessary to recommence operation, (b) reimburse Seller for any real and personal property taxes incurred by Seller and applicable to such period related to the Existing Facility, and (c) pay to Seller the sum of Six Hundred Fifty Dollars ($650.00) per month to fully 6 11 compensate Seller for the cost of maintaining the Existing Facility in an idle state. Notwithstanding the foregoing, Buyer shall have the right to terminate its obligations and rights under this Section 2.10.2 at any time upon written notice to Seller. If during such two (2) year period Seller desires to use the Existing Facility at another location, Seller shall so notify Buyer in writing and Buyer may within ten (10) working days after receipt of such notice notify Seller of its desire to obtain industrial gases from the Existing Facility and thereafter Seller and Buyer shall negotiate in good faith for an acceptable supply agreement. If Buyer fails to so notify Seller within such ten (10) working day period or conclude an acceptable supply agreement with Seller after giving such notice, Seller shall have the right to remove such Existing Facility from and the rights of Buyer and Seller under this Section 2.10.2 shall be of no further force or effect. 2.10.3 Use of Storage Tanks. The Existing Facility includes storage tanks capable of storing 8,690 cubic feet (water volume) or a total capacity of 17,380 cubic feet (water volume) (the "Existing Gaseous Oxygen Receiver Tanks"). For a period of six (6) months after the Date of First Delivery Seller agrees that it shall, without additional cost to Buyer, keep the Existing Gaseous Oxygen Receiver Tanks at the Existing Facility and Buyer shall be entitled to use such Tanks in connection with the New Facility. Buyer may, by written notice to Seller within such six-month period, make a one-time election to use for the duration of the term hereof the Existing Gaseous Oxygen Receiver Tanks at the New Facility for an additional fee of $3,650 per month commencing with the first month following the giving of such notice. If during the final three (3) months of such six month period Seller desires to use the Existing Gaseous Oxygen Receiver Tanks at another facility, Seller shall so notify Buyer in writing and Buyer may within ten (10) days after receipt of such notice notify Seller of its election to use for the duration of the term hereof the Existing Gaseous Oxygen Receiver Tanks as provided herein. If Buyer fails to so notify Seller within such ten (10) day period, Seller shall have the right to remove such Existing Gaseous Oxygen Receiver Tanks from the Existing Facility and Buyer's rights under this Section 2.10.3 shall be of no further force or effect. ARTICLE 3 - UTILITIES 3.1 Site Utilities. Subject to the provisions of Section 2.1, Buyer will provide at no charge to Seller at the locations depicted on Exhibit 1.6 hereto the following utilities and services and in the estimated quantities shown for Seller's use: Sanitary Sewer .......................... Domestic sewage that has been pumped to Buyer's system by Seller 7 12 Storm Drain and Waste Water Runoff(1).... Storm and wastewater runoff that has been piped by Seller to Buyer's existing storm drainage system Electrical Power (13,800 Volts/60 Hertz).................. 19000 KVA peak demand connected load (At 13800 V. The minimum short circuit shall be 700 MVA and the maximum short circuit shall be 1000 MVA). (480 Volts).............................. 1000 KVA peak demand connected load for emergency and construction power. Natural Gas............................. 17.300 MMBTU per hour LHV peak. Nitrogen for Plant Start-Up............. 75 SCF per minute at 450 PSIG with a dew point of at least minus 40 degrees Fahrenheit. All other water, except fire water which shall be provided by Buyer (Seller to be responsible for the cost of connection and installation of appropriate lines from nearest available source of supply), and water delivery systems for the New Facility, including potable, treated and make-up water, shall be obtained by Seller from other sources without cost to Buyer. In the event of a utility interruption, Buyer shall use reasonable commercial efforts to minimize and eliminate such interruption as soon as reasonably practicable. Notwithstanding the foregoing, Buyer shall not be liable for any interruption of utility service to the New Facility. ARTICLE 4 - QUANTITY Seller shall sell and deliver to Buyer, and Buyer will purchase and receive from Seller, the following Products: 4.1 Oxygen Quantities. 4.1.1 Oxygen. Seller will sell and deliver into the Oxygen Distribution System such gaseous produced oxygen from the New Facility as Buyer may from time to time reasonably notify Seller it desires up to (a) a maximum instantaneous delivery rate at the Oxygen Delivery Point of 13,422 SCF per minute, and (b) 800 Tons per day average gaseous production with no liquid production or 750 Tons per day average gaseous production with 50 Tons per day average liquid production, such production and delivery rates adjusted for the design conditions of 70 degrees ____________________________ (1) Discharges to Buyer's 36" culvert shall be comprised of only cooling tower blowdown containing no heavy metals, intermittent surface run-off from scuppers around equipment which may contain only traces of oil, building floor drains which may contain only traces of oil and detergents, and hub drains containing only clean condensate. 8 13 Fahrenheit dry bulb, relative humidity of 24%, and barometric pressure of 12.4 PSIA. In addition, Seller will sell and deliver into the Oxygen Distribution System such vaporized Liquid Oxygen from the Liquid Oxygen owned by Buyer in storage at the New Facility as Buyer may from time to time reasonably notify Seller it desires up to a maximum instantaneous delivery rate of 13,422 SCF per minute. 4.1.2 Excess Produced Gaseous Oxygen. If, from time to time, Buyer desires Gaseous Oxygen production rates in excess of those specified in Section 4.1.1 hereof, Seller shall supply to Buyer without additional charge such Gaseous Oxygen to the extent it is produced and can be compressed at the New Facility in gaseous form. 4.1.3 Supplemental Liquid Oxygen. If, from time to time, Buyer desires Supplemental Liquid Oxygen, Seller shall supply to Buyer Supplemental Liquid Oxygen to the extent that it is available and delivery can be safely made within the flow and pressure limitations of the equipment installed at the New Facility. Notwithstanding the foregoing, Buyer shall have the unconditional right to obtain Liquid Oxygen from any other source it deems appropriate. 4.2 Argon Quantities. Subject to the parties' reaching a mutually satisfactory price pursuant to Section 5.3, Seller will sell, f.o.b. truck at the New Facility, on an as-available basis from Seller's storage tanks such Argon produced from the New Facility as Buyer may from time to time reasonably notify Seller it desires to purchase for its own use and not for resale. 4.3 Operation Level. Under normal operating conditions, that is when no contingency exists under Article 11 and no shutdown has been taken pursuant to Section 8.1 hereof, Seller will operate the New Facility at the greater of the delivery level for (i) Products of which Seller has received the notice specified in this Article 4, or (ii) Oxygen, Liquid Nitrogen and Argon to which Seller is entitled herein, subject to the production rates as set forth in this Article 4. 4.4 Liquid Products. When the New Facility is operating at 750 Tons per day average production rates for Gaseous Oxygen, the New Facility will produce a minimum of 100 Tons per day of Liquid Oxygen, a minimum of 50 Tons per day of Liquid Nitrogen, and a minimum of 40.5 Tons per day of Argon. Subject to Section 4.1.2 and this Section 4.4, Buyer shall have the right to the production of Liquid Oxygen, up to a maximum of 50 Tons per day, during the term hereof determined pursuant to either of the following formulae, as the case may be: (i) For any day on which the Actual combined Tons of Gaseous Oxygen and Liquid Oxygen produced at the New Facility total 850 Tons or less, Buyer shall have the right to Liquid Oxygen as follows: Liquid Oxygen = 800 Tons - Actual Tons of Gaseous Oxygen delivered to Buyer 9 14 (ii) For any day on which the Actual combined Tons of Gaseous Oxygen and Liquid Oxygen produced at the New Facility total more than 850 Tons, Buyer shall have the right to Liquid Oxygen as follows: Liquid Oxygen = (800 Tons + EP) - Actual Tons of Gaseous Oxygen delivered to Buyer. WHERE: EP = (Actual Tons of Oxygen Produced - 850 Tons) Notwithstanding the foregoing, Seller shall have the right to all remaining Liquid Oxygen produced. 4.4.1 Liquid Oxygen and Liquid Nitrogen Credit. Seller shall credit against the Adjusted Monthly Facility Charge and any other monetary obligations of Buyer hereunder the following amounts for each Ton of Liquid Oxygen and each Ton of Liquid Nitrogen removed from the New Facility by Seller each month during the term hereof, the quantity of which shall be measured pursuant to the provisions of Section 9.2 hereof: PRICE ($ per TON) Liquid Oxygen and Liquid Nitrogen P x 520 where: P = Buyer's then current incremental electrical power costs in dollars per KWH, as defined in Section 6.3 hereof. Each month Buyer will provide adequate documentation to Seller supporting the calculation of such incremental power cost. 4.4.2 Argon Credit. Seller shall credit against the Monthly Facility Charge and any other monetary obligations of Buyer hereunder, the sum of $ per Ton of Argon (the "Argon Credit") when removed by Seller from the New Facility, the quantity of which shall be measured pursuant to the provisions of Section 9.2 hereof. The Argon Credit will be increased annually, commencing on the first anniversary of the Date of First Delivery, in the amount of ($ ) per year. Seller agrees to remove all Argon produced at the New Facility that is available for shipment and to minimize to the extent reasonable any Argon evaporation prior to such removal. 4.5 Title. Title to Gaseous Oxygen shall pass to Buyer upon delivery by Seller of into the Oxygen Distribution System at the Oxygen Delivery Point. Title to Liquid Oxygen shall pass to Buyer, in the proportion set forth in Section 4.4 hereof, upon delivery into the liquid oxygen 10 15 storage tanks. Title to Argon purchased by Buyer pursuant to Section 4.2 hereof shall pass at the point at which such Argon is loaded into trucks at the New Facility. 4.6 Inventory Records. Seller shall keep adequate inventory records on a daily basis documenting Liquid Oxygen production, including storage tank level, Supplemental Liquid Oxygen, vaporized Liquid Oxygen, Liquid Oxygen removed from the New Facility, and evaporization losses. Such records shall establish respective ownership by Buyer and Seller of any commingled Liquid Oxygen and shall be subject to Buyer's review and approval. ARTICLE 5 - PRICES 5.1 Monthly Facility Charge. As promptly as practicable after the end of each calendar month, Seller will invoice Buyer and Buyer will pay Seller a monthly facility charge (the "Monthly Facility Charge") in the amount of ($ ), as adjusted under Section 5.5.1, plus the taxes specified in Article 10; provided that if Buyer elects to retain the Existing Gaseous Oxygen Storage Tanks as provided in Section 2.10.3 hereof, the Monthly Facility Charge shall be increased by $ per month. The Monthly Facility Charge is intended to fully compensate Seller for the New Facility and all Oxygen (except Supplemental Liquid Oxygen) that Seller is obligated to deliver to Buyer pursuant to this Agreement. 5.2 Supplemental Liquid Oxygen. Any Supplemental Liquid Oxygen delivered by Seller to Buyer at Buyer's request shall be invoiced to Buyer at $ per 100 SCF, as such price may be adjusted pursuant to Section 5.5.2 hereof, plus, for Supplemental Liquid Oxygen hauled in from off-site, reasonable actual delivery charges to the Facility Site. 5.3 Argon. The price for Argon purchased pursuant to Section 4.2 hereof (the "Argon Price") shall be agreed upon among the parties at the time of any such purchase. 5.4 Payment. The terms of payment will be net twenty (20) days following receipt of invoice. Buyer shall remit payments to Seller hereunder to the address indicated on Seller's invoice. Seller shall have the right to charge Buyer a late payment fee on any past due amount, such fee to be computed from the date such payment was due at an interest rate of 3% above the prevailing prime rate of interest of Texas Commerce Bank, N.A., Houston, Texas (or any successor principal bank of Seller). Any billing dispute or claim must be made in writing within thirty (30) days after receipt of invoice, otherwise the amount indicated on such invoice shall be considered by both parties to be final and binding. The Adjusted Monthly Facility Charge, prorated for any partial month, shall commence on the Date of First Delivery. Buyer shall be invoiced by Seller in arrears. If Buyer is not ready to utilize such Products within sixty (60) days after Completion, Buyer shall commence the payment of the Monthly Facility Charge with the Monthly Facility Charge due for the month following the expiration of such sixty (60) day period. However, Seller agrees to reduce the Monthly Facility Charge during the period of such non-use by Buyer by an amount equal to any of Seller's avoided out-of-pocket costs. 11 16 5.5 Price Adjustment. 5.5.1 Adjustment. The Monthly Facility Charge will be adjusted (the "Adjusted Monthly Facility Charge") semi-annually on January 1 and July 1 (each an "Adjustment Date"), commencing January 1, 1996, in accordance with the following formula. Adjusted Monthly Facility Charge = C0 [0.10 L/15.31 + 0.10 P/122.4 + .80] where: C0 = Monthly Facility Charge determined pursuant to Section 5.1 without adjustments. L = Earnings Index, as hereinafter defined. P = PPI, as hereinafter defined. 5.5.2 Supplemental Liquid Oxygen and Argon. The prices for Supplemental Liquid Oxygen shall be adjusted from time to time in accordance with changes in Seller's published schedule prices. Buyer shall be given at least thirty (30) days' prior notice of any price changes for Supplemental Liquid Oxygen or Argon. Seller represents that the prices paid hereunder by Buyer for Supplemental Liquid Oxygen and Argon shall not be higher than those paid by any other customers of Seller for similar quantities and qualities of such Products produced at the New Facility under comparable contract supply and duration. 5.5.3 Required Documentation. At the time Seller makes any adjustment pursuant to this Section 5.5 it shall deliver to Buyer adequate documentation (including mathematical calculations) supporting such adjustment. 5.5.4 Definitions. As used herein, the term (a) "Earnings Index" means the average of the Average Hourly Earnings for workers in Chemical and Allied Industries for each of the three (3) months immediately preceding the Adjustment Date, and (b) "PPI" means the average of the Producers Price Index for Industrial Commodities, based upon 1982=100, for each of the three (3) months immediately preceding the Adjustment Date, both of which indices are published by the United States Department of Labor, Bureau of Labor Statistics. If the computation of either or both of such indices is changed so that the base year differs from that at the time the beginning index is first published, the such index will be converted in accordance with the conversion factor published by the Department of Labor, Bureau of Labor Statistics. If either or both such 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 dominated or revised. 12 17 5.6 Delay and Early Completion Adjustment. 5.6.1 Delay Adjustment. If Seller fails, for reasons other than the occurrence of a contingency as defined in Article 11 or a delay contemplated by Section 2.3.2 hereof, to achieve Completion of the New Facility and the interconnection of the New Facility with the Oxygen Distribution System and to provide the Products to Buyer from the New Facility as specified in Article 4 by the Completion Date, then the Monthly Facility Charge shall be decreased, for the term of this Agreement, by the sum of the following amounts for each calendar day after the Completion Date that the New Facility has not achieved Completion:
Daily Credit against Days of Delay Monthly Facility Charge ------------- ----------------------- 1 through 15 $ 16 through 45 $
Seller acknowledges that the damages to be suffered by Buyer in the event Seller fails to timely achieve Completion of the New Facility by the Completion Date will result in irreparable harm to Buyer which is difficult to calculate. The foregoing reduction in the Monthly Facility Charge is intended to compensate in part Buyer for the damages that will be caused by such late completion and are agreed upon liquidated damages not a penalty or other forfeiture. Notwithstanding the foregoing, in the event the New Facility has not achieved Completion within forty-five (45) days after the Completion Date, Buyer, in addition thereto, shall have the right to seek specific performance hereunder and/or any other relief available at law or in equity. 5.6.2 Early Completion Adjustment. If prior to the scheduled Completion Date Seller achieves Completion of the New Facility, the interconnection of the New Facility with the Oxygen Distribution System, and is ready to provide the Products to Buyer from the New Facility as specified in Article 4, then Monthly Facility Charge, shall be increased, for the term of this Agreement, by the sum of the following amounts for each calendar day before the Completion Date that the New Facility has achieved Completion:
Each Day Increase to Early Monthly Facility Fee -------- -------------------- 1 through 15 $ 16 through 45 $
13 18 5.7 Disputes. In the event Buyer disputes, in good faith, any invoice of Seller, Buyer shall timely pay the undisputed portion of such invoice and include therewith a reasonably detailed explanation in writing of the reasons Buyer disputes the balance of such invoice. If Seller disagrees with Buyer's explanation, the matter shall be referred for dispute resolution pursuant to Article 19. ARTICLE 6 - PRODUCT SPECIFICATIONS AND POWER CONSUMPTION GUARANTEE 6.1 Product Specifications. Seller guarantees that Products delivered at their respective Delivery Points hereunder shall conform to the following composition: 6.1.1 Oxygen. Oxygen will be at least 99.5% pure by volume. 6.1.2 Argon. Argon will be at least 99.999% pure by volume. 6.2 Non-conforming Product. 6.2.1 Non-conforming Oxygen. Any Oxygen delivered hereunder by Seller which does not conform to the specifications set forth in Section 6.1 hereof may be rejected by Buyer by providing Seller with verbal notice within twenty-four (24) hours and subsequent written confirmation within twenty (20) days after delivery thereof, and the Adjusted Monthly Facility Charge shall be reduced pro rata in proportion to the following ratio: (i) The total amount of non-conforming Oxygen delivered (in Tons) during the month; divided by: (ii) 24,320. Buyer reserves the right to review Seller's records and to confirm Oxygen conformity with the requirements of this Agreement. 6.2.2 Non-conforming Argon. Any Argon purchased by Buyer pursuant to Section 4.2 hereof which does not conform to the specifications set forth in Section 6.1 hereof, may be rejected by Buyer providing Seller with verbal notice within twenty- four (24) hours and subsequent written confirmation within twenty (20) days after delivery thereof, and the non-conforming Argon will be replaced at Seller's sole cost. 6.3 Power Consumption Guarantee. 6.3.1 Power Tests. Within ninety (90) days following the Date of First Delivery, and at a time mutually agreeable to Buyer and Seller, Seller's representatives will measure 14 19 the electrical power demand of the New Facility ("Power Test"). Additionally, Buyer and Seller each have the right to demand a Power Test up to two (2) times each calendar year. Each Power Test will be conducted while producing Product and Liquid Nitrogen at the following average rates: Gaseous Oxygen 750 Tons per day at 450 PSIG Liquid Oxygen 100 Tons per day Liquid Nitrogen 50 Tons per day Argon 40.5 Tons per day Buyer's personnel, at their option, may witness the Power Test. The duration of the Power Test shall be twenty-four (24) hours. The actual demand, as measured using meters installed at the New Facility, pursuant to Section 9.3, as adjusted for power and product meter tolerances and ambient conditions at Vineyard, Utah of 70 degrees Fahrenheit dry bulb, 24% relative humidity, and 12.4 pounds per square inch absolute, shall not exceed 14,641 KW plus or minus 4% (the "Power Consumption Guarantee"). 6.3.2 Penalty. Should the demand during the Power Test exceed the Power Consumption Guarantee, the Adjusted Monthly Facility Charge shall be immediately reduced by the following amount: Amount = (A - 1.02 B) x C x P where: A = the average power demand rate established during the Power Test B = the Power Consumption Guarantee (14,641 kw) C = the number of hours the New Facility operated during the month P = Buyer's Incremental cost of electric power, calculated as follows: Incremental Cost (P) = ((D/730) + E) Where: E = price paid by Buyer for the energy portion of the power purchased from PacifiCorp for a demand rate in excess of 90 MW, expressed in dollars per kwh.; and D = the demand charge (expressed in $ per kwh) under Utah Power's Schedule 9 rate or, if Schedule 9 is no longer available, a successor tariff of Utah Power generally available to industrial customers like Seller. Such reduction shall be made until such time as Seller has demonstrated compliance with the Power Consumption Guarantee. 15 20 6.3.3 Credit. Should the demand during the Power Test be less than the Power Consumption Guarantee, then the Adjusted Monthly Facility Charge shall be increased by fifty percent (50%) of the Amount set forth below: Amount = (0.98 B - A) x C x P where: A = the average power demand rate established during the Power Test B = the Power Consumption Guarantee (14,641 kw) C = the number of hours the New Facility operated during the month P = Buyer's Incremental cost of electric power, calculated as follows: Incremental Cost (P) = ((D/730) + E Where: E = price paid by Buyer for the energy portion of the power purchased from PacifiCorp for a demand rate in excess of 90 MW, expressed in dollars per kwh; and D = the demand charge (expressed in $ per kwh) under Utah Power's Schedule 9 rate or, if Schedule 9 is no longer available, a successor tariff of Utah Power generally available to industrial customers like Seller. Such increase shall be made until such time as Seller is not in compliance with the Power Consumption Guarantee. 6.4 Limitation. THERE ARE NO EXPRESS WARRANTIES BY SELLER OTHER THAN THOSE SPECIFIED IN THIS AGREEMENT. NO WARRANTIES BY SELLER (OTHER THAN WARRANTY OF TITLE AS PROVIDED IN THE UNIFORM COMMERCIAL CODE) SHALL BE IMPLIED OR OTHERWISE CREATED UNDER THE UNIFORM COMMERCIAL CODE, INCLUDING BUT NOT LIMITED TO, THE WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ARTICLE 7 - DELIVERY PRESSURE Gaseous Oxygen shall be delivered by Seller into the Oxygen Distribution System and at a minimum pressure of 450 PSIG. ARTICLE 8 - SELLER'S SHUTDOWN 8.1 Ordinary Downtime. Seller will have the right from time to time to shut down the production portion of the New Facility for such periods of time as may be necessary for Seller to 16 21 perform scheduled ordinary repairs for maintenance and/or thawing necessary or consistent with proper operation, not in any event to exceed fourteen (14) days during any two consecutive contract years during the term hereof; provided, however, that the foregoing period is not intended to limit Seller's rights in the event of a contingency under Article 11 hereof. During any such shut-down period, at Buyer's request, Buyer's Liquid Oxygen available in the New Facility's storage tanks, determined pursuant to Section 4.6 hereof, will be vaporized and delivered to Buyer. Buyer and Seller will coordinate to the extent practicable Seller's scheduled shutdowns under this Article 8 with Buyer's periods of reduced Product needs and when the Praxair Facility is on-line, and shall minimize any resulting downtime or reduced production impacts on Buyer's operations. 8.2 Vaporization. In the event from time to time Seller is unable to supply all or part of the applicable quantities of Products set forth in Article 4 by reason of shutdown under Sections 6.3 or 8.1 or a contingency under Article 11, and Buyer requires the use of Seller's storage and vaporization equipment for Products purchased from third parties, Seller, without charge to Buyer, shall permit such storage, and shall also vaporize and deliver such oxygen to the Oxygen Distribution System. Buyer hereby agrees to hold Seller harmless and indemnify Seller against any loss or damage to its equipment, or injury, illness or death of persons arising out of or incident to any deliveries by another industrial gas supplier. Buyer's exercise of the rights specified in this Section 8.2 shall not entitle Buyer to recover from Seller any part of the purchase price paid to such other industrial gas supplier, including but not limited to the difference between the price for Product(s) charged by such other industrial gas supplier and the price(s) specified in this Agreement; provided, however, that if (a) such downtime under Sections 6.3 or 8.1 exceeds eight (8) consecutive days, (b) Seller is unable to supply to Buyer the required quantities of Products hereunder, and (c) Buyer is required to obtain Oxygen and/or Argon from sources (including from third parties or Seller) other than the New Facility to supply all or part of the applicable quantities of Products set forth in Article 4, then the Adjusted Monthly Facility Charge will be reduced by the costs incurred by Buyer in obtaining such Products from sources other than the New Facility and the term of this Agreement will be extended for a period equal to twice the duration of such shutdown. Upon written notice from Seller that the shutdown or contingency is concluded, Buyer's right to obtain Products from a third party and Seller's obligation to accept deliveries and vaporize Products obtained from third parties shall cease with respect to such shutdown or contingency and the entire Adjusted Monthly Facility Charge shall be paid to Seller by Buyer pursuant to the terms of this Agreement. If the Adjusted Monthly Facility Charge is reduced pursuant to this Section 8.2, then any days of downtime under Section 6.1 or 8.1 hereof in excess of eight (8) consecutive days shall not be counted for purposes of Seller's fourteen (14) days of ordinary downtime pursuant to Section 8.1 hereof. 8.3 Right to Alternate Supply. In all events, including periods when Seller is unable to supply all or part of the applicable quantities of Products set forth in Article 4 by reason of shutdown under Sections 6.3 or 8.1 or a contingency under Article 11, Buyer shall have the independent right to purchase Products, or any part thereof, from another industrial gas supplier; provided, however, that except as specified in Section 8.2 all such deliveries of Products made by such other industrial gas supplier shall be made into equipment provided by such other industrial gas 17 22 supplier. Notwithstanding the foregoing, except for Products from the Praxair Facility, Buyer shall not exercise its right to purchase Gaseous Oxygen under this Section 8.3 for resale or for use in Buyer's currently existing processes from independent suppliers unless Buyer first takes delivery of at least 750 Tons per day of Gaseous Oxygen from the New Facility. ARTICLE 9 - METERING EQUIPMENT 9.1 Gaseous Oxygen Metering. Seller, at its expense, shall install and maintain gas-phase oxygen flow rate meter as a part of the New Facility at locations within the Facility Site mutually acceptable to the parties for the purpose of accurately measuring the quantities and instantaneous flow rates of Oxygen delivered to Buyer hereunder. The meters shall be billing quality meters of a brand and type mutually agreed upon by Buyer and Seller. 9.1.1 Calibration. Seller, at its expense, shall calibrate such metering equipment at six month intervals, and Buyer may have its representatives present during any such tests. 9.1.2 Buyer Tests. At any time requested by Buyer, but not more often than once a year, Seller will test such metering equipment in the presence of Buyer's representative, and if the metering equipment is found on such test to be accurate as specified above, then the cost and expense of such test will be borne by Buyer but if the metering equipment is found on such test to be inaccurate as specified above, then the cost and expense of such test and of correcting the inaccuracy in the metering equipment will be borne by Seller. 9.2 Liquid Weights. Seller will measure the quantities of Liquid Oxygen, Liquid Nitrogen and Argon delivered to, and removed from, the New Facility by certified weight scales or any other method mutually agreed upon in writing by the parties hereto. Seller shall deliver documentation of such weights to Buyer upon request therefor. Such scales shall be tested and calibrated in accordance with the same procedures set forth in Section 9.1.1 hereof except such tests and calibrations shall be performed on three (3) month intervals. The quantity of Argon produced at the New Facility shall be determined by using the weights determined as set forth above. 9.3 Electric Metering Equipment. Seller, at its expense, shall install and maintain electricity meters of a mutually acceptable quality, brand and type, as a part of the New Facility at a location mutually acceptable to the parties for the purpose of accurately measuring the power consumption of the New Facility. 18 23 ARTICLE 10 - TAXES 10.1 Sales and Other Taxes. If at any time during the term of this Agreement any tax (other than a net income or excess profits tax, general franchise tax imposed on corporations on account of their right to do business within the state as a foreign corporation) is imposed on Seller by any governmental authority upon, or measured by, the production, delivery, or use of the Products supplied to Buyer, which directly increases Seller's costs incurred in the production, sale or delivery of any Products to Buyer hereunder, Buyer will reimburse Seller therefor to the extent that Seller can reasonably demonstrate that its costs of production, sale or delivery hereunder are directly increased thereby. Buyer shall pay any sales or use taxes imposed on the purchase and sale of Products hereunder. It is expressly agreed that all sales and use taxes arising as a result of the construction of the New Facility shall be paid by Seller. Notwithstanding the preceding sentence, Buyer agrees to reimburse Seller for the amount of all such sales and use taxes arising as a result of the construction of the New Facility as follows: The amount of the Monthly Facility Charge during the term of this Agreement shall be increased by 10.2 Property Taxes. Seller and Buyer shall each pay one-half (1/2) of all real and personal property taxes or assessments which may now or hereafter be levied on the Facility Site or the New Facility, respectively, during the term of this Agreement. ARTICLE 11 - CONTINGENCIES 11.1 Contingencies. Neither party hereto will be liable to the other for default or delay in the performance of any of its obligations hereunder due to an act of God, accident, fire, flood, storm, riot, war, sabotage, explosion, strike, work stoppage, concerted acts of workers, national defense requirement, governmental law, ordinance, rule or regulation, whether valid or invalid, extraordinary failure of equipment or inability to obtain sufficient quantities of electrical power, steam, water or other utilities or type of energy, raw material, labor, equipment or transportation or any similar or different contingency beyond its reasonable control which would make performance commercially impracticable whether or not the contingency is of the same class as those enumerated above, it being expressly agreed that such enumeration shall be non-exclusive; provided, however, that neither business downturn nor economic conditions will qualify as a contingency within the meaning of this Article 11. The party so prevented from performance shall, upon prompt, written notice to the other party, be excused to the extent that its obligations are prevented, interfered with or restructured because of such contingency event. Notwithstanding the occurrence of such contingency, each party shall exert all reasonable efforts to continue in the performance of its obligations hereunder and bring any period of contingency to an end and as expeditiously as possible; provided that any strike or labor disturbance or similar difficulty of any kind shall be deemed to be beyond the reasonable control of the party whose performance is affected thereby. 19 24 11.2 Reduced Delivery or Taking. If, for any period, a contingency covered by Section 11.1 reduces the delivery or taking of Oxygen from the New Facility, the party affected thereby will give prompt notice to the other party of the reduction or interruption, and the Adjusted Monthly Facility Charge will be reduced pursuant to the following formula: Reduction Amount = 0.80 x Monthly Facility Fee x A x N -------------------------- --- 30.4 800 where: A = Average Oxygen delivered in Tons per day during such time of reduced delivery or taking. N = Number of days of reduced delivery or taking. Buyer will accept and pay for any Product, delivered before said notice is given. Upon receiving said notice from Seller, Buyer will advise Seller to discontinue said deliveries or request that they be continued. If advised by Buyer, Seller shall deliver any Products reasonably available from the New Facility and shall use reasonable efforts to deliver in accord with Buyer's demand any Products which Seller has reasonably available for Buyer from other locations. Seller will continue said deliveries, if so requested, to the extent and for as long as Seller in its reasonable discretion determines that its own needs for consumption of Products and its pre-existing contract commitments to others will permit. Buyer will pay for any Products delivered by Seller from other locations pursuant to this Section 11.2 at the price negotiated between the parties at the time plus any additional costs related to special purchase, freight or handling. Buyer shall have the right to obtain Products from other suppliers during the existence of any contingency under Section 11.1. 11.3 No Production. During any period that no Oxygen is delivered or taken from the production of the New Facility due to the occurrence of a contingency covered by Section 11.1, Buyer will be fully relieved of its obligation to pay the Monthly Facility Charge. 11.4 Extension of Term. The term of this Agreement shall, at either party's option, be extended for a period equal to twice the total number of calendar days that Buyer is relieved from payment of any portion of the Adjusted Monthly Facility Charge pursuant to Section 8.2, this Article 11, and Article 21. The party desiring to exercise this option must so notify the other party in writing within sixty (60) calendar days after the end of such period of reduced payments. ARTICLE 12 - LIABILITY 12.1 Acknowledgement. Buyer acknowledges that there are hazards associated with the use of the Products. Buyer agrees that its personnel concerned with the Products are aware of the hazards and assumes all responsibility for the warning of its employees and independent contractors of all hazards to persons and property in any way connected with Buyer's use, storage and handling of the Products. Buyer also assumes all responsibility for the suitability and the results of using the Products alone or in combination with other articles or substances and in any manufacturing or other 20 25 processes or procedures. Neither Seller nor Buyer shall be liable under this Agreement for any incidental, consequential, indirect, or special damages of any kind, including, but not limited to, loss of profits, loss of use or loss of business, unless caused by the willful or intentional acts of such party. 12.2 Indemnity by Buyer. Buyer hereby covenants and agrees to indemnify and hold Seller harmless from and against any and all claims, losses, damages, actions, and causes of action, costs or expenses (including reasonable attorneys' fees) of any nature or kind, brought against Seller arising from or incidental to Buyer's activities or presence, including that of its employees, contractors, agents, representatives, and invitees on or about the Facility Site or New Facility; provided, however, that Buyer shall not be liable for, and this indemnity shall not extend to, any such liability, loss, demand, action, or cause of action to the extent that it results from or is attributable to the negligent acts or omissions of Seller, or its employees, contractors, agents, representatives and invitees. 12.3 Indemnity by Seller. Subject to Section 12.1, Seller hereby covenants and agrees to indemnify and hold Buyer harmless from and against any and all claims, losses, damages, actions, and causes of actions, costs or expenses (including reasonable attorneys' fees) of any nature or kind, brought against Buyer arising from or incidental to Seller's activities or presence, including that of its employees, contractors, agents, representatives, and invitees on or about the Geneva Works; provided, however, that Seller shall not be liable for, and this indemnity shall not extend to, any such liability, loss, demand, action, or cause of action to the extent that it results from or is attributable to the negligent acts or omissions of Buyer, or its employees, contractors, agents, representatives and invitees. ARTICLE 13 - ATMOSPHERIC CONTAMINANTS Buyer agrees to notify and consult with Seller concerning any process or facility changes by Buyer at the Geneva Works which would cause an increase in atmospheric contaminants at or near the New Facility. ARTICLE 14 - ENVIRONMENTAL CONDITIONS AND PERMITS 14.1 Site Condition. In the event any hazardous or toxic materials or substances are discovered on, in or under the Facility Site which would prevent, delay or increase the cost of erection or operation of the New Facility, Seller shall promptly notify Buyer and, unless otherwise directed by Geneva, cease all construction activities at the Facility Site and the Completion Date shall be extended as provided in Section 2.3.2.3 hereof. Such work shall not be resumed except by written agreement of Buyer and Seller if in fact such materials or substances are hazardous or toxic and have not been rendered harmless. 21 26 14.2 Permitting. Seller, without out-of-pocket cost to Buyer, will pay any fees associated with, and otherwise procure all necessary permits relating to air quality, air emissions and the Clean Air Act for the installation, operation, and maintenance of the New Facility and the delivery of Products to Geneva Works. In addition to the foregoing, Seller, without out-of-pocket cost to Buyer, will pay any fees associated with, and otherwise procure all necessary permits relating to the installation, operation, and maintenance of the New Facility and the delivery of Products to Geneva Works. Notwithstanding the foregoing, Buyer agrees to reimburse Seller for permitting costs paid by Seller as follows: The amount of the Monthly Facility Charge during the term of this Agreement shall be increased by ARTICLE 15 - FAIR LABOR STANDARDS ACT Seller represents that Products delivered to Buyer hereunder will have been produced in compliance with the Fair Labor Standards Act of 1938, as amended. ARTICLE 16 - DEFAULT 16.1 Default by Seller. If a voluntary or involuntary petition should be filed by or against Seller under any bankruptcy law (including a petition for reorganization, extension of payment, composition or adjustment of liabilities), or if a receiver should be appointed for Seller, or if an attachment or execution should be levied against all or part of the New Facility, or if Seller should materially default in the performance of any material covenant or obligation to be performed by it under this Agreement, and within ninety (90) days after receipt of written notification thereof from Buyer, should Seller not cure such default or if such default is not curable within ninety (90) days and Seller has not commenced and is diligently pursuing such cure, then Buyer may, without prejudice to any other right or remedy, terminate this Agreement by written notice without further responsibility or liability. 16.2 Default by Buyer. If a voluntary or involuntary petition should be filed by or against Buyer under any bankruptcy law (including a petition for reorganization, extension of payment, composition or adjustment of liabilities), or if a receiver should be appointed for Buyer, or if an attachment or execution should be levied against all or part of the Geneva Works, or if Buyer should materially default in the performance of any material covenant or obligation to be performed by it under this Agreement, and within ninety (90) days after receipt of written notification thereof from Seller, should Buyer not cure such default or if such default is not curable within ninety (90) days and Buyer has not commenced and is diligently pursuing such cure, then Seller may, without prejudice to any other right or remedy, terminate this Agreement by written notice without further responsibility or liability. 22 27 ARTICLE 17 - ASSIGNMENT Any assignment of this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld, shall be void. ARTICLE 18 - APPLICABLE LAW This Agreement will be governed by and construed in accordance with the laws of the State of Utah and any action seeking to enforce or interpret the terms hereof, or arising out of the breach hereof, shall be commenced and maintained in the State of Utah. ARTICLE 19 - RESOLUTION OF DISPUTES In the event that a party to this Agreement has reasonable grounds to believe that the other party hereto has failed to fulfill any obligation hereunder, such party will promptly notify the other party in writing of the substance of its belief. Unless otherwise agreed in writing, the party receiving such notice must respond in writing within fifteen (15) days of receipt of such notice by (a) providing either evidence of cure of the condition specified or an explanation of why it believes that its performance is in accordance with the terms and conditions of this Agreement, and (b) specifying three (3) dates, all of which must be within fifteen (15) days from the date of its response, unless otherwise agreed in writing, for a meeting to resolve the dispute. The claiming party will then select one (1) of the three (3) dates, and a dispute resolution meeting will be held. At the conclusion of such meeting, the parties shall have the right to pursue any remedy otherwise permitted in law or in equity. Notwithstanding anything in this Agreement to the contrary, but subject to Article 11 and Section 8.1, Seller agrees that it will provide uninterrupted supply of Products during any such dispute so long as all contractually required payments are made. ARTICLE 20 - TERM 20.1 Term. Subject to the provisions of Section 11.4, the term of this Agreement will commence as of the Effective Date and expire fifteen (15) years after the Date of First Delivery, and will continue in effect thereafter until terminated by either party upon giving not less than twelve (12) months prior written notice of such termination to the other party. Upon conclusion of the initial term of this Agreement, both parties agree to renegotiate in good faith for a contract extension with terms which will reflect capital depreciation, plant efficiency, technical obsolescence, expected plant life, additional maintenance requirements and similar factors reasonable profit to Seller, and other factors reasonably related to the production and price of Oxygen. 23 28 20.2 Early Termination. Beginning on the date occurring five (5) years prior to the end of the term of this Agreement, as defined pursuant to Section 20.1 hereof, Buyer shall have the option at any time it determines that its needs for Gaseous Oxygen at the Geneva Works are less than 600 Tons per day on average, to terminate this Agreement by giving written notice to Seller at least six (6) months prior to the anticipated date of such termination. On the effective date of the termination pursuant to this Section 20.2, Buyer shall pay to Seller a termination fee accordingly to the following schedule:
Years Remaining in Term Termination Fee ----------------------- --------------- 5 4 3 2 1
ARTICLE 21 - ECONOMIC HARDSHIP If a downturn in the economy or a change in the processes utilized by Buyer for the production of iron or steel renders the continuing operation of New Facility uneconomical for Buyer, Buyer shall have the one time option during the term of this Agreement, upon sixty (60) days' advance written notice to Seller, to reduce the Adjusted Monthly Facility Charge by $ for a period up to six (6) consecutive months. Should Buyer desire to exercise said option, then: 1) Buyer shall present Seller with information that evidences, to Seller's reasonable satisfaction, such uneconomical operation. 2) Seller shall have the right to continue to operate the New Facility to produce Products and Liquid Nitrogen required by Seller. 3) The term of the Agreement shall be extended pursuant to Section 11.4 hereof. 4) The other terms and conditions of this Agreement remain unchanged and in effect. ARTICLE 22 - NOTICE Any notice required to be given by either party to the other under any provisions of this Agreement shall be in writing and shall be considered as having been delivered on the date of personal delivery or by an acknowledged facsimile transmission, addressed to the other party as follows: 24 29 SELLER: AIR LIQUIDE AMERICA CORPORATION 3535 West Twelfth Street Houston, Texas 77008 Attention: Director, On-Site Business and Project Development Facsimile No.: 713-868-0345 BUYER: GENEVA STEEL COMPANY 10 South Geneva Road Vineyard, Utah 84058 Attention: Senior Vice President, Engineering Facsimile No.: 801-227-9198 With required copies to: GENEVA STEEL COMPANY 10 South Geneva Road Vineyard, Utah 84058 ATTENTION: General Counsel Facsimile No.: 801-227-9141 and KIMBALL, PARR, WADDOUPS, BROWN & GEE 185 South State Street, Suite 1300 Salt Lake City, Utah 84111 Attention: Roger D. Henriksen, Esq. Facsimile No.: 801-532-7750 or to such other party or such other address as either party shall from time to time designate for that purpose. Any notice by letter under this Agreement will be deemed to be given as of the date such letter is received by the other party hereto. ARTICLE 23 - ENTIRE AGREEMENT This Agreement comprises the entire agreement between the parties hereto and supersedes all previous and contemporaneous writings, oral understandings, negotiations, and previous agreements with reference to the subject matter hereof; provided, however, that the Current Agreement shall be terminated upon the Date of First Delivery. There are no other promises, representations or warranties affecting this Agreement. There shall be no modification or recision of this Agreement except by a writing signed by both Buyer and Seller. Any terms and conditions appearing in any purchase orders, even if signed by Seller and/or Buyer, shall be deemed null and void. 25 30 ARTICLE 24 - MISCELLANEOUS 24.1 Confidentiality. Neither this Agreement nor any information relating to this Agreement or the New Facility shall be publicized or disclosed by Seller or Buyer without the prior written consent of the other party in each instance, except as otherwise required by law. 24.2 Severability. Whenever possible, each provision of this Agreement shall be interpreted to be valid under applicable law. In the event that any condition, covenant or other provision herein contained is held to be invalid or void by any court of competent jurisdiction, the same shall be deemed severable from the remainder of this Agreement and shall in no way affect any other covenant or condition herein contained. If such condition, covenant or other provision shall be deemed invalid due to its scope or breadth, such provision shall be deemed valid to the extent of the scope or breadth permitted by law. 24.3 Waiver. Either party may, by notice signed by an officer of such party and delivered in the manner provided in this Agreement, but shall be under no obligation to, waive any of its rights or conditions to its rights hereunder, or any duty, obligation or covenant of the other party. To be effective, such waiver shall specifically state the intention of the waiving party to waive such rights or conditions to its rights. Such a written waiver shall not affect or alter the other provisions of this Agreement. 24.4 Power Rates. Upon the request of Buyer, Seller agrees to use reasonable efforts to assist Buyer in obtaining the most favorable electrical power rates possible for power to be utilized at the New Facility, including but not limited to providing documentation, information and consultation in connection therewith, and, if necessary, restructuring the ownership of the New Facility and other provisions of this Agreement in a mutually acceptable manner to take advantage of any available lower power rates. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first above written. AIR LIQUIDE AMERICA CORPORATION, a Delaware corporation By: /s/ KEN MILLER ------------------------------------- Its: Exec. Vice Pres. ------------------------------------ GENEVA STEEL COMPANY, a Utah corporation By: /s/ MAX E. SORENSON ------------------------------------- Its: Senior Vice President ------------------------------------ 26 31 Exhibit 1.6 to Industrial Gas Supply Agreement - -------------------------------------------------------------------------------- FACILITY SITE The "Facility Site" is depicted on Buyer's Drawing dated May 18, 1995, a copy of which is attached hereto. 32 EXHIBIT 1.9 to Industrial Gas Supply Agreement - -------------------------------------------------------------------------------- GROUND LEASE The "Ground Lease" referred to in the foregoing Agreement is attached hereto. 2 33 EXHIBIT 2.1 to Industrial Gas Supply Agreement - -------------------------------------------------------------------------------- The "New Facility" identified in the foregoing Industrial Gas Supply Agreement includes, but is not limited to, the following equipment, systems and facilities: 1. All equipment, systems, and facilities depicted on, or reasonably inferable from, Seller's "Description of Seller's Supplies" Document No. AS 9410-217 (alternate 1, Revision 3), and Seller's Drawing Nos. AS9410-217-R1 (Revision B), AS 9410-217-Y1 (Revision B) and AS 9410-217-E1 (Revision C). 2. Cryogenic storage vessels with a total capacity of 1,800 Tons of Liquid Oxygen. 3. Equipment to vaporize 13,422 SCF per minute of Liquid Oxygen at a pressure of 450 PSIG on a sustained basis. 4. If so elected by Buyer pursuant to Section 2.10.3 of the foregoing Agreement, Gas receivers with a total usable capacity of 17,380 cubic feet water volume for Gaseous Oxygen. 5. Supply and install power distribution from Buyer's switch house located in substation #2 near the existing oxygen plants on the east side of the Geneva Works. Seller to supply all equipment, reconditioning, and labor necessary to tie into Geneva's existing 13.8KV bus in switch house #2. This shall include a Westinghouse IQ Analyzer power meter, ABB MMCO 3P&G protective overcurrent relay, zero sequence current transformer(s), cable, terminations, instrument wiring, etc. in the switch house plus any PT's or CT's necessary for mutually agreeable metering accuracy. Geneva will supply engineering and labor for work done inside the switch house. Seller shall supply all engineering, equipment, and labor to install main power distribution conductors from the switch house to the Seller's facility, including cable, bus duct, cable tray, supports, excavation, underground duct, cement, and all other items necessary for a fully functioning system. Geneva personnel will supply labor and supervision for terminations and tie in to the electrical service. Seller shall supply all engineering, equipment, and labor to supply emergency power to the facility, including transformation and protective relaying costs. The source of power may be from the switch house noted above, Utah Power independent lines, or through local emergency generation located in the Seller's facility. 34 Seller shall supply all engineering, equipment, and labor to supply construction power to the facility. Construction power may be obtained from the switch house noted above, from Utah Power independent lines or through local emergency generation located in the Seller's facility. Seller shall supply all engineering, equipment, and labor to supply construction power to the facility, including transformation and protective relaying costs. Construction power may be obtained from the switch house noted above, or from Utah Power independent lines located across the street from the facility. All 13.8KV switchgear shall have an interrupting capacity of 1000 MVA. Grounding for the 13.8KV system will be through a 40 ampere grounding transformer or through a 2000 ampere grounding transformer as determined by given switching configurations. 6. Installation of process and sanitary sewer line and tie-in from the New Facility to Buyer's existing sanitary sewer system. 7. Front-end air purification systems to remove substantially all hydrocarbons heavier than propane. 8. On-line hydrocarbon analyzer and associated sample vaporizer to continuously monitor the hydrocarbon content of Liquid Oxygen. 9. Continuous withdrawal of Liquid Oxygen from the low pressure column sump. 10. Bailey (or equal) distributed control system for process monitoring and control. 11. Central control room. 12. Two (2) 400 tons per day oxygen compressors. 13. Spare parts for all major equipment, including, but not limited to: a. Expansion turbine cartridge assembly; b. Gas seals, oils seals, and bearings for all rotating equipment; c. Instrument system spare parts, including valves, operators and control cards; d. Electrical spare parts; and e. Liquid pumps. 2 35 14. Billing quality meters for gaseous products, as provided in Section 9.1 of the Agreement. 15. Billing quality meters for electricity usage, as provided in Section 9.3 of the Agreement. 16. The following equipment, materials and work: - boiler (including, but not limited to, equipment supply, foundation and installation) - seismic zone 4 - road paving - road paving - road entrance - 450 PSIG Oxygen Vaporizer - Reactivation heater - DCS Interface Connection 3 EX-10.4 5 1ST AMENDMENT TO REVOLVING CREDIT AGREEMENT 1 FIRST AMENDMENT TO AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT First Amendment to Amended and Restated Revolving Credit Agreement (this "Amendment"), dated as of June 30, 1995, 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: (a) The definition of the term "Applicable Base Rate Margin" set forth in Section 1.1 of the Credit Agreement is amended to read in its entirety as follows: "'Applicable Base Rate Margin' means 1.75%; provided, however, that if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), satisfactory in form and substance to the Agent, establishing that the Borrower achieved (a) a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12- month period of at least the ratios set forth for the Fiscal Quarters below and (b) the cumulative Cash Flow (exclusive of Capital Expenditures) for the period commencing September 30, 1994 through and as of December 31, 1995 and each quarter thereafter, then, commencing on the first day of the month next succeeding 2 the delivery of such information, the Applicable Base Rate Margin shall be decreased for the three-month period commencing on such day to 1.25%; provided further, however, that if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), satisfactory in form and substance to the Agent, establishing that the Borrower achieved a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12-month period of at least 3.60 to 1.00, and the Borrower has achieved the tests set forth in clause (b) above, then, commencing on the first day of the month next succeeding the delivery of such information (but not prior to July 1, 1995), the Applicable Base Rate Margin shall be reduced for the three-month period commencing on such day to 1.00%; provided further, however, that notwithstanding the foregoing if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), establishing that the Borrower did not achieve (a) a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12-month period of at least the ratios set forth for the Fiscal Quarters below and (b) the cumulative Cash Flow (exclusive of Capital Expenditures) for the period commencing September 30, 1994 through and as of December 31, 1995 and each quarter thereafter, then, commencing on the first day of the month next succeeding the delivery of such information, the Applicable Base Rate Margin shall be increased for the three-month period commencing on such day to 1.75%.
For the Fiscal EBITDA to Cash Quarter Ending Interest Expense Ratio Cash Flow - --------------- ---------------------- --------- December 31, 1995 2.75:1.0 $ 70,000,000 March 31, 1996 2.75:1.0 $ 90,000,000 June 30, 1996 2.75:1.0 $ 130,000,000 September 30, 1996 3.00:1.0 $ 155,000,000 December 31, 1996 3.00:1.0 $ 180,000,000 March 31, 1997 3.00:1.0 $ 190,000,000 June 30, 1997 3.00:1.0 $ 210,000,000 September 30, 1997 3.00:1.0 $ 225,000,000 December 31, 1997 3.00:1.0 $ 260,000,000 March 31, 1998 3.00:1.0 $ 275,000,000 June 30, 1998 3.00:1.0 $ 290,000,000 September 30, 1998 3.00:1.0 $ 305,000,000
2 3 December 31, 1998 3.00:1.0 $ 325,000,000 March 31, 1999 3.00:1.0 $ 325,000,000"
(b) The definition of the term "Applicable Eurodollar Rate Margin" set forth in Section 1.1 of the Credit Agreement is amended to read in its entirety as follows: "'Applicable Eurodollar Rate Margin' means 3.00%; provided, however, that if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), satisfactory in form and substance to the Agent, establishing that the Borrower achieved (a) a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12-month period of at least the ratios set forth for the Fiscal Quarters below and (b) the cumulative Cash Flow (exclusive of Capital Expenditures) for the period commencing September 30, 1994 through and as of December 31, 1995 and each quarter thereafter, then, commencing on the first day of the month next succeeding the delivery of such information, the Applicable Eurodollar Rate Margin shall be decreased for the three-month period commencing on such day to 2.50%; provided further, however, that if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), satisfactory in form and substance to the Agent, establishing that the Borrower achieved a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12-month period of at least 3.60 to 1.00, and the Borrower has achieved the tests set forth in clause (b) above, then, commencing on the first day of the month next succeeding the delivery of such information (but not prior to July 1, 1995), the Applicable Eurodollar Rate Margin shall be reduced for the three-month period commencing on such day to 2.25%; provided further, however, that notwithstanding the foregoing if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), establishing that the Borrower did not achieve (a) a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12-month period of at least the ratios set forth for the Fiscal Quarters below and (b) the cumulative Cash Flow (exclusive of Capital Expenditures) for the period commencing September 30, 1994 through and as of December 31, 1995 and each quarter thereafter, then, commencing on the first day of the month next succeeding the delivery of such information, the Applicable Eurodollar 3 4 Rate Margin shall be increased for the three-month period commencing on such day to 3.00%.
For the Fiscal EBITDA to Cash Quarter Ending Interest Expense Ratio Cash Flow - --------------- ---------------------- --------- December 31, 1995 2.75:1.0 $ 70,000,000 March 31, 1996 2.75:1.0 $ 90,000,000 June 30, 1996 2.75:1.0 $ 130,000,000 September 30, 1996 3.00:1.0 $ 155,000,000 December 31, 1996 3.00:1.0 $ 180,000,000 March 31, 1997 3.00:1.0 $ 190,000,000 June 30, 1997 3.00:1.0 $ 210,000,000 September 30, 1997 3.00:1.0 $ 225,000,000 December 31, 1997 3.00:1.0 $ 260,000,000 March 31, 1998 3.00:1.0 $ 275,000,000 June 30, 1998 3.00:1.0 $ 290,000,000 September 30, 1998 3.00:1.0 $ 305,000,000 December 31, 1998 3.00:1.0 $ 325,000,000 March 31, 1999 3.00:1.0 $ 325,000,000"
(c) The definition of the term "Tangible Net Worth" set forth in Section 1.1 of the Credit Agreement is amended to read in its entirety as follows: "'Tangible Net Worth' of any Person means, at any date, the Net Worth of such Person at such date, excluding, however, (a) from the determination of the Total Assets of such Person at such date (to the extent the same are included in the determination of Total Assets and without duplication), (i) all goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles, (ii) all deferred charges or unamortized debt discount and expense, (iii) all reserves carried and not deducted from assets or carried as a liability, (iv) treasury stock and capital stock of such Person and its Restricted Subsidiaries, and all obligations or other securities of, or capital contributions to, or investments in or advances or loans to, any Unrestricted Subsidiary of such Person or any of its Subsidiaries, (v) securities which are not readily marketable, (vi) cash held in a sinking or other analogous fund established for the purpose of redemption, retirement, defeasance or prepayment of any Stock, 4 5 (vii) any write-up in the book value of any asset resulting from a revaluation thereof, and (viii) any items not included in clauses (i) through (vii) above which are treated as intangibles in conformity with GAAP, and (b) the carrying value of all outstanding Preferred Stock." (d) Section 2.16(m)(i) of the Credit Agreement is amended in its entirety as follows: "(i) to the Agent for the ratable benefit of each Lender who has purchased or has been deemed to have purchased participations in the Letters of Credit, an administrative fee equal to 2.75% of the maximum amount available from time to time to be drawn under such Letter of Credit, computed monthly in arrears on the first day of each month and on the termination of such Letter of Credit, and calculated on the basis of a 360-day year and the actual number of days elapsed, which amounts shall, without further action on the part of the Borrower, be added to the outstanding principal amount of the Revolving Credit Loans as Base Rate Loans; provided, however, that if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), establishing that the Borrower achieved (a) a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12-month period of at least the ratios set forth for the Fiscal Quarters below and (b) the cumulative Cash Flow (exclusive of Capital Expenditures) for the period commencing September 30, 1994 through and as of December 31, 1995 and each quarter thereafter, then, commencing on the first day of the month next succeeding the delivery of such information, such administrative fee shall be decreased for the three-month period commencing on such day to 2.25%; provided further, however, that if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), satisfactory in form and substance to the Agent, establishing that the Borrower achieved a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12-month period of at least 3.60 to 1.00, and the Borrower has achieved the tests set forth in clause (b) above, then, commencing on the first day of the month next succeeding the delivery of such information (but not prior to July 1, 1995), the administrative fee shall be reduced for the three-month period commencing on such day to 2.00%; provided further, however, that 5 6 notwithstanding the foregoing if the Agent shall have received from the Borrower financial and other information (which information shall be delivered to the Agent within 45 days after the end of each Fiscal Quarter), establishing that the Borrower did not achieve (a) a ratio of EBITDA for the rolling 12-month period ended on the last day of the immediately preceding Fiscal Quarter to Cash Interest Expense for such 12-month period of at least the ratios set forth for the Fiscal Quarters below and (b) the cumulative Cash Flow (exclusive of Capital Expenditures) for the period commencing September 30, 1994 through and as of December 31, 1995 and each quarter thereafter, then, commencing on the first day of the month next succeeding the delivery of such information, such administrative fee shall be increased for the three-month period commencing on such day to 2.75%.
For the Fiscal EBITDA to Cash Quarter Ending Interest Expense Ratio Cash Flow - --------------- ---------------------- --------- December 31, 1995 2.75:1.0 $ 70,000,000 March 31, 1996 2.75:1.0 $ 90,000,000 June 30, 1996 2.75:1.0 $ 130,000,000 September 30, 1996 3.00:1.0 $ 155,000,000 December 31, 1996 3.00:1.0 $ 180,000,000 March 31, 1997 3.00:1.0 $ 190,000,000 June 30, 1997 3.00:1.0 $ 210,000,000 September 30, 1997 3.00:1.0 $ 225,000,000 December 31, 1997 3.00:1.0 $ 260,000,000 March 31, 1998 3.00:1.0 $ 275,000,000 June 30, 1998 3.00:1.0 $ 290,000,000 September 30, 1998 3.00:1.0 $ 305,000,000 December 31, 1998 3.00:1.0 $ 325,000,000 March 31, 1999 3.00:1.0 $ 325,000,000"
(e) Section 5.1 of the Credit Agreement is amended to read in its entirety as follows: "5.1. Maximum Leverage Ratio. The Borrower shall achieve a ratio of (a) the sum of (i) Total Liabilities plus (ii) the carrying value of all outstanding preferred stock issued by the Borrower and its Restrictive Subsidiaries, to (b) Tangible Net Worth not in excess of the ratio set forth below: 6 7
During Each Month Ending on the Date Set Forth Below Maximum Ratio -------------------------- ------------- June 30, 1995 5.70:1.0 July 31, 1995 5.70:1.0 August 31, 1995 5.70:1.0 September 30, 1995 5.65:1.0 October 31, 1995 5.65:1.0 November 30, 1995 5.65:1.0 December 31, 1995 5.60:1.0 January 31, 1996 5.60:1.0 February 29, 1996 5.60:1.0 March 31, 1996 5.60:1.0 April 30, 1996 5.60:1.0 May 31, 1996 5.60:1.0 June 30, 1996 5.60:1.0 July 31, 1996 5.60:1.0 August 31, 1996 5.60:1.0 September 30, 1996 5.50:1.0 October 31, 1996 5.50:1.0 November 30, 1996 5.50:1.0 December 31, 1996 5.50:1.0 January 31, 1997 5.50:1.0 February 28, 1997 5.50:1.0 March 31, 1997 5.40:1.0 April 30, 1997 5.40:1.0 May 31, 1997 5.40:1.0 June 30, 1997 5.40:1.0 July 31, 1997 5.40:1.0 August 31, 1997 5.40:1.0 September 30, 1997 5.20:1.0 October 31, 1997 5.20:1.0 November 30, 1997 5.20:1.0 December 31, 1997 5.20:1.0 January 31, 1998 5.20:1.0 February 28, 1998 5.20:1.0 March 31, 1998 5.10:1.0 April 30, 1998 5.10:1.0
7 8 May 31, 1998 5.10:1.0 June 30, 1998 5.00:1.0 July 31, 1998 5.00:1.0 August 31, 1998 5.00:1.0 September 30, 1998 4.80:1.0 October 31, 1998 4.80:1.0 November 30, 1998 4.80:1.0 December 31, 1998 4.70:1.0 January 31, 1999 4.70:1.0 February 28, 1999 4.70:1.0 March 31, 1999 and thereafter 4.50:1.0"
(f) Section 5.2 of the Credit Agreement is amended to read in its entirety as follows: "5.2. Maintenance of Tangible Net Worth. The Borrower shall maintain, during each of the months set forth below, Tangible Net Worth no less than the sum of (a) the amounts set forth below plus (b) an amount equal to 75% of the net proceeds received by the Borrower from the sale of its Stock since the date hereof:
During Each Month Ending on the Date Minimum Set Forth Below Amount ------------------ ------ June 30, 1995 $ 92,000,000 July 31, 1995 $ 92,000,000 August 31, 1995 $ 92,000,000 September 30, 1995 $ 93,000,000 October 31, 1995 $ 93,000,000 November 30, 1995 $ 93,000,000 December 31, 1995 $ 95,000,000 January 31, 1996 $ 95,000,000 February 29, 1996 $ 95,000,000 March 31, 1996 $ 97,500,000 April 30, 1996 $ 97,500,000 May 31, 1996 $ 97,500,000 June 30, 1996 $100,000,000 July 31, 1996 $100,000,000
8 9 August 31, 1996 $100,000,000 September 30, 1996 $102,500,000 October 31, 1996 $102,500,000 November 30, 1996 $102,500,000 December 31, 1996 $105,000,000 January 31, 1997 $105,000,000 February 28, 1997 $105,000,000 March 31, 1997 $107,500,000 April 30, 1997 $107,500,000 May 31, 1997 $107,500,000 June 30, 1997 $110,000,000 July 31, 1997 $110,000,000 August 31, 1997 $110,000,000 September 30, 1997 $113,500,000 October 31, 1997 $113,500,000 November 30, 1997 $113,500,000 December 31, 1997 $115,000,000 January 31, 1998 $115,000,000 February 28, 1998 $115,000,000 March 31, 1998 $117,500,000 April 30, 1998 $117,500,000 May 31, 1998 $117,500,000 June 30, 1998 $120,000,000 July 31, 1998 $120,000,000 August 31, 1998 $120,000,000 September 30, 1998 $122,500,000 October 31, 1998 $122,500,000 November 30, 1998 $122,500,000 December 31, 1998 $130,000,000 January 31, 1999 $130,000,000 February 28, 1999 $130,000,000 March 31, 1999 and thereafter $135,000,000"
(g) Section 5.3 of the Credit Agreement is amended to read in its entirety as follows: "5.3. Capital Expenditures. The Borrower shall not make cumulative Capital Expenditures for the period from September 30, 1994 through the date set forth below in excess of the amount set forth below: 9 10
Maximum Amount of During the Cumulative Capital Period Ending Expenditures -------------- ------------------ June 30, 1995 $ 50,000,000 July 31, 1995 $ 55,000,000 August 31, 1995 $ 60,000,000 September 30, 1995 $ 65,000,000 October 31, 1995 $ 85,000,000 November 30, 1995 $ 85,000,000 December 31, 1995 $ 85,000,000 January 31, 1996 $ 97,000,000 February 29, 1996 $ 97,000,000 March 31, 1996 $ 97,000,000 April 30, 1996 $103,000,000 May 31, 1996 $103,000,000 June 30, 1996 $103,000,000 July 31, 1996 $110,000,000 August 31, 1996 $110,000,000 September 30, 1996 $110,000,000 October 31, 1996 $120,000,000 November 30, 1996 $120,000,000 December 31, 1996 $120,000,000 January 31, 1997 $130,000,000 February 28, 1997 $130,000,000 March 31, 1997 $130,000,000 April 30, 1997 $141,000,000 May 31, 1997 $141,000,000 June 30, 1997 $141,000,000 July 31, 1997 $152,000,000 August 31, 1997 $152,000,000 September 30, 1997 $152,000,000 October 31, 1997 $165,000,000 November 30, 1997 $165,000,000 December 31, 1997 $165,000,000 January 31, 1998 $175,000,000 February 28, 1998 $175,000,000 March 31, 1998 $175,000,000 April 30, 1998 $185,000,000
10 11 May 31, 1998 $185,000,000 June 30, 1998 $185,000,000 July 31, 1998 $195,000,000 August 31, 1998 $195,000,000 September 30, 1998 $195,000,000 October 31, 1998 $210,000,000 November 30, 1998 $210,000,000 December 31, 1998 $210,000,000 January 31, 1999 and thereafter $220,000,000
provided, however, that the Borrower may, in any calendar month, make Capital Expenditures in addition to those set forth above in an aggregate amount not in excess of the difference between (a) the Additional Discretionary Amount (to the extent not previously utilized pursuant to this proviso after September 30, 1994), and (b) the sum of (i) all cash Investments in Subsidiaries made by the Borrower from September 30, 1994 to the date of such determination (other than Investments made in Funding pursuant to the Securitization Documents and permitted under Section 7.6), plus (ii) all cash dividends paid and Indebtedness purchased, redeemed, prepaid, defeased or otherwise acquired for value or paid by the Borrower from September 30, 1994 to the date of such determination (other than purchases, redemptions, prepayments, defeasance, acquisitions for value or payments that are required payments or are specifically permitted by Sections 7.4(b)(i) through (v))." (h) Section 5.4 of the Credit Agreement is amended to read in its entirety as follows: "5.4. Cash Flow. The Borrower's cumulative Cash Flow (exclusive of Capital Expenditures) for the period from September 30, 1994 through and as of each of the dates set forth below shall not be less than the amount set forth below:
Date Minimum Cash Flow ---- ----------------- June 30, 1995 $ 30,000,000 July 31, 1995 $ 30,000,000 August 31, 1995 $ 40,000,000 September 30, 1995 $ 45,000,000 October 31, 1995 $ 55,000,000 November 30, 1995 $ 60,000,000
11 12 December 31, 1995 $ 65,000,000 January 31, 1996 $ 65,000,000 February 29, 1996 $ 70,000,000 March 31, 1996 $ 70,000,000 April 30, 1996 $ 80,000,000 May 31, 1996 $ 85,000,000 June 30, 1996 $ 95,000,000 July 31, 1996 $ 95,000,000 August 31, 1996 $ 95,000,000 September 30, 1996 $105,000,000 October 31, 1996 $105,000,000 November 30, 1996 $105,000,000 December 31, 1996 $130,000,000 January 31, 1997 $130,000,000 February 28, 1997 $130,000,000 March 31, 1997 $140,000,000 April 30, 1997 $140,000,000 May 31, 1997 $140,000,000 June 30, 1997 $150,000,000 July 31, 1997 $150,000,000 August 31, 1997 $150,000,000 September 30, 1997 $160,000,000 October 31, 1997 $160,000,000 November 30, 1997 $160,000,000 December 31, 1997 $170,000,000 January 31, 1998 $170,000,000 February 28, 1998 $170,000,000 March 31, 1998 $180,000,000 April 30, 1998 $180,000,000 May 31, 1998 $180,000,000 June 30, 1998 $190,000,000 July 31, 1998 $190,000,000 August 31, 1998 $190,000,000 September 30, 1998 $210,000,000 October 31, 1998 $220,000,000 November 30, 1998 $220,000,000 December 31, 1998 $220,000,000 January 31, 1999 $235,000,000 February 28, 1999 $235,000,000
12 13 March 31, 1999 and thereafter $235,000,000"
(i) Section 5.5 of the Credit Agreement is amended to read in its entirety as follows: "5.5. EBITDA to Cash Interest Expense Ratio. (a) The Borrower shall achieve as of the last day of its Fiscal Quarter ending on June 30, 1995, determined on the basis of the three Fiscal Quarters ending on June 30, 1995, a ratio of (a) EBITDA for such period to (b) Cash Interest Expense for such period, not less than 2.20:1.00. (b) The Borrower shall achieve as of the last day of each Fiscal Quarter commencing with the Fiscal Quarter ending September 30, 1995, determined on the basis of the four Fiscal Quarters ending on the date of determination, a ratio of (a) EBITDA for such period to (b) Cash Interest Expense for such period, not less than the ratio set forth below:
For the Fiscal Minimum Quarter Ending Ratio Required --------------- --------------- September 30, 1995 2.20:1.0 December 31, 1995 2.20:1.0 March 31, 1996 2.25:1.0 June 30, 1996 2.25:1.0 September 30, 1996 2.25:1.0 December 31, 1996 2.25:1.0 March 31, 1997 2.25:1.0 June 30, 1997 2.30:1.0 September 30, 1997 2.40:1.0 December 31, 1997 2.40:1.0 March 31, 1998 2.45:1.0 June 30, 1998 2.45:1.0 September 30, 1998 and thereafter 2.50:1.0
(j) Section 7.3(a) of the Credit Agreement is amended by substituting for "$5,000,000" in the next to last line of such Section, "$7,500,000". SECTION 2. Conditions Precedent. 13 14 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) 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. 14 15 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. 3.2. 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 15 16 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. 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. 16 17 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 17 18 CORESTATES BANK, N.A., as Lender By: /s/ MYRON LANDAU -------------------------- 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/ SCOTT M. EASTWOOD -------------------------- Name: Title: Vice President 18 EX-27 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the registrants balance sheet and statement of income as of and for the nine months ended June 30, 1995 and is qualified in its entirety by reference to such financial statements, including the notes thereto. US DOLLARS 9-MOS SEP-30-1994 OCT-1-1994 JUN-30-1995 1 6,786,000 0 34,877,000 1,730,000 85,566,000 135,836,000 586,621,000 122,607,000 611,234,000 112,369,000 333,092,000 79,567,000 48,934,000 0 26,559,000 611,234,000 496,832,000 496,832,000 442,018,000 442,018,000 18,214,000 4,563,000 24,012,000 11,224,000 3,389,000 7,835,000 0 0 0 7,835,000 .13 .13
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