-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JAmVRhMAHrc5a2RcRVOTodC/0JTcLL33m8eVZnJZHfJGEaP/MN+oSbuhYx7lsyi3 W0/ppF4TGJisHMda7SPc8g== 0000950149-97-001081.txt : 19970520 0000950149-97-001081.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950149-97-001081 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENEVA STEEL CO CENTRAL INDEX KEY: 0000860192 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] 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: 97608233 BUSINESS ADDRESS: STREET 1: 10 SOUTH GENEVA ROAD CITY: VINEYARD STATE: UT ZIP: 84058 BUSINESS PHONE: 8012279000 10-Q 1 QUARTERLY REPORT FOR THE PERIOD ENDED 3/31/97 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 [ ] 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. 13,786,289 and 19,151,348 shares of Class A and Class B common stock, respectively, outstanding as of April 30, 1997. 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GENEVA STEEL COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) ASSETS - ------
March 31, September 30, 1997 1996 --------- --------- Current assets: Cash and cash equivalents $ -- $ 597 Accounts receivable, net 80,711 76,527 Inventories 97,478 93,139 Deferred income taxes 8,716 7,637 Prepaid expenses and other 15,417 15,410 Related party receivable 700 250 --------- --------- Total current assets 203,022 193,560 --------- --------- Property, plant and equipment: Land 1,990 1,990 Buildings 16,109 16,109 Machinery and equipment 626,771 600,290 Mineral property and development costs 8,425 8,425 --------- --------- 653,295 626,814 Less accumulated depreciation (192,744) (172,291) --------- --------- Net property, plant and equipment 460,551 454,523 --------- --------- Other assets 8,351 9,303 --------- --------- $ 671,924 $ 657,386 ========= =========
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets. Page 2 of 19 3 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Continued) (Dollars in thousands) (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, September 30, 1997 1996 ----------- ------------- Current liabilities: Accounts payable $ 61,624 $ 59,575 Accrued liabilities 19,262 18,353 Accrued payroll and related taxes 11,930 10,867 Production prepayments 15,000 9,763 Accrued interest payable 4,628 4,746 Accrued dividends payable 9,321 4,682 Accrued pension and profit sharing costs 1,640 2,259 --------- --------- Total current liabilities 123,405 110,245 --------- --------- Long-term debt 402,407 388,431 --------- --------- Deferred income tax liabilities 8,716 10,446 --------- --------- Redeemable preferred stock 55,801 55,437 --------- --------- Stockholders' equity: Preferred stock -- -- Common stock: Class A 87,979 87,979 Class B 10,110 10,110 Warrants to purchase Class A common stock 5,360 5,360 Retained earnings (deficit) (9,136) 5,077 Class A common stock held in treasury, at cost (12,718) (15,699) --------- --------- Total stockholders' equity 81,595 92,827 --------- --------- $ 671,924 $ 657,386 ========= =========
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated balance sheets. Page 3 of 19 4 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1997 AND 1996 (In thousands, except per share data) (Unaudited)
1997 1996 --------- --------- Net sales $ 182,961 $ 159,131 Cost of sales 175,040 151,326 --------- --------- Gross margin 7,921 7,805 Selling, general and administrative expenses 5,405 6,166 --------- --------- Income from operations 2,516 1,639 --------- --------- Other income (expense): Interest and other income 54 94 Interest expense (10,072) (8,626) Other expense -- (558) --------- --------- (10,018) (9,090) --------- --------- Loss before benefit for income taxes (7,502) (7,451) Benefit for income taxes (1,998) (2,766) --------- --------- Net loss (5,504) (4,685) Less redeemable preferred stock dividends and accretion for original issue discount 2,542 2,235 --------- --------- Net loss applicable to common shares $ (8,046) $ (6,920) ========= ========= Net loss per common share $ (.52) $ (.45) ========= ========= Weighted average common shares outstanding 15,584 15,281 ========= =========
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements. Page 4 of 19 5 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (In thousands, except per share data) (Unaudited)
1997 1996 --------- --------- Net sales $ 352,702 $ 326,220 Cost of sales 331,851 306,213 --------- --------- Gross margin 20,851 20,007 Selling, general and administrative expenses 11,041 11,899 --------- --------- Income from operations 9,810 8,108 --------- --------- Other income (expense): Interest and other income 229 272 Interest expense (19,774) (16,883) Other expense -- (1,111) --------- --------- (19,545) (17,722) --------- --------- Loss before benefit for income taxes (9,735) (9,614) Benefit for income taxes (2,822) (3,597) --------- --------- Net loss (6,913) (6,017) Less redeemable preferred stock dividends and accretion for original issue discount 5,003 4,399 --------- --------- Net loss applicable to common shares $ (11,916) $ (10,416) ========= ========= Net loss per common share $ (.77) $ (.68) ========= ========= Weighted average common shares outstanding 15,531 15,267 ========= =========
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements. Page 5 of 19 6 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (Dollars in thousands) (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents 1997 1996 -------- ------ Cash flows from operating activities: Net loss $ (6,913) $ (6,017) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation 20,690 21,128 Amortization 956 843 Deferred income taxes (2,809) (3,597) (Increase) decrease in current assets-- Accounts receivable, net (4,184) 6,767 Inventories (4,339) (3,512) Prepaid expenses and other (457) (9,923) Increase (decrease) in current liabilities-- Accounts payable 2,049 (7,886) Accrued liabilities 120 (2,660) Accrued payroll and related taxes 1,746 (62) Production prepayments 5,237 5,000 Accrued interest payable (118) (6) Accrued pension and profit sharing costs (619) (179) -------- -------- Net cash provided by (used for) operating activities 11,359 (104) -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment (26,782) (12,261) Change in other assets -- (373) -------- -------- Net cash used for investing activities $(26,782) $(12,634) -------- --------
The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements. Page 6 of 19 7 GENEVA STEEL COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) SIX MONTHS ENDED MARCH 31, 1997 AND 1996 (Dollars in thousands) (Unaudited)
1997 1996 -------- -------- Cash flows from financing activities: Proceeds from issuance of long-term debt $ 37,841 $ 17,296 Payments on long-term debt (23,865) (11,852) Change in bank overdraft 789 -- Other 61 (125) -------- -------- Net cash provided by financing activities 14,826 5,319 -------- -------- Net decrease in cash and cash equivalents (597) (7,419) Cash and cash equivalents at beginning of period 597 12,808 -------- -------- Cash and cash equivalents at end of period $ -- $ 5,389 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest (net of amount capitalized) $ 19,212 $ 17,826
Supplemental schedule of noncash financing activities: For the six months ended March 31, 1997 and 1996, the Company increased redeemable preferred stock by $364 and $356, respectively, for the accretion required over time to amortize the original issue discount on the redeemable preferred stock incurred at the time of issuance. In addition, the Company increased the redeemable preferred stock liquidation preference by $3,690 in lieu of paying a cash dividend during the six months ended March 31, 1996. At March 31, 1997, the Company had accrued dividends payable of $9,321. The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated statements. Page 7 of 19 8 GENEVA STEEL COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Dollars In Thousands) (Unaudited) - -------------------------------------------------------------------------- (1) INTERIM CONSOLIDATED FINANCIAL STATEMENTS The accompanying condensed consolidated financial statements of Geneva Steel Company and Geneva Steel Funding Corporation, a wholly-owned subsidiary of Geneva Steel Company (collectively, the "Company"), have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the financial position and results of operations of the Company. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's latest Annual Report on Form 10-K. (2) INVENTORIES
Inventories were comprised of the following components: March 31, September 30, 1997 1996 ------- ------- Raw materials $24,030 $31,064 Semi-finished and finished goods 65,757 53,604 Operating materials 7,691 8,471 ------- ------- $97,478 $93,139 ======= =======
(3) NET INCOME (LOSS) PER COMMON SHARE Net income (loss) per common share is calculated based upon the weighted average number of common and common equivalent shares outstanding during the periods. Common equivalent shares consist of warrants and options to purchase Class A common stock which have a dilutive effect when applying the treasury stock method. Class B common stock is included in the weighted average number of common shares outstanding at one share for every ten shares outstanding because the Class B common stock is convertible to Class A common stock at this same rate. The net income (loss) for the three and six-month periods ended March 31, 1997 and 1996 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 issuance. Page 8 of 19 9 (4) RELATED PARTY TRANSACTIONS On February 13, 1997, the Company's Board of Directors approved the loan of an additional $200 to the Company's Chief Executive Officer. The loan is secured by interests in real and personal property owned by the Chief Executive Officer and an affiliated entity. (5) PRODUCTION PREPAYMENTS A production prepayment arrangement with Mannesmann has historically provided the Company with up to $9 million in added liquidity. The Company's production prepayment arrangement with Mannesmann allows for its termination in the event that the Company's stockholders' equity falls below $90 million. As of March 31, 1997, the Company's stockholders' equity was $81.6 million. On February 10, 1997, the Company received from Mannesmann the required 90 day notice terminating the production prepayment arrangement. The Company continues to discuss possible means of modifying the production prepayment arrangement with Mannesmann. (6) INSURANCE CLAIM RECEIVABLE During the three months ended March 31, 1997, the Company recognized an additional $3.7 million as a reduction in costs in connection with the insurance claim associated with the January 1996 power outage. The Company recognized the additional amount in connection with completing and submitting its insurance claim, which was filed during the quarter. The Company has recognized only a portion of the total expected claim recovery, which includes both lost income and property damage. The Company received $5 million from its first layer insurers in October 1996. At March 31, 1997, the Company had an insurance claim receivable of $11 million included in prepaid expenses and other in the accompanying financial statements. See "Part II Other Information, Item 1. Legal Proceedings." (7) CERTAIN RECLASSIFICATIONS Certain reclassifications have been made in the prior period financial statements to conform to the current period presentation. Page 9 of 19 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS The following table sets forth the percentage relationship of certain cost and expense items to net sales for the periods indicated:
Three Months Ended Six Months Ended March 31, March 31, ------------------ ------------- 1997 1996 1997 1996 ---- ---- ---- ---- Net sales 100.0% 100.0% 100.0% 100.0% Cost of sales 95.7 95.1 94.1 93.9 ----- ----- ----- ----- Gross margin 4.3 4.9 5.9 6.1 Selling, general and administrative expenses 2.9 3.9 3.1 3.6 ----- ----- ----- ----- Income from operations 1.4 1.0 2.8 2.5 ----- ----- ----- ----- Other income (expense): Interest and other income - 0.1 - 0.1 Interest expense (5.5) (5.4) (5.6) (5.2) Other expense - (0.4) -- (0.3) ----- ----- ----- ----- (5.5) (5.7) (5.6) (5.4) ----- ----- ----- ----- Loss before benefit for income taxes (4.1) (4.7) (2.8) (2.9) Benefit for income taxes (1.1) (1.8) (0.8) (1.1) ----- ----- ----- ----- Net loss (3.0)% (2.9)% (2.0)% (1.8)% ===== ===== ===== =====
The following table sets forth the sales product mix as a percentage of net sales for the periods indicated:
Three Months Ended Six Months Ended March 31, March 31, ------------------- ------------- 1997 1996 1997 1996 ---- ---- ---- ---- Sheet 34.2% 29.8% 36.3% 32.2% Plate 41.5 45.2 40.6 39.8 Pipe 7.5 6.2 8.0 5.3 Slab 13.5 16.1 12.1 20.0 Non-Steel 3.3 2.7 3.0 2.7 ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
Page 10 of 19 11 THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31, 1996 Net sales increased 15.0% due to an increase in shipments of approximately 59,100 tons, a shift in product mix to higher-priced pipe and sheet products from lower-priced slab products and increased overall average selling prices for the three months ended March 31, 1997 as compared to the same period in the previous fiscal year. The weighted average sales price (net of transportation costs) per ton of sheet, pipe and slab products increased by 3.2%, 2.6% and 4.3%, respectively, while the weighted average sales price of plate decreased by 1.8% in the three months ended March 31, 1997 compared to the same period in the previous fiscal year. The decrease in plate prices was due to pricing pressure resulting from a surge of unfairly traded imports and other market factors. Shipped tonnage of plate, pipe and sheet increased approximately 14,000 tons or 7.3%, 8,900 tons or 36.4% and 45,300 tons or 27.9%, respectively, while shipped tonnage of slabs decreased approximately 9,100 tons or 8.0%, between the two periods. Consistent with the Company's strategic objectives, plate shipments have increased, in part through utilization of outside processors to level and cut plate from coils. The Company is also currently experiencing increased demand for pipe and hot-rolled bands. The Company continues to sell slabs to maximize production from the continuous caster while efforts to increase rolling mill throughput continue. The Company is currently in the process of completing the rolling mill finishing stands upgrade, which is expected to increase rolling mill throughput and product quality. In November 1996, the Company, together with another domestic plate producer, filed anti-dumping petitions with the Department of Commerce and the International Trade Commission against imports of cut-to-length carbon plate from the Russian Federation, Ukraine, the People's Republic of China and the Republic of South Africa (the "Plate Trade Cases"). The petitions allege large dumping margins and also set forth the injury to the U.S. industry caused by dumped imports from the subject countries. In its preliminary injury determination, the International Trade Commission ("ITC") ruled unanimously in late December that dumped imports of cut-to-length carbon plate were causing or threatening to cause material injury to the domestic industry. The Department of Commerce will issue preliminary determinations on June 3, 1997 that will set bond rates in the amount of the preliminary dumping margins on plate imports from the subject countries. They will also make determinations on allegations of critical circumstances against China, Russia and Ukraine which can result in duties retroactive to early March 1997. The final outcome of the Plate Trade Cases is expected by November 1997. Failure to win the Plate Trade Cases would have a material adverse effect upon the Company. Given that domestic demand for plate continues to be strong, the Company expects that plate pricing and volume will continue to improve as the amount of dumped products from these countries declines. Increased imports from countries not subject to the Plate Trade Cases, could, however, adversely affect plate pricing and volume. Domestic competition remains intense and imported steel continues to adversely affect the 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. Consequently, the Company may be affected by price increases or decreases more quickly than many of its competitors. The Company intends to react to price increases or decreases in the market as required by competitive conditions. Page 11 of 19 12 Cost of sales includes raw materials, labor costs, energy costs, depreciation and other operating and support costs associated with the production process. The Company's cost of sales, as a percentage of net sales, increased to 95.7% for the three months ended March 31, 1997 from 95.1% for the same period in the previous fiscal year. The overall average cost of sales per ton shipped increased approximately $10 per ton between the two periods primarily as a result of a shift in product mix to higher-cost plate, pipe and sheet products from lower-cost slab products as well as an increase in operating costs. Operating costs increased as a result of increased natural gas and other fuel costs, increased hot metal costs associated with a blast furnace reline, higher wages and benefits and other increased costs. The increase in costs was partially offset by significant improvements in production yields and throughput rates. The Company expects that production yields and throughput will continue to improve in future periods. In addition, natural gas costs have declined to more normal levels. The Company also recognized an additional $3.7 million as a reduction in costs in connection with the insurance claim associated with the January 1996 power outage. The Company recognized the additional amount in connection with completing and submitting its insurance claim, which was filed during the quarter. The Company has recognized only a portion of the total expected claim recovery, which includes both lost income and property damage. Depreciation costs included in cost of sales remained level for the three months ended March 31, 1997 compared with the same period in the previous fiscal year. Selling, general and administrative expenses for the three months ended March 31, 1997 decreased approximately $0.8 million as compared to the same period in the previous fiscal year. These lower expenses resulted primarily from decreased outside services. The Company has initiated a Company-wide effort to effect a systemic and pervasive change with respect to corporate systems, processes and structures. The effort uses a team approach to redesign various business processes and aspects of the Company to be more effective and efficient. During the quarter ended March 31, 1997, the Company's cost reduction team completed a plan intended to reduce administrative and management costs by approximately 20 percent as compared to calendar year 1996. As a part of that plan, the Company terminated 39 administrative employees, and 12 contract employees effective March 31, 1997. Interest expense increased approximately $1.5 million during the three months ended March 31, 1997 as compared to the same period in the previous fiscal year as a result of significantly lower capitalized interest and higher levels of borrowing. The higher levels of borrowing resulted, in part, from the termination of the Company's receivables securitization facility. In May 1996, the Company terminated its receivables securitization facility in connection with an amendment to and restatement of the Company's revolving credit facility. As a result, other expense decreased approximately $0.6 million for the three months ended March 31, 1997, as compared with the same period in the previous fiscal year. For the three months ended March 31, 1997, the Company recognized a benefit for income taxes by carrying back approximately $5.2 million of the $7.5 million loss before benefit for income taxes against income from prior periods. As of March 31, 1997, the Company had, for financial reporting purposes, a net operating loss carryforward of approximately $2.3 million. Page 12 of 19 13 SIX MONTHS ENDED MARCH 31, 1997 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1996 Net sales increased 8.1% due to increased shipments of approximately 39,500 tons, a shift in product mix to higher priced plate, pipe and sheet products from lower-priced slab products and increased overall average selling prices for the six months ended March 31, 1997 as compared to the same period in the previous fiscal year. The weighted average sales price (net of transportation costs) per ton of sheet and pipe products increased by 3.2% and 0.3%, respectively, while the weighted average sales price of plate and slab products decreased by 2.3% and 0.5%, respectively, in the six months ended March 31, 1997 compared to the same period in the previous fiscal year. Shipped tonnage of plate, pipe and sheet increased approximately 43,200 tons or 12.6% , 26,600 or 63.6% and 64,900 tons or 18.2%, respectively, while shipped tonnage of slabs decreased approximately 95,200 tons or 34.5% between the two periods. The Company's cost of sales, as a percentage of net sales, increased to 94.1% for the six months ended March 31, 1997 from 93.9% for the same period in the previous fiscal year. The overall average cost of sales per ton shipped increased approximately $13 per ton between the two periods primarily as a result of a shift in product mix to higher-cost plate, pipe and sheet products from lower-cost slab products as well as an increase in operating costs. Operating costs increased as a result of increased natural gas and other fuel costs, hot metal costs associated with a blast furnace reline, higher wages and benefits and other increased costs. These increased costs were partially offset by significant improvements in production yields and throughput rates, and the additional $3.7 million reduction in costs recognized in connection with the insurance claim. Depreciation costs included in cost of sales decreased approximately $0.4 million for the six months ended March 31, 1997 compared with the same period in the previous fiscal year. This decrease was due to decreases in the asset base resulting from some plant assets becoming fully depreciated. Selling, general and administrative expenses for the six months ended March 31, 1997 decreased approximately $0.9 million as compared to the same period in the previous fiscal year. The lower expenses resulted primarily from reduced outside services. Interest expense increased approximately $2.9 million for the six months ended March 31, 1997 as compared to the same period in the previous fiscal year, reflecting higher levels of borrowing, in part from the termination of the Company's receivables securitization facility, and lower levels of capitalized interest. Other expense decreased approximately $1.1 million for the six months ended March 31, 1997, as compared to the same period in the previous fiscal year as a result of the termination in May 1996 of the Company's receivables securitization facility. For the six months ended March 31, 1997, the Company recognized a benefit for income taxes by carrying back approximately $7.4 million of the $9.7 million loss before benefit for income taxes against income from prior periods. Page 13 of 19 14 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 principally from the sale of equity, the incurrence of long-term indebtedness, including borrowings under the Company's credit facilities, equipment lease financing and cash provided by operations. As of March 31, 1997, the Company's eligible inventories and accounts receivable supported access to $104.9 million under the revolving credit facility (the "Revolving Credit Facility"). As of March 31, 1997, the Company had $77.4 million in borrowings and $8.4 million in letters of credit outstanding under the Revolving Credit Facility, leaving $19.1 million in additional borrowing availability. The terms of the Revolving Credit Facility and of the Company's 11 1/8% senior notes issued in March 1993 and 9 1/2% senior notes issued in February 1994 (collectively, the "Senior Notes") include cross default and other customary provisions. Financial covenants contained in the Revolving Credit Facility and/or the Senior Notes also include, among others, a limitation on dividends and distributions on capital stock of the Company, a tangible net worth requirement, a cash interest coverage requirement, a cumulative capital expenditure limitation, limitations on the incurrence of additional indebtedness unless certain financial tests are satisfied, a limitation on mergers, consolidations and dispositions of assets and limitations on liens. In the event of a change in control, the Company must offer to purchase all Senior Notes then outstanding at a premium. The Company will likely seek amendments to the Revolving Credit Facility in the future based on actual operating results. The Company's ability to pay cash dividends on the 14% cumulative redeemable exchangeable preferred stock (the "Redeemable Preferred Stock") is subject to the covenants and tests contained in the indentures governing the Senior Notes and in the Company's Revolving Credit Facility. Restricted payment limitations under the Company's Senior Notes precluded payment of the preferred stock dividends due on June 15, 1996, September 15, 1996, December 15, 1996 and March 15, 1997. Unpaid dividends were approximately $9.3 million at March 31, 1997. Unpaid dividends accumulate until paid and accrue additional dividends at a rate of 14% per annum. As a result of the Company's failure to pay dividends on the Redeemable Preferred Stock in an amount equal to four full quarterly dividends, the holders of the Redeemable Preferred Stock have the right to elect not less than 25 percent of the members of the board of directors (two of eight directors) and have scheduled a meeting on May 30, 1997 to do so. The right of such holders to elect directors continues until the Company has paid all dividends in arrears and has paid the dividends due for two consecutive quarters thereafter. While not affecting net income/loss, dividends and the accretion required over time to amortize the original issue discount associated with the Redeemable Preferred Stock will negatively impact quarterly earnings per share by approximately $.15 per share. Besides financing activities, the Company's major source of liquidity has been cash provided by operating activities. Net cash provided by operating activities was $11.4 million for the six months ended March 31, 1997 compared with net cash used for operating activities of $0.1 million for the six months ended March 31, 1996. The sources of cash provided by operating activities during the six months ended March 31, 1997, included depreciation and amortization of $21.6 million, an increase in production prepayments of $5.2 million and an increase in accounts payable and other accrued liabilities of $3.3 million. These sources of cash flow Page 14 of 19 15 were offset in part by an increase in accounts receivable of $4.2 million, an increase in inventories of $4.3 million, a decrease in the deferred tax liability of $2.8 million and a net loss of $6.9 million. In addition to ongoing operations, the Company's near-term sources of liquidity include resolving its outstanding insurance claim associated with a January 1996 power outage and reducing inventories which increased during the six months ended March 31, 1997. A production prepayment arrangement with Mannesmann has historically provided the Company with up to $9 million in added liquidity. The Company's production prepayment arrangement with Mannesmann allows for its termination in the event that the Company's stockholders' equity falls below $90 million. As of March 31, 1997, the Company's stockholders' equity was $81.6 million. On February 10, 1997, the Company received from Mannesmann the required 90 day notice terminating the production prepayment arrangement. The Company continues to discuss possible means of modifying the production prepayment arrangement with Mannesmann. Termination of the arrangement would not affect Mannesmann's other obligations under its Sales Representation Agreement with the Company. Capital expenditures were approximately $26.8 million for the six months ended March 31, 1997. Capital expenditures for fiscal year 1997 are estimated at $40 million, which includes capital spending previously scheduled for fiscal year 1996 for its No. 1 Blast Furnace reline. The No. 1 Blast Furnace reline was completed and placed in service in early January 1997. Additional capital projects for fiscal year 1997 consist of installation of certain rolling mill finishing stand equipment, some repairs on the No. 2 Blast Furnace and various other projects designed to reduce costs and increase product quality and throughput. The Company anticipates that it may incur start-up and transition costs when the rolling mill finishing stand equipment is installed and implemented. Depending on market, operational, liquidity and other factors, the Company may elect to adjust the design, timing and budgeted expenditures of its capital plan. In addition, the Revolving Credit Facility contains certain limitations on capital expenditures. The Company formed a limited liability company with certain unrelated parties, which in turn entered into a cooperative agreement with the United States Department of Energy ("DOE") for the demonstration of a direct ironmaking facility and associated power generation and air separation facilities. As of March 31, 1997, the Company had spent approximately $975,000 in connection with the project, which has been included in construction in progress in the accompanying consolidated financial statements. Expenditures on the project are subject to government cost share arrangements. Completion of the project remains subject to several contingencies. Under certain circumstances, the Company may be required to repay some or all of the government cost share funds in the event the project is terminated. The Company is required to make substantial interest and dividend payments on the Senior Notes, outstanding balances under the Revolving Credit Facility and its Redeemable Preferred Stock. Currently, the Company's annual cash interest expense is approximately $39.2 million and its annual preferred stock dividends are approximately $9.5 million. FACTORS AFFECTING FUTURE RESULTS The Company's future operations will be impacted by, among other factors, pricing, product mix, throughput levels and production efficiencies. The Company Page 15 of 19 16 has efforts underway to increase throughput and production efficiencies and to continue shifting its product mix to higher-margin products. There can be no assurance that the Company's efforts will be successful or that sufficient demand will exist to support the Company's additional throughput capacity. Pricing in future periods is a key variable to the Company's future operating results that remains subject to significant uncertainty. Future pricing will be affected by several factors including the level of imports, the outcome of the Plate Trade Cases, future capacity additions and other market factors, including increased domestic plate production capacity currently coming on line. The short-term and long-term liquidity of the Company is also dependent upon several factors, including availability of financing, foreign currency fluctuations, competitive and market forces, capital expenditures and general economic conditions. Moreover, the United States steel market is subject to cyclical fluctuations that may affect the amount of cash internally generated by the Company and the ability of the Company to obtain external financing. Although the Company believes that the anticipated cash from future operations and borrowings under the Revolving Credit Facility will provide sufficient liquidity for the Company to meet its debt service requirements and to fund ongoing operations, including required capital expenditures, there can be no assurance that these or other possible sources will be adequate. As stated above, pricing remains a key variable with respect to future operating results. Moreover, because of the Company's current leverage situation, its financial flexibility is limited. Inflation can be expected to have an effect on many of the Company's operating costs and expenses. Due to worldwide competition in the steel industry, the Company may not be able to pass through such increased costs to its customers. This quarterly report may contain certain forward-looking statements with respect to the Company that are subject to risks and uncertainties that include, but are not limited to, those identified throughout this report, described from time to time in the Company's other Securities and Exchange Commission filings or discussed in the Company's press releases. Actual results may vary materially from expectations. Page 16 of 19 17 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On February 25, 1997, the Company filed a Verified Complaint in the Fourth Judicial District Court for Utah County, State of Utah, against Commerce & Industry Insurance Company ("Commerce & Industry"), a New York corporation, seeking recovery under the Company's policy of insurance with Commerce & Industry (the "Policy") of losses and damages to the Company's steel plant arising out of a storm-related power outage occurring on January 24, 1996 (the "Incident"). The Complaint was filed but not served on Commerce & Industry as investigation and discussion of the Company's claims was ongoing. On April 9, 1997, the Company filed and caused to be served its first Amended Verified Incident-related losses and damages properly payable under the policy in an amount to be proven at trial, as well as the Company's reasonable attorneys' fees and costs. On the same date, the Company submitted a Proof of Loss for its claims to Commerce & Industry of approximately $99 million. The claims have been and are expected to be the subject of extensive investigation and discussion and there can be no assurance that the amounts ultimately recovered through negotiation or litigation will approximate the amount of the claims asserted. As permitted by the Policy, the Company secured insurance on the deductibles under the Policy in the amount of $5 million from a separate group of insurers, all of which has been paid to the Company. On May 1, 1997, Commerce & Industry filed a Notice of Removal of the Action to the United States District Court for the District of Utah, Central Division. Commerce & Industry has not yet filed an answer to the First Amended Verified Complaint. The factual basis underlying the Company's claims is its position that the Incident caused the loss of electricity and steam necessary to operate, control and protect the Company's blast furnaces, stoves, coke batteries and other critical functions and resulted in extensive damage to nearly every part of the steel plant. The Company maintains that the Policy, which insures the Company against loss from "all risks", provides insurance coverage to the Company for the losses and damages it has suffered and is continuing to suffer on account of the Incident. The Company has submitted schedules detailing its damages and losses from the Incident in addition to cooperating fully with Commerce & Industry in its investigation of its claims. Notwithstanding the information the Company has provided to evidence the financial impact suffered by the Company as a result of the Incident, Commerce & Industry has rejected major elements of the Company's claim, including the portions of the claims dealing with the coke battery, the blast furnaces and the stoves. The Company has filed the civil action because of Commerce & Industry's refusal to fully compensate the Company for its losses. The Company is continuing to provide additional information to Commerce & Industry and is continuing discussions in an attempt to resolve the claims. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The registrant held its Annual Meeting of Shareholders on February 20, 1997. The shareholders elected the following Directors to serve until the next annual meeting of shareholders: Joseph A. Cannon, Robert J. Grow, Richard D. Clayton, R.J. Shopf, Alan C. Ashton, and K. Fred Skousen. Page 17 of 19 18 The shareholders voted to adopt the Geneva Steel Company 1996 Incentive Plan by a vote of 23,231,843 shares for, 1,873,598 shares against and 164,993 shares abstained. The shareholders also ratified the appointment of Arthur Andersen LLP as independent auditors for fiscal year 1997 by a vote of 31,852,386 shares for, 212,109 shares against, 109,794 shares abstained and 109,794 broker-non votes. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. --------- 10.1 Geneva Steel Company 1996 Incentive X Plan 10.2 Promissory Notes and Collateral X Agreements Evidencing Loans from the Company to Joseph A. Cannon 27 Financial Data Schedule X (b) Reports on Form 8-K.
The Company did not filed any reports on Form 8-K during the three months ended March 31, 1997. Page 18 of 19 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GENEVA STEEL COMPANY By: /s/ DENNIS L. WANLASS ------------------------------------------------- Vice President, Treasurer and Chief Financial Officer Dated: May 15, 1997 Page 19 of 19 EX-10.1 2 1996 INCENTIVE PLAN 1 ______________________________ GENEVA STEEL COMPANY 1996 INCENTIVE PLAN ______________________________ 2 TABLE OF CONTENTS
Page ---- 1. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ------- 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ----------- 2.1 "Adjusted Fair Market Value" . . . . . . . . . . . . . . 1 2.2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . 1 2.3 "Agreement" . . . . . . . . . . . . . . . . . . . . . . 1 2.4 "Award" . . . . . . . . . . . . . . . . . . . . . . . . 1 2.5 "Board" . . . . . . . . . . . . . . . . . . . . . . . . 1 2.6 "Cause" . . . . . . . . . . . . . . . . . . . . . . . . 1 2.7 "Change in Capitalization" . . . . . . . . . . . . . . . 2 2.8 "Change in Control" . . . . . . . . . . . . . . . . . . 2 2.9 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . 3 2.10 "Committee" . . . . . . . . . . . . . . . . . . . . . . 3 2.11 "Company" . . . . . . . . . . . . . . . . . . . . . . . 3 2.12 "Director" . . . . . . . . . . . . . . . . . . . . . . . 3 2.13 "Director Option" . . . . . . . . . . . . . . . . . . . 3 2.14 "Disability" . . . . . . . . . . . . . . . . . . . . . . 3 2.15 "Division" . . . . . . . . . . . . . . . . . . . . . . . 4 2.16 "Dividend Equivalent Right" . . . . . . . . . . . . . . 4 2.17 "Eligible Director" . . . . . . . . . . . . . . . . . . 4 2.18 "Eligible Individual" . . . . . . . . . . . . . . . . . 4 2.19 "Employee Option" . . . . . . . . . . . . . . . . . . . 4 2.20 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . 4 2.21 "Fair Market Value" . . . . . . . . . . . . . . . . . . 4 2.22 "Grantee" . . . . . . . . . . . . . . . . . . . . . . . 4 2.23 "Incentive Stock Option" . . . . . . . . . . . . . . . . 4 2.24 "Nonemployee Director" . . . . . . . . . . . . . . . . . 4 2.25 "Nonqualified Stock Option" . . . . . . . . . . . . . . 4 2.26 "Option" . . . . . . . . . . . . . . . . . . . . . . . . 4 2.27 "Optionee" . . . . . . . . . . . . . . . . . . . . . . . 4 2.28 "Outside Director" . . . . . . . . . . . . . . . . . . . 4 2.29 "Parent" . . . . . . . . . . . . . . . . . . . . . . . . 5 2.30 "Performance Awards" . . . . . . . . . . . . . . . . . . 5 2.31 "Performance Cycle" . . . . . . . . . . . . . . . . . . 5 2.32 "Performance Objectives" . . . . . . . . . . . . . . . . 5 2.33 "Performance Shares" . . . . . . . . . . . . . . . . . . 5 2.34 "Performance Units" . . . . . . . . . . . . . . . . . . 5 2.35 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . 5 2.36 "Pooling Transaction" . . . . . . . . . . . . . . . . . 5 2.37 "Restricted Stock" . . . . . . . . . . . . . . . . . . . 5 2.38 "Shares" . . . . . . . . . . . . . . . . . . . . . . . . 5 2.39 "Stock Appreciation Right" . . . . . . . . . . . . . . . 5 2.40 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . 5 2.41 "Successor Corporation" . . . . . . . . . . . . . . . . 5
i 3 2.42 "Ten-Percent Stockholder" . . . . . . . . . . . . . . . . 5 2.43 "Termination of Employment" . . . . . . . . . . . . . . . 5 3. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 6 -------------- 3.1 The Committee . . . . . . . . . . . . . . . . . . . . . . 6 3.2 The Committee Powers . . . . . . . . . . . . . . . . . . . 6 4. STOCK SUBJECT TO THE PLAN . . . . . . . . . . . . . . . . . . . . 7 ------------------------- 4.1 Maximum Shares . . . . . . . . . . . . . . . . . . . . . . 7 4.2 Adjustments to Shares . . . . . . . . . . . . . . . . . . 7 4.3 Effect of Expiration, Cancellation or Termination . . . . 7 5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS . . . . . . . . . . . . . . 8 -------------------------------------- 5.1 Authority of Committee . . . . . . . . . . . . . . . . . . 8 5.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 8 5.3 Maximum Duration . . . . . . . . . . . . . . . . . . . . . 8 5.4 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . 8 5.5 Modification . . . . . . . . . . . . . . . . . . . . . . . 8 6. OPTION GRANTS FOR NONEMPLOYEE DIRECTORS . . . . . . . . . . . . . 8 --------------------------------------- 6.1 Grant . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 9 6.3 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . 9 6.4 Duration . . . . . . . . . . . . . . . . . . . . . . . . . 9 7. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS . . . . . . . . . . 9 ---------------------------------------------- 7.1 Transferability . . . . . . . . . . . . . . . . . . . . . 9 7.2 Method of Exercise . . . . . . . . . . . . . . . . . . . . 10 7.3 Rights of Optionees . . . . . . . . . . . . . . . . . . . 10 7.4 Effect of Change in Control . . . . . . . . . . . . . . . 10 8. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . 11 ------------------------- 8.1 Time of Grant . . . . . . . . . . . . . . . . . . . . . . 11 8.2 Stock Appreciation Right Related to an Option . . . . . . 11 8.3 Stock Appreciation Right Unrelated to an Option . . . . . 11 8.4 Method of Exercise . . . . . . . . . . . . . . . . . . . . 12 8.5 Form of Payment . . . . . . . . . . . . . . . . . . . . . 12 8.6 Modification . . . . . . . . . . . . . . . . . . . . . . . 12 8.7 Effect of Change in Control . . . . . . . . . . . . . . . 12 9. DIVIDEND EQUIVALENT RIGHTS . . . . . . . . . . . . . . . . . . . . 12 -------------------------- 10. RESTRICTED STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 13 ---------------- 10.1 Grant . . . . . . . . . . . . . . . . . . . . . . . . . . 13 10.2 Rights of Grantee . . . . . . . . . . . . . . . . . . . . 13 10.3 Non-transferability . . . . . . . . . . . . . . . . . . . 13 10.4 Lapse of Restrictions . . . . . . . . . . . . . . . . . . 13 10.5 Modification or Substitution . . . . . . . . . . . . . . . 14
ii 4 10.6 Treatment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10.7 Delivery of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 11. PERFORMANCE AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 ------------------ 11.1 Performance Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 11.2 Performance Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 11.3 Performance Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 11.4 Effect of Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 11.5 Modification or Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 12. EFFECT OF A TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 ------------------------------------- 13. ADJUSTMENT UPON CHANGES IN CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ----------------------------------------- 14. EFFECT OF CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 ------------------------------ 15. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 -------------- 16. POOLING TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 -------------------- 17. EFFECTIVE DATE, TERMINATION AND AMENDMENT OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ----------------------------------------------------- 18. NON-EXCLUSIVITY OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 --------------------------- 19. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ----------------------- 20. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ---------------------------------------------- 20.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 20.2 Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 20.3 Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 20.4 Securities Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 20.5 Restrictions on Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 ------------- 21.1 Multiple Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 21.2 Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
iii 5 GENEVA STEEL COMPANY 1996 INCENTIVE PLAN 1. PURPOSE. The purpose of this Plan is to strengthen Geneva Steel Company (the "Company"), by providing an incentive to its employees, officers, consultants and directors and thereby encouraging them to devote their abilities and industry to the success of the Company's business enterprise. It is intended that this purpose be achieved by extending to employees, officers, consultants and directors of the Company and its Subsidiaries long-term incentives for high levels of performance and consistent efforts through the grant of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Dividend Equivalent Rights, Performance Awards and Restricted Stock (as each term is herein defined). 2. DEFINITIONS. For purposes of the Plan: 2.1 "Adjusted Fair Market Value" means, in the event of a Change in Control, the greater of (i) the highest price per Share paid to holders of the Shares in any transaction (or series of transactions) constituting or resulting in a Change in Control or (ii) the highest Fair Market Value of a Share during the sixty (60) day period ending on the date of a Change in Control. 2.2 "Affiliate" means any entity, directly or indirectly, controlled by, controlling or under common control with the Company or any corporation or other entity acquiring, directly or indirectly, all or substantially all the assets and business of the Company, whether by operation of law or otherwise. 2.3 "Agreement" means the written agreement between the Company and an Optionee or Grantee evidencing the grant of an Option or Award and setting forth the terms and conditions thereof. 2.4 "Award" means a grant of Restricted Stock, a Stock Appreciation Right, a Performance Award, a Dividend Equivalent Right or any or all of them. 2.5 "Board" means the Board of Directors of the Company. 2.6 "Cause" shall mean: (a) for purposes of Section 6.4, (i) a willful act which constitutes gross misconduct or fraud and which is materially injurious to the Company or (ii) conviction of, or plea of "guilty" or "no contest" to, a felony; and (b) in all other cases, either (1) the definition set forth in the employment agreement between the Optionee or Grantee, or in absence thereof, (2)(i) intentional failure to perform reasonably assigned duties, (ii) dishonesty or willful misconduct in the performance of duties, (iii) involvement in a transaction in connection with the performance of duties to the Company or any of its Subsidiaries which transaction is adverse to the interests of the Company or any of its Subsidiaries and which is engaged in for personal profit or (iv) willful violation of any law, rule or regulation in connection with the performance of duties (other than traffic violations or similar offenses). 1 6 2.7 "Change in Capitalization" means any increase or reduction in the number of Shares, or any change (including, but not limited to, a change in value) in the Shares or exchange of Shares for a different number or kind of shares or other securities of the Company or another corporation, by reason of a reclassification, recapitalization, merger, consolidation, reorganization, spin-off, split-up, issuance of warrants or rights or debentures, stock dividend, stock split or reverse stock split, cash dividend, property dividend, combination or exchange of shares, repurchase of shares, change in corporate structure or otherwise. 2.8 "Change in Control" shall mean the occurrence during the term of the Plan of any of the following events: (1) An acquisition (other than directly from the Company or pursuant to options granted under this Plan or otherwise by the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) immediately after which such Person has 'Beneficial Ownership' (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of the combined voting power of the Company's then outstanding Voting Securities; provided, however, in determining whether a Change in Control has occurred, Voting Securities which are acquired in a "Non-Control Acquisition" (as defined below) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (A) an employee benefit plan (or a trust forming a part thereof) maintained by (i) the Company or (ii) any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a "Company Subsidiary"), (B) the Company or any Company Subsidiary, or (C) any Person in connection with a "Non-Control Transaction" (as defined below); (2) The individuals who, as of October 1, 1996, are members of the Board of Directors (the "Incumbent Board"), cease for any reason to constitute at least two-thirds of the Board of Directors; provided, however, that if the election, or nomination for election by the Company's stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of the Plan, be considered as a member of the Incumbent Board; provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (3) Approval by stockholders of the Company of: (A) A merger, consolidation or reorganization involving the Company, unless (i) the stockholders of the Company immediately before such merger, consolidation or reorganization own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least seventy-five percent (75%) of the combined voting power of the outstanding voting securities of the corporation resulting from merger or consolidation or reorganization (the "Surviving Corporation") in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization. 2 7 (ii) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least two-thirds of the members of the board of directors of the Surviving Corporation. (iii) no Person (other than the Company or any Company Subsidiary, any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any Company's Subsidiary, or any Person who, immediately prior to such merger, consolidation or reorganization had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Voting Securities) has Beneficial Ownership of twenty percent (20%) or more of the combined voting power of the Surviving Corporation's then outstanding voting securities, and (iv) a transaction described in clauses (i) through (iii) shall herein be referred to as a "Non-Control Transaction;" (B) A complete liquidation or dissolution of the Company; or (C) An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a Company Subsidiary). Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because any person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the acquisition of Voting Securities by the Company which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares beneficially owned by the Subject Person; provided, however, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities beneficially owned by the Subject Person, then a Change in Control shall occur. 2.9 "Code" means the Internal Revenue Code of 1986, as amended. 2.10 "Committee" means a committee, as described in Section 3.1, appointed by the Board from time to time to administer the Plan and to perform the functions set forth herein. 2.11 "Company" means Geneva Steel Company. 2.12 "Director" means a director of the Company. 2.13 "Director Option" means an Option granted pursuant to Section 6. 2.14 "Disability" means: (a) in the case of an Optionee or Grantee whose employment with the Company or a Subsidiary is subject to the terms of an employment agreement between such Optionee or Grantee and the Company or Subsidiary, which employment agreement includes a definition of 3 8 "Disability," the term "Disability" as used in this Plan or any Agreement shall have the meaning set forth in such employment agreement during the period that such employment agreement remains in effect; and (b) in all other cases, the term "Disability" as used in this Plan or any Agreement shall mean a physical or mental infirmity which impairs the Optionee's or Grantee's ability to perform substantially his or her duties for a period of one hundred eighty (180) consecutive days. 2.15 "Division" means any of the operating units or divisions of the Company designated as a Division by the Committee. 2.16 "Dividend Equivalent Right" means a right to receive all or some portion of the cash dividends that are or would be payable with respect to Shares. 2.17 "Eligible Director" means a director of the Company who is not an employee of the Company or any subsidiary thereof. 2.18 "Eligible Individual" means any director (other than an Eligible Director), officer or employee of the Company or a Subsidiary, or any consultant or advisor who is receiving cash compensation from the Company or a Subsidiary, designated by the Committee as eligible to receive Options or Awards subject to the conditions set forth herein. 2.19 "Employee Option" means an Option granted pursuant to Section 5. 2.20 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 2.21 "Fair Market Value" on any date means the closing sales price for a Share on such date on the New York Stock Exchange or such other stock exchange determined by the Company to be the primary market for the Shares or, if there have been no published bid or asked quotations with respect to Shares on such date, the Fair Market Value shall be the value established by the Board in good faith and, in the case of an Incentive Stock Option, in accordance with Section 422 of the Code. 2.22 "Grantee" means a person to whom an Award has been granted under the Plan. 2.23 "Incentive Stock Option" means an Option satisfying the requirements of Section 422 of the Code and designated by the Committee as an Incentive Stock Option. 2.24 "Nonemployee Director" means a director of the Company who is a 'nonemployee director' within the meaning of Rule 16b-3 promulgated under the Exchange Act. 2.25 "Nonqualified Stock Option" means an Option which is not an Incentive Stock Option. 2.26 "Option" means a Nonqualified Stock Option, an Incentive Stock Option, a Director Option, or any or all of them. 2.27 "Optionee" means a person to whom an Option has been granted under the Plan. 2.28 "Outside Director" means a director of the Company who is an 'outside director' within the meaning of Section 162(m) of the Code and the regulations promulgated thereunder. 4 9 2.29 "Parent" means any corporation which is a parent corporation (within the meaning of Section 424(e) of the Code) with respect to the Company. 2.30 "Performance Awards" means Performance Units, Performance Shares or either or both of them. 2.31 "Performance Cycle" means the time period specified by the Committee at the time Performance Awards are granted during which the performance of the Company, a Subsidiary or a Division will be measured. 2.32 "Performance Objectives" has the meaning set forth in Section 11. 2.33 "Performance Shares" means Shares issued or transferred to an Eligible Individual under Section 11. 2.34 "Performance Units" means Performance Units granted to an Eligible Individual under Section 11. 2.35 "Plan" means the Geneva Steel Company 1996 Incentive Plan, as amended and restated from time to time. 2.36 "Pooling Transaction" means an acquisition of the Company in a transaction which is intended to be treated as a 'pooling of interests' under generally accepted accounting principles. 2.37 "Restricted Stock" means Shares issued or transferred to an Eligible Individual pursuant to Section 10. 2.38 "Shares" means the Class A Common Stock of the Company, no par value. 2.39 "Stock Appreciation Right" means a right to receive all or some portion of the increase in the value of the Shares as provided in Section 8 hereof. 2.40 "Subsidiary" means any corporation which is a subsidiary corporation (within the meaning of Section 424(f) of the Code) with respect to the Company. 2.41 "Successor Corporation" means a corporation, or a parent or subsidiary thereof within the meaning of Section 424(a) of the Code, which issues or assumes a stock option in a transaction to which Section 424(a) of the Code applies. 2.42 "Ten-Percent Stockholder" means an Eligible Individual, who, at the time an Incentive Stock Option is to be granted to him or her, owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, or of a Parent or a Subsidiary. 2.43 "Termination of Employment" means the later of (i) a severance of the employer-employee relationship with the Company or (ii) the resignation, removal or termination of an officer of the Company. 5 10 3. ADMINISTRATION. 3.1 The Committee. The Plan shall be administered by the Committee, which shall hold meetings at such times as may be necessary for the proper administration of the Plan. The Committee shall keep minutes of its meetings. A quorum shall consist of not fewer than two members of the Committee and a majority of a quorum may authorize any action. Any decision or determination reduced to writing and signed by a majority of all of the members of the Committee shall be as fully effective as if made by a majority vote at a meeting duly called and held. The Committee shall consist of at least two (2) directors of the Company and may consist of the entire Board; provided, however, that (A) if the Committee consists of less than the entire Board, each member shall be a Nonemployee Director and (B) to the extent necessary for any Option or Award intended to qualify as performance-based compensation under Section 162(m) of the Code to so qualify, each member of the Committee, whether or not it consists of the entire Board, shall be an Outside Director. No member of the Committee shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to this Plan or any transaction hereunder, except for liability arising from his or her own willful misfeasance, gross negligence or reckless disregard of his or her duties. The Company hereby agrees to indemnify each member of the Committee for all costs and expenses and, to the extent permitted by applicable law, any liability incurred in connection with defending against, responding to, negotiating for the settlement of or otherwise dealing with any claim, cause of action or dispute of any kind arising in connection with any actions in administering this Plan or in authorizing or denying authorization to any transaction hereunder. 3.2 The Committee Powers. Subject to the express terms and conditions set forth herein, the Committee shall have the power from time to time to: (a) determine those Eligible Individuals to whom Employee Options shall be granted under the Plan and the number of such Employee Options to be granted and to prescribe the terms and conditions (which need not be identical) of each such Employee Option, including the purchase price per Share subject to each Employee Option, and make any amendment or modification to any Option Agreement consistent with the terms of the Plan; (b) select those Eligible Individuals to whom Awards shall be granted under the Plan and to determine the number of Stock Appreciation Rights, Performance Awards, Shares of Restricted Stock and/or Dividend Equivalent Rights to be granted pursuant to each Award, the terms and conditions of each Award, including the restrictions or Performance Objectives relating to Shares, the maximum value of each Performance Share and make any amendment or modification to any Award Agreement consistent with the terms of the Plan; (c) to construe and interpret the Plan and the Options and Awards granted hereunder and to establish, amend and revoke rules and regulations for the administration of the Plan, including, but not limited to, correcting any defect or supplying any omission, or reconciling any inconsistency in the Plan or in any Agreement, in the manner and to the extent it shall deem necessary or advisable so that the Plan complies with applicable law including Rule 16b-3 under the Exchange Act and the Code to the extent applicable, and otherwise to make the Plan fully effective. All decisions and determinations by the Committee in the exercise of this power shall be final, binding and conclusive upon the Company, its Subsidiaries, the Optionees and Grantees, and all other persons having any interest therein; 6 11 (d) to determine the duration and purposes for leaves of absence which may be granted to an Optionee or Grantee on an individual basis without constituting a termination of employment or service for purposes of the Plan; (e) to exercise its discretion with respect to the powers and rights granted to it as set forth in the Plan; and (f) generally, to exercise such powers and to perform such acts as are deemed necessary or advisable to promote the best interests of the Company with respect to the Plan. 4. STOCK SUBJECT TO THE PLAN. 4.1 Maximum Shares. The maximum number of Shares that may be made the subject of Options and Awards granted under the Plan is 1,500,000; provided, however, that in the aggregate, not more than one-third of the number of allotted Shares may be made the subject of Restricted Stock Awards under Section 10 of the Plan; and provided, further, that during the term of the Plan (i) no Eligible Individual may be granted Options and Awards (other than Awards described in clause (ii) below) in the aggregate in respect of more than 150,000 Shares per calendar year, (ii) the maximum dollar amount that any Eligible Individual may receive during the term of the Plan in respect of Performance Units denominated in dollars may not exceed 100% of the aggregate base salary of such Eligible Individual and (iii) the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options granted under the Plan become exercisable for the first time by an Optionee during any calendar year shall not exceed $100,000. Upon a Change in Capitalization, the maximum number of Shares referred to in the preceding sentence shall be adjusted in number and kind pursuant to Section 13. The Company shall reserve for the purposes of the Plan, out of its authorized but unissued Shares or out of Shares held in the Company's treasury, or partly out of each, such number of Shares as shall be determined by the Board. 4.2 Adjustments to Shares. Upon the granting of an Option or an Award, the number of Shares available under Section 4.1 for the granting of further Options and Awards shall be reduced as follows: (a) In connection with the granting of an Option or an Award (other than the granting of a Performance Unit denominated in dollars), the number of Shares shall be reduced by the number of Shares in respect of which the Option or Award is granted or denominated. (b) In connection with the granting of a Performance Unit denominated in dollars, the number of Shares shall be reduced by an amount equal to the quotient of (i) the dollar amount in which the Performance Unit is denominated, divided by (ii) the Fair Market Value of a Share on the date the Performance Unit is granted. 4.3 Effect of Expiration, Cancellation or Termination. Whenever any outstanding Option or Award or portion thereof expires, is canceled or is otherwise terminated for any reason without having been exercised or payment having been made in respect of the entire Option or Award, the Shares allocable to the expired, canceled or otherwise terminated portion of the Option or Award may again be the subject of Options or Awards granted hereunder. 7 12 5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS. 5.1 Authority of Committee. Subject to the provisions of the Plan, the Committee shall have full and final authority to select those Eligible Individuals who will receive Employee Options, and the terms and conditions of the grant to such Eligible Individuals shall be set forth in an Agreement. 5.2 Purchase Price. The purchase price [(WHICH MAY BE NOT LESS THAN 80% OF THE FAIR MARKET VALUE ON THE DATE OF GRANT)] or the manner in which the purchase price is to be determined for Shares under each Employee Option shall be determined by the Committee and set forth in the Agreement; provided, however, that the purchase price per Share under each Incentive Stock Option shall not be less than 100% of the Fair Market Value of a Share on the date the Employee Option is granted (110% in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder). 5.3 Maximum Duration. Employee Options granted hereunder shall be for such term as the Committee shall determine, provided that an Incentive Stock Option shall not be exercisable after the expiration of ten (10) years from the date it is granted (five (5) years in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder) and a Nonqualified Stock Option shall not be exercisable after the expiration of ten (10) years from the date it is granted. The Committee may, subsequent to the granting of any Employee Option, extend the term thereof, but in no event shall the term as so extended exceed the maximum term provided for in the preceding sentence. 5.4 Vesting. Subject to Section 7.4, each Employee Option shall become exercisable in such installments (which need not be equal) and at such times as may be designated by the Committee and set forth in the Agreement. To the extent not exercised, installments shall accumulate and be exercisable, in whole or in part, at any time after becoming exercisable, but not later than the date the Employee Option expires. The Committee may accelerate the exercisability of any Employee Option or portion thereof at any time. 5.5 Modification. No modification of an Employee Option shall adversely alter or impair any rights or obligations under the Employee Option without the Optionee's consent. 6. OPTION GRANTS FOR NONEMPLOYEE DIRECTORS. 6.1 Grant. Director Options shall be granted (i) to Eligible Directors who become members of the Board after October 1, 1996 upon election or appointment and (ii) to all Eligible Directors who are members of the Board as follows: (a) Each Eligible Director who becomes a Director after January 1, 1997 shall, upon becoming a Director, be granted a Director Option in respect of 4,000 Shares. (b) Each Eligible Director shall be granted a Director Option in respect of 2,000 Shares annually on the first business day on or after January 1 of each calendar year that the Plan is in effect provided that the Eligible Director is a Director on such date; provided, however, that a Director shall not be entitled to receive an annual grant pursuant to this Section 6.1(b) for the calendar year in which such Director is first elected or appointed to the Board. (c) All Director Options shall be evidenced by an Agreement containing such other terms and conditions not inconsistent with the provisions of this Plan as determined by the Board; provided, however, that such terms shall not vary the price, amount or timing of Director Options 8 13 provided under this Section 6, including provisions dealing with vesting, forfeiture and termination of such Director Options. 6.2 Purchase Price. The purchase price for Shares under each Director Option shall be equal to 100% of the Fair Market Value of such Shares on the date the Director Option is granted. 6.3 Vesting. Subject to Sections 6.4 and 7.4, each Director Option shall become fully vested and exercisable with respect to 40% of the Shares subject thereto on the second anniversary of the date of grant and 20% each year thereafter; provided, however, that the Optionee continues to serve as a Director as of such date. If an Optionee ceases to serve as a Director for any reason, the Optionee shall have no rights with respect to any Director Option which has not then vested pursuant to the preceding sentence and the Optionee shall automatically forfeit any Director Option which remains unvested. 6.4 Duration. Each Director Option shall terminate on the date which is the tenth anniversary of the date of grant, unless terminated earlier as follows: (a) If an Optionee's service as a Director terminates for any reason other than Disability, death or Cause, the Optionee may for a period of three (3) months after such termination exercise his or her Option to the extent, and only to the extent, that such Option or portion thereof was vested and exercisable as of the date the Optionee's service as a Director terminated, after which time the Option shall automatically terminate in full. (b) If an Optionee's service as a Director terminates by reason of the Optionee's resignation or removal from the Board due to Disability, the Optionee may, for a period of one (1) year after such termination, exercise his or her Option to the extent, and only to the extent, that such Option or portion thereof was vested and exercisable, as of the date the Optionee's service as Director terminated, after which time the Option shall automatically terminate in full. (c) If an Optionee's service as a Director terminates for Cause, the Option granted to the Optionee hereunder shall immediately terminate in full and no rights thereunder may be exercised. (d) If an Optionee dies while a Director or within three (3) months after termination of service as a Director as described in clause (a) of this Section 6.4 or within twelve (12) months after termination of service as a Director as described in clause (b) of this Section 6.4, the Option granted to the Optionee may be exercised at any time within twelve (12) months after the Optionee's death by the person or persons to whom such rights under the Option shall pass by will, or by the laws of descent or distribution, after which time the Option shall terminate in full; provided, however, that an Option may be exercised to the extent, and only to the extent, that the Option or portion thereof was exercisable on the date of death or earlier termination of the Optionee's services as a Director. 7. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS. 7.1 Transferability. Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised during the lifetime of the Optionee, only by the Optionee. Other Options or Awards shall be transferrable to the extent provided in the Option or Award Agreement. 9 14 7.2 Method of Exercise. (a) The exercise of an Option shall be made only by a written notice delivered in person or by mail to the Secretary of the Company at the Company's principal executive office, specifying the number of Shares to be purchased and accompanied by payment therefor and otherwise in accordance with the Agreement pursuant to which the Option was granted. The purchase price for any Shares purchased pursuant to the exercise of an Option shall be paid, as determined by the Committee in its discretion, in either of the following forms (or any combination thereof): (i) cash or (ii) the transfer of Shares to the Company upon such terms and conditions as determined by the Committee. In addition, both Employee Options and Director Options may be exercised through a registered broker-dealer pursuant to such cashless exercise procedures (other than Share withholding) which are, from time to time, deemed acceptable by the Committee. Any Shares transferred to the Company (or withheld upon exercise) as payment of the purchase price under an Option shall be valued at their Fair Market Value on the trading day preceding the date of exercise of such Option. The Optionee shall deliver the Agreement evidencing the Option to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreement to the Optionee. No fractional Shares (or cash in lieu thereof) shall be issued upon exercise of an Option and the number of Shares that may be purchased upon exercise shall be rounded to the nearest number of whole Shares. (b) If the Fair Market Value of the Shares with respect to which the Option is being exercised exceeds the exercise price of such Option, an Optionee may, instead of exercising an Option as provided in Section 7.2(a), request that the Committee authorize payment to the Optionee of the difference between the Fair Market Value of part or all of the Shares which are the subject of the Option and the exercise price of the Option, such difference to be determined as of the date the Committee receives the request from the Optionee. The Committee in its sole discretion may grant or deny such a request from an Optionee with respect to part or all of the Shares as to which the Option is then exercisable and, to the extent granted, shall direct the Company to make the payment to the Optionee either in cash or in Shares or in any combination thereof, provided, however, that any Share shall be distributed based upon its Fair Market Value as of the date the Committee received the request from the Optionee. An Option shall be deemed to have been exercised and shall be canceled to the extent that the Committee grants a request pursuant to this Section 7.2(b). 7.3 Rights of Optionees. No Optionee shall be deemed for any purpose to be the owner of any Shares subject to any Option unless and until (i) the Option shall have been exercised pursuant to the terms thereof, (ii) the Company shall have issued and delivered Shares to the Optionee, and (iii) the Optionee's name shall have been entered as a stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such Shares, subject to such terms and conditions as may be set forth in the applicable Agreement. 7.4 Effect of Change in Control. In the event of a Change in Control, all Options outstanding on the date of such Change in Control shall become immediately and fully exercisable. In addition, to the extent set forth in an Agreement evidencing the grant of an Employee Option, an Optionee will be permitted to surrender to the Company for cancellation within sixty (60) days after such Change in Control any Employee Option or portion of an Employee Option to the extent not yet exercised and the Optionee will be entitled to receive a cash payment in an amount equal to the excess, if any, of (x) (A) in the case of a Nonqualified Stock Option, the greater of (1) the Fair Market Value, on the date preceding the date of surrender, of the Shares subject to the Employee Option or portion thereof surrendered or (2) the Adjusted Fair Market Value of the Shares subject to the Employee Option or 10 15 portion thereof surrendered or (B) in the case of an Incentive Stock Option, the Fair Market Value, on the date preceding the date of surrender, of the Shares subject to the Employee Option or portion thereof surrendered, over (y) the aggregate purchase price for such Shares under the Employee Option or portion thereof surrendered. In the event an Optionee's employment with, or service as a Director of, the Company is terminated by the Company following a Change in Control, each Option held by the Optionee that was exercisable as of the date of termination of the Optionee's employment or service shall remain exercisable for a period ending not before the earlier of (A) the first anniversary of the termination of the Optionee's employment or service or (B) the expiration of the stated term of the Option. 8. STOCK APPRECIATION RIGHTS. The Committee may in its discretion, either alone or in connection with the grant of an Employee Option, grant Stock Appreciation Rights in accordance with the Plan, the terms and conditions of which shall be set forth in an Agreement. If granted in connection with an Option, a Stock Appreciation Right shall cover the same Shares covered by the Option (or such lesser number of Shares as the Committee may determine) and shall, except as provided in this Section 8, be subject to the same terms and conditions as the related Option. 8.1 Time of Grant. A Stock Appreciation Right may be granted (i) at any time if unrelated to an Option, or (ii) if related to an Option, either at the time of grant, or at any time thereafter during the term of the Option. 8.2 Stock Appreciation Right Related to an Option. (a) Subject to Section 8.7, a Stock Appreciation Right granted in connection with an Option shall be exercisable at such time or times and only to the extent that the related Options are exercisable, and will not be transferable except to the extent the related Option may be transferable. A Stock Appreciation Right granted in connection with an Incentive Stock Option shall be exercisable only if the Fair Market Value of a Share on the date of exercise exceeds the purchase price specified in the related Incentive Stock Option Agreement. (b) Upon the exercise of a Stock Appreciation Right related to an Option, the Grantee shall be entitled to receive an amount determined by multiplying (A) the excess of the Fair Market Value of a Share on the date preceding the date of exercise of such Stock Appreciation Right over the per Share purchase price under the related Option, by (B) the number of Shares as to which such Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit in the Agreement evidencing the Stock Appreciation Right at the time it is granted. (c) Upon the exercise of a Stock Appreciation Right granted in connection with an Option, the Option shall be canceled to the extent of the number of Shares as to which the Stock Appreciation Right is exercised, and upon the exercise of an Option granted in connection with a Stock Appreciation Right, the Stock Appreciation Right shall be canceled to the extent of the number of Shares as to which the Option is exercised or surrendered. 8.3 Stock Appreciation Right Unrelated to an Option. The Committee may grant to Eligible Individuals Stock Appreciation Rights unrelated to Options. Stock Appreciation Rights unrelated to Options shall contain such terms and conditions as to exercisability (subject to Section 8.7), vesting and duration as the Committee shall determine, but in no event shall they have a term of greater than ten (10) years. Upon exercise of a Stock Appreciation Right unrelated to an Option, the Grantee shall be 11 16 entitled to receive an amount determined by multiplying (A) the excess of the Fair Market Value of a Share on the date preceding the date of exercise of such Stock Appreciation Right over the Fair Market Value of a Share on the date the Stock Appreciation Right was granted, by (B) the number of Shares as to which the Stock Appreciation Right is being exercised. Notwithstanding the foregoing, the Committee may limit in any manner the amount payable with respect to any Stock Appreciation Right by including such a limit in the Agreement evidencing the Stock Appreciation Right at the time it is granted. 8.4 Method of Exercise. Stock Appreciation Rights shall be exercised by a Grantee only by a written notice delivered in person or by mail to the Secretary of the Company at the Company's principal executive office, specifying the number of Shares with respect to which the Stock Appreciation Right is being exercised. If requested by the Committee, the Grantee shall deliver the Agreement evidencing the Stock Appreciation Right being exercised and the Agreement evidencing any related Option to the Secretary of the Company who shall endorse thereon a notation of such exercise and return such Agreement to the Grantee. 8.5 Form of Payment. Payment of the amount determined under Sections 8.2(b) or 8.3 may be made in the discretion of the Committee solely in whole Shares in a number determined at their Fair Market Value on the date preceding the date of exercise of the Stock Appreciation Right, or solely in cash, or in a combination of cash and Shares. If the Committee decides to make full payment in Shares and the amount payable results in a fractional Share, payment for the fractional Share will be made in cash. 8.6 Modification. No modification of an Award shall adversely alter or impair any rights or obligations under the Agreement without the Grantee's consent. 8.7 Effect of Change in Control. In the event of a Change in Control, all Stock Appreciation Rights shall become immediately and fully exercisable. In addition, to the extent set forth in an Agreement evidencing the grant of a Stock Appreciation Right, a Grantee will be entitled to receive a payment from the Company in cash or stock, in either case, with a value equal to the excess, if any, of (A) the greater of (x) the Fair Market Value, on the date preceding the date of exercise, of the underlying Shares subject to the Stock Appreciation Right or portion thereof exercised and (y) the Adjusted Fair Market Value, on the date preceding the date of exercise, of the Shares over (B) the aggregate Fair Market Value, on the date the Stock Appreciation Right was granted, of the Shares subject to the Stock Appreciation Right or portion thereof exercised. In the event a Grantee's employment with the Company is terminated by the Company following a Change in Control each Stock Appreciation Right held by the Grantee that was exercisable as of the date of termination of the Grantee's employment shall remain exercisable for a period ending not before the earlier of the first anniversary of (A) the termination of the Grantee's employment or (B) the expiration of the stated term of the Stock Appreciation Right. 9. DIVIDEND EQUIVALENT RIGHTS. Dividend Equivalent Rights may be granted to Eligible Individuals in tandem with an Option or Award. The terms and conditions applicable to each Dividend Equivalent Right shall be specified in the Agreement under which the Dividend Equivalent Right is granted. Amounts payable in respect of Dividend Equivalent Rights may be payable currently or deferred until the lapsing of restrictions on such Dividend Equivalent Rights or until the vesting, exercise, payment, settlement or other lapse of restrictions on the Option or Award to which the Dividend Equivalent Rights relate. In the event that the amount payable in respect of Dividend Equivalent Rights are to be deferred, the Committee shall determine whether such amounts are to be held in cash or reinvested in Shares or deemed (notionally) to be reinvested in Shares. If amounts payable in respect of 12 17 Dividend Equivalent Rights are to be held in cash, there may be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of the year at a rate per annum as the Committee, in its discretion, may determine. Dividend Equivalent Rights may be settled in cash or Shares or a combination thereof, in a single installment or multiple installments. 10. RESTRICTED STOCK. 10.1 Grant. The Committee may grant Awards to Eligible Individuals of Restricted Stock, which shall be evidenced by an Agreement between the Company and the Grantee. Each Agreement shall contain such restrictions, terms and conditions as the Committee may, in its discretion, determine and (without limiting the generality of the foregoing) such Agreements may require that an appropriate legend be placed on Share certificates. Awards of Restricted Stock shall be subject to the terms and provisions set forth below in this Section 10. 10.2 Rights of Grantee. Shares of Restricted Stock granted pursuant to an Award hereunder shall be issued in the name of the Grantee as soon as reasonably practicable after the Award is granted provided that the Grantee has executed an Agreement evidencing the Award, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require as a condition to the issuance of such Shares. If a Grantee shall fail to execute the Agreement evidencing a Restricted Stock Award, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require within the time period prescribed by the Committee at the time the Award is granted, the Award shall be null and void. At the discretion of the Committee, Shares issued in connection with a Restricted Stock Award shall be deposited together with the stock powers with an escrow agent (which may be the Company) designated by the Committee. Unless the Committee determines otherwise and as set forth in the Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall have all of the rights of a stockholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares. 10.3 Non-transferability. Until all restrictions upon the Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner set forth in Section 10.4, such Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated, nor shall they be delivered to the Grantee. 10.4 Lapse of Restrictions. (a) Restrictions upon Shares of Restricted Stock awarded hereunder shall lapse at such time or times and on such terms and conditions as the Committee may determine. The Agreement evidencing the Award shall set forth any such restrictions. (b) Unless the Committee shall determine otherwise at the time of the grant of an Award of Restricted Stock, the restrictions upon Shares of Restricted Stock shall lapse upon a Change in Control. The Agreement evidencing the Award shall set forth any such provisions. 10.5 Modification or Substitution. Subject to the terms of the Plan, the Committee may modify outstanding Awards of Restricted Stock or accept the surrender of outstanding Shares of Restricted Stock (to the extent the restrictions on such Shares have not yet lapsed) and grant new Awards in 13 18 substitution for them. Notwithstanding the foregoing, no modification of an Award shall adversely alter or impair any rights or obligations under the Agreement without the Grantee's consent. 10.6 Treatment of Dividends. At the time an Award of Shares of Restricted Stock is granted, the Committee may, in its discretion, determine that the payment to the Grantee of dividends, or a specified portion thereof, declared or paid on such Shares by the Company shall be (i) deferred until the lapsing of the restrictions imposed upon such Shares and (ii) held by the Company for the account of the Grantee until such time. In the event that dividends are to be deferred, the Committee shall determine whether such dividends are to be reinvested in shares of Stock (which shall be held as additional Shares of Restricted Stock) or held in cash. If deferred dividends are to be held in cash, there may be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of the year at a rate per annum as the Committee, in its discretion, may determine. Payment of deferred dividends in respect of Shares of Restricted Stock (whether held in cash or as additional Shares of Restricted Stock), together with interest accrued thereon, if any, shall be made upon the lapsing of restrictions imposed on the Shares in respect of which the deferred dividends were paid, and any dividends deferred (together with any interest accrued thereon) in respect of any Shares of Restricted Stock shall be forfeited upon the forfeiture of such Shares. 10.7 Delivery of Shares. Upon the lapse of the restrictions on Shares of Restricted Stock, the Committee shall cause a stock certificate to be delivered to the Grantee with respect to such Shares, free of all restrictions hereunder. 11. PERFORMANCE AWARDS. 11.1 Performance Objectives. (a) Performance Objectives for Performance Awards may be expressed in terms of (i) earnings per Share, (ii) Share price, (iii) pre-tax profits, (iv) net earnings, (v) return on equity or assets, (vi) revenues, (vii) EBITDA, (viii) market share or market penetration or (ix) any combination of the foregoing, and may be determined before or after accounting changes, special charges, foreign currency effects, acquisitions, divestitures or other extraordinary events. Performance Objectives may be in respect of the performance of the Company and its Subsidiaries (which may be on a consolidated basis), a Subsidiary or a Division. Performance Objectives may be absolute or relative and may be expressed in terms of a progression within a specified range. The Performance Objectives with respect to a Performance Cycle shall be established in writing by the Committee by the earlier of (i) the date on which a quarter of the Performance Cycle has elapsed or (ii) the date which is ninety (90) days after the commencement of the Performance Cycle, and in any event while the performance relating to the Performance Objectives remains, substantially uncertain. (b) Prior to the vesting, payment, settlement or lapsing of any restrictions with respect to any Performance Award made to a Grantee who is subject to Section 162(m) of the Code, the Committee shall certify in writing that the applicable Performance Objectives have been satisfied. 11.2 Performance Units. The Committee, in its discretion, may grant Awards of Performance Units to Eligible Individuals, the terms and conditions of which shall be set forth in an Agreement between the Company and the Grantee. Performance Units shall be denominated in Shares or a specified dollar amount and, contingent upon the attainment of specified Performance Objectives within the Performance Cycle, represent the right to receive payment as provided in Section 11.2(b) of the specified dollar amount or a percentage (which may be more than 100%) thereof depending on the 14 19 level of Performance Objective attainment; provided, however,that, the Committee may at the time a Performance Unit is granted specify a maximum amount payable in respect of a vested Performance Unit. Each Agreement shall specify the number of Performance Units to which it relates, the Performance Objectives which must be satisfied in order for the Performance Units to vest and the Performance Cycle within which such Performance Objectives must be satisfied. (a) Subject to Sections 11.1(b) and 11.4, a Grantee shall become vested with respect to the Performance Units to the extent that the Performance Objectives set forth in the Agreement are satisfied for the Performance Cycle. (b) Payment to Grantees in respect of vested Performance Units shall be made as soon as practicable after the last day of the Performance Cycle to which such Award relates unless the Agreement evidencing the Award provides for the deferral of payment, in which event the terms and conditions of the deferral shall be set forth in the Agreement. Subject to Section 11.4, such payments may be made entirely in Shares valued at their Fair Market Value as of the last day of the applicable Performance Cycle or such other date specified by the Committee, entirely in cash, or in such combination of Shares and cash as the Committee in its discretion shall determine at any time prior to such payment; provided, however, that if the Committee in its discretion determines to make such payment entirely or partially in Shares of Restricted Stock, the Committee must determine the extent to which such payment will be in Shares of Restricted Stock and the terms of such Restricted Stock at the time the Award is granted. 11.3 Performance Shares. The Committee, in its discretion, may grant Awards of Performance Shares to Eligible Individuals, the terms and conditions of which shall be set forth in an Agreement between the Company and the Grantee. Each Agreement may require that an appropriate legend be placed on Share certificates. Awards of Performance Shares shall be subject to the following terms and provisions: (a) The Committee shall provide at the time an Award of Performance Shares is made the time or times at which the actual Shares represented by such Award shall be issued in the name of the Grantee; provided, however, that no Performance Shares shall be issued until the Grantee has executed an Agreement evidencing the Award, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require as a condition to the issuance of such Performance Shares. If a Grantee shall fail to execute the Agreement evidencing an Award of Performance Shares, the appropriate blank stock powers and, in the discretion of the Committee, an escrow agreement and any other documents which the Committee may require within the time period prescribed by the Committee at the time the Award is granted, the Award shall be null and void. At the discretion of the Committee, Shares issued in connection with an Award of Performance Shares shall be deposited together with the stock powers with an escrow agent (which may be the Company) designated by the Committee. Except as restricted by the terms of the Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall have, in the discretion of the Committee, all of the rights of a stockholder with respect to such Shares, including the right to vote the Shares and to receive all dividends or other distributions paid or made with respect to the Shares. (b) Until any restrictions upon the Performance Shares awarded to a Grantee shall have lapsed in the manner set forth in Sections 11.3(c) or 11.4, such Performance Shares shall not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated, nor shall they be delivered to the Grantee. The Committee may also impose such other restrictions and conditions on the Performance Shares, if any, as it deems appropriate. 15 20 (c) Subject to Sections 11.1(b) and 11.4, restrictions upon Performance Shares awarded hereunder shall lapse and such Performance Shares shall become vested at such time or times and on such terms, conditions and satisfaction of Performance Objectives as the Committee may, in its discretion, determine at the time an Award is granted. (d) At the time the Award of Performance Shares is granted, the Committee may, in its discretion, determine that the payment to the Grantee of dividends, or a specified portion thereof, declared or paid on actual Shares represented by such Award which have been issued by the Company to the Grantee shall be (i) deferred until the lapsing of the restrictions imposed upon such Performance Shares and (ii) held by the Company for the account of the Grantee until such time. In the event that dividends are to be deferred, the Committee shall determine whether such dividends are to be reinvested in shares of Stock (which shall be held as additional Performance Shares) or held in cash. If deferred dividends are to be held in cash, there may be credited at the end of each year (or portion thereof) interest on the amount of the account at the beginning of the year at a rate per annum as the Committee, in its discretion, may determine. Payment of deferred dividends in respect of Performance Shares (whether held in cash or in additional Performance Shares), together with interest accrued thereon, if any, shall be made upon the lapsing of restrictions imposed on the Performance Shares in respect of which the deferred dividends were paid, and any dividends deferred (together with any interest accrued thereon) in respect of any Performance Shares shall be forfeited upon the forfeiture of such Performance Shares. (e) Upon the lapse of the restrictions on Performance Shares awarded the Committee shall cause a stock certificate to be delivered to the Grantee, free of all restrictions hereunder. 11.4 Effect of Change in Control. In the event of a Change in Control: (a) With respect to Performance Units, unless otherwise determined by the Committee, the Grantee shall (i) become vested in all Performance Units and (ii) be entitled to receive in respect of all Performance Units which become vested as a result of a Change in Control a cash payment within ten (10) days after such Change in Control in an amount as determined by the Committee at the time of the Award of such Performance Unit and as set forth in the Agreement. (b) With respect to Performance Shares, unless otherwise determined by the Committee, restrictions shall lapse immediately on all Performance Shares. (c) The Agreements evidencing Performance Shares and Performance Units shall provide for the treatment of such Awards (or portions thereof) which do not become vested as the result of a Change in Control, including, but not limited to, provisions for the adjustment of applicable Performance Objectives. 11.5 Modification or Substitution. Subject to the terms of the Plan, the Committee may modify outstanding Performance Awards or accept the surrender of outstanding Performance Awards and grant new Performance Awards in substitution for them. Notwithstanding the foregoing, no modification of a Performance Award shall adversely alter or impair any rights or obligations under the Agreement without the Grantee's consent. 12. EFFECT OF A TERMINATION OF EMPLOYMENT. An employment agreement, if applicable, between an Optionee or Grantee and the Company shall govern with respect to the terms and conditions 16 21 applicable to such Option or Award upon a termination or change in the status of the employment of the Optionee or Grantee. However, in absence of an employment agreement, the following shall apply: (a) The Agreement evidencing the grant of each Option and each Award shall set forth the terms and conditions applicable to such Option or Award upon a termination or change in the status of the employment of the Optionee or Grantee by the Company, a Subsidiary or a Division (including a termination or change by reason of the sale of a Subsidiary or a Division), which, except for Director Options, shall be as the Committee may, in its discretion, determine at the time the Option or Award is granted or thereafter. (b) Unless otherwise determined by the Committee at the time of grant (and set forth in the Option Agreement) or at a later date, except in the case of death and Disability as provided in paragraphs 12(c) and 12(d) below, if an Optionee of an Employee Option granted under the Plan has a Termination of Employment with the Company or a Subsidiary, any unexercised Employee Option held by such Optionee shall expire ninety (90) days after the Optionee has a Termination of Employment for any reason other than a termination for Cause or a Voluntary Termination (as defined below), and such Employee Option may only be exercised by the Optionee or his Beneficiary to the extent that the Employee Option or a portion thereof was exercisable on the date of Termination of Employment; provided, however, no Employee Option may be exercised after the expiration date specified for the particular Employee Option in the Employee Option grant. If the Optionee's Termination of Employment arises as a result of a termination for Cause or a Voluntary Termination, then, unless the Committee determines otherwise at the time of the Termination of Employment, any unexercised Options held by such Optionee shall terminate and expire concurrently with the Optionee's Termination of Employment. A "Voluntary Termination" shall mean the voluntary Termination of Employment by an Optionee prior to five years of total Service (as defined below) as an employee with the Company and its Subsidiaries. "Service" shall mean total of years for which the Optionee, prior to or after first becoming an Optionee, has 1,000 hours of service as an employee or otherwise with, or has served as a director or officer of, the Company or a Subsidiary. (c) Unless otherwise determined by the Committee at the time of grant (and set forth in the Option Agreement) or at a later date, if an Optionee dies while still employed by the Company, the shares which the Optionee was entitled to exercise on the date of the Optionee's death under an Option or Options granted under the Plan may be exercised at any time after the Optionee's death by the Optionee's beneficiary; provided, however, that no Option may be exercised after the earlier of: (i) one (1) year after the Optionee's death or (ii) the expiration date specified for the particular Option in the Option Agreement. (d) Unless otherwise determined by the Committee at the time of grant (and set forth in the Option Agreement) or at a later date, if an Optionee becomes disabled within the meaning of Section 2.14 hereof, any unexercised Employee Option held by such disabled Optionee shall expire one (1) year after the Optionee has a Termination of Employment because of such Disability and such Option may only be exercised by the Optionee or his Beneficiary to the extent that the Employee Option or a portion thereof was exercisable on the date of Termination of Employment because of such Disability; provided, however, no Employee Option may be exercised after the expiration date specified for the particular Employee Option in the Employee Option grant. 17 22 13. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. (a) In the event of a Change in Capitalization, the Committee shall conclusively determine the appropriate adjustments, if any, to (i) the maximum number and class of Shares or other stock or securities with respect to which Options or Awards may be granted under the Plan, (ii) the maximum number and class of Shares or other stock or securities with respect to which Options or Awards may be granted to any Eligible Individual during the term of the Plan, (iii) the number and class of Shares or other stock or securities which are subject to outstanding Options or Awards granted under the Plan and the purchase price therefor, if applicable, (iv) the number and class of Shares or other securities in respect of which Director Options are to be granted under Section 6 and (v) the Performance Objectives. (b) Any such adjustment in the Shares or other stock or securities subject to outstanding Incentive Stock Options (including any adjustments in the purchase price) shall be made in such manner as not to constitute a modification as defined by Section 424(h)(3) of the Code and only to the extent otherwise permitted by Sections 422 and 424 of the Code. (c) If, by reason of a Change in Capitalization, a Grantee of an Award shall be entitled to, or an Optionee shall be entitled to exercise an Option with respect to, new, additional or different shares of stock or securities, such new, additional or different shares shall thereupon be subject to all of the conditions, restrictions and performance criteria which were applicable to the Shares subject to the Award or Option, as the case may be, prior to such Change in Capitalization. 14. EFFECT OF CERTAIN TRANSACTIONS. Subject to Sections 7.4, 8.7, 10.4(b) and 11.4 or as otherwise provided in an Agreement, in the event of (i) the liquidation or dissolution of the Company or (ii) a merger or consolidation of the Company (a "Transaction"), the Plan and the Options and Awards issued hereunder shall continue in effect in accordance with their respective terms, except that following a Transaction each Optionee and Grantee shall be entitled to receive in respect of each Share subject to any outstanding Options or Awards, as the case may be, upon exercise of any Option or payment or transfer in respect of any Award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a Share was entitled to receive in the Transaction in respect of a Share; provided, however, that such stock, securities, cash, property, or other consideration shall remain subject to all of the conditions, restrictions and performance criteria which were applicable to the Options and Awards prior to such Transaction. 15. INTERPRETATION. Following the required registration of any equity security of the Company pursuant to Section 12 of the Exchange Act: (a) The Plan is intended to comply with Rule 16b-3 promulgated under the Exchange Act and the Committee shall interpret and administer the provisions of the Plan or any Agreement in a manner consistent therewith. Any provisions inconsistent with such Rule shall be inoperative and shall not affect the validity of the Plan. (b) Unless otherwise expressly stated in the relevant Agreement, each Option, Stock Appreciation Right and Performance Award granted under the Plan is intended to be performance-based compensation within the meaning of Section 162(m)(4)(C) of the Code. The Committee shall not be entitled to exercise any discretion otherwise authorized hereunder with respect to such Options or Awards if the ability to exercise such discretion or the exercise of such discretion itself would cause the compensation attributable to such Options or Awards to fail to qualify as performance-based compensation. 18 23 16. POOLING TRANSACTIONS. Notwithstanding anything contained in the Plan or any Agreement to the contrary, in the event of a Change in Control which is also intended to constitute a Pooling Transaction, the Committee shall take such actions, if any, as are specifically recommended by an independent accounting firm retained by the Company to the extent reasonably necessary in order to assure that the Pooling Transaction will qualify as such, including but not limited to (i) deferring the vesting, exercise, payment, settlement or lapsing of restrictions with respect to any Option or Award, (ii) providing that the payment or settlement in respect of any Option or Award be made in the form of cash, Shares or securities of a successor or acquiror of the Company, or a combination of the foregoing, and (iii) providing for the extension of the term of any Option or Award to the extent necessary to accommodate the foregoing, but not beyond the maximum term permitted for any Option or Award. 17. EFFECTIVE DATE, TERMINATION AND AMENDMENT OF THE PLAN. The effective date of this Plan shall be the date the Plan is adopted by the Board, subject only to the approval by the affirmative vote of the holders of a majority of the securities of the Company present, or represented, and entitled to vote at a meeting of stockholders duly held in accordance with the applicable laws of the State of Utah within twelve (12) months of the adoption of the Plan by the Board. No new Awards under the Plan shall be granted after the day preceding the tenth anniversary of the date of its adoption by the Board and no Option or Award may be granted thereafter. The Board may sooner terminate the Plan and the Board may at any time and from time to time amend, modify or suspend the Plan; provided, however, that: (a) no such amendment, modification, suspension or termination shall impair or adversely alter any Options or Awards theretofore granted under the Plan, except with the consent of the Optionee or Grantee, nor shall any amendment, modification, suspension or termination deprive any Optionee or Grantee of any Shares which he or she may have acquired through or as a result of the Plan; and (b) to the extent necessary under applicable law, no amendment shall be effective unless approved by the stockholders of the Company in accordance with applicable law. 18. NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under the Plan, and such arrangements may be either applicable generally or only in specific cases. 19. LIMITATION OF LIABILITY. As illustrative of the limitations of liability of the Company, but not intended to be exhaustive thereof, nothing in the Plan shall be construed to: (i) give any person any right to be granted an Option or Award other than at the sole discretion of the Committee; (ii) give any person any rights whatsoever with respect to Shares except as specifically provided in the Plan; (iii) limit in any way the right of the Company to terminate the employment of any person at any time; or (iv) be evidence of any agreement or understanding, expressed or implied, that the Company will employ any person at any particular rate of compensation or for any particular period of time. 19 24 20. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW. 20.1 Governing Law. Except as to matters of federal law, the Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State of Utah without giving effect to conflicts of laws principles thereof. 20.2 Applicable Laws. The obligation of the Company to sell or deliver Shares with respect to Options and Awards granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate by the Committee. 20.3 Rules and Regulations. The Board may make such changes as may be necessary or appropriate to comply with the rules and regulations of any government authority, or to obtain for Eligible Individuals granted Incentive Stock Options the tax benefits under the applicable provisions of the Code and regulations promulgated thereunder. 20.4 Securities Regulations. Each Option and Award is subject to the requirement that, if at any time the Committee determines, in its discretion, that the listing, registration or qualification of Shares issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Option or Award or the issuance of Shares, no Options or Awards shall be granted or payment made or Shares issued, in whole or in part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions as acceptable to the Committee. 20.5 Restrictions on Shares. Notwithstanding anything contained in the Plan or any Agreement to the contrary, in the event that the disposition of Shares acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise exempt from such registration, such Shares shall be restricted against transfer to the extent required by the Securities Act and Rule 144 or other regulations thereunder. The Committee may require any individual receiving Shares pursuant to an Option or Award granted under the Plan, as a condition precedent to receipt of such Shares, to represent and warrant to the Company in writing that the Shares acquired by such individual are acquired without a view to any distribution thereof and will not be sold or transferred other than pursuant to an effective registration thereof under said Act or pursuant to an exemption applicable under the Securities Act or the rules and regulations promulgated thereunder. The certificates evidencing any of such Shares shall be appropriately amended to reflect their status as restricted securities as aforesaid. 21. MISCELLANEOUS. 21.1 Multiple Agreements. The terms of each Option or Award may differ from other Options or Awards granted under the Plan at the same time, or at some other time. The Committee may also grant more than one Option or Award to a given Eligible Individual during the term of the Plan, either in addition to, or in substitution for, one or more Options or Awards previously granted to that Eligible Individual. 20 25 21.2 Withholding of Taxes. (a) At such times as an Optionee or Grantee recognizes taxable income in connection with the receipt of Shares or cash hereunder (a "Taxable Event"), the Optionee or Grantee shall pay to the Company an amount equal to the federal, state and local income taxes and other amounts as may be required by law to be withheld by the Company in connection with the Taxable Event (the "Withholding Taxes") prior to the issuance, or release from escrow, of such Shares or the payment of such cash. The Company shall have the right to deduct from any payment of cash to an Optionee or Grantee an amount equal to the Withholding Taxes in satisfaction of the obligation to pay Withholding Taxes. In satisfaction of the obligation to pay Withholding Taxes to the Company, the Optionee or Grantee may make a written election (the "Tax Election"), which may be accepted or rejected in the discretion of the Committee, to have withheld a portion of the Shares then issuable to him or her having an aggregate Fair Market Value equal to the Withholding Taxes. (b) If an Optionee makes a disposition, within the meaning of Section 424(c) of the Code and regulations promulgated thereunder, of any Share or Shares issued to such Optionee pursuant to the exercise of an Incentive Stock Option within the two-year period commencing on the day after the date of the grant or within the one-year period commencing on the day after the date of transfer of such Share or Shares to the Optionee pursuant to such exercise, the Optionee shall, within ten (10) days of such disposition, notify the Company thereof, by delivery of written notice to the Company at its principal executive office. 21 EX-10.2 3 PROMISSORY NOTE & COLLATERAL AGREEMENTS 1 PROMISSORY NOTE U.S. $460,000 Dated: September 27, 1996 The undersigned, JOSEPH A. CANNON, an individual ("Borrower"), promises to pay to GENEVA STEEL COMPANY, a Utah corporation (hereinafter, together with any subsequent holder of this promissory note, referred to as "Lender"), at 10 South Geneva Road, Vineyard, Utah 84058, or at such other place as Lender may designate, in lawful money of the United States, the principal sum of FOUR HUNDRED SIXTY THOUSAND DOLLARS ($460,000), together with interest from the date hereof on the unpaid principal, payable as hereinafter provided for in this promissory note (the "Note"). 1. Borrower shall pay to Lender the principal amount of this Note and all interest accrued thereon at the earliest to occur of (i) demand for repayment by Lender and (ii) September 27, 1997. On such repayment date, the entire then-remaining unpaid principal balance, plus accrued interest and all other fees and amounts required by this Note, shall be due and payable in full. 2. Except as otherwise expressly provided in the following paragraphs of this Note, the outstanding principal balance of this Note shall bear interest for each day from and including the date hereof to but excluding the date such principal and interest accrued thereon is repaid in full at a rate per annum equal to Eight and 53/100 Percent (8.53%). Interest shall accrue based upon a year of 360 days. 3. Any overdue principal hereof and, to the extent permitted by law, overdue interest hereon shall bear interest payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate equal to Eighteen Percent (18%) per annum. 4. This Note may be prepaid in full or in part at any time without the consent of Lender and without penalty or premium. Each payment under this Note shall be applied first, to the payment of Lender's costs, fees and expenses as provided herein, second, to accrued but unpaid interest due under this Note, and third, to the reduction of unpaid principal owing under this Note. 5. If one or more of the following events (each, an "Event of Default") shall have occurred and be continuing: (a) Borrower shall fail to pay any principal of this Note when due, or interest thereon or any fees or any other amounts payable hereunder within ten (10) days after the due date thereof; -1- 2 (b) the occurrence of an Event of Default, as such term is defined in Section 8 of that certain Security Agreement dated September 27, 1996 executed by Borrower, Janeal B. Cannon and Lender (the "Security Agreement"); (c) Borrower or Janeal B. Cannon shall breach or fail to comply with any agreement respecting any "Obligation," as such term is defined in a Deed of Trust dated as of September 27, 1996, executed by Borrower and Janeal B. Cannon as trustor, to Associated Title Company, as trustee, for the use and benefit of Lender, as beneficiary (the "Cannon Trust Deed"); (d) Riverwood Limited Partnership, a Utah limited partnership ("Riverwood Partnership"), shall breach or fail to comply with any of its agreements respecting any "Obligation," as such term is defined in a Utah Deed of Trust, Security Agreement and Financing Statement dated as of September 27, 1996, executed by Riverwood Partnership as trustor, to Associated Title Company, as trustee, for the use and benefit of Lender, as beneficiary (the "Riverwood Trust Deed," and collectively with the Cannon Trust Deed, the "Trust Deeds"); or (e) Borrower shall use any of the proceeds of the loan evidenced by this Note for any purpose other than for the payment of principal, interest or related fees and expenses under a promissory note dated October 29, 1993 made by Borrower in favor of Citibank, N.A., a national banking association, as amended; then, and in every such event, without notice to Borrower or any other act by Lender, the entire unpaid principal balance hereunder, together with all accrued but unpaid interest and all fees and charges required by this Note, shall, at the option of the holder hereof, at once become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived by Borrower (time being the essence hereof). The failure of Lender to exercise any right or remedy upon the occurrence or continuance of an Event of Default shall not constitute or be construed to constitute a waiver of any right or remedy of Lender. 6. Notwithstanding any other provision contained in this Note or in any agreement, document or instrument related to the transaction of which this Note is a part: (a) the rates of interest and charges and the payments provided for herein and therein shall in no event exceed the rates and charges and the payments which would result in interest being charged at a rate equalling the maximum allowed by law; and (b) if, for any reason whatsoever, the holder hereof ever receives as interest (or as a charge in the nature of interest) in connection with the transaction of which this Note is a part an amount which would result in interest being charged at a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically be applied toward reduction of the unpaid principal balance then outstanding hereunder. Any such amount shall not be applied toward payment of interest (or toward payment of a charge in the nature of interest). 7. In the event that (a) any payment under this Note is not made at the time and in the manner required hereunder, (b) the holder hereof incurs any costs of collection or other costs -2- 3 reasonably necessary for the protection of the interest of Lender with respect to this Note, or (c) the holder hereof exercises its right to accelerate the maturity of the obligations hereunder, Borrower agrees to pay any and all costs and expenses (regardless of the particular nature thereof and whether incurred before or after the initiation of suit or before or after judgment) which may be incurred by the holder hereof in connection with the enforcement of any of its rights under this Note, including court costs and attorneys' fees. 8. The undersigned, sureties, guarantors, and endorsers hereof severally waive presentment for payment, demand, protest and notice of dishonor of this Note, and consent to any and all extensions of time, renewals, waivers or modifications that may be granted by the holder hereof with respect to the payment or other provisions of this Note, and to the release of any security, or any part thereof, with or without substitution. 9. This Note is secured by, and entitled to the benefits of, the Security Agreement and the Trust Deeds. "BORROWER" /s/ JOSEPH A. CANNON ______________________________________ Joseph A. Cannon -3- 4 PROMISSORY NOTE U.S. $40,000 Dated: December 23, 1996 The undersigned, JOSEPH A. CANNON, an individual ("Borrower"), promises to pay to GENEVA STEEL COMPANY, a Utah corporation (hereinafter, together with any subsequent holder of this promissory note, referred to as "Lender"), at 10 South Geneva Road, Vineyard, Utah 84058, or at such other place as Lender may designate, in lawful money of the United States, the principal sum of FORTY THOUSAND DOLLARS ($40,000), together with interest from the date hereof on the unpaid principal, payable as hereinafter provided for in this promissory note (the "Note"). 1. Borrower shall pay to Lender the principal amount of this Note and all interest accrued thereon at the earliest to occur of (i) demand for repayment by Lender and (ii) September 27, 1997. On such repayment date, the entire then-remaining unpaid principal balance, plus accrued interest and all other fees and amounts required by this Note, shall be due and payable in full. 2. Except as otherwise expressly provided in the following paragraphs of this Note, the outstanding principal balance of this Note shall bear interest for each day from and including the date hereof to but excluding the date such principal and interest accrued thereon is repaid in full at a rate per annum equal to Eight and 53/100 Percent (8.53%). Interest shall accrue based upon a year of 360 days. 3. Any overdue principal hereof and, to the extent permitted by law, overdue interest hereon shall bear interest payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate equal to Eighteen Percent (18%) per annum. 4. This Note may be prepaid in full or in part at any time without the consent of Lender and without penalty or premium. Each payment under this Note shall be applied first, to the payment of Lender's costs, fees and expenses as provided herein, second, to accrued but unpaid interest due under this Note, and third, to the reduction of unpaid principal owing under this Note. 5. If one or more of the following events (each, an "Event of Default") shall have occurred and be continuing: (a) Borrower shall fail to pay any principal of this Note when due, or interest thereon or any fees or any other amounts payable hereunder within ten (10) days after the due date thereof; -1- 5 (b) the occurrence of an Event of Default, as such term is defined in Section 8 of that certain Security Agreement dated September 27, 1996 executed by Borrower, Janeal B. Cannon and Lender (the "Security Agreement"); (c) Borrower or Janeal B. Cannon shall breach or fail to comply with any agreement respecting any "Obligation," as such term is defined in a Deed of Trust dated as of September 27, 1996, executed by Borrower and Janeal B. Cannon as trustor, to Associated Title Company, as trustee, for the use and benefit of Lender, as beneficiary, as amended by a First Amendment to Deed of Trust dated as of December 23, 1996 (as amended, the "Cannon Trust Deed"); (d) Riverwood Limited Partnership, a Utah limited partnership ("Riverwood Partnership"), shall breach or fail to comply with any of its agreements respecting any "Obligation," as such term is defined in a Utah Deed of Trust, Security Agreement and Financing Statement dated as of September 27, 1996, executed by Riverwood Partnership as trustor, to Associated Title Company, as trustee, for the use and benefit of Lender, as beneficiary, as amended by a First Amendment to Utah Deed of Trust, Security Agreement and Financing Statement dated as of December 23, 1996 (as amended, the "Riverwood Trust Deed," and collectively with the Cannon Trust Deed, the "Trust Deeds"); or (e) Borrower shall use any of the proceeds of the loan evidenced by this Note for any purpose other than for the payment of principal, interest or related fees and expenses under a promissory note dated October 29, 1993 made by Borrower in favor of Citibank, N.A., a national banking association, as amended; then, and in every such event, without notice to Borrower or any other act by Lender, the entire unpaid principal balance hereunder, together with all accrued but unpaid interest and all fees and charges required by this Note, shall, at the option of the holder hereof, at once become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived by Borrower (time being the essence hereof). The failure of Lender to exercise any right or remedy upon the occurrence or continuance of an Event of Default shall not constitute or be construed to constitute a waiver of any right or remedy of Lender. 6. Notwithstanding any other provision contained in this Note or in any agreement, document or instrument related to the transaction of which this Note is a part: (a) the rates of interest and charges and the payments provided for herein and therein shall in no event exceed the rates and charges and the payments which would result in interest being charged at a rate equalling the maximum allowed by law; and (b) if, for any reason whatsoever, the holder hereof ever receives as interest (or as a charge in the nature of interest) in connection with the transaction of which this Note is a part an amount which would result in interest being charged at a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically be applied toward reduction of the unpaid principal balance then outstanding hereunder. Any such amount shall not be applied toward payment of interest (or toward payment of a charge in the nature of interest). -2- 6 7. In the event that (a) any payment under this Note is not made at the time and in the manner required hereunder, (b) the holder hereof incurs any costs of collection or other costs reasonably necessary for the protection of the interest of Lender with respect to this Note, or (c) the holder hereof exercises its right to accelerate the maturity of the obligations hereunder, Borrower agrees to pay any and all costs and expenses (regardless of the particular nature thereof and whether incurred before or after the initiation of suit or before or after judgment) which may be incurred by the holder hereof in connection with the enforcement of any of its rights under this Note, including court costs and attorneys' fees. 8. The undersigned, sureties, guarantors, and endorsers hereof severally waive presentment for payment, demand, protest and notice of dishonor of this Note, and consent to any and all extensions of time, renewals, waivers or modifications that may be granted by the holder hereof with respect to the payment or other provisions of this Note, and to the release of any security, or any part thereof, with or without substitution. 9. This Note is secured by, and entitled to the benefits of, the Security Agreement and the Trust Deeds. "BORROWER" /s/ JOSEPH A. CANNON ------------------------------------ Joseph A. Cannon -3- 7 PROMISSORY NOTE U.S. $200,000 Dated: February 13, 1997 The undersigned, JOSEPH A. CANNON, an individual ("Borrower"), promises to pay to GENEVA STEEL COMPANY, a Utah corporation (hereinafter, together with any subsequent holder of this promissory note, referred to as "Lender"), at 10 South Geneva Road, Vineyard, Utah 84058, or at such other place as Lender may designate, in lawful money of the United States, the principal sum of TWO HUNDRED THOUSAND DOLLARS ($200,000), together with interest from the date hereof on the unpaid principal, payable as hereinafter provided for in this promissory note (the "Note"). 1. Borrower shall pay to Lender the principal amount of this Note and all interest accrued thereon at the earliest to occur of (i) demand for repayment by Lender and (ii) September 27, 1997. On such repayment date, the entire then-remaining unpaid principal balance, plus accrued interest and all other fees and amounts required by this Note, shall be due and payable in full. 2. Except as otherwise expressly provided in the following paragraphs of this Note, the outstanding principal balance of this Note shall bear interest for each day from and including the date hereof to but excluding the date such principal and interest accrued thereon is repaid in full at a rate per annum equal to Eight and 53/100 Percent (8.53%). Interest shall accrue based upon a year of 360 days. 3. Any overdue principal hereof and, to the extent permitted by law, overdue interest hereon shall bear interest payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate equal to Eighteen Percent (18%) per annum. 4. This Note may be prepaid in full or in part at any time without the consent of Lender and without penalty or premium. Each payment under this Note shall be applied first, to the payment of Lender's costs, fees and expenses as provided herein, second, to accrued but unpaid interest due under this Note, and third, to the reduction of unpaid principal owing under this Note. 5. If one or more of the following events (each, an "Event of Default") shall have occurred and be continuing: (a) Borrower shall fail to pay any principal of this Note when due, or interest thereon or any fees or any other amounts payable hereunder within ten (10) days after the due date thereof; -1- 8 (b) the occurrence of an Event of Default, as such term is defined in Section 8 of that certain Security Agreement dated September 27, 1996 executed by Borrower, Janeal B. Cannon and Lender (the "Security Agreement"); (c) Borrower or Janeal B. Cannon shall breach or fail to comply with any agreement respecting any "Obligation," as such term is defined in a Deed of Trust dated as of September 27, 1996, executed by Borrower and Janeal B. Cannon as trustor, to Associated Title Company, as trustee, for the use and benefit of Lender, as beneficiary, as amended by a First Amendment to Deed of Trust dated as of December 23, 1996 (as amended, the "Cannon Trust Deed"); (d) Riverwood Limited Partnership, a Utah limited partnership ("Riverwood Partnership"), shall breach or fail to comply with any of its agreements respecting any "Obligation," as such term is defined in a Utah Deed of Trust, Security Agreement and Financing Statement dated as of September 27, 1996, executed by Riverwood Partnership as trustor, to Associated Title Company, as trustee, for the use and benefit of Lender, as beneficiary, as amended by a First Amendment to Utah Deed of Trust, Security Agreement and Financing Statement dated as of December 23, 1996 (as amended, the "Riverwood Trust Deed," and collectively with the Cannon Trust Deed, the "Trust Deeds"); or (e) Borrower shall use any of the proceeds of the loan evidenced by this Note for any purpose other than for the payment of principal, interest or related fees and expenses under a promissory note dated October 29, 1993 made by Borrower in favor of Citibank, N.A., a national banking association, as amended; then, and in every such event, without notice to Borrower or any other act by Lender, the entire unpaid principal balance hereunder, together with all accrued but unpaid interest and all fees and charges required by this Note, shall, at the option of the holder hereof, at once become due and payable without presentment, demand, protest or notice of any kind, all of which are hereby waived by Borrower (time being the essence hereof). The failure of Lender to exercise any right or remedy upon the occurrence or continuance of an Event of Default shall not constitute or be construed to constitute a waiver of any right or remedy of Lender. 6. Notwithstanding any other provision contained in this Note or in any agreement, document or instrument related to the transaction of which this Note is a part: (a) the rates of interest and charges and the payments provided for herein and therein shall in no event exceed the rates and charges and the payments which would result in interest being charged at a rate equalling the maximum allowed by law; and (b) if, for any reason whatsoever, the holder hereof ever receives as interest (or as a charge in the nature of interest) in connection with the transaction of which this Note is a part an amount which would result in interest being charged at a rate exceeding the maximum allowed by law, such amount or portion thereof as would otherwise be excessive interest shall automatically be applied toward reduction of the unpaid principal balance then outstanding hereunder. Any such amount shall not be applied toward payment of interest (or toward payment of a charge in the nature of interest). -2- 9 7. In the event that (a) any payment under this Note is not made at the time and in the manner required hereunder, (b) the holder hereof incurs any costs of collection or other costs reasonably necessary for the protection of the interest of Lender with respect to this Note, or (c) the holder hereof exercises its right to accelerate the maturity of the obligations hereunder, Borrower agrees to pay any and all costs and expenses (regardless of the particular nature thereof and whether incurred before or after the initiation of suit or before or after judgment) which may be incurred by the holder hereof in connection with the enforcement of any of its rights under this Note, including court costs and attorneys' fees. 8. The undersigned, sureties, guarantors, and endorsers hereof severally waive presentment for payment, demand, protest and notice of dishonor of this Note, and consent to any and all extensions of time, renewals, waivers or modifications that may be granted by the holder hereof with respect to the payment or other provisions of this Note, and to the release of any security, or any part thereof, with or without substitution. 9. This Note is secured by, and entitled to the benefits of, the Security Agreement, the Trust Deeds and an Assignment of Interest, dated as of the date hereof, made by Borrower in favor of Lender. "BORROWER" /s/ JOSEPH A. CANNON ------------------------------------ Joseph A. Cannon -3- 10 AFTER RECORDING, RETURN TO: Brian G. Lloyd, Esq. KIMBALL, PARR, WADDOUPS, BROWN & GEE 185 South State Street, Suite 1300 Salt Lake City, Utah 84111 UTAH DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT (WITH ASSIGNMENT OF RENTS AND LEASES) THIS DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT (hereinafter the "Trust Deed") is executed as of the 27th day of September, 1996, by RIVERWOOD LIMITED PARTNERSHIP, a Utah limited partnership whose address for purposes hereof is 3919 North Riverwood Drive, Provo, Utah 84604, (hereinafter, "Trustor"), to ASSOCIATED TITLE COMPANY, a Utah corporation whose address for the purposes hereof is 560 South 300 East, Salt Lake City, Utah 84111 ("Trustee"), for the use and benefit of GENEVA STEEL COMPANY, a Utah corporation, and its successors and assigns (hereinafter "Beneficiary"), whose address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058. RECITALS: A. Trustor is the record owner of fee title to a certain tract of real property lying in the County of Wayne, State of Utah, which said property is more particularly described as follows (hereinafter the "Tract"): See Exhibit A attached hereto and incorporated herein by this reference. B. Joseph A. Cannon, a general partner of Trustor ("Borrower"), has obtained a loan (the "Loan") from Beneficiary in the original principal amount of FOUR HUNDRED SIXTY THOUSAND and no/100 DOLLARS ($460,000.00), as evidenced by a Promissory Note of even date herewith, made by Borrower payable to the order of Beneficiary, which note also provides for interest on the unpaid principal balance at the rate or rates therein set forth, described, or provided for, and payable at the times and in the manner therein set forth (hereinafter the "Note"). NOW, THEREFORE, in order to secure (A) The payment and performance of each and every obligation of Borrower under the Note; (B) Any extensions, renewals, modifications or replacements of the Note or of the obligations evidenced thereby, regardless of the extent of or the subject matter of any such extension, renewal, modification or replacement; (C) The payment and performance of each and every agreement and obligation of Trustor under this Trust Deed and under any other instrument given to evidence or further secure the payment and 11 performance of any obligation secured hereby; (D) The payment of such additional loans or advances as may hereafter be made by Beneficiary to Borrower or Trustor, or their respective successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Trust Deed; and (E) The payment of all sums expended or advanced by Beneficiary or Trustee pursuant to the terms of this Trust Deed, the Note, or any instrument further evidencing or securing any obligation secured hereby, together with interest thereon as herein and therein provided (the foregoing items (A) through (E) and the matters referred to therein being hereinafter collectively referred to as the "Obligations"), Trustor hereby CONVEYS, WARRANTS, and TRANSFERS to Trustee, IN TRUST, WITH POWER OF SALE, the following property, rights, privileges, interests, and franchises, to-wit: I. The Tract (which is described in Paragraph A appearing at the outset hereof). Together with all minerals, oil, gas and other hydrocarbon substances, air rights, water rights, water stock, rights-of-way, easements, tenements, hereditaments, and appurtenances belonging to or in any way appertaining to the Tract and of any improvements now or hereafter situated on the Tract. Together with all right, title, and interest of Trustor, now owned or hereafter acquired, in and to any land lying in the bed of any street, road, or avenue, open or proposed, in front of or adjoining the Tract. Together with all right, title, and interest of Trustor, now owned or hereafter acquired, in and to any and all sidewalks and alleys, and all strips and gores of land, adjacent to or used in connection with the Tract. II. All buildings, structures, and improvements now or at any time hereafter erected, constructed, or situated upon the Tract or any part thereof, and all apparatus, fixtures, and articles of property now or hereafter attached to or necessary for use in connection with the operation or maintenance of any such building, structure, or other improvement, including, but without limiting the generality of the foregoing, all carpeting, draperies, appliances, engines, furnaces, boilers, pumps, heaters, tanks, motors, generators, electrical equipment, heating, plumbing, lifting, and ventilating apparatus, air-cooling and air-conditioning apparatus, gas and electric fixtures, elevators, fittings, and machinery, and all other fixtures, property, and equipment of every kind and description, attached to or necessary for use in connection with the operation or maintenance of any building standing on the Tract (all of which apparatus, fixtures, property, and equipment shall be deemed to be fixtures and a part of the realty), together with any and all replacements and renewals of any of the foregoing and any and all additions thereto. 2 12 III. All awards made for the taking by eminent domain or by any proceeding or purchase in lieu thereof of the whole or any part of the Tract or of any improvements now or hereafter situated thereon or any estate or easement therein (including any awards for change of grade of streets), and all proceeds of insurance paid on account of any partial or total destruction of improvements on the Tract, all of which awards and proceeds are hereby assigned to Beneficiary, which is hereby authorized to collect and receive such awards and proceeds and to give proper receipts and acquittances therefor and (subject to the terms of Paragraph 4 of this Trust Deed) to apply the same against the Obligations, whether or not then due. IV. All right, title, and interest of Trustor in and to all unearned premiums accrued, accruing, or to accrue under any and all insurance policies now or hereafter obtained by Trustor pursuant to the provisions hereof. V. All fixtures, carpeting, floor coverings, draperies, equipment, sun screens, awnings, implements, goods, fittings, machinery, appliances, furniture, and other personal property of every kind or nature whatsoever which are presently, or which are at any time hereafter, installed, placed, located, contained, or used in, about, or in connection with, or procured for purposes of installation, placing, location, being contained, or used in, about, or in connection with, and which are necessary for the existence, construction, creation, operation, or maintenance of any building or other structure now or at any time hereafter erected or situated on, any part of the Tract, together with all construction materials and all plans and specifications of every kind or nature whatsoever which are intended to be used, which are used, or which are procured for use in constructing and completing any of the improvements located or to be located on the Tract (including all replacements, renewals, additions, products, and proceeds of all of the foregoing). Together with all inventory, equipment, trademarks, trade names, logos and designs for the operations located on the Tract, contract rights, deposit, escrow and cash accounts, chattel paper, instruments, documents, general intangibles, certificates, agreements, insurance policies, business records, plans and specifications, drawings, maps, surveys, studies, permits, licenses, zoning, subdivision development and other applications, filings and approvals and other intangible personal property now owned or hereafter acquired by Trustor and used in connection with the ownership or operation of the Tract, and any substitutions and replacements thereof, and any proceeds or products therefrom. Together with all water stock relating to the Tract, and deposits and other security given to utility companies or governmental or quasi-governmental agencies in connection with the Tract. 3 13 All of the property, rights, privileges, interests, and franchises described in the foregoing items I through V and hereby conveyed, warranted, and transferred are hereinafter collectively referred to as the "Property." All of the property described in the foregoing items III, IV and V is hereinafter collectively referred to as the "Personal Property." IN CONNECTION WITH THIS TRUST DEED, IT IS AGREED AS FOLLOWS: 1. Warranties of Title and Authority. Trustor hereby represents and warrants that it is lawfully seized of indefeasible fee title to the Property, that it has the authority and right to execute and deliver this Trust Deed, that it shall defend the title to the Property against all claims and demands whatsoever, that the Property is free and clear of any and all liens, encumbrances, and interests of third parties (other than such liens, encumbrances, and interests as may be set forth in the policy of mortgage title insurance to be provided to Beneficiary pursuant to Paragraph 7 of this Trust Deed), that no hazardous substances, hazardous wastes, pollutants or contaminants are, have been or will be used, deposited, stored, disposed of, placed or otherwise located in or on the Property or at any facility operated on the Property at any time, and that any and all obligations it may have incurred in connection with the Property are current and without default. Trustor hereby releases, waives, and relinquishes all exemptions and homestead rights which may exist with respect to the Property. 2. Obligations Mandatory. Trustor shall promptly pay or cause to be paid to Beneficiary, or order, and shall promptly perform or cause to be performed, each and every payment and obligation on the part of Trustor provided to be paid or performed in connection with any of the Obligations. All of such payments and obligations are mandatory, and Trustor's failure to accomplish any of the same shall constitute a default under this Trust Deed. 3. Payments Protecting Against Liens. Trustor shall pay, when due, all taxes, assessments, and governmental, municipal, or other charges or impositions levied against or affecting the Property, or which might become a lien thereon, and shall promptly deliver all receipts for such payments to Beneficiary upon request. Trustor shall also pay, when due, any and all sums constituting an encumbrance, charge, or lien upon the Property, or any part thereof, which may at any time appear to Beneficiary to be prior or superior to the interest of Beneficiary or Trustee hereunder. 4. Insurance Coverage. Trustor shall secure and at all times maintain an insurance policy or policies in a form reasonably satisfactory to Beneficiary, naming Beneficiary as additional insured thereunder, providing: (i) hazard insurance with "all risk" coverage upon the buildings, fixtures, improvements and Personal Property now existing or hereafter erected or placed upon the Tract, insuring, inter alia, against the perils of fire, extended coverage, vandalism, and malicious mischief, having a full replacement cost endorsement, and in an amount based upon a minimum insurable value and upon co-insurance rates which value and rates are acceptable to Beneficiary; and (iii) if the Tract is or comes to be located in a flood prone or flood risk area 4 14 as identified pursuant to the Flood Disaster Protection Act of l973, as amended or supplemented, hazard insurance covering the risk of damage to improvements caused by flooding, in such amounts as Beneficiary may require. Trustor shall deliver to Beneficiary (at the option of Beneficiary) either the originals of the policies evidencing such insurance coverage or certificates duly executed by the insurer(s) evidencing such insurance coverage. Concurrently with the delivery to Beneficiary of each such policy or certificate (and of each renewal policy or other evidence that the insurance coverage required hereby has been renewed, which said renewal policy or other evidence of renewal shall be delivered to Beneficiary at least fifteen (l5) days prior to the expiration of the coverage then in force), Trustor shall also furnish to Beneficiary paid premium receipts evidencing payment in full of the required insurance premiums for at least the first full year (and for each renewal policy, the applicable full renewal year) of coverage. Each insurer concerned shall agree that the coverage will not be cancelled or modified unless at least thirty (30) days advance written notice of the proposed cancellation or modification has been given to Beneficiary. In the event Trustor fails to secure and maintain any of the insurance coverage as provided in this Paragraph, Beneficiary may procure such insurance on Trustor's behalf, including insurance in favor of Beneficiary alone. In the event of loss, Trustor shall give immediate notice to Beneficiary which may, but without any obligation to do so, make proof of loss, and each insurance company concerned is hereby authorized and directed to make payment for such loss directly to Beneficiary, instead of to Trustor and Beneficiary jointly. Insurance proceeds of any of the hazard insurance maintained pursuant to this Paragraph may be applied by Beneficiary, at its option, to reduce the Obligations (whether or not then due) and/or to restore or repair the Property damaged. If Beneficiary gives its consent to use of such proceeds for restoration and repair, the proceeds shall be made available by Beneficiary for use in restoring or reconstructing the Property damaged in accordance with plans and specifications and construction arrangements approved by Beneficiary. Beneficiary or its nominee shall hold such hazard insurance proceeds in escrow and from time to time shall, upon compliance with such reasonable conditions or requirements as may be imposed by Beneficiary, disburse portions of such proceeds to Trustor and/or to those entitled thereto as progress is made on necessary restoration and reconstruction. If any of such proceeds remain after the cost of such restoration and reconstruction has been paid, Beneficiary may, at its option, apply such remaining proceeds to reduce the Obligations (whether or not then due) and/or remit the same to Trustor. 5. Proof of Payment for Taxes and Insurance. Trustor shall, prior to the due date of each required payment of taxes, assessments, and insurance premiums relating to the Property, make the required payment and furnish to Beneficiary a receipt evidencing that such payment has been timely made. 6. Maintenance and Use of Property. Trustor agrees: to maintain the Property at all times in good condition and repair; to keep and maintain all buildings and improvements which may be or become part of the Property in good and neat order and repair and to allow no nuisances to exist or be maintained; to keep all buildings and improvements which may be or become part of the Property free from dry rot, fungus, termites and all other infestations; to keep and maintain abutting grounds, sidewalks, roads, and parking and landscaped areas in good and neat order and repair; to comply with all federal, state, county, municipal, and other govern- 5 15 mental statutes, ordinances, laws, and regulations and all covenants, conditions and restrictions affecting the Property or any condition or activity respecting the Property; not to commit or permit waste upon the Property and not to remove, materially alter, damage, or demolish any improvement on the Tract; to restore promptly and in a good and workmanlike manner any improvement on the Tract which may for any reason be damaged or destroyed; to allow Beneficiary or its designated representative to inspect the Property at all reasonable times during the term hereof and to conduct soil and other tests thereon; to comply with all requirements and conditions necessary to preserve and extend any and all rights, licenses, permits (including but not limited to zoning variances, conditional uses, special exceptions, special permits, and non- conforming uses), privileges, franchises and concessions which are applicable to the Tract or which have been granted to or contracted for by Trustor in connection with any existing or presently contemplated use of the Tract; not to drill or permit the drilling for or extraction of oil, gas or other hydrocarbon substances, or any mineral of any kind upon the Tract without the prior written consent of Beneficiary; and to comply with all provisions of law concerning maintenance, use, or improvement of the Property. Trustor agrees to do any act which, from the character or use of the Property, is reasonably necessary to protect and preserve the fair market value of the Property, any specific enumerations herein not limiting the general. Trustor shall not, without the prior written consent of Trustor subdivide the Tract or any portion thereof. Beneficiary shall have the right to review and approve or disapprove the layout, configuration, terms and conditions of any subdivision or development of the Tract, including but not limited to, the number and configuration of lots, roads, utilities, or other improvements on the Tract. At any time and from time to time upon written request of Beneficiary, payment of its fees and presentation of this Trust Deed and the note for endorsement (in case of full reconveyance, for cancellation and retention), without affecting the liability of any person for the payment of the indebtedness secured hereby, Trustee may (a) consent to the making of any map or plat of said property; (b) join in granting any easement or creating any restriction thereon; (c) join in any subordination or other agreement affecting this Trust Deed or the lien or charge thereof; (d) reconvey, without warranty, all or any part of the Tract. The grantee in any reconveyance may be described as "the person or persons entitled thereto," and the recitals therein of any matters or facts shall be conclusive proof of truthfulness thereof. Trustor agrees to pay reasonable Trustee's fees for any of the services mentioned in this Paragraph. 7. Title Insurance. Trustor shall obtain and provide Beneficiary with a policy of title insurance insuring the lien of this Trust Deed. Such policy shall be in such form and issued by such company as are acceptable to Beneficiary and shall be in an amount not less than the face amount of the Note. 8. Sale and Assignment of Leases. Trustor shall not, without the prior written consent of Beneficiary (which consent may be given or withheld in the absolute and unqualified discretion of Beneficiary), sell, assign, transfer, mortgage, pledge, or otherwise dispose of or encumber, whether by operation of law or otherwise, any lease of the Tract or of any portion thereof or of space in any building now or hereafter constituting a portion of the Property, or any rents, issues, or profits issuing from the Property. Any transaction done in contravention 6 16 of the foregoing limitation shall be null and void as regards the interest of Beneficiary in the Property and under this Trust Deed and shall constitute a default hereunder. 9. Appearance in Proceedings Affecting Security. Trustor shall appear in and defend any action or proceeding which purports to or which might in any way affect the title to the Property or the security hereof (the phrase "the security hereof" when used in this Trust Deed shall mean the interest of Trustor, Beneficiary, and Trustee in the Property, the rights, powers, duties, covenants, representations, warranties, and authority of Trustor, Beneficiary, and Trustee hereunder and under any instrument further evidencing or securing the Obligations, and the validity, enforceability, and binding effect hereof and of any instrument further evidencing or securing the Obligations). Should Beneficiary or Trustee elect to appear in or defend any such action or proceeding, Trustor shall pay all costs and expenses incurred by Beneficiary or Trustee in connection therewith, including costs of evidence of title, court costs, and reasonable attorneys' fees. 10. Beneficiary's Performance in Trustor's Stead. Should Trustor fail to make any payment, to do any act or thing, or to perform any obligation herein or in any lease of any part of the Property provided to be paid, done, or performed, at the time and in the manner so provided, Beneficiary may, but without any obligation to do so, and without notice to or demand upon Trustor, and without releasing Trustor from any obligation hereunder or thereunder: (a) make, do, pay, or perform the same in such manner and to such extent as Beneficiary may deem reasonably necessary or desirable to protect the security hereof or to protect any other interest of Beneficiary or Trustee, Beneficiary for such purposes being authorized to enter upon the Property at all reasonable times and to commence, appear in, or defend any action or proceeding purporting to affect the security hereof; or (b) pay, purchase, contest, or compromise any encumbrance, charge, or lien which in the sole judgment of Beneficiary appears to be prior or superior to the interest of Beneficiary or Trustee in the Property. 11. Repayment of Advances. Trustor shall immediately repay to Beneficiary all sums, with interest thereon as hereafter provided, which at any time may be paid or advanced by Beneficiary for the payment of insurance, taxes, assessments, governmental, municipal, or other charges or impositions, title searches, title reports or abstracts, any obligation secured by a prior lien upon or prior interest in the Property, and any other advances made by Beneficiary which are or appear to be necessary or desirable, in Beneficiary's sole discretion, to maintain this Trust Deed as a prior, valid, and subsisting lien upon the Property, to preserve and protect Beneficiary's, Trustee's, or Trustor's interest therein or hereunder, or to preserve, repair or maintain the Property. All such advances shall be wholly optional on the part of Beneficiary, and Trustor's obligation to repay the same, with interest, to Beneficiary shall be secured by the lien of this Trust Deed. The amount of each such advance shall, for the period during which it remains unpaid and both before and after judgment, bear interest at the rate of eighteen percent (l8%) per annum. 12. Application of Awards and Proceeds. Should the Property or any part thereof be taken or damaged by reason of any public improvement or condemnation proceeding, or be 7 17 damaged by fire, flood, or earthquake or in any other manner, Beneficiary shall be entitled to all compensation, awards, insurance proceeds, and other payments or relief therefor, and shall be entitled at its option to commence, appear in, and prosecute in its own name any action or proceeding, and to make any compromise or settlement, in connection with such taking or damage. All such compensation, awards, damages, rights of action, proceeds, or other payments are hereby assigned to Beneficiary which may, after deducting therefrom all costs and expenses (regardless of the particular nature thereof and whether incurred with or without suit), including attorneys' fees, incurred by it in connection with such compensation, awards, damages, rights of action, proceeds, or other payments, release any and all moneys so received by it or apply the same, or any portion thereof, to reduce the Obligations (whether or not then due); Beneficiary's rights hereunder regarding use of hazard insurance proceeds being subject, however, to the provisions of Paragraph 4 of this Trust Deed. Trustor agrees to execute and deliver to Beneficiary such further assignments of such compensation, awards, damages, rights of action, proceeds, or other payments as Beneficiary may from time to time require. 13. Assignment of Leases and Rents; Leasing Requirements. Trustor hereby absolutely, irrevocably and unconditionally conveys, transfers and assigns to Beneficiary all present and future leases, subleases and rental agreements covering the Property (collectively the "Leases"), and all rents, issues, profits, royalties, income (including security deposits) and profits arising from the Property (collectively, the "Rents"), together with the right, power and authority to enforce the Leases, collect the Rents and apply the Rents to any of the Obligations. Notwithstanding anything contained in this Trust Deed to the contrary, the assignment set forth in the preceding sentence is an absolute, irrevocable and unconditional present assignment from Trustor to Beneficiary and not merely the passing of a security interest. Trustor may, on behalf of Beneficiary, enforce the Leases and collect the Rents (but not more than one (1) month in advance) at any time a default does not exist hereunder and an event or condition does not exist which with the giving of notice or lapse of time or both would result in a default hereunder. Trustor shall hold the Rents so collected in trust for Beneficiary and shall use so much of the Rents as is required for the satisfaction of the Obligations. Upon the occurrence of a default hereunder or an event or condition which with the giving of notice or lapse of time or both would result in a default hereunder, the right of Trustor to enforce the Leases and collect the Rents shall automatically terminate, and Trustor shall immediately pay to Beneficiary all of the Rents then held by Trustor. All tenants, lessees and other persons having any obligation to make any payment in connection with the Property are hereby authorized and directed to make such payment directly to Beneficiary upon the demand of Beneficiary. The receipt by Beneficiary of such payment shall be a good and sufficient discharge of the obligation of the tenant, lessee or other person concerned to make the payment connected with the amount so received by Beneficiary. Nothing contained in this Paragraph shall be construed to make Beneficiary a mortgagee in possession or make Beneficiary responsible for any matters relating to the Property or the Leases. Without the prior written consent of Beneficiary, Trustor shall not enter into, modify, terminate or accept a surrender of any Leases, permit the assignment of any Leases or accept payment of more than one (1) installment of rent due thereunder prior to its due date. Trustor 8 18 shall timely comply with all of the terms, covenants and conditions as landlord under the Leases. Trustor shall promptly notify Beneficiary of (a) the default by a lessee under any of the Leases; (b) the commencement of any action by any lessee against Trustor, or by Trustor against any lessee; or (c) the receipt of a written notice by Trustor from any lessee claiming that Trustor is in default under a Lease. Trustor shall promptly deliver to Beneficiary a copy of any process, pleading or notice given or received by Trustor in reference to any such action or claim. Prior to entering into any Lease, Trustor shall furnish a copy of the proposed Lease to Beneficiary for its approval. If Beneficiary conditions its approval of a Lease upon certain changes being made thereto, Trustor shall make all of such changes prior to the execution of such Lease. Immediately upon the execution thereof, an executed copy of each Lease shall be furnished to Beneficiary. 14. No Waiver of Rights by Collection of Proceeds. The entering upon and taking possession of the Property or the collection of Rents or the application or release thereof as aforesaid shall not cure or waive any default or notice of default hereunder, shall not invalidate any act done pursuant to such notice of default, and shall not operate to postpone or suspend any of the Obligations. 15. Application of Payments. If at any time during the term hereof Beneficiary receives or obtains a payment, installment, or sum which is less than the entire amount then due in connection with the Obligations and in connection with all other instruments and transactions to which Trustor and Beneficiary are parties, Beneficiary shall, notwithstanding any instructions which may be given by Trustor, have the right to apply such payment, installment, or sum, or any part thereof, to such of the items or obligations then due as Beneficiary may in its sole discretion determine. 16. Tax on Trust Deed or Debt. Trustor shall pay to Beneficiary the amount of all taxes, assessments, or charges which may be levied by any governmental authority upon this Trust Deed, upon the Obligations, or upon Beneficiary by reason of its interests under this Trust Deed or the Obligations. In the event any of said taxes, assessments, or charges cannot legally be paid by Trustor, all of the Obligations shall, at the option of Beneficiary, become immediately due and payable. 17. Records. Throughout the term of this Trust Deed, Trustor shall furnish to Beneficiary annually, within sixty (60) days after the close of each fiscal year of Trustor, all of the following materials: (i) Statements relating to the Property, showing in detail all items of income and expense relative to the Property for the preceding year and a detailed current rent roll for the Property; (ii) Summarized statements of gross sales made by Trustor or lessees on or from the Property during the preceding year, where and to the extent that the leases under which such lessees are in occupancy provide for information respecting gross sales to be provided to the lessor or landlord; and (iii) Complete financial statements concerning Trustor, including information respecting the assets and liabilities of Trustor and a profit and loss statement for Trustor. Each of such materials shall be in form satisfactory to Beneficiary and shall be certified by a person satisfactory to Beneficiary. Trustor shall, upon the request of 9 19 Beneficiary, advise Beneficiary in writing as to the commencement date of Trustor's fiscal year. Any and all of the records, lists and statements described in this Paragraph 17 shall be supplied to Beneficiary without expense to Beneficiary. 18. Acceleration. Time is the essence hereof. All of the Obligations, at the option of Beneficiary and without notice or demand, shall become immediately due and payable upon the discovery that any representation or warranty contained herein or in any instrument relating to the Loan or evidencing or securing the Obligations is untrue or was untrue as of the effective date(s) of such representation or warranty, upon Trustor's breach of or failure to comply with any of its agreements respecting any of the Obligations, upon the occurrence of any other default hereunder or otherwise in connection with the Obligations (including, but not limited to, Borrower's default in the timely payment of any installment of principal or interest under the Note), or upon the occurrence of any default in the payment or performance of any obligation owed by Borrower or Trustor to Beneficiary other than those created by the Note or any instrument evidencing or securing the same or comprising the term Obligations as herein defined, or if Borrower or Trustor makes an assignment for the benefit of creditors, or if a receiver is appointed for Borrower or Trustor or any part of the Property, or if Borrower or Trustor files a petition in bankruptcy, or if Borrower or Trustor is adjudicated a bankrupt. Thereupon, Beneficiary may either: (i) Cause Trustee to accomplish any necessary prerequisites and to sell the Property at public auction to the highest bidder; or (ii) Proceed to foreclose this Trust Deed in the manner provided by law for the foreclosure of mortgages covering real property. 19. Law Governing Exercise of Power of Sale. All procedural matters relating to exercise of the Power of Sale available under this Trust Deed (such as the manner of giving notice of default and notice of sale, the forms employed for such purpose, the persons to receive notice, the time which must elapse between various stages of the proceeding, and the manner in which the sale is conducted) shall be governed by the statutory law which is in effect at the time said power is exercised. In the event some or all of such procedural matters are not covered by then-effective legislation, the matters not covered shall be governed by the law which is in effect at the time this Trust Deed is executed. 20. Trustee's Sale. At Trustee's sale the Property may be sold in its entirety or in separate parts in such order as Trustee may determine, subject to Trustor's statutory right to direct the order of sale of real property consisting of several known parcels or lots. Any person, including Borrower, Trustor, Trustee and Beneficiary, may bid and purchase at the sale. Upon receipt of payment Trustee shall execute and deliver its deed (the "Trustee's Deed") to the purchaser. The Trustee's Deed may contain recitals of compliance with any requirements of applicable law relating to exercise of the Power of Sale or to the sale. Such recitals shall constitute conclusive evidence of such compliance in favor of bona fide purchasers and encumbrances for value and prima facie evidence thereof in favor of all other persons. The Trustee's Deed shall operate to convey to the grantee, not subject to any right of redemption, the Trustee's title and all right, title, interest, and claim of Trustor, of its successors in interest, and of all persons claiming by, through, or under them, in and to that part of the Property sold, 10 20 including any and all right, title, interest, or claim in and to such part which may have been acquired by Trustor or its successors in interest subsequent to the execution of this Trust Deed, but without any covenant or warranty, express or implied. Trustee shall apply the proceeds of sale toward payment of the following, and in the order indicated: (a) All costs and expenses incurred in connection with exercise of the Power of Sale or with the sale, including Trustee's and attorneys' fees and the cost of any evidence of title procured in connection with the sale; (b) Each sum the payment of which is secured by this Trust Deed, together with accrued interest thereon at the applicable rate; and (c) The balance, if any, to those entitled thereto or, at Trustee's discretion, such remainder may be deposited with the County Clerk of the County in which the sale took place. If a deficiency remains after proper application of the proceeds of sale of the Property, Trustor shall, immediately after determination of the amount thereof, pay the same to Beneficiary. Such deficiency shall, both before and after judgment therefor is entered, bear interest at the rate of eighteen percent (l8%) per annum. At any time within three (3) months after Trustee's sale of the Property, Beneficiary may commence an action to recover such deficiency and interest thereon. In said action Beneficiary shall also be entitled to recover all costs and expenses, including reasonable attorneys' fees, incurred by it in connection therewith. Trustor hereby authorizes Trustee, upon its being presented with an Affidavit signed by Beneficiary setting forth facts showing a default under this Trust Deed, to accept as true and conclusive all facts and statements contained therein and to rely and act thereon. 21. Foreclosure as Mortgage. In any proceeding brought to foreclose this Trust Deed as a mortgage, Beneficiary shall be entitled to recover all costs and expenses incident to the realization of its rights hereunder, including court costs and attorneys' fees. Beneficiary shall be entitled to possession of the Property during any period of redemption. Trustor hereby waives any right it or its successors in interest may have in the event of acceleration or entry of a decree of foreclosure: to obtain a partial release of the Property from the lien of this Trust Deed by paying less than the entire amount then secured hereby; or to partially redeem the Property by paying less than the amount necessary to effect redemption in full. If a deficiency remains after proper application of the proceeds from the foreclosure sale, Trustor shall pay the same to Beneficiary immediately after determination of the amount thereof. Such deficiency shall, both before and after judgment therefor is entered, bear interest at the rate of eighteen percent (l8%) per annum. 22. Trustee's and Attorneys' Fees. The Obligations shall include all costs, expenses, and fees whatsoever which are in any way related to, or which are in any way incurred by Beneficiary or Trustee in connection with the enforcement or protection of Beneficiary's or Trustee's rights and interests hereunder or otherwise in connection with the Obligations, including Trustee's and attorneys' fees as follows: (a) In the event Beneficiary's rights are enforced or in any way protected through the services of an attorney, but not in conjunction with acceleration of the maturity of the Obligations, a reasonable attorney's fee; (b) In the event Beneficiary accelerates the maturity of the Obligations and thereafter reinstatement thereof occurs, Trustee's and attorneys' fees actually incurred not exceeding such amount as is permissible under the statutory law which is in effect at the time said reinstatement occurs; (c) In the event a sale of the Property is effected by Trustee pursuant to the Power of Sale available 11 21 hereunder, a reasonable Trustee's fee and a reasonable attorney's fee; (d) In the event an action is commenced to obtain judgment for a deficiency remaining after exercise of the Power of Sale, a reasonable attorney's fee; and (e) In the event a decree of foreclosure is entered in proceedings to foreclose this Trust Deed as a mortgage, a reasonable attorney's fee. 23. Mailing Address for Notice of Default. Trustor hereby requests that a copy of any notice of default required by law and a copy of any notice of sale required by law be mailed to Trustor at the address for Trustor set forth at the outset of this instrument. 24. Substitution of Trustee. At any time during the term of this Trust Deed Beneficiary may appoint a successor Trustee to act hereunder. All matters relating to the method of effecting a substitution of Trustees shall be governed by the statutory law which is in effect at the time substitution takes place. In the event then-effective legislation does not cover some or all of the matters relating to the method of accomplishing a substitution of Trustees, the matters not covered shall be governed by the law which is in effect at the time this Trust Deed is executed. From the time a substitution of Trustees is accomplished the new Trustee shall succeed to all the power, duties, authority, and title of the Trustee named herein and of any successor Trustee. 25. Reconveyances. Beneficiary may, through its delivery to Trustee of written request therefor, require Trustee to reconvey, release, and discharge from the operation of this Trust Deed all or any part of the Property. Such written request shall contain a description of that portion of the Property to be reconveyed, a statement of the consideration, if any, received by Beneficiary for such reconveyance, a declaration that Beneficiary is the owner and holder of the Note, and a statement that the Note has not been assigned or transferred. Any reconveyance executed by Trustee shall identify this Trust Deed and shall describe that portion of the Property being released from the lien hereof. The grantee in any such reconveyance may be described as "the person or persons entitled thereto." Any partial reconveyance shall not diminish Trustor's liability for the Obligations and shall not affect or impair the lien of this Trust Deed with respect to the remaining portion of the Property. This Trust Deed need not accompany a request for partial reconveyance but, upon Trustee's demand, Beneficiary shall exhibit to it the Note. 26. Security Agreement. With respect to the Personal Property, this Trust Deed shall constitute a Security Agreement between Trustor, as Debtor, and Beneficiary, as Secured Party, and, cumulative of all other rights of Beneficiary under this Trust Deed, Beneficiary shall have all of the rights and remedies available to a Secured Party under Article 9 of the Utah Uniform Commercial Code. Upon the occurrence of a default in connection with the Obligations, Beneficiary may at its discretion require Trustor to assemble the Personal Property and make it available to Beneficiary at a place, reasonably convenient to both parties, to be designated by Beneficiary. Beneficiary shall give Trustor notice, by certified or registered mail, postage prepaid, of the time and place of any public sale of any of the Personal Property or of the time after which any private sale or other intended disposition thereof is to be made by sending notice to Trustor at least five (5) days before the time of the sale or other disposition, which provisions 12 22 for notice Trustor and Beneficiary agree are reasonable. Provided, however, that nothing herein shall preclude Beneficiary from proceeding as to both real and personal property (including the Personal Property) in accordance with Beneficiary's rights and remedies in respect of the real property, as provided in Section 70A-9-501(4), Utah Code Annotated (1953). A carbon, photographic, or other reproduction or copy of this Trust Deed or of a Financing Statement related to or executed pursuant to this Trust Deed shall be sufficient as and may be filed as an original Financing Statement in connection with the security interest granted to Beneficiary herein. Until this Trust Deed is discharged and satisfied of record, Trustor shall, from time to time as and if requested by Beneficiary so to do, execute one or more Financing Statements, Continuation Statements, and other documents in the manner and form required by law and to the reasonable satisfaction of Beneficiary, to perfect, preserve, and maintain the encumbrance of this Trust Deed and the priority hereof relative to such classes or items of collateral (including, without limitation, the Personal Property) covered by this Trust Deed as Beneficiary may from time to time specify. Trustor shall pay to Beneficiary upon demand all expenses incurred by Beneficiary in connection with the preparation, execution, or filing of any such documents. 27. Fixture Filing. With respect to any fixtures included within the definition of Property hereunder, and with respect to any item of Personal Property (including any goods) that are or may become such fixtures, this Trust Deed shall constitute a Financing Statement under the Utah Uniform Commercial Code. It is intended that as to such fixtures and any items of Personal Property (including any goods) that are or may become such fixtures, as well as the proceeds and products thereof, this Trust Deed shall be effective as a Financing Statement filed as a fixture filing in the Real Estate Records of the County in which the Property is located. The Property affected by this Trust Deed is, in part, defined and described by reference to the "Tract" described on Exhibit A hereto. The Record Owner of such "Tract" is the Trustor. Information concerning the interest of Beneficiary in such fixtures may be obtained from Beneficiary at its address as shown at the outset of this Trust Deed. Beneficiary is a seller and purchase money lender of the Property. 28. Termination of Leases upon Foreclosure. Upon foreclosure of this Trust Deed (whether pursuant to the Power of Sale which is available under this Trust Deed or pursuant to foreclosure of this Trust Deed as a mortgage), no lease then affecting the Property shall be terminated by application of the doctrine of merger, or as a matter of law, or as a result of such foreclosure, unless Beneficiary or the purchaser at the foreclosure sale shall so elect in writing. No act by or on behalf of Beneficiary, Trustee, or any such purchaser shall constitute or result in termination of any such lease unless Beneficiary or such purchaser shall give written notice of such termination to the tenant or lessee thereunder. 29. Rights Cumulative and Not Waived; Written Consent Required. The rights and remedies accorded by this Trust Deed shall be in addition to, and not in substitution of, any rights or remedies available under now existing or hereafter arising applicable law. All rights and remedies provided for in this Trust Deed or afforded by law or equity are distinct and cumulative and may be exercised concurrently, independently, or successively. The failure on 13 23 the part of Beneficiary or Trustee to promptly enforce any right hereunder shall not operate as a waiver of such right and the waiver of any default shall not constitute a waiver of any subsequent or other default. The mere giving of notice to Beneficiary of any proposed or contemplated action requiring Beneficiary's consent shall not constitute consent thereto by Beneficiary. Any consent required to be given by Beneficiary under this Trust Deed shall be deemed given only upon the receipt by Trustor of a writing signed by Beneficiary expressing such consent. 30. Binding on Successors. This Trust Deed shall be binding upon and shall inure to the benefit of the respective grantees, transferees, heirs, devisees, personal representatives, successors, and assigns of the parties hereto. The term "Beneficiary" as used herein shall mean the owner and holder, including any pledgee, of the Obligations. 31. Late Charge. Trustor agrees to pay Beneficiary a "late charge" equal to five percent (5%) of each and any payment due hereunder or pursuant to the Note which is more than fifteen (l5) days in arrears. Such late charge shall be made to cover the extra expense involved in handling delinquent payments. 32. Acceptance of Trust. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other Deed of Trust or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party, unless brought by Trustee. 33. Transfers or Further Encumbrances. In the event any of the transactions or occurrences mentioned in the following items (a) through (c) takes place without the prior review and written consent of Beneficiary (which consent may be given or withheld in the absolute and unqualified discretion of Beneficiary), Beneficiary may, at its option, declare all of the Obligations to be immediately due and payable: (a) The Property or any portion thereof or any interest therein is sold, contracted to be sold, conveyed, assigned, or transferred, whether voluntarily, involuntarily, or by operation of law; or (b) The Property or any portion thereof or any interest therein is subjected to any mortgage, deed of trust, or other security device junior or inferior to this Trust Deed; or (c) There occurs any material change in the composition, ownership, and/or control of any party Trustor or of any successor in interest of any party Trustor. 34. Interpretation. The captions which precede the Paragraphs of this Trust Deed are for convenience only and shall in no way affect the manner in which any provision hereof is construed. Whenever the context so requires, the singular shall include the plural, the plural shall include the singular, the whole shall include any part thereof, and any gender shall include both other genders. The invalidity or unenforceability of any portion or provision of this Trust Deed shall in no way affect the validity or enforceability of the remainder hereof. This Trust Deed is executed pursuant to Sections 57-l-l9 through 57-l-36, Utah Code Annotated (l953). To the extent the provisions of that legislation are consistent with this Trust Deed, such provisions 14 24 shall supplement the terms hereof and are incorporated herein. This instrument is delivered in the State of Utah and shall be governed by and construed in accordance with Federal law and the laws of said State. EXECUTED on or as of the day and year first above written. "Trustor": RIVERWOOD LIMITED PARTNERSHIP, a Utah limited partnership By: /s/ JOSEPH A. CANNON ---------------------------------- Joseph A. Cannon, General Partner 15 25 STATE OF UTAH ) : ss. County of Utah ) The foregoing instrument was acknowledged before me this 27th day of September, 1996, by Joseph A. Cannon, a general partner of Riverwood Limited Partnership, a Utah limited partnership. /s/ Lori G. Loumis ------------------------------------- (Seal) Notary Public My commission expires: Residing at: February 6, 1998 Salt Lake City, Utah - ----------------------- ------------------------------------- 16 26 EXHIBIT A to Utah Deed of Trust, Security Agreement and Financing Statement Executed by Riverwood Limited Partnership in favor of Geneva Steel Company. The real property referred to in said instrument consists of the following-described realty situated in the County of Wayne, State of Utah: Parcel No. 1 Southeast quarter of Southeast quarter of Section 31, Township 29 South, Range 5 East, Salt Lake Base and Meridian, LESS: Beginning at the Southeast corner of the Southwest quarter of the Southeast quarter of the Southeast quarter of Section 31, Township 29 South, Range 5 East, Salt Lake Base and Meridian; thence North 89 degrees 22'43" West 660.70 feet, along the Section line to the Southwest corner of the Southeast quarter of the Southeast quarter of said Section 31; thence North 30 feet; thence North 89 degrees 19'10" East 277.52 feet; thence North 78 degrees 23'45" East 177.88 feet; thence North 86 degrees 47'10" East 176.34 feet; thence South 86 degrees 07'10" East 32.95 feet; thence South 93.90 feet to the point of beginning. SUBJECT TO AND TOGETHER WITH a 20 foot wide right-of-way of ingress and egress through property. ALSO SUBJECT TO current taxes and assessments and all liens, encumbrances, rights- of-way, easements, restrictions, reservations and other matters of record or enforceable at law or in equity. Parcel No. 2 Beginning at the Southwest corner of Section 32, Township 29 South, Range 5 East, Salt Lake Base and Meridian, and running thence North 0 degrees 28'52" East along the Section line 1000 feet; 17 27 thence East 435 feet; thence South 1000 feet to the South line of said Section 32; thence North 89 degrees 44'48" West along Section line 435 feet, more or less, to the point of beginning. TOGETHER with a non-exclusive easement and right-of-way for rights of ingress, egress, and utilities, over and across the existing roadway running from Highway 117 to the Property, running through the remaining property owned by Bill Jones on June 21, 1991. SUBJECT TO current taxes and assessments and all liens, encumbrances, rights-of-way, easements, restrictions, reservations and other matters of records, or enforceable in law and equity. 18 28 AFTER RECORDING, RETURN TO: Brian G. Lloyd, Esq. KIMBALL, PARR, WADDOUPS, BROWN & GEE 185 South State Street, Suite 1300 Salt Lake City, Utah 84111 DEED OF TRUST (WITH ASSIGNMENT OF RENTS) THIS DEED OF TRUST, (hereinafter the "Trust Deed") is executed as of the 27th day of September, 1996, by JOSEPH A. CANNON and JANEAL B. CANNON, Husband and Wife as Joint Tenants, whose address for purposes hereof is 3919 North Riverwood Drive, Provo, Utah 84604 (hereinafter, collectively, "Trustor"), to ASSOCIATED TITLE COMPANY, a Utah corporation whose address for the purposes hereof is 560 South 300 East, Salt Lake City, Utah 84111 ("Trustee"), for the use and benefit of GENEVA STEEL COMPANY, a Utah corporation, and its successors and assigns (hereinafter "Beneficiary"), whose address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058. RECITALS: A. Trustor is the record owner of fee title to a certain tract of real property lying in the County of Utah, State of Utah, which said property is more particularly described below as the "Trust Property." B. Joseph A. Cannon ("Borrower") has obtained a loan (the "Loan") from Beneficiary in the original principal amount of FOUR HUNDRED SIXTY THOUSAND and no/100 DOLLARS ($460,000.00), as evidenced by a Promissory Note of even date herewith, made by Borrower payable to the order of Beneficiary, which note also provides for interest on the unpaid principal balance at the rate or rates therein set forth, described, or provided for, and payable at the times and in the manner therein set forth (hereinafter the "Note"). NOW, THEREFORE, in order to secure (A) The payment and performance of each and every obligation of Borrower under the Note; (B) Any extensions, renewals, modifications or replacements of the Note or of the obligations evidenced thereby, regardless of the extent of or the subject matter of any such extension, renewal, modification or replacement; (C) The payment and performance of each and every agreement and obligation of Trustor under this Trust Deed and under any other instrument given to evidence or further secure the payment and performance of any obligation secured hereby; (D) The payment of such additional loans or advances as may hereafter be made by Beneficiary to Borrower or Trustor or their respective successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Trust Deed; and (E) The payment of all sums expended or advanced by Beneficiary or Trustee pursuant to the terms of this Trust Deed, the Note, or any instrument further evidencing or securing any obligation secured hereby, together with interest thereon as herein and therein provided (the foregoing items (A) through (E) and the matters referred to therein being hereinafter collectively referred to as the "Obligations"), Trustor hereby CONVEYS, WARRANTS, and TRANSFERS to Trustee, IN TRUST, WITH POWER OF SALE, the following described property situated in Utah County, State of Utah (the "Trust Property"): 1 29 See Exhibit A attached hereto and incorporated herein by this reference. Together with all buildings, fixtures and improvements thereon and all water rights, rights of way, easements, rents, issues, profits, income, tenements, hereditaments, privileges and appurtenances thereunto belonging, now or hereafter used or enjoyed with the Trust Property, or any part thereof, SUBJECT, HOWEVER, to the right, power and authority hereinafter given to and conferred upon Beneficiary to collect and apply such rents, issues, and profits; TO PROTECT THE SECURITY OF THIS TRUST DEED, TRUSTOR AGREES: 1. To maintain the Trust Property and every part thereof in good order, condition and repair, and in a clean and sanitary condition, including both structural and nonstructural portions, including, without limitation, all plumbing, heating, air conditioning, ventilating, electrical, lighting facilities and equipment, fixtures, walls (interior and exterior), foundations, ceilings, roofs (interior and exterior), columns, beams, floors, windows, window sashes and frames, doors and door frames, glass, landscaping, driveway and fences located on the Trust Property. To remove or demolish any building thereon, to complete or restore promptly and in good and workmanlike manner any building which may be constructed, damaged or destroyed thereon; to not do or permit anything to be done on the Trust Property which may (a) increase the existing rate or violate the provisions of any insurance carried with respect to the Trust Property; (b) create a public or private nuisance, commit waste, spoil or destruction on the Trust Property; (c) overload the floors or otherwise damage the structure of the building; (d) constitute an improper, immoral or objectionable purpose; (e) subject Beneficiary to any liability to any third party; or (f) lower the value of the Trust Property. Trustor shall, at its sole cost, (v) use the Trust Property in a careful, safe and proper manner; (w) comply with all present and future governmental or quasi-governmental laws, ordinances, regulations and requirements and any covenants, conditions and restrictions existing with respect to the Trust Property; (x) keep the Trust Property free of objectionable noises and odors; (y) not store, use or dispose of any hazardous substances, hazardous wastes, pollutants or contaminants on the Trust Property; and (z) do all other acts which from the character or use of the Trust Property may be reasonably necessary, the specific enumerations herein not excluding the general. Trustee, upon presentation to it of an affidavit signed by Beneficiary, setting forth facts showing a default by Trustor under this numbered paragraph, is authorized to accept as true and conclusive all facts and statements therein, and to act thereon hereunder. 2. To provide and maintain insurance, of such type or types and amounts as Beneficiary may require, on the improvements now existing or hereafter erected or placed on the Trust Property. Such insurance shall be carried in companies approved by Beneficiary with loss payable clauses in favor of and in form acceptable to Beneficiary. In event of loss, Trustor shall give immediate notice to Beneficiary, who may make proof of loss, and each insurance company concerned is hereby authorized and directed to make payment for such loss directly to Beneficiary instead of to Trustor and Beneficiary jointly, and the insurance proceeds, or any part thereof, may be applied by Beneficiary, at its option, to reduction of the indebtedness hereby secured or to the restoration of repair of the Trust Property damaged. 3. To deliver to, pay for and maintain with Beneficiary until the indebtedness secured hereby is paid in full, such evidence of title as Beneficiary may require, including policies of title insurance and any extensions or renewals thereof or supplements thereto. 4. To appear in and defend any action or proceeding purporting to affect the security hereof, the title to the Trust Property, or the rights or powers of Beneficiary or Trustee; and should Beneficiary or Trustee elect to also appear in or defend any such action or proceeding, to pay all costs and expenses, 2 30 including cost of evidence of title and attorney's fees in a reasonable sum incurred by Beneficiary or Trustee. 5. To pay at least ten (10) days before delinquency all taxes and assessments affecting the Trust Property, including all assessments upon water company stock and all rents, assessments and charges for water, appurtenant to or used in connection with the Trust Property; to pay, when due, all encumbrances, charges, and liens with interest, on the Trust Property or any part thereof, which at any time appear to be prior or superior hereto; to pay all costs, fees, and expenses of this trust and to timely pay when due all costs, expenses, charges and amounts, of whatever kind or character, for all water, gas, heat, light, power, air conditioning, telephone, sewer service, trash disposal and other utilities and services supplied to the Trust Property, together with any taxes thereon. 6. Should Trustor fail to make any payment or to do any act as herein provided, then Beneficiary or Trustee, but without obligation so to do and without notice to or demand upon Trustor and without releasing Trustor from any obligation hereof, may: make or do the same in such manner and to such extent as either may deem necessary to protect the security hereof, Beneficiary or Trustee being authorized to enter upon the Trust Property for such purposes; commence, appear in and defend any action or proceeding purporting to affect the security hereof or the rights of powers of Beneficiary or Trustee; pay, purchase, contest, or compromise any encumbrance, charge or lien which in the judgment of either appears to be prior or superior hereto; and in exercising any such powers, incur any liability, expend whatever amounts reasonably necessary therefor, including the reasonable costs of evidence of title and the employment of legal counsel. 7. To perform and do all obligations, responsibilities and duties of Beneficiary pursuant to that certain Trust Deed Note dated June 10, 1996 executed by Beneficiary in favor of First Security Bank of Utah, N.A. and that certain Trust Deed of even date therewith, with Joseph A. Cannon and Janeal B. Cannon, Husband and Wife as Joint Tenants, as trustor, Affiliated Title Company as trustee, and First Security Bank of Utah, N.A., as beneficiary, recorded in the official records of the Utah County Recorder's office, (the "First Trust Deed"), and to indemnify, defend and hold harmless Beneficiary with respect thereto. Trustor agrees that all and all notices of default, late payment, or nonperformance by Trustor of any type pursuant to the First Trust Deed received by Trustor shall be immediately delivered to Beneficiary and such event of default, non-payment or non-performance immediately cured to the satisfaction of the holder of the First Trust Deed and Beneficiary. Any default by Trustor of its obligations under the First Trust Deed shall be a default pursuant to this Trust Deed. 8. To promptly pay or cause to be paid to Beneficiary, or order, and shall promptly perform or cause to be performed, each and every payment and obligation on the part of Trustor provided to be paid or performed in connection with any of the Obligations, including, without limitation, to pay immediately and without demand all sums expended hereunder by Beneficiary or Trustee, and the repayment thereof shall be secured hereby. All of such payments and obligations are mandatory, and Trustor's failure to accomplish any of the same shall constitute a default under this Trust Deed. IT IS MUTUALLY AGREED THAT: 9. Should the Trust Property or any part thereof be taken or damaged by reason of any public improvement or condemnation proceeding, or damaged by fire, or earthquake, or in any other manner, Beneficiary shall be entitled to all compensation, awards, and other payments or relief therefor, and shall be entitled at its option to commence, appear in and prosecute in its own name, any action or proceedings, or to make any compromise or settlement, in connection with such taking or damage. All such compensation, awards, damages, rights of action and proceeds, including the proceeds of any 3 31 policies of fire and other insurance affecting the Trust Property, are hereby assigned to Beneficiary in trust for the restoration of the Trust Property as necessary as a result of such damage or condemnation, after deducting therefrom all its expenses, including attorney's fees. Beneficiary may apply any such proceeds which are not necessary to restore the Trust Property toward the indebtedness secured hereby. Trustor agrees to execute such further assignments of any compensation, award, damages, and rights of action and proceeds as Beneficiary or Trustee may require. 10. At any time and from time to time upon written request of Beneficiary, payment of its fees and presentation of this Trust Deed and the Note secured hereby for endorsement (in case of full reconveyance, for cancellation and retention), without affecting the liability of any person for the payment of the indebtedness secured hereby, Trustee may (a) consent to the making of any map or plat of said property; (b) join in granting any easement or creating any restriction thereon; (c) join in any subordination or other agreement affecting this Trust Deed or the lien or charge thereof; (d) reconvey, without warranty, all or any part of said property. The grantee in any reconveyance may be described as "the person or persons entitled thereto," and the recitals therein of any matters or facts shall be conclusive proof of truthfulness thereof. Trustor agrees to pay reasonable Trustee's fees for any of the services mentioned in this Paragraph 10. 11. During the existence of this Trust, Trustor may make changes, additions and improvements to the Trust Property, provided, however, that each such change, addition or improvement: (a) equals or exceeds the then-current standard for the building and utilizes only new and first-grade materials; (b) is in conformity with all applicable governmental and quasi-governmental laws, ordinances, regulations and requirements, and is made after obtaining any required permits and licenses; (c) is made with the prior written consent of Beneficiary; (d) is made pursuant to plans and specifications approved in writing in advance by Beneficiary; and (e) is carried out by persons approved in writing by Beneficiary, who, if required by Beneficiary, deliver to Beneficiary before commencement of their work proof of such insurance coverage as Beneficiary may require, with Beneficiary named as an additional insured. Trustor shall promptly pay the entire cost thereof. Trustor shall indemnify, defend and hold harmless Beneficiary from and against all liens, claims, damages, losses, liabilities and expenses, including attorneys' fees, which may arise out of or be connected in any way with any such change, addition or improvement. 12. In the event Trustor shall default in the payment of any taxes, assessments, insurance premiums or other expenses of the Trust Property, Beneficiary may, at Beneficiary's option, pay said taxes, assessments, insurance premiums or other expenses, and if Beneficiary elects so to do, Trustor agrees to immediately repay Beneficiary upon demand all such sums so advanced and paid by Beneficiary together with interest thereon from date of payment of said sums at the rate of one and one-half percent (1 1/2%) per month until paid. In the event on the date the monetary obligations secured hereby are fully paid, Trustor fails to also repay Beneficiary such advances, with the interest provided for herein, Beneficiary may refuse to release this Trust Deed until such repayment is made. 13. As additional security, Trustor hereby assigns Beneficiary, during the continuance of this trust, all rents, issues, royalties and profits of the Trust Property and of any personal property of Trustor located thereon. Until Trustor shall default in the payment of any indebtedness secured hereby or in the performance of any agreement hereunder, Trustor shall have the right to collect all such rents, issues, royalties, and profits earned prior to default as they become due and payable. If Trustor shall default as aforesaid, Trustor's right to collect any of such moneys shall cease and Beneficiary shall have the right, with or without taking possession of the property affected hereby, to collect all rents, royalties, issues, and profits. Failure or discontinuance of Beneficiary at any time or from time to time to collect any such moneys shall not in any manner affect the subsequent enforcement by Beneficiary of the right, power, 4 32 and authority to collect the same. Nothing contained herein, nor the exercise of the right by Beneficiary to collect, shall be, or be construed to be, an affirmation by Beneficiary of any tenancy, lease or option, an assumption of liability under, or a subordination of the lien or charge of this Trust Deed to any such tenancy, lease or option. 14. Upon any default by Trustor hereunder or pursuant to the First Trust Deed, Beneficiary may at any time without notice, either in person, by agent, or by a receiver to be appointed by a court (Trustor hereby consenting to the appointment of Beneficiary as such receiver), and without regard to the adequacy of any security for the indebtedness hereby secured, enter upon and take possession of the Trust Property or any part thereof, in its own name sue for or otherwise collect said rents, issues, and profits, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including reasonable attorney's fees, upon any indebtedness secured hereby, and in such order as Beneficiary may determine. 15. The entering upon and taking possession of said property, the collection of such rents, issues, and profits, or the proceeds of fire and other insurance policies, or compensation or awards for any taking or damage of said property, and the application or release thereof as aforesaid, shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice. 16. The failure on the part of Beneficiary to promptly enforce any right hereunder shall not operate as a waiver of such right and the waiver by Beneficiary of any default shall not constitute a waiver of any other or subsequent default. 17. Time is of the essence hereof. Upon default by Trustor in the payment of any indebtedness secured hereby or in the performance of any agreement hereunder, including, but not limited to the First Trust Deed, all sums secured hereby shall immediately become due and payable at the option of Beneficiary. In the event of such default, Beneficiary may execute or cause Trustee to execute a written notice of default and of election to cause the Trust Property to be sold to satisfy the obligations hereof, and Trustee shall file such notice for record in each county wherein the Trust Property or some part or parcel thereof is situated. Beneficiary also shall deposit with Trustee, the Note and all documents evidencing expenditures secured hereby. 18. After the lapse of such time as may then be required by law following the recordation of said notice of default, and notice of default and notice of sale having been given as then required by law, Trustee, without demand on Trustor, shall sell the Trust Property on the date and at the time and place designated in said notice of sale, either as a whole or in separate parcels, and in such order as it may determine (but subject to any statutory right of Trustor to direct the order in which the Trust Property, if consisting of several known lots or parcels, shall be sold), at public auction to the highest bidder, the purchase price payable in lawful money of the United States at the time of sale. The person conducting the sale may, for any cause he deems expedient, postpone the sale from time to time until it shall be completed and, in every case, notice of postponement shall be given by public declaration thereof by such person at the time and place last appointed for the sale; provided, if the sale is postponed for longer than one day beyond the day designated in the notice of sale, notice thereof shall be given in the same manner as the original notice of sale. Trustee shall execute and deliver to the purchaser its deed conveying the Trust Property so sold, but without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including Beneficiary, may bid at the sale. Trustee shall apply the proceeds of the sale to payment of (1) the costs and expenses of exercising the power of sale and the sale, including the payment of Trustee's and attorney's fees; (2) costs of any evidence of title procured in connection with such sale and revenue stamps on the Trustee's deed; (3) all sums expended pursuant the terms hereof, not then 5 33 repaid; (4) all other sums then secured hereby; and (5) the remainder, if any, to the person or persons legally entitled thereto, or the Trustee, in its discretion, may deposit the balance of such proceeds with the County Clerk of the county in which the sale took place. 19. Upon the occurrence of any default hereunder, Beneficiary shall have the option to declare all sums secured hereby immediately due and payable and foreclose this Trust Deed in the manner provided by law for the foreclosure of mortgages on real property and Beneficiary shall be entitled to recovery in such proceeding of all costs and expenses incident thereto, including a reasonable attorney's fee. 20. Beneficiary may appoint a successor trustee at any time by filing for record in the office of the County Recorder of each county in which the Trust Property or some part thereof is situated, a substitution of trustee. From the time the substitution is filed for record, the new trustee shall succeed to all the powers, duties, authority and title of the trustee named herein or of any successor trustee. Each such substitution shall be executed and acknowledged, and notice thereof shall be given and proof thereof made, in the manner provided by law. 21. This Trust Deed shall apply to, inure to the benefit of, and bind all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns. The term "Beneficiary" shall mean the owner and holder, including any pledgee, of the note secured hereby. In this Trust Deed, whenever the context requires, the masculine gender includes the feminine and/or neuter, and the singular number includes the plural. 22. Trustee accepts this trust when this Trust Deed, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other Trust Deed or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall be a party, unless brought by Trustee. 23. This Trust Deed shall be construed according to the laws of the State of Utah. 24. The undersigned Trustor requests that a copy of any notice of default and of any notice of sale hereunder be mailed to them at the address hereinbefore set forth. 25. The obligations secured by this Trust Deed shall become immediately due and payable at the option of Beneficiary if, without the prior written consent of Beneficiary, any part of the Trust Property or any interest therein is in any manner directly or indirectly further mortgaged, encumbered, sold, transferred, conveyed, assigned, or subjected to a lien (not removed in thirty (30) days), or if the Trust Property is not kept in good condition and repair or if any portion of the Trust Property is taken by any governmental or quasi-governmental body through eminent domain or otherwise. Trustor shall pay all costs and expenses incurred by Beneficiary and/or Trustee in evaluating and investigating any consent requested by Trustor. 26. Notwithstanding any provision contained in this Trust Deed to the contrary, the covenants, warranties, agreements and representations evidenced by this Trust Deed shall be joint and several between Joseph A. Cannon and Janeal B. Cannon. The use of the neuter singular pronoun to refer to Trustor shall be deemed a proper reference even though Trustor may be an individual, partnership, association, corporation or a group of two or more individuals, partnerships, associations or corporations. The necessary grammatical changes required to make the provisions of this Deed of Trust apply in the plural sense where more than one Trustor exists and to individuals, partnerships, associations, corporations, males or females, shall in all cases be assumed as though in each case fully expressed. 6 34 EXECUTED on or as of the day and year first above written. "Trustor": /s/ JOSEPH A. CANNON ------------------------------------ Joseph A. Cannon, an individual /s/ JANEAL B. CANNON ------------------------------------ Janeal B. Cannon, an individual 7 35 STATE OF UTAH ) : ss. County of Utah ) The foregoing instrument was acknowledged before me this 27th day of September, 1996, by Joseph A. Cannon. /s/ Lori G. Loumis ------------------------------------ (Seal) Notary Public My commission expires: Residing at: February 6, 1998 Salt Lake City, Utah - ----------------------- ------------------------------------ STATE OF UTAH ) : ss. County of Utah ) The foregoing instrument was acknowledged before me this 27th day of September, 1996, by Janeal B. Cannon. /s/ Lori G. Loumis ------------------------------------ (Seal) Notary Public My commission expires: Residing at: February 6, 1998 Salt Lake City, Utah - ----------------------- ------------------------------------ 8 36 EXHIBIT A TO TRUST DEED _________________________________________________________ THE "TRUST PROPERTY" The Trust Property described in the foregoing Trust Deed is situated in Utah County, State of Utah, and is more particularly described as follows: LOT 11, PLAT "A", RIVERWOOD ESTATES, PROVO, UTAH ACCORDING TO THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE UTAH COUNTY RECORDER'S OFFICE. 37 AFTER RECORDING, PLEASE RETURN TO: Brian G. Lloyd, Esq. Kimball, Parr, Waddoups, Brown & Gee 185 South State Street, Suite 1300 Salt Lake City, Utah 84111 FIRST AMENDMENT TO DEED OF TRUST THIS FIRST AMENDMENT TO DEED OF TRUST (the "Amendment") is executed as of the 23rd day of December, 1996, by JOSEPH A. CANNON and JANEAL B. CANNON, Husband and Wife as Joint Tenants, whose address for purposes hereof is 3919 North Riverwood Drive, Provo, Utah 84604 (hereinafter, collectively, "Trustor"), and GENEVA STEEL COMPANY, a Utah corporation ("Beneficiary"), whose address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058. RECITALS A. Trustor is the record owner of fee title to a certain tract of real property lying in the County of Utah, State of Utah, the legal description of which is attached hereto as Exhibit "A" (the "Trust Property"). B. Joseph A. Cannon ("Borrower"), has obtained a loan (the "Loan") from Beneficiary in the original principal amount of FOUR HUNDRED SIXTY THOUSAND and no/100 DOLLARS ($460,000.00), which loan is evidenced by a promissory note in the same principal amount, dated as of September 27, 1996, made by Borrower payable to the order of Beneficiary (the "Original Note") and secured by certain liens and security interests with respect to the Trust Property created by certain instruments, including, without limitation, a Deed of Trust (the "Trust Deed"), dated as of September 27, 1996, executed by Trustor, as trustor, to Associated Title Company, as trustee, for the benefit of Beneficiary, as beneficiary. C. As of the date hereof, Borrower has obtained from Beneficiary an increase in the amount of the Loan in the additional principal amount of FORTY THOUSAND and no/100 DOLLARS ($40,000.00), which increase is evidenced by a Promissory Note (the "Additional Note") of even date herewith made by Borrower payable to the order of Beneficiary in the aggregate principal amount of FORTY THOUSAND and no/100 DOLLARS ($40,000.00). 38 D. The Original Note, the Additional Note, the Trust Deed, and all other agreements, instruments, certificates and documents executed by Trustor or Borrower in connection with the Loan are referred to collectively as the "Loan Documents." E. Trustor has requested, and Beneficiary has consented to, certain modifications of the Trust Deed as of the date set forth above. NOW THEREFORE, in consideration of the mutual promises and covenants set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Amendment to Trust Deed. The Trust Deed is hereby amended in the following respects: (a) Recital B. Recital B of the Trust Deed and the paragraph following immediately thereafter are hereby deleted in their entirety and replaced with the following provisions: B. Joseph A. Cannon ("Borrower") has obtained a loan (the "Loan") from Beneficiary in the aggregate principal amount of FIVE HUNDRED THOUSAND and no/100 DOLLARS ($500,000.00), as evidenced by a promissory note, dated as of September 27, 1996, made by Borrower payable to the order of Beneficiary (the "Original Note") and a promissory note, dated as of December 23, 1996, made by Borrower payable to the order of Beneficiary (the "Additional Note"), which promissory notes also provide for interest on the unpaid principal balance of the Loan at the rate or rates therein set forth, described, or provided for, and payable at the times and in the manner therein set forth (the Original Note and the Additional Note are referred to collectively hereinafter as the "Notes"). NOW, THEREFORE, in order to secure (A) The payment and performance of each and every obligation of Borrower under the Notes; (B) Any extensions, renewals, modifications or replacements of the Notes or of the obligations evidenced thereby, regardless of the extent of or the subject matter of any such extension, renewal, modification or replacement; (C) The payment and performance of each and every agreement and obligation of Trustor under this Trust Deed and under any other instrument given to evidence or further secure the payment and performance of any obligation secured hereby; (D) The payment of such additional loans or advances as may hereafter be made by Beneficiary to Borrower or Trustor or their respective successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Trust Deed; and (E) The payment of all sums expended or advanced by Beneficiary or Trustee pursuant to the terms of this Trust Deed, the Notes, or any instrument further -2- 39 evidencing or securing any obligation secured hereby, together with interest thereon as herein and therein provided (the foregoing items (A) through (E) and the matters referred to therein being hereinafter collectively referred to as the "Obligations"), Trustor hereby CONVEYS, WARRANTS, and TRANSFERS to Trustee, IN TRUST, WITH POWER OF SALE, the following property situated in Utah County, State of Utah (the "Trust Property"): (b) Reference to Notes. All references in the Trust Deed to the "Note" shall be amended and modified to refer to the "Notes" and such references shall refer collectively to the Original Note and the Additional Note. 2. General Provisions. Except as modified by this Amendment, the Trust Deed and the other Loan Documents and each provision thereof are hereby ratified and affirmed in their entirety. This Amendment modifies and amends the Trust Deed, but does not in any manner cancel, repeal, extinguish, replace, satisfy, or release the obligations evidenced and secured by the Trust Deed or the other Loan Documents. This Amendment shall in no manner impair, limit, restrict, or otherwise affect the liens, security interests, assignments, or other rights, benefits, remedies, or prerogatives created and evidenced by the Loan Documents; and such liens, security interests, assignments, and other rights, benefits, remedies, and prerogatives are valid and subsisting and shall continue with their original priority until all of the obligations under the Loan Documents, as modified and amended hereby, are paid and performed in full. The captions in this Amendment shall be solely for convenience of reference. This Amendment may be executed in any number of counterparts, each of which shall, when so executed and delivered, constitute in the aggregate but one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. "TRUSTOR" /s/ JOSEPH A. CANNON ------------------------------------ Joseph A. Cannon, an individual /s/ JANEAL B. CANNON ------------------------------------ Janeal B. Cannon, an individual -3- 40 "BENEFICIARY" GENEVA STEEL COMPANY, a Utah corporation By /s/ KEN C. JOHNSON --------------------------------- Title Vice President ------------------------------ "TRUSTOR" STATE OF UTAH ) : COUNTY OF UTAH ) The foregoing instrument was acknowledged before me this 23rd day of December, 1996, by Joseph A. Cannon, an individual. /s/ LORI G. LOUMIS ------------------------------------ NOTARY PUBLIC My Commission Expires: Residing at: Salt Lake City, Utah February 6, 1998 - --------------------------- STATE OF UTAH ) : COUNTY OF UTAH ) The foregoing instrument was acknowledged before me this 23rd day of December, 1996, by Janeal B. Cannon, an individual. /s/ LORI G. LOUMIS ------------------------------------ NOTARY PUBLIC My Commission Expires: Residing at: Salt Lake City, Utah February 6, 1998 - --------------------------- -4- 41 "BENEFICIARY" STATE OF UTAH ) : COUNTY OF UTAH ) The foregoing instrument was acknowledged before me this 23rd day of December, 1996, by Ken C. Johnson, the V.P. of Geneva Steel Company, a Utah corporation. /s/ LORI G. LOUMIS ------------------------------------ NOTARY PUBLIC My Commission Expires: Residing at: Salt Lake City, Utah February 6, 1998 - --------------------------- -5- 42 EXHIBIT "A" to FIRST AMENDMENT TO DEED OF TRUST LEGAL DESCRIPTION The Property referred to in the foregoing instrument is located in Utah County, State of Utah, and is more particularly described as follows: LOT 11, PLAT "A," RIVERWOOD ESTATES, PROVO, UTAH, ACCORDING TO THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE UTAH COUNTY RECORDER'S OFFICE. 43 AFTER RECORDING, PLEASE RETURN TO: Brian G. Lloyd, Esq. Kimball, Parr, Waddoups, Brown & Gee 185 South State Street, Suite 1300 Salt Lake City, Utah 84111 FIRST AMENDMENT TO UTAH DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT THIS FIRST AMENDMENT TO UTAH DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT (the "Amendment") is executed as of the 23rd day of December, 1996, by RIVERWOOD LIMITED PARTNERSHIP, a Utah limited partnership ("Trustor"), whose address for purposes hereof is 3919 North Riverwood Drive, Provo, Utah 84604, and GENEVA STEEL COMPANY, a Utah corporation ("Beneficiary"), whose address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058. RECITALS A. Trustor is the record owner of fee title to a certain tract of real property lying in the County of Wayne, State of Utah, the legal description of which is attached hereto as Exhibit "A" (the "Property"). B. Joseph A. Cannon, a general partner of Trustor ("Borrower"), has obtained a loan (the "Loan") from Beneficiary in the original principal amount of FOUR HUNDRED SIXTY THOUSAND and no/100 DOLLARS ($460,000.00), which loan is evidenced by a promissory note in the same principal amount, dated September 27, 1996, made by Borrower payable to the order of Beneficiary (the "Original Note") and secured by certain liens and security interests with respect to the Property created by certain instruments, including, without limitation, a Utah Deed of Trust, Security Agreement and Financing Statement (the "Trust Deed") dated as of September 27, 1996 and executed by Trustor, as trustor, to Associated Title Company, as trustee, for the benefit of Beneficiary, as beneficiary. C. As of the date hereof, Borrower has obtained from Beneficiary an increase in the amount of the Loan in the additional principal amount of FORTY THOUSAND and no/100 DOLLARS ($40,000.00), which increase is evidenced by a Promissory Note (the "Additional Note") of even date herewith made by Borrower payable to the order of Beneficiary in the aggregate principal amount of FORTY THOUSAND and no/100 DOLLARS ($40,000.00). 44 D. The Original Note, the Additional Note, the Trust Deed, and all other agreements, instruments, certificates and documents executed by Trustor or Borrower in connection with the Loan are referred to collectively as the "Loan Documents." E. Trustor has requested, and Beneficiary has consented to, certain modifications of the Trust Deed as of the date set forth above. NOW THEREFORE, in consideration of the mutual promises and covenants set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Amendment to Trust Deed. The Trust Deed is hereby amended in the following respects: (a) Recital B. Recital B of the Trust Deed and the paragraph following immediately thereafter are hereby deleted in their entirety and replaced with the following provisions: B. Joseph A. Cannon, a general partner of Trustor ("Borrower"), has obtained a loan (the "Loan") from Beneficiary in the aggregate principal amount of FIVE HUNDRED THOUSAND and no/100 DOLLARS ($500,000.00), as evidenced by a promissory note, dated as of September 27, 1996, made by Borrower payable to the order of Beneficiary (the "Original Note") and a promissory note, dated as of December 23, 1996, made by Borrower payable to the order of Beneficiary (the "Additional Note"), which promissory notes also provide for interest on the unpaid principal balance of the Loan at the rate or rates therein set forth, described, or provided for, and payable at the times and in the manner therein set forth (the Original Note and the Additional Note are referred to collectively hereinafter as the "Notes"). NOW, THEREFORE, in order to secure (A) The payment and performance of each and every obligation of Borrower under the Notes; (B) Any extensions, renewals, modifications or replacements of the Notes or of the obligations evidenced thereby, regardless of the extent of or the subject matter of any such extension, renewal, modification or replacement; (C) The payment and performance of each and every agreement and obligation of Trustor under this Trust Deed and under any other instrument given to evidence or further secure the payment and performance of any obligation secured hereby; (D) The payment of such additional loans or advances as may hereafter be made by Beneficiary to Borrower or Trustor, or their respective successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Trust Deed; and (E) The payment of all sums expended or advanced by Beneficiary or Trustee pursuant to the terms of this Trust Deed, the Notes, or any instrument further -2- 45 evidencing or securing any obligation secured hereby, together with interest thereon as herein and therein provided (the foregoing items (A) through (E) and the matters referred to therein being hereinafter collectively referred to as the "Obligations"), Trustor hereby CONVEYS, WARRANTS, and TRANSFERS to Trustee, IN TRUST, WITH POWER OF SALE, the following property, rights, privileges, interests, and franchises, to-wit: (b) Reference to Notes. All references in the Trust Deed to the "Note" shall be amended and modified to refer to the "Notes" and such references shall refer collectively to the Original Note and the Additional Note. 2. General Provisions. Except as modified by this Amendment, the Trust Deed and the other Loan Documents and each provision thereof are hereby ratified and affirmed in their entirety. This Amendment modifies and amends the Trust Deed, but does not in any manner cancel, repeal, extinguish, replace, satisfy, or release the obligations evidenced and secured by the Trust Deed or the other Loan Documents. This Amendment shall in no manner impair, limit, restrict, or otherwise affect the liens, security interests, assignments, or other rights, benefits, remedies, or prerogatives created and evidenced by the Loan Documents; and such liens, security interests, assignments, and other rights, benefits, remedies, and prerogatives are valid and subsisting and shall continue with their original priority until all of the obligations under the Loan Documents, as modified and amended hereby, are paid and performed in full. The captions in this Amendment shall be solely for convenience of reference. This Amendment may be executed in any number of counterparts, each of which shall, when so executed and delivered, constitute in the aggregate but one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. "TRUSTOR" RIVERWOOD LIMITED PARTNERSHIP, a Utah limited partnership By /s/ JOSEPH A. CANNON --------------------------------- Joseph A. Cannon, General Partner -3- 46 "BENEFICIARY" GENEVA STEEL COMPANY, a Utah corporation By /s/ Ken C. Johnson ------------------------------ Title Vice President ------------------------------ "TRUSTOR" STATE OF UTAH ) : COUNTY OF UTAH ) The foregoing instrument was acknowledged before me this 23rd day of December, 1996, by Joseph A. Cannon, a general partner of Riverwood Limited Partnership, a Utah limited partnership. /s/ LORI G. LOUMIS ------------------------------------ NOTARY PUBLIC My Commission Expires: Residing at: Salt Lake City, Utah February 6, 1998 - --------------------------- "BENEFICIARY" STATE OF UTAH ) : COUNTY OF UTAH ) The foregoing instrument was acknowledged before me this 23rd day of December, 1996, by Ken C. Johnson, the V.P. of Geneva Steel Company, a Utah corporation. /s/ LORI G. LOUMIS ------------------------------------ NOTARY PUBLIC My Commission Expires: Residing at: Salt Lake City, Utah February 6, 1998 - --------------------------- -4- 47 EXHIBIT "A" to FIRST AMENDMENT TO UTAH DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT LEGAL DESCRIPTION The Property referred to in the foregoing instrument is located in Wayne County, State of Utah, and is more particularly described as follows: Parcel No. 1 Southeast quarter of Southeast quarter of Section 31, Township 29 South, Range 5 East, Salt Lake Base and Meridian, LESS: Beginning at the Southeast corner of the Southwest quarter of the Southeast quarter of the Southeast quarter of Section 31, Township 29 South, Range 5 East, Salt Lake Base and Meridian; thence North 89 degrees 22'43" West 660.70 feet, along the Section line to the Southwest corner of the Southeast quarter of the Southeast quarter of said Section 31; thence North 30 feet; thence North 89 degrees 19'10" East 277.52 feet; thence North 78 degrees 23'45" East 177.88 feet; thence North 86 degrees 47'10" East 176.34 feet; thence South 86 degrees 07'10" East 32.95 feet; thence South 93.90 feet to the point of beginning. SUBJECT TO AND TOGETHER WITH a 20 foot wide right-of-way of ingress and egress through property. ALSO SUBJECT TO current taxes and assessments and all liens, encumbrances, rights-of-way, easements, restrictions, reservations and other matters of record or enforceable at law or in equity. 48 Parcel No. 2 Beginning at the Southwest corner of Section 32, Township 29 South, Range 5 East, Salt Lake Base and Meridian, and running thence North 0 degrees 28'52" East along the Section line 1000 feet; thence East 435 feet; thence South 1000 feet to the South line of said Section 32; thence North 89 degrees 44'48" West along Section line 435 feet, more or less, to the point of beginning. TOGETHER with a non-exclusive easement and right-of-way for rights of ingress, egress, and utilities, over and across the existing roadway running from Highway 117 to the Property, running through the remaining property owned by Bill Jones on June 21, 1991. SUBJECT TO current taxes and assessments and all liens, encumbrances, rights-of-way, easements, restrictions, reservations and other matters of records, or enforceable in law and equity. 49 AFTER RECORDING, PLEASE RETURN TO: Brian G. Lloyd, Esq. Kimball, Parr, Waddoups, Brown & Gee 185 South State Street, Suite 1300 Salt Lake City, Utah 84111 FIRST AMENDMENT TO DEED OF TRUST THIS FIRST AMENDMENT TO DEED OF TRUST (the "Amendment") is executed as of the 23rd day of December, 1996, by JOSEPH A. CANNON and JANEAL B. CANNON, Husband and Wife as Joint Tenants, whose address for purposes hereof is 3919 North Riverwood Drive, Provo, Utah 84604 (hereinafter, collectively, "Trustor"), and GENEVA STEEL COMPANY, a Utah corporation ("Beneficiary"), whose address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058. RECITALS A. Trustor is the record owner of fee title to a certain tract of real property lying in the County of Utah, State of Utah, the legal description of which is attached hereto as Exhibit "A" (the "Trust Property"). B. Joseph A. Cannon ("Borrower"), has obtained a loan (the "Loan") from Beneficiary in the original principal amount of FOUR HUNDRED SIXTY THOUSAND and no/100 DOLLARS ($460,000.00), which loan is evidenced by a promissory note in the same principal amount, dated as of September 27, 1996, made by Borrower payable to the order of Beneficiary (the "Original Note") and secured by certain liens and security interests with respect to the Trust Property created by certain instruments, including, without limitation, a Deed of Trust (the "Trust Deed"), dated as of September 27, 1996, executed by Trustor, as trustor, to Associated Title Company, as trustee, for the benefit of Beneficiary, as beneficiary. C. As of the date hereof, Borrower has obtained from Beneficiary an increase in the amount of the Loan in the additional principal amount of FORTY THOUSAND and no/100 DOLLARS ($40,000.00), which increase is evidenced by a Promissory Note (the "Additional Note") of even date herewith made by Borrower payable to the order of Beneficiary in the aggregate principal amount of FORTY THOUSAND and no/100 DOLLARS ($40,000.00). 50 D. The Original Note, the Additional Note, the Trust Deed, and all other agreements, instruments, certificates and documents executed by Trustor or Borrower in connection with the Loan are referred to collectively as the "Loan Documents." E. Trustor has requested, and Beneficiary has consented to, certain modifications of the Trust Deed as of the date set forth above. NOW THEREFORE, in consideration of the mutual promises and covenants set forth in this Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Amendment to Trust Deed. The Trust Deed is hereby amended in the following respects: (a) Recital B. Recital B of the Trust Deed and the paragraph following immediately thereafter are hereby deleted in their entirety and replaced with the following provisions: B. Joseph A. Cannon ("Borrower") has obtained a loan (the "Loan") from Beneficiary in the aggregate principal amount of FIVE HUNDRED THOUSAND and no/100 DOLLARS ($500,000.00), as evidenced by a promissory note, dated as of September 27, 1996, made by Borrower payable to the order of Beneficiary (the "Original Note") and a promissory note, dated as of December 23, 1996, made by Borrower payable to the order of Beneficiary (the "Additional Note"), which promissory notes also provide for interest on the unpaid principal balance of the Loan at the rate or rates therein set forth, described, or provided for, and payable at the times and in the manner therein set forth (the Original Note and the Additional Note are referred to collectively hereinafter as the "Notes"). NOW, THEREFORE, in order to secure (A) The payment and performance of each and every obligation of Borrower under the Notes; (B) Any extensions, renewals, modifications or replacements of the Notes or of the obligations evidenced thereby, regardless of the extent of or the subject matter of any such extension, renewal, modification or replacement; (C) The payment and performance of each and every agreement and obligation of Trustor under this Trust Deed and under any other instrument given to evidence or further secure the payment and performance of any obligation secured hereby; (D) The payment of such additional loans or advances as may hereafter be made by Beneficiary to Borrower or Trustor or their respective successors or assigns, when evidenced by a promissory note or notes reciting that they are secured by this Trust Deed; and (E) The payment of all sums expended or advanced by Beneficiary or Trustee pursuant to the terms of this Trust Deed, the Notes, or any instrument further -2- 51 evidencing or securing any obligation secured hereby, together with interest thereon as herein and therein provided (the foregoing items (A) through (E) and the matters referred to therein being hereinafter collectively referred to as the "Obligations"), Trustor hereby CONVEYS, WARRANTS, and TRANSFERS to Trustee, IN TRUST, WITH POWER OF SALE, the following property situated in Utah County, State of Utah (the "Trust Property"): (b) Reference to Notes. All references in the Trust Deed to the "Note" shall be amended and modified to refer to the "Notes" and such references shall refer collectively to the Original Note and the Additional Note. 2. General Provisions. Except as modified by this Amendment, the Trust Deed and the other Loan Documents and each provision thereof are hereby ratified and affirmed in their entirety. This Amendment modifies and amends the Trust Deed, but does not in any manner cancel, repeal, extinguish, replace, satisfy, or release the obligations evidenced and secured by the Trust Deed or the other Loan Documents. This Amendment shall in no manner impair, limit, restrict, or otherwise affect the liens, security interests, assignments, or other rights, benefits, remedies, or prerogatives created and evidenced by the Loan Documents; and such liens, security interests, assignments, and other rights, benefits, remedies, and prerogatives are valid and subsisting and shall continue with their original priority until all of the obligations under the Loan Documents, as modified and amended hereby, are paid and performed in full. The captions in this Amendment shall be solely for convenience of reference. This Amendment may be executed in any number of counterparts, each of which shall, when so executed and delivered, constitute in the aggregate but one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. "TRUSTOR" /s/ JOSEPH A. CANNON ------------------------------------ Joseph A. Cannon, an individual /s/ JANEAL B. CANNON ------------------------------------ Janeal B. Cannon, an individual -3- 52 "BENEFICIARY" GENEVA STEEL COMPANY, a Utah corporation By /s/ Ken C. Johnson ------------------------------ Title Vice President ------------------------------ "TRUSTOR" STATE OF UTAH ) : COUNTY OF UTAH ) The foregoing instrument was acknowledged before me this 23rd day of December, 1996, by Joseph A. Cannon, an individual. /s/ LORI G. LOUMIS ------------------------------------ NOTARY PUBLIC My Commission Expires: Residing at: Salt Lake City, Utah February 6, 1998 - --------------------------- STATE OF UTAH ) : COUNTY OF UTAH ) The foregoing instrument was acknowledged before me this 23rd day of December, 1996, by Janeal B. Cannon, an individual. /s/ LORI G. LOUMIS ------------------------------------ NOTARY PUBLIC My Commission Expires: Residing at: Salt Lake City, Utah February 6, 1998 - --------------------------- -4- 53 "BENEFICIARY" STATE OF UTAH ) : COUNTY OF UTAH ) The foregoing instrument was acknowledged before me this 23rd day of December, 1996, by Ken C. Johnson, the V.P. of Geneva Steel Company, a Utah corporation. /s/ LORI G. LOUMIS ------------------------------------ NOTARY PUBLIC My Commission Expires: Residing at: Salt Lake City, Utah February 6, 1998 - --------------------------- -5- 54 EXHIBIT "A" to FIRST AMENDMENT TO DEED OF TRUST LEGAL DESCRIPTION The Property referred to in the foregoing instrument is located in Utah County, State of Utah, and is more particularly described as follows: LOT 11, PLAT "A," RIVERWOOD ESTATES, PROVO, UTAH, ACCORDING TO THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE UTAH COUNTY RECORDER'S OFFICE. 55 SECURITY AGREEMENT THIS SECURITY AGREEMENT (the "Agreement"), dated as of February 13, 1997, made by JOSEPH A. CANNON, an individual, and JANEAL B. CANNON, an individual (collectively, the "Grantor"), in favor of GENEVA STEEL COMPANY, a Utah corporation ("Lender"), WITNESSETH: WHEREAS, Lender has advanced funds to Grantor pursuant to certain promissory notes dated September 27, 1996 ($460,000), December 23, 1996 ($40,000) and February 13, 1997 ($200,000) (the "Promissory Notes") in the total original principal amount of Seven Hundred Thousand Dollars (the "Loan") and Grantor has executed and delivered to Lender the Promissory Notes evidencing Grantor's obligation to repay the Loan; and WHEREAS, as a condition of Lender making the Loan, Grantor is required to enter into this Agreement for the purpose of securing their full and complete performance under the Promissory Notes; and WHEREAS, Grantor is willing to give and grant to Lender a security interest in the Collateral (as defined below) as herein provided. AGREEMENT: NOW, THEREFORE, in consideration of the foregoing premises and in order to induce Lender make the Loan, Grantor hereby agrees with Lender, as follows: 1. Defined Terms. As used in this Agreement, the following terms have the meanings specified below (such meanings being equally applicable to both the singular and plural forms of the terms defined): "Collateral" has the meaning assigned to such term in Section 2 of this Agreement. "Consumer Goods" means any "consumer goods," as such term is defined in Section 9-109(1) of the UCC, now owned or hereafter acquired by Grantor. "Event of Default" has the meaning set forth in Section 7 of this Agreement. "General Intangible" means any "general intangible," as such term is defined in Section 9-106 of the UCC now owned or hereafter acquired by Grantor, and includes, without limitation, all licenses, permits, rights of indemnification and all right, title and interest which Grantor may now or hereafter have in or under any contract or agreement now owned or hereafter acquired by Grantor. "Instrument" means any "instrument" as that term is defined in Section 9-105(i) of the UCC, now owned or hereafter acquired by Grantor. "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), security interest or preference, priority or other security agreement, preferential arrangement or charge of any kind or nature whatsoever, whether voluntary, involuntary or by operation of law. "Proceeds" means "proceeds," as such term is defined in Section 9-306(1) of the UCC. 56 "Secured Obligations" means all of (a) Grantor's obligations under the Promissory Notes, (b) Grantor's obligations under this Agreement in accordance with the terms hereof and (c) Grantor's obligations under two Deeds of Trust executed by Grantor, as trustor, to Associated Title Company, as trustee, for the use and benefit of Lender (the "Trust Deeds"), as the Promissory Notes, this Agreement and the Trust Deeds have been or may in the future be amended, modified or supplemented, including, but not limited to, the obligations to perform and observe all covenants and conditions contained in the Promissory Notes, this Agreement and the Trust Deeds, to indemnify Lender for certain liabilities herein provided and to pay all amounts advanced in connection with the Loan. "Tax Returns" means a United States federal income tax return and Utah State income tax return filed by Grantor for the tax year ended December 31, 1996. "UCC" means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of Utah; provided, however, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of Lender's security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Utah, the term "UCC" shall means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions. 2. Grant of Security Interest. As collateral security for the full and prompt payment when due (whether at stated maturity, by acceleration or otherwise) of, and the performance of, all the Secured Obligations, Grantor hereby assigns, conveys, mortgages, pledges, hypothecates and transfers to Lender, and hereby grants to Lender a security interest in, all of Grantor's right, title and interest in, to the following (hereinafter referred to as the "Collateral": (a) Grantor's Utah Art Collection as more particularly described on Schedule I hereto; (b) Grantor's European Art Collection as more particularly described on Schedule I hereto; (c) Any and all amounts payable to or for the benefit of Grantor by the United States of America or any agency thereof, including, without limitation, the United States Internal Revenue Service and the United States Treasury Department, in connection with Grantor's preparation and filing of the federal portion of the Tax Return, representing taxes paid by Grantor in excess of Grantor's actual federal income tax obligation for the 1996 tax year. (d) Any and all amounts payable to or for the benefit of Grantor by the State of Utah or any agency thereof, including, without limitation, the Utah State Tax Commission and the Utah State Treasurer's Office, in connection with Grantor's preparation and filing of the state portion of the Tax Returns, representing taxes paid by Grantor in excess of Grantor's actual state income tax obligation for the 1996 tax year. (e) to the extent not otherwise included, all Proceeds, both cash and noncash, of the foregoing items of Collateral. 2 57 3. Representation and Warranties. Grantor hereby represents and warrants to Lender as follows: (a) Each of the representations and warranties made by Grantor in this Agreement is true and correct in all material respects. (b) Grantor is the sole owner of each item of the Collateral in which a security interest is granted hereunder, having good title thereto, free and clear of any and all Liens except for the security interest granted to Lender pursuant to this Agreement. (c) No effective security agreement, financing statement, equivalent security or Lien instrument or continuation statement covering all or any part of the Collateral is on file or of record in any public office, except (i) such as may have been filed by Grantor in favor of Lender pursuant to this Agreement or the Trust Deeds, and (ii) those for which a valid release has been executed and filed with the appropriate public office. (d) Appropriate financing statements having been filed in the jurisdictions listed on Schedule II hereto, this Agreement is effective to create a valid and continuing security interest in the Collateral prior to all other Liens. All actions necessary or desirable to protect and perfect such security interest in each item of the Collateral has been duly taken. If, after the date hereof, additional filings are required to create a valid and continuing security interest in the Collateral prior to all other Liens, Grantor shall promptly notify Lender, submit an appropriate amendment to Schedule II hereto and file all such financing statements. (f) The Collateral is in Grantor's control or possession and is located at the location(s) set forth on Schedule III hereto. 4. Covenants. Grantor covenants and agrees with Lender that from and after the date of this Agreement and until the Secured Obligations are fully satisfied: (a) Further Documentation: Pledge of Instruments. At any time and from time to time, upon the written request of Lender, and at the sole expense of Grantor, Grantor will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as Lender may reasonably deem desirable to obtain the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the UCC with respect to the security interest granted hereby and transferring Proceeds to Lender's possession (if a security interest in such Proceeds must be perfected by possession). Grantor also hereby authorizes Lender to file any such financing or continuation statement without the signature of Grantor to the extent permitted by applicable law. If any of the Collateral shall be or become evidenced by any Instrument, Grantor agrees to pledge such Instrument to Lender and shall duly endorse such Instrument in a manner reasonably satisfactory to Lender and deliver the same to Lender. Grantor hereby authorizes and directs each obligor under any such Instrument, on and after the date of an Event of Default, and upon demand of Lender, to remit directly to Lender all proceeds arising out of the Instrument. Grantor hereby relieves each obligor under such Instruments from any liability to Grantor by reason of the remittal of such proceeds directly to Lender. Grantor agrees that within two (2) business days of the receipt of such demand, they will remit to Lender all such proceeds coming into their possession. Lender may apply all proceeds received to the payment of the Secured Obligations, whether or not then due, in such order and manner as Lender, in its sole discretion, may determine. (b) Maintenance of Records. Grantor will keep and maintain at their own cost and expense satisfactory and complete records of the Collateral, including, without limitation, a record of all payments received and all credits granted with respect to the Collateral and all other dealings with the Collateral. 3 58 For Lender's further security, Grantor agrees that Lender shall have a special property interest in all of Grantor's books and records pertaining to the Collateral and, if an Event of Default shall have occurred and be continuing, Grantor shall deliver and turn over any such books and records to Lender or to its representatives at any time on demand of Lender. (c) Indemnification. In any suit, proceeding or action brought by Lender relating to any Instrument or General Intangible for any sum owing thereunder, or to enforce any provision of any Instrument or General Intangible, Grantor will save, indemnify and keep Lender harmless from and against all expense, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction of liability whatsoever of the obligor thereunder, arising out of a breach by Grantor of any obligation thereunder or arising out of any such other agreement, indebtedness or liability at any time owing to, or in favor of, such obligor or its successors from Grantor, and all such obligations of Grantor shall be and remain enforceable against and only against Grantor and shall not be enforceable against Lender. (d) Compliance with Laws, Etc. Grantor will comply, in all material respects, with all federal, state and local laws, regulations and statutes applicable to the Collateral or any part thereof or to the operation of Grantor's business. (e) Payment of Obligations. Grantor shall pay all liabilities and obligations of Grantor promptly when due in accordance with their terms, and pay and discharge promptly when due all taxes, assessments, and governmental charges or levies imposed upon them or upon their income or profits or in respect of their properties before the same shall become delinquent or in default; provided, however, that Grantor shall not be required to pay and discharge or to cause to be paid and discharged any such tax, assessment, charge, levy, or claim so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and so long as such proceedings do not result in a risk of loss to Lender of any Collateral. (f) Limitation on Liens on Collateral. Grantor will not create, permit or suffer to exist, and will defend the Collateral against and take such other action as is necessary to remove, any Lien on the Collateral), and will defend the right, title and interest of Lender in and to any of Grantor's rights to or under the Collateral and to the Proceeds thereof against the claims and demands of all persons whomsoever. (g) Maintenance of Insurance. Grantor will maintain, with financially sound and reputable companies, insurance policies insuring the Collateral to the full insurable value thereof against loss by fire, explosion, theft and such other casualties as Lender may require. Proceeds of such insurance shall be payable to Lender as its interest may appear and all policies shall provide for ten (10) days minimum written cancellation notice to Lender. Insurance proceeds may be applied by Lender toward payment of the Promissory Notes, or any other obligations of Grantor to Lender, whether due or not due, in such order of application as Lender shall determine. Grantor shall deposit with Lender policies or certificates of insurance evidencing the insurance coverage required by this section. (h) Limitations on Disposition. Grantor will not sell, lease, transfer or otherwise dispose of any of the Collateral, or attempt or contract to do so, except as expressly permitted under this Agreement. (i) Further Identification of Collateral. Grantor will, if so requested by Lender, furnish to Lender, as often as Lender reasonably requests, statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Lender may reasonably request, all in reasonable detail. 4 59 (j) Notices. Grantor will advise Lender promptly, in reasonable detail, (i) of any Lien or claim made or asserted against any of the Collateral, and (ii) of the occurrence of any other event which would have a material adverse effect on the aggregate value of the Collateral or in the security interests created hereunder. (k) Right of Inspection. Lender shall, at any reasonable time and from time to time upon reasonable prior notice to Grantor (it being agreed that Lender will use its best efforts to give at least five (5) business days' prior notice unless an Event of Default shall have occurred and be continuing, in which case no prior notice is necessary), have full and free access to all the books and records and correspondence of Grantor, and Lender or its representatives may examine the same, take extracts therefrom and make photocopies thereof, and Grantor agrees to render to Lender, at Grantor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. Lender and its representatives shall at all times also have the right to enter into and upon any premises belonging to, or under the control of, Grantor where any of the Collateral is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein, after giving any appropriate notice as required above. (l) Continuous Perfection. Grantor will not change the location of the Collateral as set forth on Schedule III hereto, except for the temporary removal of certain items of Collateral in connection with their ordinary use, unless they give Lender at least thirty (30) days' prior written notice thereof and has taken such action as is necessary to cause the security interest of Lender in the Collateral to continue to be perfected. (m) Personal Property. The Collateral is now and shall be and remain personal property, notwithstanding the manner in which the Collateral or any part thereof shall be now or hereafter affixed, attached or annexed to real estate. Grantor will obtain and deliver to Lender such instruments as may be requested by Lender pursuant to which any person with an interest in any real estate upon which any part or all of the tangible Collateral is now or may hereafter be located, consents to the security interests granted herein, disclaims any interest in the tangible Collateral as fixtures, waives in favor of Lender all right to levy upon the Collateral for rent due or to become due from Grantor, and authorizes Lender to enter upon any premises where the Collateral is located at any time and to remove the Collateral. (n) Tax Returns. Within seven (7) days after Grantor's filing of the Tax Returns with the Internal Revenue Service and the Utah State Tax Commission, as applicable, Grantor shall deliver to Lender a copy of the Tax Returns, with all accompanying schedules. Upon Grantor's receipt of any amount payable to or for the benefit of Grantor in connection with the Tax Returns, Grantor shall immediately deliver and negotiate to Lender any such amount. 5. Lender's Appointment as Attorney-in-Fact. (a) Grantor hereby irrevocably constitutes and appoints Lender and any officer or agent thereof, with full power of substitution, as their true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Grantor and in the name of Grantor or in its own name, from time to time in Lender's discretion, for the purpose of protecting Lender's rights and interests as established by this Agreement and for the purpose of performing any of Lender's rights upon the occurrence of an Event of Default, to take any and all appropriate action and to execute and deliver any and all documents and instruments which Lender may deem necessary or desirable to accomplish the purposes of this Agreement and, without limiting the generality of the foregoing, hereby gives Lender the power and right, on behalf of Grantor, without notice to or assent by Grantor to do the following: (i) to ask, demand, collect, receive and give acquittance and receipts for any and all moneys due and to become due under any Collateral and, in the name of Grantor or in its own 5 60 name or otherwise, to take possession of and endorse (without representation, warranty or recourse whatsoever) and collect any checks, drafts, notes, acceptances or other Instruments for the payment of moneys due under any Collateral and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Lender for the purpose of collecting any and all such moneys due under any Collateral whenever payable; and (ii) to pay or discharge taxes, Liens, security interests or other encumbrances levied or placed on or threatened against the Collateral, to effect any repairs or any insurance called for by the terms of this Agreement and to pay all or any part of the premiums therefor and the costs thereof; and (iii) (A) to direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due, and to become due thereunder, directly to Lender or as Lender shall direct; (B) to receive payment of and receipt for any and all moneys, claims and other amounts due, and to become due at any time, in respect of, or arising out of, any Collateral; (C) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any part thereof and to enforce any other right in respect of any Collateral; (D) to defend any suit, action or proceeding brought against Grantor with respect to any Collateral; (E) to settle, compromise or adjust any suit, action or proceeding described above and, in connection therewith, to give such discharges or releases as Lender may deem appropriate; and (F) generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though Lender were the absolute owner thereof for all purposes, and to do, at Lender's option and Grantor's expense, at any time, or from time to time, all acts and things which Lender reasonably deems necessary to protect, preserve or realize upon the Collateral and Lender's Lien therein, in order to effect the intent of this Agreement, all as fully and effectively as Grantor might do. (b) Grantor hereby ratifies, to the extent permitted by law, all that any said attorney shall lawfully do or cause to be done by virtue hereof. The power of attorney granted pursuant to this Section 5, being coupled with an interest, shall be irrevocable until the Secured Obligations are indefeasibly paid and satisfied in full. (c) The powers conferred on Lender hereunder are solely to protect Lender's interests in the Collateral and shall not impose any duty upon it to exercise any such powers. Lender shall be required to give an accounting only for amounts that it actually receives as a result of the exercise of such powers and neither it nor any of its officers, directors, employees or agents shall be responsible to Grantor for any act or failure to act, except for its own gross negligence or willful misconduct. (d) Grantor also authorizes Lender, at any time and from time to time after the occurrence and during the continuance of an Event of Default, to execute without recourse and without representation or warranty of any kind (except as to ability to convey title), in connection with the sale provided for in Section 8 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral. 6. Performance by Lender of Grantor's Obligations. If Grantor fails to perform or comply with any of their agreements contained herein and Lender, as provided for by the terms of this Agreement, shall itself perform or comply, or otherwise cause performance or compliance, with such agreement, the reasonable expenses of Lender incurred in connection with such performance or compliance shall be added to the outstanding principal amount pursuant to the Promissory Notes. 6 61 7. Events of Default. The occurrence of any one or more of the following events or existence of any one or more of the following conditions shall constitute an event of default ("Event of Default") under this Agreement. (a) Grantor shall fail to pay, when due, the principal of or interest on the Promissory Notes, or any fees or charges associated therewith (whether due on the date provided for herein or by acceleration or otherwise); (b) Grantor shall fail to observe or perform any other term, condition or covenant of this Agreement not cured within ten (10) business days after written notice from Lender; (c) Any warranty or representation made or furnished to Lender by or on behalf of Grantor in connection with this Agreement, the Promissory Notes, the Trust Deeds or the Loan proves to have been false in any material respect when made or furnished; (d) There shall occur a material default or a defined Event of Default under the Promissory Notes or the Trust Deeds; or (e) Grantor shall fail to perform any Obligation, as such term is defined in the Trust Deeds. 8. Remedies, Rights After Event of Default. (a) After the occurrence and during the continuance of an Event of Default, Lender may exercise in addition to all other rights and remedies granted to it in this Agreement, all rights and remedies of a secured party under the UCC. Without limiting the generality of the foregoing, Grantor expressly agrees that in any such event, Lender, without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Grantor or any other person (all and each of which demands, advertisements and/or notices are hereby expressly waived to the maximum extent permitted by the UCC and other applicable law), may forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give an option or options to purchase, or sell or otherwise dispose of and deliver said Collateral (or contract to do so), or any part thereof, in one or more parcels at a public or private sale or sales, at any exchange or Lender's offices or elsewhere at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of said Collateral so sold to the extent allowed by law, free of any right or equity of redemption, which right or equity of redemption Grantor hereby releases. Grantor further agrees, at Lender's request, to assemble the Collateral and make it available to Lender at Grantor's premises or such other location near Grantor's premises to which Lender has full access or otherwise at places which Lender shall reasonably select, whether at Grantor's premises or elsewhere. Lender shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, as provided in Section 8(d) hereof, Grantor remaining liable for any deficiency remaining unpaid after such application. Lender shall be required to account for any surplus, if any, to Grantor only after applying such net proceeds as set forth in Section 8(d) and after the payment by Lender of any other amount required by any provision of law, including Section 9-504(1)(c) of the UCC. To the maximum extent permitted by applicable law, Grantor waives all claims, damages, and demands against Lender arising out of the repossession, retention or sale of the Collateral. Grantor agrees that Lender need not give more than ten (10) days' notice of the time and place of any public sale or of the time after which a private sale may take place and that such notice is reasonable notification of such matters. Grantor shall remain liable for any deficiency if the proceeds of any sale or disposition 7 62 of the Collateral are insufficient to pay all amounts to which Lender is entitled, Grantor also being liable for the fees and expenses of any attorneys employed by Lender to collect such deficiency. (b) Grantor also agrees to pay all costs of Lender, including, without limitation, attorneys' fees and expenses, incurred in connection with the enforcement of any of its rights and remedies hereunder. (c) Grantor hereby waives presentment, demand, protest or any notice (to the maximum extent permitted by applicable law) of any kind in connection with this Agreement or any Collateral. (d) The Proceeds of any sale, disposition or other realization upon all or any part of the Collateral shall be distributed by Lender in the following order of priorities: First, to the payment of the reasonable costs and expenses of such sale, including, without limitation, all reasonable expenses of Lender and its agents including the fees and expenses of its counsel, and all expenses, liabilities and advances made or incurred by Lender in connection therewith or pursuant to Section 6 hereof; Next, to Lender, for the payment in full of the Secured Obligations in accordance with the terms of the Promissory Notes; and Finally, after payment in full of all the Secured Obligations, to Grantor, or their successors or assigns, or to whomsoever may be lawfully entitled to receive the same, or as a court of competent jurisdiction may direct. 9. Limitation on Lender's Duty in Respect of Collateral. Lender shall not have any duty as to any Collateral in its possession or control or in the possession or control of any agent or nominee of Lender or any income thereon or as to the preservation of rights against prior parties or any other rights pertaining thereto, except that Lender shall use reasonable care with respect to the Collateral in its possession or under its control. Upon request of Grantor, Lender shall account for any moneys received by it in respect of any foreclosure on or disposition of the Collateral. 10. Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopy, or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered by hand, if to Grantor, addressed to them at 3919 North Riverwood Drive, Provo, Utah 84607, and if to Lender, addressed to it at 10 South Geneva Road, Vineyard, Utah 84058, attention Ken C. Johnsen, or, as to each party, at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this section. All such notices and other communications shall, when mailed, telegraphed, telexed, telecopied, cabled or delivered, be effective when deposited in the mails, delivered to the telegraph company, confirmed by telex answerback, telecopied with confirmation or receipt, delivered to the cable company, or delivered by hand to the addressee or its agent, respectively. If the notice period required by this Agreement is two days or less, notice shall be given to the other party by telecopy, telephone or hand delivery in addition to any other method chosen by the party giving notice. 11. Amendments, Etc. No amendment or waiver of any provision of this Agreement nor consent to any departure by Grantor therefrom shall in any event be effective unless the same shall be in writing and signed by Lender, and then any such waiver or consent shall only be effective in the specific instance and for the specific purpose for which given. 12. No Waiver; Remedies. (a) No failure on the part of Lender to exercise, and no delay in exercising any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise 8 63 of any right hereunder preclude any other or future exercise thereof or the exercise of any other right. The remedies herein provided are cumulative, may be exercised singly or concurrently, and are not exclusive of any remedies provided by law, or any other agreement or instrument executed by Grantor or Lender. (b) Failure by Lender at any time or times hereafter to require strict performance by Grantor of any of the provisions, warranties, terms or conditions contained in this Agreement or any other agreement or instrument now or at any time or times hereafter executed by Grantor or any such other person and delivered to Lender shall not waive, affect or diminish any right of Lender at any time or times hereafter to demand strict performance thereof, and such right shall not be deemed to have been modified or waived by any course of conduct or knowledge of Lender, or any agent, officer or employee thereof. 13. Successors and Assigns. This Agreement and all obligations of Grantor hereunder shall be binding upon the heirs, successors and assigns of Grantor, and shall, together with the rights and remedies of Lender hereunder, inure to the benefit of Lender and its respective successors and assigns. 14. Governing Law. This Agreement shall be governed by, and be construed and interpreted in accordance with, the law of the State of Utah. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity and without invalidating the remaining provisions of this Agreement. 15. Further Indemnification. Grantor agrees to pay, and to save Lender harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement. 16. Section Titles. The section titles and headings contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. 17. Entire Agreement. This Agreement, together with the Promissory Notes and the Trust Deeds, constitutes, on and as of the date hereof, the entire agreement of Grantor and Lender with respect to the subject matter hereof, and all prior or contemporaneous understandings or agreements, whether written or oral, between Lender and Grantor with respect to such subject matter are hereby superseded in their entireties. 18. Termination of Security Interest. This Agreement and the security interests created or granted hereby shall terminate when the Secured Obligations shall have been fully and indefeasibly paid and satisfied at which time Lender (without recourse upon, or any warranty whatsoever by, Lender) shall promptly execute and deliver to Grantor, for filing in each office in which this Agreement or any related notice or filing, or any part thereof, shall have been filed, an instrument releasing Lender's security interest granted hereby as Grantor may reasonably request, all without recourse upon, or any warranty whatsoever by, Lender and at the cost and expense of Grantor. 19. References to Grantor. Notwithstanding any provision contained in this Agreement to the contrary, the covenants, warranties, agreements and representations evidenced by this Agreement shall be joint and several between Joseph A. Cannon and Janeal B. Cannon. The use of the neuter singular pronoun to refer to Grantor shall be deemed a proper reference even though Grantor may be a group of two or more individuals. The necessary grammatical changes required to make the provisions of this 9 64 Agreement apply in the plural sense where more than one Grantor exists and to males or females, shall in all cases be assumed as though in each case fully expressed. IN WITNESS WHEREOF, Grantor has executed and delivered this Agreement as of the date first above written. /s/ JOSEPH A. CANNON ------------------------------------ Joseph A. Cannon, an individual /s/ JANEAL B. CANNON ------------------------------------ Janeal B. Cannon, an individual Accepted and acknowledged by: GENEVA STEEL COMPANY, a Utah corporation By: /s/ KEN C. JOHNSON ------------------------------- Name: Ken C. Johnson ------------------------ Title: Vice President ----------------------- 10 65 Schedule I to Security Agreement (Description of Collateral) See Attachments 11 66 JOSEPH AND JANEAL CANNON COLLECTION OF UTAH ART Steel Plant, Utah Valley #2 by Steven L. Adams Andrew Finds His Brother Peter by Robert T. Barrett Savior by Dee Jay Bawden Joseph and Hyrum by Dee Jay Bawden Brigham Young by Dee Jay Bawden First Vision by Dee Jay Bawden Laguna Beach by Ken B. Baxter Abraham Lincoln Bust by George E. Bissell Springville Museum of Art Garden by Marilee B. Campbell Tetons by Bruce S. Cheever Angel in Pursuit of Fish by Knowledge by James Christensen Solo by James C. Christensen Floral by Jenni J. Christensen Floral by Jenni J. Christensen Floral by Jenni J. Christensen Country Garden, Pleasant Grove by Marriam G. Christensen Zion's Alter by Arthur B. Clarke Indian Encampment by Michael Coleman Box Canyon by Linda W. Curley Golden Park, Dimple Dale by Linda W. Curley Southern Utah Scene by Linda W. Curley Near Stovepipe Wells, Death Valley by Leland Curtis Portraits of George G. Cannon by Cyrus E. Dallin Red by George N. Daniels Earth Knower by L. Maynard Dixon Grand Canyon Colorado by Christian Eiselle Wash Day by Cinthia Fehr Mountainous Landscape by John Fery Takin a Break by Calvin Fletcher Pioneers by Calvin Fletcher Geneva Resort, Utah Lake by John Hafen Deseret Landscape by Carol P. Harding Sunflower Still Life by Carol P. Harding Royal Palm by David Harrison-Smith Geneva Open Hearth by Donald V. Hague Sunset by John B. Jarvis LaSalle, Peaks from Arches by John B. Jarvis Road Through the Woods by Samuel Hans Jepperson Geneva by Earl M. Jones Pilgram by Brian T. Kershisnik Southern Utah Scene by Linda Adams Kesler Raising the Flag by Liz M. Lemon Grande Canyon by Deana McDonald Josh on the Wall by David M. Merrill 67 Fishing on the River/Brigham and Abby by David M. Merrill Sky Study by Anne Marie Oborn Pioneer Wagon Train by George Martin Ottinger Querling Temple Marble by Kathleen B. Peterson Salt Lake Temple, East Face by Kathleen B. Peterson Against the Light Kathleen B. Peterson Holiness to the Lord by Kathleen B. Peterson Carving Instruments by Kathleen B. Peterson Sealing Room, Moroni Delivering Plates to Joseph by Kathleen B. Peterson I am Alpha Omega by Kathleen B. Peterson Big Dipper by Kathleen B. Peterson San Rafael Series #15 by Denis R. Phillips Deer Park Valley, Colorado by David Howell Rosenbaum State Street at Eagle Gate by Al G. Rounds Mt. Olympus, Afternoon Autumn by Jack S. Sears Landscape by Nina N. Schumann Girl on Bike by Dennis V. Smith The Pyramid by Dennis V. Smith Wild Apple at Kristina's by Dennis V. Smith Watermaster by Dennis V. Smith The Constitution by Dennis V. Smith Backyard Icarus by Dennis V. Smith The Boy Jesus by Gary Ernest Smith Portrait of Jesus by Gary Ernest Smith The Man of the Earth by Gary Ernest Smith Christ Healing the Blind Man by Gary Ernest Smith Woman in a Garden by Gary Ernest Smith Potato Field by Gary Ernest Smith Jerusalem Inside the Walls by Moishe Smith Pieta by Trevor J. Southey New Bloom by Trevor J. Southey Hope by Trevor J. Southey Farm Buildings In Winter by Leconte Stewart Winterscape by Karl R. Thomas Brigham Young by N. Kraig Varner Broke Down Again by Lary C. Wade Landscape by Alma Jay Young The Farm Worker by Mahonri M. Young The Steel Worker by Mahonri M. Young Hauling Granite by Mahonri M. Young Rembrandt by Mahonri M. Young Nautilus by Christopher Young 68 JOSEPH AND JANEAL CANNON COLLECTION OF EUROPEAN ART Paintings: The Adulteress (17th C. European), artist unknown The Annunciation by Lee Bennion Man of the Earth by Gary Smith The Bible I and II by Chagall Etchings by Rembrandt: Presentation in the Temple Presentation in the Temple Jews in Synagogue David at Prayer The Adoration of the Shepherds Christ Preaching The Circumcision in the Stable Saints Peter and John Christ Seated Disputing with Doctors The Agony in the Garden Joseph Telling His Dreams David and Goliath Christ and the Woman of Samaria Raising of Lazarus Abraham and Isaac The Hundred Guilder Print (Christ Healing the Sick) Bronzes: Scout by Cyrus Dallin James Madison by Avard Fairbanks Restoration of the Melchizedek Priesthood by Avard Fairbanks Signing of the Constitution by Dennis Smith Mohonri Young Pair (farmer and laborer) George Q. Cannon by Cyrus Dallin Other: Sacred Family, 16th C. Italian marble sculpture, artist unknown Ivory chess set (large) Ivory chess set (small) The Last Supper by Durer (a fine Meder b impression) 69 Schedule II to Security Agreement (Jurisdictions Where UCC-1 Financing Statements Have Been Filed) Utah 12 70 Schedule III (Location of Collateral) Grantor's residence: 3919 North Riverwood Drive Provo, Utah 84607 13 71 EXHIBIT "A" to SECURITY AGREEMENT LEGAL DESCRIPTION The Property referred to in the foregoing instrument is located in Utah County, State of Utah, and is more particularly described as follows: LOT 11, PLAT "A," RIVERWOOD ESTATES, PROVO, UTAH, ACCORDING TO THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE UTAH COUNTY RECORDER'S OFFICE. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE REGISTRANT'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO. 1,000 U.S. DOLLARS 6-MOS SEP-30-1997 OCT-01-1996 MAR-31-1997 1 0 0 80,711 4,143 97,478 203,022 653,295 192,744 671,924 123,405 402,407 55,801 0 85,371 (3,776) 671,924 352,702 352,702 331,851 331,851 11,041 4,051 19,774 (9,735) (2,822) (6,913) 0 0 0 (6,913) (.77) (.77)
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