<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 13, 1994
REGISTRATION NO. 33-51619
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GENEVA STEEL COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C>
UTAH 93-0942346
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
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<TABLE>
<S> <C>
KEN C. JOHNSEN, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
GENEVA STEEL COMPANY
10 SOUTH GENEVA ROAD 10 SOUTH GENEVA ROAD
VINEYARD, UTAH 84058 VINEYARD, UTAH 84058
(801) 227-9000 (801) 227-9000
(Address, including zip code, (Name, address, including zip code,
and telephone number, including area code, and telephone number, including area code,
of registrant's principal executive offices) of agent for service)
</TABLE>
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Copies to:
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<S> <C>
RICHARD G. BROWN, ESQ.
DAVID G. ANGERBAUER, ESQ. JAMES J. CLARK, ESQ.
KIMBALL, PARR, WADDOUPS, BROWN & GEE CAHILL GORDON & REINDEL
185 SOUTH STATE STREET, SUITE 1300 EIGHTY PINE STREET
SALT LAKE CITY, UTAH 84111 NEW YORK, NEW YORK 10005
(801) 532-7840 (212) 701-3000
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 13, 1994
$125,000,000
[LOGO]
% SENIOR NOTES DUE 2004
----------------------
Geneva Steel Company (the "Company") is offering $125,000,000 aggregate
principal amount of % Senior Notes Due 2004 (the "Senior Notes"). Interest
on the Senior Notes is payable semi-annually on and
of each year, commencing , 1994, at the rate of
% per annum. The Senior Notes will mature on , 2004 and are
redeemable, in whole or in part, at the option of the Company, on or after
, 1999, at the redemption prices set forth herein plus accrued
interest. At any time prior to , 1997, the Company may redeem up to
30% of the original principal amount of the Senior Notes with the net proceeds
of a Public Equity Offering (as defined herein) at a redemption price of %
of the principal amount thereof plus accrued interest.
In the event of a Change of Control (as defined herein), the Company is
obligated to make an offer to purchase all outstanding Senior Notes at a price
of 101% of the principal amount thereof plus accrued interest. In addition, the
Company is obligated to make offers to purchase Senior Notes at a redemption
price of 100% of the principal amount plus accrued interest with a portion of
the net cash proceeds of certain sales or other dispositions of assets.
The Senior Notes will be senior unsecured obligations of the Company and
will rank pari passu in right of payment with all senior debt of the Company,
which will be approximately $260,000,000 upon consummation of this offering. The
Senior Notes will be effectively subordinated to amounts outstanding under the
Company's secured Revolving Credit Facility (as defined herein) with respect to
the assets securing such facility.
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN
INVESTMENT IN THE SENIOR NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) COMPANY(3)
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Per Senior Note.............. % % %
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Total........................ $ $ $
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(1) Plus accrued interest, if any, from the date of original issuance.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at approximately
$575,000.
----------------------
The Senior Notes are offered by the Underwriters, subject to prior sale,
when, as and if delivered to and accepted by them, and subject to certain other
conditions. It is expected that delivery of the Senior Notes will be made in New
York, New York on or about , 1994.
----------------------
CITICORP SECURITIES, INC. SALOMON BROTHERS INC
----------------------
The date of this Prospectus is , 1994
<PAGE> 3
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), a Registration Statement on Form S-3 (the "Registration Statement") with
respect to the Senior Notes offered hereby. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement and the exhibits thereto. For further
information pertaining to the Company and the Senior Notes, reference is hereby
made to the Registration Statement, including the exhibits thereto, which may be
obtained from the Public Reference Section of the Commission at the address set
forth below. Statements contained in this Prospectus regarding the contents of
any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or document incorporated
or deemed to be incorporated by reference in, or filed as an exhibit to, the
Registration Statement, each such statement being qualified in all respects by
such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661 and
Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such
materials may be obtained at prescribed rates from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, such materials may also be inspected at the offices of the
New York Stock Exchange, 20 Broad Street, New York, New York 10005 and the
Pacific Stock Exchange, 301 Pine Street, San Francisco, California 94104.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act (File No. 1-10459) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the fiscal year ended September 30,
1993.
(b) Current Report on Form 8-K dated December 2, 1993.
All reports and other documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Senior Notes
shall be deemed to be incorporated by reference herein. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a Prospectus
is delivered, upon the written or oral request of such person, a copy of any or
all of the information incorporated by reference in this Prospectus, other than
exhibits to such information (unless such exhibits are specifically incorporated
by reference into the information that this Prospectus incorporates). Requests
for such copies should be directed to Ken C. Johnsen, Vice President, Secretary
and General Counsel, Geneva Steel Company, 10 South Geneva Road, Vineyard, Utah
84058, telephone (801) 227-9000.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SENIOR NOTES AND THE
COMPANY'S EXISTING 11 1/8% SENIOR NOTES DUE 2001 AT LEVELS ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus.
THE COMPANY
Geneva Steel Company ("Geneva" or the "Company") owns and operates the only
integrated steel mill operating west of the Mississippi River. Located 45 miles
south of Salt Lake City, Utah, the Company's mill manufactures hot-rolled sheet,
plate and pipe products for sale primarily in the western and central United
States. Based on industry information and the Company's own estimates, Geneva
believes that it sold approximately 36% and 33% of the hot-rolled sheet and
plate, respectively, purchased in the eleven western states during the nine
months ended September 30, 1993.
The Company believes that its operating margins were among the most
favorable of all publicly-held domestic integrated steel producers during its
1991, 1992 and 1993 fiscal years. The Company attributes its relatively high
operating margins primarily to (i) its favorable labor costs and motivated
workforce, (ii) its transportation cost advantages in the western United States
markets over competitors in the central and eastern United States, and (iii) its
favorable costs of certain production inputs, particularly energy. The Company
believes that completion of its modernization program will enhance its operating
margins and strengthen its position as a low-cost producer of steel products.
Geneva's strategy is to preserve and strengthen the competitive position of
its products in western United States markets and to increase penetration of
markets in the central region of the country, while focusing on product mix
optimization. Geneva's sheet and plate customers include service centers and
distributors, steel processors and various end-users, including manufacturers of
welded tubing, highway guardrail, storage tanks, railcars, ships, and
agricultural and industrial equipment. The Company believes that sales of its
products, either directly or through service centers and distributors, to
automotive or appliance manufacturers have been immaterial.
The Company has undertaken a major modernization program intended to
strengthen its competitive position by reducing operating costs, broadening the
Company's product line, improving product quality and significantly increasing
throughput capacity of finished flat-rolled steel products. Management believes
that completion of the modernization program will enable the Company to produce
the widest continuously cast steel slabs in the world and position the Company
for additional market penetration, particularly with respect to plate products.
The Company believes that substantial operating cost savings were being realized
at December 31, 1993 as a result of completed modernization projects. The
Company expects that additional significant operating cost savings will be
realized as the remaining projects included in the modernization program are
completed. See "The Modernization Program."
To date, many of the projects included in the modernization program have
been completed. The most significant modernization project, in terms of total
costs and potential operating cost savings, is a continuous casting facility and
related improvements. The Company expects that construction of the continuous
caster and related improvements will be completed in March 1994 followed by a
start-up period of approximately six months. Other modernization projects are
scheduled for completion at various intervals through fiscal year 1995. These
projects consist of (i) a wide plate coiler and related plate processing
facilities, and (ii) rolling mill finishing stand improvements. The Company
currently plans to make capital expenditures aggregating approximately $118
million during fiscal years 1994 and 1995 (including approximately $33 million
spent during the first quarter of fiscal year 1994) in order to complete the
modernization program. In addition, management intends to spend approximately
$60 million for continuing capital maintenance and other projects during these
years.
The Company acquired the steel mill and related facilities from USX
Corporation ("USX") in August 1987. USX operated the steel mill from 1944 until
1986, when it placed the mill on hot idle status. From the date of the
acquisition through December 31, 1993, Geneva made approximately $408 million in
capital improvements and capital maintenance expenditures, including
approximately $269 million for capital
3
<PAGE> 5
improvements pursuant to the Company's modernization program. Unless otherwise
noted, all amounts regarding capital expenditures contained in this Prospectus
include capitalized interest.
The Company was incorporated under Utah law in February 1987. The principal
executive offices of the Company are located at 10 South Geneva Road, Vineyard,
Utah 84058, and its telephone number is (801) 227-9000.
THE REFINANCING
The net proceeds of this offering will be used primarily to repay an
aggregate of $90 million principal amount of privately-placed senior and
subordinated term debt bearing a weighted average interest rate of 11.24% (the
"Private Debt"), plus contractual prepayment premiums currently estimated at
approximately $15 million and accrued interest of approximately $5 million (the
"Refinancing"). The balance of the net proceeds will be used for capital
expenditures and general corporate purposes. See "Use of Proceeds" and
"Capitalization."
The Senior Notes will replace the Private Debt with indebtedness having a
lower interest rate and a longer maturity. The Refinancing will also increase
the Company's liquidity and financial flexibility by providing full access to
the Company's existing $50 million revolving credit facility (the "Revolving
Credit Facility") and by eliminating near-term principal sinking fund
requirements contained in the Private Debt. The Private Debt includes
restrictions that currently limit borrowings under the Revolving Credit Facility
to a total of $20 million. With this improved access and the resulting financial
flexibility, Geneva intends to pursue the rolling mill finishing stand
improvements, the final remaining project included in the modernization program.
See "The Modernization Program."
THE OFFERING
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Notes Offered...................... $125 million aggregate principal amount of % Senior
Notes Due 2004 (the "Senior Notes").
Interest Payments.................. Interest will accrue from the date of issuance and will
be payable semi-annually on each and
, commencing , 1994.
Optional Redemption................ The Senior Notes are redeemable, in whole or in part, at
the option of the Company, on or after ,
1999, at the redemption prices set forth herein plus
accrued interest. At any time and from time to time
prior to , 1997, the Company may redeem
in the aggregate up to 30% of the original principal
amount of the Senior Notes with the net proceeds of a
Public Equity Offering (as defined herein) at a
redemption price of % of the principal amount thereof
plus accrued interest.
Change of Control Offer............ In the event of a Change of Control (as defined herein),
the Company is obligated to make an offer to purchase
all outstanding Senior Notes at a redemption price of
101% of the principal amount thereof plus accrued
interest.
Asset Sale Proceeds................ The Company is obligated to make offers to purchase
Senior Notes at a redemption price of 100% of the
principal amount plus accrued interest with a portion of
the net cash proceeds of certain sales or other
dispositions of assets.
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4
<PAGE> 6
<TABLE>
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Ranking............................ The Senior Notes will be senior obligations of the
Company ranking senior in right of payment to any
subordinated indebtedness of the Company, and pari passu
with the existing and future senior unsecured
indebtedness of the Company. The Senior Notes will be
effectively subordinated to the amounts outstanding
under the Company's secured Revolving Credit Facility
with respect to the assets securing such facility.
Certain Covenants.................. The Indenture relating to the Senior Notes will contain
certain covenants that, among other things, limit the
type and amount of additional indebtedness that may be
incurred by the Company or certain of its subsidiaries
and impose limitations on investments, loans, advances,
sales or transfers of assets, the making of dividends
and other payments, the creation of liens,
sale-leaseback transactions, certain transactions with
affiliates and certain mergers.
</TABLE>
RISK FACTORS
For a discussion of certain risks associated with an investment in the
Senior Notes, see "Risk Factors."
5
<PAGE> 7
SUMMARY FINANCIAL INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER TON AMOUNTS; TONS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
---------------------------------------------- -------------------
1989 1990 1991 1992 1993 1992 1993
------ ------ ------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................... $525.0 $507.3 $446.0 $420.0 $465.2 $101.1 $127.1
Cost of sales....................... 402.9 409.7 393.2 406.3 443.5 99.4 115.6
------ ------ ------ ------ ------ ------ ------
Gross margin........................ 122.1 97.6 52.8 13.7 21.7 1.7 11.5
Selling, general and administrative
expenses.......................... 27.7 28.9 21.9 22.3 20.6 4.6 5.7
------ ------ ------ ------ ------ ------ ------
Income (loss) from operations....... 94.4 68.7 30.9 (8.6) 1.1 (2.9) 5.8
------ ------ ------ ------ ------ ------ ------
Other income (expense):
Interest and other income......... 4.4 4.2 3.5 0.8 1.9 0.1 0.4
Interest expense(a)............... (6.9) (10.2) (6.2) (13.7) (17.1) (3.6) (3.5)
------ ------ ------ ------ ------ ------ ------
Total other income (expense).... (2.5) (6.0) (2.7) (12.9) (15.2) (3.5) (3.1)
------ ------ ------ ------ ------ ------ ------
Income (loss) before provision
(benefit) for income taxes........ 91.9 62.7 28.2 (21.5) (14.1) (6.4) 2.7
Provision (benefit) for income
taxes............................. 36.5 24.5 10.7 (8.4) (5.5) (2.5) 1.0
------ ------ ------ ------ ------ ------ ------
Net income (loss)................... $ 55.4 $ 38.2 $ 17.5 $(13.1) $ (8.6)(b) $ (3.9) $ 1.7(b)
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
BALANCE SHEET DATA:
Working capital..................... $ 68.1 $134.0 $105.9 $ 75.7 $ 89.2 $ 60.8 $ 56.4
Property, plant and equipment,
net............................... 56.5 102.7 204.2 252.8 314.6 258.0 355.5
Total assets........................ 206.6 308.4 375.9 390.5 498.4 392.5 508.3
Long-term debt...................... 33.4 110.6 160.0 178.2 225.0 169.5 225.0
Redeemable preferred stock.......... -- -- -- -- 36.0 -- 37.7
Total stockholders' equity.......... 97.9 133.5 154.4 141.8 135.8 138.0 136.0
OPERATING STATISTICS:
Net tons shipped.................... 1,368 1,375 1,274 1,323 1,511 337 386
Average selling price per ton....... $ 384 $ 369 $ 350 $ 317 $ 308 $ 300 $ 329
Manufacturing cost per ton(c)....... 281 285 299 294 280 280 285
OTHER DATA:
Ratio of earnings to fixed
charges(d)........................ 13.5x 5.6x 2.4x --(e) --(e) --(e) --(e)
EBITDA(f)........................... $101.7 $ 78.9 $ 44.1 $ 10.5 $ 21.8 $ 2.2 $ 11.4
Depreciation and amortization(g).... 7.4 10.2 13.2 19.1 20.7 5.2 5.6
Capital expenditures(h)............. 30.7 56.2 113.4 66.6 82.5 10.4 46.6
Capitalized interest................ 0.5 2.8 8.3 5.8 7.7 1.5 3.4
</TABLE>
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(a) Interest expense includes amortization of debt issuance costs and excludes
capitalized interest.
(b) Net income (loss) applicable to the Company's common stock for the fiscal
year ended September 30, 1993 and the three months ended December 31, 1993
was $(12.1) million and $0.03 million, respectively, as a result of
redeemable preferred stock dividends and accretion for original issue
discount. See Note 5 of the Notes to Financial Statements included elsewhere
herein.
(c) Includes direct variable and fixed costs of manufacturing, excluding
depreciation expense.
(d) For purposes of determining the ratio of earnings to fixed charges, earnings
consist of income (loss) before provision (benefit) for income taxes plus
interest expense. Fixed charges consist of interest expense plus capitalized
interest.
(e) For the fiscal years ended September 30, 1992 and 1993 and the three months
ended December 31, 1992 and 1993, earnings were inadequate to cover fixed
charges by $27.2 million, $21.8 million, $7.9 million and $0.6 million,
respectively.
(f) EBITDA is defined as earnings before interest and other income, interest
expense, provision (benefit) for income taxes, depreciation and
amortization.
(g) Excludes amortization of debt issuance costs.
(h) Includes capitalized interest.
6
<PAGE> 8
RISK FACTORS
Prospective purchasers of the Senior Notes offered hereby should consider
the specific factors set forth below as well as the other information contained
in this Prospectus.
RECENT LOSSES AND FUTURE OUTLOOK
Although the Company was profitable for the three months ended December 31,
1993, the Company incurred net losses in the 1992 and 1993 fiscal years due
primarily to lower steel prices. Notwithstanding the recent improvement in the
domestic steel industry, there can be no assurance that such improvement will
continue or that the Company will be able to maintain profitable operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Although the Company believes that it will achieve significant operating
cost reductions as a result of completion of the modernization program, it
expects other costs will be substantially higher than in the past. As remaining
projects included in the modernization program such as the continuous caster are
completed, interest which is currently being capitalized will be expensed. In
addition, the issuance of the Senior Notes will result in incremental interest
expense. Depreciation expense will also increase significantly as the remaining
facilities associated with the modernization program and capital maintenance
projects become operational. See "The Modernization Program." In addition, the
Company anticipates that certain raw materials, labor and other operating costs
will increase over time. See "-- Cost of Raw Materials" and "-- Labor
Agreement."
LEVERAGE AND CERTAIN RESTRICTIONS
The Company currently has, and after this offering will continue to have,
significant amounts of outstanding indebtedness. The indebtedness of the Company
and the restrictive covenants and tests contained in its debt instruments,
including the Indenture relating to the Senior Notes, could significantly limit
the Company's operating and financial flexibility. These factors could also
significantly restrict the Company's ability to withstand competitive pressures
or adverse economic consequences, including its ability to make necessary
capital expenditures related to the modernization program or otherwise. The
Company currently is, and upon the consummation of the Refinancing will be, in
compliance with the covenants and tests contained in the Revolving Credit
Facility and the indenture governing the Company's 11 1/8% senior notes due 2001
(the "11 1/8% Senior Notes").
As is the case with other asset-based borrowers, Geneva has a lockbox
arrangement with the lenders under the Revolving Credit Facility. When
borrowings in excess of $10 million are incurred by the Company under the
Revolving Credit Facility, this arrangement requires that all cash be deposited
with an affiliate of the agent bank and used to reduce the outstanding balance
thereunder. Geneva's ability to borrow under the Revolving Credit Facility is
based upon the level and quality of its inventory and accounts receivable and
also requires continued compliance with covenants and tests which, if breached,
could result in termination of such ability to borrow or cause a default under
the Company's debt instruments. Consequently, under such circumstances, the
Company's access to necessary operating funds may be adversely affected. The
Company has from time to time entered into amendments relaxing certain of the
covenants and tests in the Revolving Credit Facility and may be required to seek
additional amendments in the future. Although Geneva anticipates that it would
be able to obtain such amendments, there can be no assurance that the lenders
under the Revolving Credit Facility would agree to such amendments. The
Revolving Credit Facility is a floating rate obligation and, therefore, is
subject to changes in prevailing interest rates. As of December 31, 1993, there
were no amounts outstanding under the Revolving Credit Facility.
The Revolving Credit Facility expires in February 1995. Management believes
it will be necessary to replace or extend such facility at that time. The
Company's business is capital intensive requiring substantial funds for capital
expenditures and working capital. There can be no assurance that the Company
will be able to obtain financing required for its business on satisfactory terms
or at all. The Company's ability to obtain such financing may be adversely
affected by the highly leveraged nature of its capital structure or by other
factors. In addition, the Revolving Credit Facility, the indenture governing the
11 1/8% Senior Notes and the Indenture for the Senior Notes impose limitations
on the amount of indebtedness that Geneva may incur. If
7
<PAGE> 9
Geneva is unable to obtain such financing or if sufficient cash generated from
operations is not available, Geneva's liquidity may be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
The Senior Notes will be senior unsecured obligations of the Company which
are effectively subordinated to any amounts outstanding under the Revolving
Credit Facility with respect to the assets securing such facility. Borrowings
under the Revolving Credit Facility are secured by the Company's existing and
future inventory, accounts receivable, certain general intangibles and proceeds
thereof. Because the Company has pledged these assets as collateral under the
Revolving Credit Facility, in the event of a bankruptcy, liquidation,
reorganization or other dissolution of the Company, there may not be sufficient
assets remaining to satisfy the claims of the holders of the Senior Notes after
satisfying the claims of any holders of secured indebtedness. See "Description
of the Senior Notes."
DEFICIENCY OF EARNINGS TO FIXED CHARGES
The Company's performance is subject to financial, economic and other
factors, some of which are beyond its control. The ability of the Company to
make principal and interest payments on the Senior Notes will be dependent on
the Company's future performance. For the fiscal years ended September 30, 1992
and 1993 and for the three months ended December 31, 1993, the Company's
earnings were inadequate to cover fixed charges by $27.2 million, $21.8 million
and $0.6 million, respectively. Because the Company's current and expected debt
service requirements are substantial, a material deterioration in the Company's
results of operations could create difficulty in meeting debt service
requirements.
CYCLICALITY, COMPETITION AND OTHER INDUSTRY FACTORS
The steel industry is cyclical in nature and highly competitive. During the
past several years, domestic integrated steel producers have suffered
substantial losses primarily as a result of high levels of steel imports,
worldwide production overcapacity, a general economic downturn, increased
domestic and international competition, and other factors. Moreover, the
domestic steel industry is affected by economic conditions generally, as has
been the case with the recent recession and its adverse impact on both the
industry and the Company. The Company, like other steel producers, is highly
sensitive to price changes with respect to its products. Consequently, any
downward movement in pricing could have a material adverse effect on the Company
given its high fixed costs of operations.
In the United States, the Company faces increasing competitive pressures
from mini-mills. Mini-mills are generally smaller volume steel producers which
use ferrous scrap metal as their basic raw material and serve regional markets.
These operations generally produce lower margin, commodity type steel goods such
as bars, rods and structural products. A number of mini-mills also produce plate
and pipe products that compete directly with the Company's products. In
addition, two mini-mills have announced intentions to construct facilities that
will produce wide plate in coil form, thereby potentially competing with
products produced by the Company. Recently developed thin slab casting/direct
rolling techniques have allowed mini-mills to produce types of sheet products
that have traditionally been supplied by integrated producers. The Company also
faces increasing competition from producers of certain materials such as
aluminum, composites, plastics and concrete which compete with steel in many
markets.
The highly competitive nature of the domestic steel industry has been
aggravated further by the restructuring of certain domestic integrated producers
under federal bankruptcy laws. A number of these producers have recently
completed reorganization proceedings which may result in reduced operating costs
and promote the continued operation and modernization of competing production
facilities. As a result, existing overcapacity could further increase and
additional price pressure may be experienced.
Foreign competition is a significant factor in the steel industry and has
adversely affected product prices in the United States and tonnage sold by
domestic producers. The intensity of foreign competition is substantially
affected by fluctuations in the value of the United States dollar against
several other currencies. The attractiveness of the United States steel markets
to foreign producers has been diminished somewhat during recent years by a
substantial decline in the value of the United States dollar relative to certain
foreign
8
<PAGE> 10
currencies. However, foreign exchange rates are subject to substantial
fluctuations, and there can be no assurance that this condition will continue to
exist.
The Company's competitive position may also be adversely affected by the
outcome of rulings in various trade cases involving the Company and other
domestic and foreign steel producers. On July 27, 1993, the International Trade
Commission (the "ITC") issued final injury determinations in the United States
flat-rolled steel cases. The ITC found injury in 97% of the value of the subject
imports in the cut-to-length plate product cases, 92% in the higher-value-added
corrosion resistant product cases, 37% in the cold-rolled product cases and no
injury in the hot-rolled product cases. Anti-dumping and countervailing duties
are being collected on all imports covered by the affirmative ITC
determinations. The domestic producers and many of the foreign producers have
appealed the ITC determinations to the United States Court of International
Trade. The failure to impose significant duties, or the lifting of existing
duties, could have an adverse effect on prevailing prices for the Company's
products affected thereby. The ITC rulings pertaining to the plate cases have
generally benefitted the Company; however, the positive impact of such cases has
been offset to the extent other foreign plate producers have increased shipments
into the domestic market. The Company is concerned that the hot-rolled product
market could come under increased price and volume pressure from foreign
imports. The Company has also been involved in several trade cases in Mexico and
Canada.
Many foreign steel producers are controlled or subsidized by foreign
governments whose decisions concerning production and exports may be influenced,
in part, by political and social policy considerations as well as by prevailing
market conditions and profit opportunities. Despite relatively low steel prices
and profit margins, many foreign producers have continued to ship steel products
into the domestic market. Moreover, existing trade laws and regulations may be
inadequate to prevent unfair trade practices whereby imports could pose
increasing problems for the domestic steel industry and the Company. See
"Business -- Competition and Other Market Factors."
NEED TO MODERNIZE; CAPITAL EXPENDITURES
Many of the Company's competitors have implemented steel-making
technologies not yet implemented by the Company. The Company believes that its
modernization program is necessary in order to achieve levels of productivity
and quality already attained by many of its competitors. There can be no
assurance that the projected benefits of the modernization program will actually
be achieved, sufficient product demand will exist for the additional throughput
capacity, substantial production interruptions or other start-up difficulties
will not be encountered in implementing the program, or the capital improvements
contemplated by the modernization program can be completed in a timely manner or
for the amounts budgeted. The Company may experience significant unexpected
operating problems, particularly as the continuous caster is phased into
operation. The Company anticipates that in any event it will temporarily incur
significant start-up and transition costs as the remaining projects are
completed and implemented. Upon completion of the Refinancing, the Company
believes it will have sufficient liquidity and financial flexibility to complete
the remaining modernization and planned capital maintenance and other projects.
However, there can be no assurance that such liquidity will be adequate to fund
completion of these projects. Failure to complete, or a substantial disruption
or delay in implementing, the remaining projects of the modernization program
would likely have a material adverse effect on the Company's results of
operations and competitive position. See "The Modernization Program."
Notwithstanding completion of the modernization program, management
believes that the Company will continue to require future improvements and
additional modernization projects that will require substantial capital
expenditures. These expenditures are expected to be made in various aspects of
the manufacturing process, particularly with respect to emerging technologies
for the production of iron and steel. The Company believes that foreign and
domestic producers will also continue to invest heavily to replace aging or
obsolete facilities and to achieve increased production efficiencies and
improved product quality. The Company also believes that it will be required to
make significant capital expenditures to upgrade or replace existing coke and
iron-making facilities. Moreover, the Company expects that capital maintenance
expenditures for its existing coke, iron-making and other facilities will be
substantial. Additionally, the Company does not have the financial resources of
some of its competitors. Like other domestic integrated producers, the Company
is
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<PAGE> 11
reviewing alternative production processes that may be required in the future
due to competitive, environmental and other factors.
ENVIRONMENTAL REGULATION
Compliance with environmental laws and regulations is a significant factor
in the Company's business. Environmental legislation and regulations have
changed rapidly in recent years and it is likely that the Company will be
subject to increasingly stringent environmental standards in the future. The
Company will likely be required to make significant additional expenditures
relating to environmental matters on an ongoing basis. There can be no assurance
that these expenditures, or other expenditures and penalties resulting from
unforeseen circumstances, administrative actions or liabilities relating to
environmental matters, will not have a material adverse effect on the Company's
results of operations or financial condition. See "Business -- Environmental
Matters."
COST OF RAW MATERIALS
The Company's operations require substantial amounts of raw materials,
including iron ore, iron ore pellets, coal, coke, limestone, oxygen, natural gas
and electricity. The cost of these materials has been susceptible in the past to
fluctuations in price and availability and is expected to increase over time.
Worldwide competition in the steel industry has frequently limited the ability
of steel producers to raise finished product prices to recover higher raw
material costs. The Company's future profitability will be adversely affected to
the extent it is unable to pass on higher raw material costs to its customers.
See "Business -- Raw Materials and Related Services."
MARKET AND CUSTOMER CONCENTRATION
Approximately 41% of the Company's sales during fiscal year 1993 were made
to customers in the western United States. In addition to the factors regarding
competition discussed above, the western market is particularly subject to
intense competition from importers. Moreover, several mini-mill operators have
announced or expressed an intention to construct new sheet product facilities in
the western United States and other regions that, if constructed, are expected
to further increase competition. Given the limited size of this market, one
aspect of the Company's strategy has been to increase its shipments to markets
in the central United States. The Company's penetration of these markets,
however, may be limited due to higher shipping costs than competitors located in
the eastern and central United States. Substantially all of the Company's sales
in the central United States are currently made through Mannesmann Pipe and
Steel Corporation ("Mannesmann"), a subsidiary of a major German industrial
company, which accounted for approximately 41% of the Company's sales in fiscal
year 1993. Any termination or disruption of the Company's arrangement with
Mannesmann could have a material adverse effect on the Company's results of
operations and financial condition. See "Business -- Marketing; Principal
Customers."
LABOR AGREEMENT
The Company has approximately 2,600 full-time employees, of whom
approximately 2,090 are represented by the United Steelworkers of America under
a collective bargaining agreement that was renegotiated in August 1993. The
negotiations were more difficult than previously experienced. The new agreement
expires in February 1995, contains wage increases over the prior contract and
implements a performance dividend plan that could, in certain years, further
increase the Company's labor costs. There can be no assurances regarding the
effect of future labor negotiations or the outcome thereof. See
"Business -- Employees; Labor Agreement."
CONTROL BY CLASS B STOCKHOLDERS
Joseph A. Cannon, Chairman of the Board and Chief Executive Officer, and
Robert J. Grow, President and Chief Operating Officer, together beneficially own
substantially all of the outstanding shares of the Company's Class B Common
Stock and control approximately 63% of the total voting power of the Company.
10
<PAGE> 12
Accordingly, Messrs. Cannon and Grow are able to determine the outcome of most
matters required to be submitted to stockholders for approval, including the
election of directors, amendment of the Company's articles of incorporation
(except when a class vote is required by law) and sale of all or substantially
all of the Company's assets, and to prevent certain mergers or consolidations
involving the Company.
ABSENCE OF PUBLIC MARKET FOR THE SENIOR NOTES
The Senior Notes comprise a new issue of securities for which there is
currently no public market. If the Senior Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities,
performance of the Company and other factors. The Company does not intend to
apply for listing of the Senior Notes on any securities exchange. Citicorp
Securities, Inc. and Salomon Brothers Inc have informed the Company that they
currently intend to make a market in the Senior Notes. However, such
underwriters are not obligated to do so, and any such market making may be
discontinued at any time without notice. Therefore, no assurance can be given as
to whether an active trading market will develop or be maintained for the Senior
Notes.
THE REFINANCING
The net proceeds of this offering will be used primarily to repay the
Private Debt consisting of an aggregate of $90 million principal amount of
privately-placed senior and subordinated term debt bearing a weighted average
interest rate of 11.24%, plus contractual prepayment premiums currently
estimated at approximately $15 million and accrued interest of approximately $5
million. The balance of the net proceeds will be used for capital expenditures
and general corporate purposes. See "Use of Proceeds" and "Capitalization."
The Senior Notes will replace the Private Debt with indebtedness having a
lower interest rate and a longer maturity. The Refinancing will also increase
the Company's liquidity and financial flexibility by providing full access to
the Revolving Credit Facility and by eliminating near-term principal sinking
fund requirements contained in the Private Debt. The Private Debt includes
restrictions that currently limit borrowings under the Revolving Credit Facility
to a total of $20 million. With this improved access and the resulting financial
flexibility, Geneva intends to pursue the rolling mill finishing stand
improvements, the final remaining project included in the modernization program.
See "The Modernization Program."
THE MODERNIZATION PROGRAM
OVERVIEW
In February 1990, the Company announced a major modernization program
intended to strengthen its competitive position. The modernization program was
undertaken to reduce operating costs, broaden the Company's product line,
improve product quality and increase throughput capacity of finished flat-rolled
steel products from approximately 1.4 to 1.9 million tons per year. The
modernization program provides for improvements principally to the Company's
steel-making, casting, rolling and finishing facilities. Management believes
that completion of the modernization program will enable the Company to produce
the widest continuously cast steel slabs in the world and position the Company
for additional market penetration, particularly with respect to plate products.
To date, many of the projects included in the modernization program have
been completed. The most significant modernization project, in terms of total
cost and potential operating cost savings, is the continuous casting facility
and related improvements. The Company expects that construction of the
continuous caster and related improvements will be completed in March 1994
followed by a start-up period of approximately six months. The total estimated
cost of the continuous caster project is $154.2 million, of which approximately
$121.2 million had been spent as of December 31, 1993.
Modernization program expenditures were approximately $84 million, $56
million, $61 million and $33 million for fiscal years 1991, 1992 and 1993 and
the three months ended December 31, 1993, respectively. The Company also spent
approximately $29 million, $10 million, $21 million and $14 million during such
11
<PAGE> 13
periods, respectively, on continuing capital maintenance and other projects.
Management believes that the modernization projects completed to date have
resulted in certain reduced production costs, increased throughput capacity and
improved product quality.
The modernization program was planned from the outset to be flexible and
has been managed accordingly. The Company has periodically revised the
modernization program in response to various technological, financial, market
and other operating considerations. For example, the Company has recently
increased the estimated cost of the continuous caster project by approximately
$28 million over prior budgeted amounts due to various scope changes, an
accelerated construction schedule, additional spare equipment and higher than
previously anticipated training, construction, engineering and start-up costs.
Several of the scope changes were made in connection with the Company's plan to
increase throughput beyond the anticipated 1.9 million ton annual rate. The
Company has also separated the wide plate coiler project into two specific
phases and is undertaking engineering and preliminary work with respect to the
rolling mill finishing stand improvements.
Upon completion of the Refinancing, the Company believes that it will have
sufficient liquidity and financial flexibility to complete the remaining
modernization and planned capital maintenance and other projects. Given the
improved access to borrowings under the Revolving Credit Facility and the
resulting financial flexibility, the Company intends to pursue the rolling mill
finishing stand improvements, the final remaining project included in the
modernization program. Nevertheless, Geneva plans to manage the construction and
completion of the remaining projects based upon future operating results,
availability of funds, market conditions and other factors.
COMPLETED PROJECTS
Since announcing the modernization program, the Company has completed (i)
installation of two basic oxygen process ("Q-BOP") steel-making furnaces which
began operating in October 1991, (ii) a direct rolling and large coil project,
including installation of a coilbox and an in-line steel slab conditioning or
"scarfing" facility, (iii) installation of various environmental projects,
including a biological wastewater treatment facility, benzene mitigation
equipment and coke oven gas desulfurization facility, and (iv) various other
projects such as additional plate shipping and coil storage facilities. The
major components of the completed projects are described below.
Basic Oxygen Process Facility. A major focus of the modernization program
has been to improve the process of refining iron into steel by replacing the
mill's open hearth furnaces with two Q-BOP furnaces. The Company acquired the
Q-BOP furnaces which were previously operated in a Chicago steel mill. The Q-BOP
furnaces were then upgraded and installed at the Company's mill and began
operating in October 1991. The Q-BOP furnaces have improved production yields
and product quality, increased throughput capacity and reduced production costs
and airborne particulate emissions. Although the Company has not obtained any
independent appraisal, it believes that its purchase of the previously owned
Q-BOP furnaces enabled it to obtain current steel-making technology at a
substantially lower cost than if it had acquired and installed new Q-BOP
furnaces. The Q-BOP furnaces cost approximately $77.2 million.
Direct Rolling and Large Coil Project. The Company has installed a
coilbox, an in-line steel slab conditioning or "scarfing" facility and other
rolling mill improvements that have recently resulted in cost savings and
production benefits. In March 1992, the Company completed its in-line
conditioning and direct rolling facilities which permit a significant portion of
steel slabs to be rolled directly from ingots into finished products without
going through a conventional reheating process. These facilities, together with
the Company's coilbox, enable the Company to save energy, increase productivity
and produce larger, higher quality hot-rolled coil products of up to 60,000
pounds. These large coil products permit end-users, including the Company's own
finishing units, to increase their manufacturing efficiencies and attain
improved yields and more consistent gauge and shape performance. The Company
believes that its ability to produce large coil products has provided access to
new markets in which it was previously unable to compete. The direct rolling and
large coil project cost approximately $32.5 million.
12
<PAGE> 14
Environmental and Other Projects. The modernization program also provided
for the installation of various environmental projects, such as benzene
mitigation equipment, a coke oven gas desulfurization facility and a wastewater
treatment facility. Construction of each of these projects was completed during
the period September 1990 through November 1993. Various other improvements to
the steel mill have been completed such as additional plate shipping and coil
storage facilities. The Company has also budgeted for other environmental
capital projects not included in the modernization program. See
"Business -- Environmental Matters." The total costs of the environmental and
other projects within the modernization program were approximately $32.0
million.
Estimated Operating Cost Savings. The Company believes that it was
realizing estimated operating cost savings (excluding depreciation) of $23 per
ton at December 31, 1993 as a result of the completed projects. The estimated
operating cost savings include $19 per ton associated with the Q-BOP furnaces
and $8 per ton related to the direct rolling and large coil project, offset by
$4 per ton of cost increases associated with the environmental and other
projects. The amounts related to estimated operating cost savings for each of
the completed projects are based on a comparison of historical operating costs
prior to construction of such project and the same historical operating costs
assuming that the project is fully implemented and that all other factors remain
constant. The estimated operating cost savings for the completed projects do not
take into account increases or decreases in operating costs that were unrelated
to the modernization program, such as changes in product mix, wage rates and raw
material costs. In addition, the estimated operating cost savings do not take
into account any increased depreciation or interest costs which have been
substantially higher as a result of the completed projects. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."
Upon full implementation of the continuous casting facility, the Company
expects to increase its percentage of direct rolled products, which affects the
cost savings related to the direct rolling and large coil project. This increase
is anticipated to result in an additional $2 per ton estimated operating cost
savings related to the project.
REMAINING PROJECTS
Remaining projects included in the modernization program are scheduled for
completion at various intervals through fiscal year 1995. These projects consist
of (i) the continuous casting facility and related improvements, (ii) a wide
plate coiler and related plate processing facilities, and (iii) rolling mill
finishing stand improvements. The Company currently plans to make capital
expenditures aggregating approximately $118 million during fiscal years 1994 and
1995 in order to complete the modernization program. In addition, management
intends to spend approximately $60 million for continuing capital maintenance
and other projects during these years. The major components of the remaining
projects are described below.
Continuous Casting Facility and Related Improvements. The Company is
nearing completion of its continuous casting facility designed by SMS Concast,
Inc. The caster is currently being equipped with segments to produce steel slabs
ranging from 4" to 8.6" in thickness. The caster is designed, however, to also
accept segments to produce slabs thinner than 4" in thickness. Because the
Company's rolling mill, which includes two roughing mills and six finishing
stands, is expected to have sufficient reduction capability, the Company is not
presently procuring or budgeting for segments or other facilities necessary to
produce and process slabs thinner than 4" in thickness. The continuous casting
facility will substantially replace the Company's ingot mold operations. The
caster project also includes a ladle metallurgy furnace, which will allow the
Company to more precisely control the temperature and metallurgy of its liquid
steel. The Company has situated its caster and related improvements to feed
directly into its rolling mill, thereby minimizing costly handling and reheating
of slabs. The Company expects that the continuous caster and related
improvements will improve the mill's finished product yield, reduce energy and
labor costs, increase throughput capacity and improve the metallurgical and
surface quality of its products. The Company anticipates that the construction
of the continuous caster and related improvements will be completed in March
1994 followed by a start-up period of approximately six months. As of December
31, 1993, the Company had spent approximately $121.2 million of the estimated
$154.2 million in total costs necessary to complete the project.
13
<PAGE> 15
Wide Plate Coiler and Related Plate Processing Facilities. The wide plate
coiler project allows the Company to coil plate directly after being rolled on
the Company's finishing stands. The project includes uncoiling facilities and
other related equipment to further process and handle plate in coil form. Geneva
has divided the wide plate coiler project into two phases, the first of which is
expected to be completed contemporaneously with the start-up of the continuous
casting facility. This phase will allow Geneva to direct roll coiled plate up to
96" in width and to uncoil and shear plate up to 120" wide. The second phase of
the project includes improvements designed to coil plate up to 120" in width and
1" in thickness. Completion of this phase is currently estimated for December
1994. The Company's plan to produce wide plate in coil form takes full advantage
of its unique wide finishing mill and continuous caster. These facilities,
together with the completion of various other aspects of the modernization
program, will significantly increase throughput of plate products, provide
improved product gauge, shape and metallurgical uniformity, and improve plate
yields, thereby reducing production costs. The Company believes that the
capability to produce wide plate in coil form will be a significant competitive
advantage. Management believes the total project costs will be approximately
$27.0 million, including $8.7 million for the first phase. As of December 31,
1993, the Company had spent approximately $4.0 million on this project.
Rolling Mill Finishing Stand Improvements. The Company has a six-stand
132-inch combination continuous rolling mill, the widest of its type in the
world, which gives the Company the flexibility to alter its mix of sheet and
plate products in response to customer demands and changing market conditions.
The final phase of the rolling mill modernization includes various additional
improvements to the Company's six finishing stands. These improvements are
designed to enhance the shape and gauge of the Company's products and to
increase throughput capacity. Completion of the finishing stand improvements is
currently scheduled for June 1995. The total costs of the rolling mill finishing
stand improvements are estimated to be approximately $30.7 million, of which
approximately $2.3 million had been incurred as of December 31, 1993.
The Company's modernization program is under continuous review, and it is
possible that the Company may in the future elect to make further changes in the
design of, and amounts budgeted for, its remaining projects and improvements.
Upon completion of the modernization program, the Company believes that its
mill, like those of other steel producers, will continue to require future
improvements and additional modernization projects that are critical to the
Company's long-term ability to compete. See "Risk Factors -- Need to Modernize;
Capital Expenditures."
Estimated Operating Cost Savings. The Company estimates that the remaining
projects included in the modernization program will result in reduced operating
costs (excluding depreciation) of approximately $39 per ton. The estimated
operating cost savings are based upon certain assumptions, and are subject to
associated qualifications and limitations, as discussed below. The estimated
savings in operating costs are expected to be realized after full implementation
of the continuous caster and wide plate coiler projects. No cost savings
associated with the rolling mill finishing stand improvements have been included
in the Company's cost savings estimates.
Amounts related to the estimated savings in operating costs for the
remaining projects are based on a comparison of recent operating costs (adjusted
for the future expected product mix) and the same operating costs after full
implementation of the remaining projects, assuming all other factors remain
constant. For purposes of this comparison, the Company has assumed a product mix
of approximately 49%, 46% and 5% of total tons produced for plate, sheet and
pipe products, respectively.
The estimated operating cost savings for the remaining projects do not take
into account increases or decreases in operating costs that are unrelated to the
modernization program, such as changes in wage rates and raw material costs. In
addition, the estimated operating cost savings do not take into account any
increased depreciation or interest costs which will be substantially higher as a
result of completion of the remaining projects. Consequently, the estimated
operating cost savings are not necessarily indicative of the Company's results
of operations or expected financial performance for any period. The Company
anticipates that in any event it will temporarily incur significant start-up and
transition costs as the remaining projects are completed and implemented. See
"Risk Factors -- Recent Losses and Future Outlook."
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<PAGE> 16
The Company recently shifted its product mix to a higher percentage of
lower-cost sheet products because, given existing market conditions and the
Company's current manufacturing capabilities, such products contributed to a
higher overall operating margin. The shift also resulted from downtime
associated with upgrading various facilities used to process plate products.
Once the remaining projects are fully implemented, the Company expects to
realize substantially lower manufacturing costs and higher throughput rates for
plate products. Consequently, the Company intends to produce a higher percentage
of plate products in order to maximize operating margins.
While the operating margins associated with plate products are expected to
be higher relative to sheet products, the costs of producing plate products will
also be higher. Consequently, as the Company increases its production of plate
products, overall manufacturing costs per ton will reflect a corresponding
increase. Therefore, the Company does not expect that its future average
manufacturing costs per ton will reflect the full amount of the estimated
operating cost savings. The Company believes, however, that the effect of the
increase in overall manufacturing costs from increased plate production will be
more than offset by the associated operating margin benefits.
The estimated operating cost savings of $39 per ton for the remaining
projects include $28 per ton resulting from expected yield and other process
improvements and $11 per ton associated with allocating fixed operating costs,
including current labor costs of certain operations, over an increased
throughput capacity of 1.9 million tons. The Company previously estimated that
the operating cost savings related to the anticipated yield and other process
improvements and increased throughput capacity would be approximately $31 per
ton and $17 per ton, respectively. The estimate of the expected yield and other
process benefits has been revised based on recent cost studies and operating
data. Moreover, the Company believes that a portion of the $17 per ton estimated
operating cost savings has already been realized due to increased shipments from
approximately 1.3 million tons during fiscal year 1992 to approximately 1.5
million tons during fiscal year 1993. There can be no assurance that the Company
will realize the anticipated yield and other process improvements, that sales of
higher production will increase beyond levels previously achieved or that such
increased sales will not adversely affect the Company's price realization.
In conjunction with the continuous caster and other modernization projects,
the Company is implementing additional improvements designed to increase annual
capacity above 1.9 million tons and is evaluating other improvements for
achieving increased shipments. There can be no assurance that the Company will
be able to achieve production capacity at or above 1.9 million tons or that such
increased capacity can be achieved without incurring significant additional
costs.
In addition to the assumption discussed above, each of the estimates
associated with remaining projects is based upon certain design and engineering
assumptions and the realization of certain operational benefits. Because the
estimated operating cost savings are based upon a number of assumptions and are
subject to significant uncertainties, many of which are beyond the control of
the Company, there can be no assurance that they will be realized and actual
results may vary significantly from those indicated. See "Risk Factors -- Need
to Modernize; Capital Expenditures."
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<PAGE> 17
USE OF PROCEEDS
The net proceeds from this offering are estimated to be approximately
$121.5 million. The Company intends to use such proceeds primarily to repay an
aggregate of $90 million principal amount of indebtedness constituting the
Private Debt, plus contractual prepayment premiums currently estimated at
approximately $15 million and accrued interest of approximately $5 million. The
balance of the net proceeds will be used for capital expenditures and general
corporate purposes. The Private Debt consists of $64,410,000 principal amount of
11.4% senior notes (the "11.4% Senior Notes"), $22,623,000 principal amount of
10.55% senior notes (the "10.55% Senior Notes" and, together with the 11.4%
Senior Notes, the "Private Senior Notes") and $2,958,000 principal amount of 13%
subordinated notes (the "Subordinated Notes" and, together with the Private
Senior Notes, the "Private Debt"). The weighted average interest rate of the
Private Debt is 11.24%. The Private Senior Notes mature in 1999 and, commencing
in 1995, require level annual sinking fund payments of $29 million until paid in
full. The Subordinated Notes mature in 2000 and, commencing in 1995, require
level annual sinking fund payments of $1.5 million until paid in full. The
Subordinated Notes comprise all of the Company's existing subordinated
indebtedness. Upon the closing of this offering, the Company will call for
repayment of the Private Debt, which repayment is expected to be completed
within 30 days thereafter. See "The Refinancing."
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<PAGE> 18
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1993, and as adjusted to reflect this offering, including
application of the net proceeds thereof. See "Use of Proceeds." This table
should be read in conjunction with the financial statements (including the notes
thereto) appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
---------------------
AS
ACTUAL ADJUSTED
-------- --------
(IN THOUSANDS)
<S> <C> <C>
CASH AND CASH EQUIVALENTS............................................ $ 16,130 $ 27,439
-------- --------
-------- --------
LONG-TERM DEBT:
Revolving Credit Facility(a)......................................... $ -- $ --
Private Senior Notes due 1999(b)..................................... 87,033 --
11 1/8% Senior Notes due 2001(c)..................................... 135,000 135,000
% Senior Notes due 2004(d)........................................ -- 125,000
Subordinated Notes due 2000(b)....................................... 2,958 --
-------- --------
Total long-term debt....................................... 224,991 260,000
-------- --------
REDEEMABLE PREFERRED STOCK:
Series B, no par value, 400,000 shares issued and outstanding with an
aggregate liquidation value of $44.6 million(e).................... 37,665 37,665
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, 3,600,000 shares authorized for all
series, excluding Series B......................................... -- --
Class A Common Stock, no par value, 60,000,000 shares authorized,
14,390,886 shares issued(f)........................................ 86,264 86,264
Class B Common Stock, no par value, 50,000,000 shares authorized,
22,295,138 shares issued(f)........................................ 11,770 11,770
Warrants to purchase 1,132,000 shares of Class A Common Stock(e)..... 5,360 5,360
Retained earnings(g)................................................. 52,573 42,270
Class A Common Stock held in treasury, at cost 1,519,741 shares(h)... (19,967) (19,967)
-------- --------
Total stockholders' equity................................. 136,000 125,697
-------- --------
Total capitalization.................................. $398,655 $423,362
-------- --------
-------- --------
</TABLE>
- ---------------
(a) For a description of the Revolving Credit Facility, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
(b) Reflects the repayment of $87,033,000 of the Private Senior Notes due 1999
and $2,958,000 of the Subordinated Notes due 2000 in connection with the
Refinancing. See "Use of Proceeds." Sufficient funds to complete the
repayment will be held in an escrow account. Pending repayment, the Company
may be in technical violation of the additional indebtedness limitation
contained in the Private Debt, which violation will be remedied upon
repayment.
(c) For a description of the 11 1/8% Senior Notes due 2001, see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
(d) For a description of the Senior Notes due 2004, see "Description of the
Senior Notes."
(e) For a description of the redeemable preferred stock and related warrants,
see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and Note 5 of the
Notes to Financial Statements included elsewhere herein. Pro forma net loss
per share for the year ended September 30, 1993 would have been $1.01
compared to the historical loss of $.80 had the preferred stock been issued
as of the beginning of fiscal year 1993.
(f) Shares of Class A Common Stock are issuable upon conversion of outstanding
Class B Common Stock at the rate of ten shares of Class B Common Stock for
one share of Class A Common Stock.
(g) Reflects the after tax write-off of prepayment penalties in the amount of
approximately $9,272,000 and debt issuance costs in the amount of
approximately $1,031,000 associated with the refinancing of the Private
Debt.
(h) Shares issued and held in treasury include (i) 250,800 shares of Class A
Common Stock issuable pursuant to stock option agreements between the
Company and certain existing and a former member of senior management of
the Company, and (ii) 279,200 shares of Class A Common Stock issuable
pursuant to options granted under the Geneva Steel Key Employee Plan.
17
<PAGE> 19
SELECTED FINANCIAL DATA
The selected financial information presented below (other than the
information under the caption "Operating Statistics," and "EBITDA" and
"Depreciation and amortization" under the caption "Other Data") for, and as of
the end of, each of the fiscal years ended September 30, 1989 through 1993 has
been derived from the financial statements of the Company, which have been
audited by Arthur Andersen & Co., independent public accountants. The selected
financial information presented below for, and as of the end of, the three
months ended December 31, 1992 and 1993 has been derived from unaudited
financial statements of the Company which, in the opinion of management, reflect
all adjustments which are of a normal recurring nature necessary for a fair
presentation of the results for such periods. Results for the unaudited period
ended December 31, 1993, set forth herein, are not necessarily indicative of the
results to be expected for the Company's full fiscal year. The selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements (including the notes thereto) included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
------------------------------------------------------ -----------------------
1989 1990 1991 1992 1993 1992 1993
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER TON AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $525,018 $507,297 $445,981 $420,026 $465,181 $101,149 $127,099
Cost of sales........... 402,959 409,680 393,180 406,291 443,458 99,468 115,626
-------- -------- -------- -------- -------- -------- --------
Gross margin............ 122,059 97,617 52,801 13,735 21,723 1,681 11,473
Selling, general and
administrative
expenses.............. 27,668 28,953 21,881 22,322 20,621 4,635 5,682
-------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations............ 94,391 68,664 30,920 (8,587) 1,102 (2,954) 5,791
-------- -------- -------- -------- -------- -------- --------
Other income (expense):
Interest and other
income.............. 4,376 4,194 3,464 807 1,885 70 433
Interest expense(a)... (6,854) (10,171) (6,165) (13,695) (17,096) (3,570) (3,472)
-------- -------- -------- -------- -------- -------- --------
Total other income
(expense)......... (2,478) (5,977) (2,701) (12,888) (15,211) (3,500) (3,039)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before
provision (benefit)
for income taxes...... 91,913 62,687 28,219 (21,475) (14,109) (6,454) 2,752
Provision (benefit) for
income taxes.......... 36,521 24,448 10,665 (8,383) (5,503) (2,517) 1,042
-------- -------- -------- -------- -------- -------- --------
Net income (loss)....... $ 55,392 $ 38,239 $ 17,554 $(13,092) $ (8,606)(b) $ (3,937) $ 1,710(b)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
BALANCE SHEET DATA:
Working capital......... $ 68,101 $134,022 $105,926 $ 75,654 $ 89,167 $ 60,802 $ 56,438
Property, plant and
equipment, net........ 56,504 102,677 204,150 252,797 314,590 258,037 355,531
Total assets............ 206,593 308,402 375,888 390,462 498,384 392,543 508,336
Long-term debt.......... 33,447 110,553 160,000 178,182 224,991 169,524 224,991
Redeemable preferred
stock................. -- -- -- -- 35,986 -- 37,665
Total stockholders'
equity................ 97,949 133,508 154,416 141,832 135,775 138,009 136,000
OPERATING STATISTICS:
Net tons shipped........ 1,368 1,375 1,274 1,323 1,511 337 386
Average selling price
per
ton................... $ 384 $ 369 $ 350 $ 317 $ 308 $ 300 $ 329
Manufacturing cost per
ton(c)................ 281 285 299 294 280 280 285
OTHER DATA:
Ratio of earnings to
fixed charges(d)...... 13.5x 5.6x 2.4x --(e) --(e) --(e) --(e)
EBITDA(f)............... $101,702 $ 78,895 $ 44,140 $ 10,489 $ 21,840 $ 2,161 $ 11,432
Depreciation and
amortization(g)....... 7,311 10,231 13,220 19,077 20,738 5,115 5,641
Capital
expenditures(h)....... 30,678 56,219 113,410 66,617 82,534 10,356 46,583
Capitalized interest.... 461 2,794 8,342 5,774 7,696 1,466 3,360
</TABLE>
- ---------------
(a) Interest expense includes amortization of debt issuance costs and excludes
capitalized interest.
18
<PAGE> 20
(b) Net income (loss) applicable to the Company's common stock for the fiscal
year ended September 30, 1993 and the three months ended December 31, 1993
was $(12.1) million and $0.03 million, respectively, as a result of
redeemable preferred stock dividends and accretion for original issue
discount. See Note 5 of the Notes to Financial Statements included
elsewhere herein.
(c) Includes direct variable and fixed costs of manufacturing, excluding
depreciation expense.
(d) For purposes of determining the ratio of earnings to fixed charges,
earnings consist of income (loss) before provision (benefit) for income
taxes plus interest expense. Fixed charges consist of interest expense plus
capitalized interest.
(e) For the fiscal years ended September 30, 1992 and 1993 and the three months
ended December 31, 1992 and 1993, earnings were inadequate to cover fixed
charges by $27.2 million, $21.8 million, $7.9 million and $0.6 million,
respectively.
(f) EBITDA is defined as earnings before interest and other income, interest
expense, provision (benefit) for income taxes, depreciation and
amortization.
(g) Excludes amortization of debt issuance costs.
(h) Includes capitalized interest.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain cost
and expense items to net sales for the periods indicated with respect to the
Company:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED ENDED DECEMBER
SEPTEMBER 30, 31,
------------------------- -----------------
1991 1992 1993 1992 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............................ 88.2 96.7 95.3 98.3 90.9
----- ----- ----- ----- -----
Gross margin............................. 11.8 3.3 4.7 1.7 9.1
Selling, general and administrative
expenses............................... 4.9 5.3 4.4 4.6 4.5
----- ----- ----- ----- -----
Income (loss) from operations............ 6.9 (2.0) 0.3 (2.9) 4.6
Other income (expense):
Interest and other income.............. 0.8 0.2 0.4 0.1 0.3
Interest expense....................... (1.4) (3.3) (3.7) (3.6) (2.7)
----- ----- ----- ----- -----
Income (loss) before provision (benefit)
for income taxes....................... 6.3 (5.1) (3.0) (6.4) 2.2
Provision (benefit) for income taxes..... 2.4 (2.0) (1.2) (2.5) 0.8
----- ----- ----- ----- -----
Net income (loss)........................ 3.9% (3.1)% (1.8)% (3.9)% 1.4%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
The following table sets forth the sales product mix as a percentage of net
sales for the periods indicated with respect to the Company:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS
SEPTEMBER 30, ENDED DECEMBER 31,
------------------------- ------------------
1991 1992 1993 1993
----- ----- ----- ------------------
<S> <C> <C> <C> <C>
Sheet...................................... 42.0% 44.8% 56.4% 64.3%
Plate...................................... 42.3 41.4 30.8 25.5
Pipe....................................... 12.0 11.2 9.7 6.9
Non-Steel.................................. 3.7 2.6 3.1 3.3
----- ----- ----- ------
Total............................ 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ------
----- ----- ----- ------
</TABLE>
Three Months Ended December 31, 1993 Compared with Three Months Ended December
31, 1992
The steel industry is cyclical in nature and generally characterized by
overcapacity. Beginning late in fiscal year 1989 and continuing through December
1992, the industry experienced declining prices due to, among other things,
reduced demand for steel products and significant price competition. Since early
calendar year 1993, the industry has experienced increasing steel prices
resulting from increased demand. In the first quarter of calendar year 1993, the
Company announced three separate price increases, each in the amount of $10 to
$20 per ton for various steel products. In addition, various producers have
recently announced price increases effective in 1994 which the Company intends
to follow as justified by market conditions. The Company sells substantially all
of its products in the spot market at prevailing market prices. Geneva 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 decreases and increases more quickly than many of its competitors.
Industry experience has shown, however, that announced price increases may not
be immediately realized, if at all, due to the competitive environment within
the industry.
The Company has phased in price increases as new orders have been accepted,
subject to adjustments as necessary in response to market conditions. Price
increases and other favorable developments, including reductions in steel
imports resulting from certain of the United States trade cases, increases in
customer
20
<PAGE> 22
orders, and reduced operating costs associated with completed modernization
projects, resulted in improved operating results for the past three fiscal
quarters. Notwithstanding these factors, there can be no assurance that the
Company will be able to maintain profitable operations. See "Risk
Factors -- Recent Losses and Future Outlook."
Net sales increased 25.7% on increased shipments of approximately 49,600
tons, or 14.7%, for the three months ended December 31, 1993 as compared to the
same quarter of the previous fiscal year. The increased sales resulted from
higher shipments and increased average selling prices. The weighted average
sales price (net of transportation costs) per ton of sheet, plate and pipe
products increased in the three months ended December 31, 1993 compared to the
same quarter of the previous fiscal year by 19.4%, 6.7% and 2.0%, respectively.
The overall average selling price realization per ton increased between the
periods; however, this increase was offset, in part, by a shift in product mix
to lower priced sheet products from higher priced plate and pipe products.
Shipped tonnage of sheet increased approximately 70,700 tons or 35.9%, while
shipped tonnage of plate and pipe decreased approximately 9,800 tons or 9.6% and
14,000 tons or 38.4%, respectively, between the two periods.
During the first quarter of fiscal year 1994, the Company increased its
percentage of sheet products sold. Although this shift in product mix involved
increased shipments of lower priced sheet products outside of the western market
at higher transportation costs, such shift improved the Company's operating
margin as a result of higher throughput efficiencies. In the second quarter of
fiscal year 1994, the Company will suspend production of certain plate products
for approximately two months while upgrades to various processing equipment are
implemented. During this period, the Company will further increase production of
sheet products.
Cost of sales includes raw materials, labor costs, energy costs (consisting
primarily of oxygen, electricity and natural gas), depreciation, and other
operating and support costs associated with the production process. The
Company's cost of sales, as a percentage of net sales, decreased to 90.9% for
the three months ended December 31, 1993 from 98.3% for the same quarter of the
previous fiscal year primarily as a result of higher average selling prices. The
average cost of sales per ton shipped increased approximately $4 per ton between
the two periods. Costs increased as a result of production disruptions
associated with modernization and other capital projects, an equipment failure
that temporarily interrupted operation of one of the Company's blast furnaces,
increased depreciation expense resulting from additional capital expenditures,
increased wages and benefits as required by the union labor agreement, increased
coke costs as a result of purchasing coke to supplement internal coke
production, increased costs of purchased scrap and increases in certain other
operating costs. These increased costs were offset, in part, by a shift in
product mix to lower cost sheet products.
The Company expects that certain operating costs will increase in future
periods. For example, the Company's consumption of purchased coke will be
higher, thereby increasing the Company's average cost of coke used in the
manufacturing process. The Company currently purchases its iron ore pellets and
a portion of its high volatile coal under long-term contracts that expire in
fiscal year 1994. As the Company renews or replaces these contracts, the cost of
these raw materials may increase. In addition, labor costs are expected to be
higher due to wage increases and, in certain periods, due to the implementation
of the Company's performance dividend plan. Notwithstanding these increases, the
Company expects to realize significant operating cost savings as remaining
projects included in the modernization program are implemented.
Depreciation costs included in cost of sales increased approximately $0.5
million in the three months ended December 31, 1993 compared with the same
quarter of the previous fiscal year. This increase was due to increases in the
asset base resulting from capital expenditures. Depreciation expense will
increase substantially as the various capital improvements contemplated by the
Company's capital maintenance and modernization program become operational.
Selling, general and administrative expenses for the three months ended
December 31, 1993 increased approximately $1.0 million as compared to the same
quarter of the previous fiscal year. The higher expenses resulted primarily from
increased wages and salaries and increased outside services. The Company expects
21
<PAGE> 23
that wages and salaries will continue to increase in fiscal year 1994 primarily
due to the implementation of the Company's performance dividend plan.
Interest expense increased by approximately $0.1 million during the three
months ended December 31, 1993 as compared to the same quarter of the previous
fiscal year. This increase was due to higher levels of borrowing offset, in
part, by an increase in interest capitalized during the first quarter of fiscal
year 1993.
Fiscal Year Ended September 30, 1993 Compared with Fiscal Year Ended September
30, 1992
Net sales increased 10.8% on increased shipments of approximately 188,000
tons, or 14.2%, for the year ended September 30, 1993 as compared to the
previous fiscal year. The increased sales from higher shipments were slightly
offset by lower average selling prices. Despite the price increases announced in
early calendar year 1993, the weighted average sales price (net of
transportation costs) per ton of plate and pipe products decreased in the year
ended September 30, 1993 compared to the previous fiscal year by 1.8% and 2.6%,
respectively, while the weighted average sales price per ton of sheet increased
by 0.4% between the two years. The general decline in weighted average sales
prices resulted from lower average selling prices and from higher transportation
costs due to a shift in sales volume from the western market to the midwestern
and eastern markets. The overall average selling price realization per ton was
also affected by a shift in product mix to lower priced sheet products from
higher priced plate products. Shipped tonnage of sheet increased approximately
271,000 tons or 39.1%, while shipped tonnage of plate and pipe decreased
approximately 82,000 tons or 16.1% and 1,000 tons or 1.3%, respectively, between
the two years.
During the third and fourth quarters of fiscal year 1993, the Company
increased its percentage of sheet products sold. Although this shift in product
mix involved increased shipments outside of the western market, higher
transportation costs and lower average selling prices as discussed above, such
shift improved the Company's operating margin as a result of higher throughput
efficiencies. This mix shift also allowed the Company to increase its annual
shipping rate to 1.6 million tons.
The Company's cost of sales, as a percentage of net sales, decreased to
95.3% for the year ended September 30, 1993 from 96.7% for the previous fiscal
year. The average cost of sales per ton shipped decreased approximately $13 per
ton between the two years. Costs declined primarily due to the shift in product
mix to lower cost sheet products coupled with production efficiencies associated
with the Company's completed modernization projects. These reduced costs were
partially offset by increased depreciation expense resulting from additional
capital expenditures, increased wages and benefits as required by the union
labor agreement, increased coke costs as a result of purchasing coke to
supplement internal coke production, higher costs of natural gas and increases
in certain other operating costs.
Depreciation costs included in cost of sales increased approximately $2.7
million in fiscal year 1993 compared with the previous fiscal year. This
increase was due to increases in the asset base resulting from capital
expenditures.
Selling, general and administrative expenses for the year ended September
30, 1993 decreased approximately $1.7 million as compared to the previous fiscal
year. The lower expenses resulted primarily from a write-off of approximately
$1.0 million in the first quarter of fiscal year 1992 made as a result of
replacing the Company's then existing revolving credit facility and reduced
usage of outside services.
Interest expense increased by approximately $3.4 million during the year
ended September 30, 1993 as compared to the previous fiscal year. This increase
was due to higher levels of borrowing offset, in part, by an increase in
interest capitalized in fiscal year 1993 and a noncash write-off of deferred
debt issuance costs of approximately $0.8 million resulting from the plan of
financing completed in March 1993 described below.
Fiscal Year Ended September 30, 1992 Compared with Fiscal Year Ended September
30, 1991
Net sales decreased 5.8% during the fiscal year ended September 30, 1992
compared to the previous fiscal year. This decrease was due primarily to a
reduction in average price realization of 9.4% partially offset by an increase
in shipments of approximately 50,000 tons or 3.8% as compared to fiscal 1991.
The weighted average sales price per ton of sheet, plate and pipe products
decreased in fiscal 1992 compared to fiscal 1991 by 5.9%, 9.7% and 10.2%,
respectively. Plate and sheet tonnage shipped increased approximately 10,000
tons or 2.0% and 43,000 tons or 6.7%, respectively, while pipe tonnage shipped
decreased approximately 3,000 tons or 2.5%
22
<PAGE> 24
between these periods. In addition to reduced prices, this product mix shift to
lower priced sheet products contributed slightly to the overall reduction in
price realization. The decrease in price realization adversely affected the
Company's results of operations for fiscal 1992 resulting in a net loss of $13.1
million compared to net income of $17.5 million in fiscal 1991. Sheet sales
increased to 44.8% of net sales for fiscal 1992 as compared with 42.0% for the
previous year, while sales of plate and pipe products decreased to 41.4% and
11.2% during fiscal 1992 from 42.3% and 12.0%, respectively, of net sales during
fiscal 1991.
The Company's cost of sales as a percentage of net sales increased to 96.7%
in fiscal 1992 from 88.2% for the previous fiscal year. This increase was
principally a result of lower average selling prices. The average cost of sales
per ton shipped decreased approximately $2 per ton between the two periods.
Costs declined due to a shift in product mix to lower cost sheet products from
higher cost plate and pipe products and to significantly lower costs as a result
of production efficiencies associated with the Company's Q-BOP furnaces. These
reduced costs were offset by increased costs and higher utilization of iron ore
pellets, higher labor costs due to increased wages and benefits as scheduled
under the union labor agreement, increased delivered coal costs from purchasing
medium volatile coal from eastern sources, increased depreciation expense as a
result of additional capital expenditures and transition costs (primarily in the
first quarter of fiscal year 1992) associated with integrating new equipment and
systems such as the Company's coilbox and Q-BOP facility.
Depreciation and amortization costs included in cost of sales increased
approximately $5.9 million to 4.5% of net sales in fiscal 1992 from 2.7% of net
sales during fiscal 1991. This increase was due primarily to increases in the
Company's asset base resulting from additional capital expenditures.
Selling, general and administrative expenses increased approximately $0.4
million for the year ended September 30, 1992 as compared to the previous fiscal
year. The higher expenses resulted primarily from a noncash write-off of
deferred debt issuance costs of approximately $1.0 million in the first quarter
of fiscal year 1992 made in anticipation of replacing the Company's then
existing revolving credit facility and increased consulting costs associated
with efforts to reduce costs, improve efficiency and otherwise enhance operating
results. These increases were offset in large part by reduced accruals for
profit sharing and reductions made in labor and outside services during the last
two quarters of fiscal 1992.
Interest and other income decreased by approximately $2.7 million in fiscal
1992 as compared to fiscal 1991 as a result of a decrease in available cash and
cash equivalents. Cash and cash equivalents were invested in high-grade
short-term securities until needed for the Company's capital maintenance and
modernization program. Interest expense for the fiscal year ended September 30,
1992 increased approximately $7.5 million from the previous fiscal year due to
higher levels of borrowing and a decrease in the amount of interest capitalized
as projects were completed or deferred.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from capital expenditures and
working capital requirements, including interest payments. The Company has met
these requirements over the last three years principally from the incurrence of
additional long-term indebtedness and cash provided by operations.
In April 1992, the Company obtained the Revolving Credit Facility in the
amount of $50 million from a syndicate of banks led by Citicorp USA, Inc., as
agent, for the working capital and capital expenditure needs of the Company. The
Revolving Credit Facility is secured by the Company's inventories, accounts
receivable, certain general intangibles and proceeds thereof, and expires on
February 28, 1995. At such time, management believes it will be necessary to
obtain new or replacement credit arrangements. See "Risk Factors -- Leverage and
Certain Restrictions." The Private Debt includes restrictions that currently
limit borrowings under the Revolving Credit Facility to a total of $20 million.
Without such restrictions, the Company will have full access to such facility.
The Company's ability to borrow under the Revolving Credit Facility is subject
to compliance with various financial covenants and tests contained therein. The
indentures governing the 11 1/8% Senior Notes and the Senior Notes also contain
certain restrictions on the Company's ability to borrow additional funds.
In March 1993, the Company completed a plan of financing which included,
among other things, (i) the public offering of $135 million principal amount of
11 1/8% Senior Notes; (ii) the private placement to certain institutional
investors of $40 million of 14% cumulative redeemable exchangeable preferred
stock which was
23
<PAGE> 25
subsequently exchanged in a registered offering (the "Redeemable Preferred
Stock") and related warrants to purchase an aggregate of 1,132,000 shares of
Class A Common Stock of the Company; and (iii) the purchase of $70 million
principal amount of the then $160 million principal amount of privately-placed
term debt. The 11 1/8% Senior Notes mature in 2001, are unsecured and require
interest payments semi-annually on March 15 and September 15. After March 1998,
the 11 1/8% Senior Notes are redeemable, in whole or in part, at the option of
the Company, subject to certain redemption premiums. In the event of a change in
the control, the Company must offer to purchase all 11 1/8% Senior Notes then
outstanding at a premium.
The Redeemable Preferred Stock consists of 400,000 shares, no par value,
with a liquidation preference of approximately $111 per share as of December 31,
1993. Dividends accrue at a rate equal to 14% per annum of the liquidation
preference and, except as provided below, are payable quarterly in cash from
funds legally available therefor. For dividend periods ending before April 1996,
the Company may, at its option, add dividends to the liquidation preference in
lieu of payment in cash. In fiscal year 1993 and for the three months ended
December 31, 1993, the Company elected to add the applicable quarterly dividends
to the liquidation preference. After March 1994, the Redeemable Preferred Stock
is exchangeable, at the Company's option, into subordinated debentures of the
Company due 2003 (the "Exchange Debentures"). The Company is obligated to redeem
all of the Redeemable Preferred Stock in March 2003 from funds legally available
therefor. The Company's ability to incur debt resulting from the exchange of the
Redeemable Preferred Stock for Exchange Debentures and to pay cash dividends on
the Redeemable Preferred Stock is subject to compliance with the covenants and
tests contained in the indenture governing the 11 1/8% Senior Notes and in the
Revolving Credit Facility. After March 1998, both the Redeemable Preferred Stock
and Exchange Debentures are redeemable, at the Company's option, subject to
certain redemption premiums. 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, which impact is currently $.11 per share per quarter. For
the fiscal year ended September 30, 1993, these dividends and accretion reduced
earnings by $.23 per share. The warrants to purchase Geneva's Class A Common
Stock are exercisable at $11 per share, subject to adjustment in certain
circumstances, and expire in March 2000.
The debt instruments governing the Revolving Credit Facility and the
11 1/8% Senior Notes contain cross default and other customary provisions.
Financial covenants contained in the Revolving Credit Facility and/or the
11 1/8% Senior Notes also include, among other things, a limitation on dividends
and distributions on capital stock of the Company, a tangible net worth
maintenance requirement, a leverage ratio maintenance requirement, an interest
coverage requirement, a cumulative cash flow requirement, a cumulative capital
expenditure limitation, a limitation on the incurrence of additional
indebtedness unless certain financial tests are satisfied, a limitation on
mergers, consolidations and dispositions of assets and a limitation on liens.
The Company has from time to time entered into amendments relaxing certain of
the covenants and tests contained in the Revolving Credit Facility and may be
required to seek additional amendments in the future. See "Risk
Factors -- Leverage and Certain Restrictions."
Besides these financing activities, the Company's major source of liquidity
has been cash provided by operations. Net cash provided by (used for) operating
activities was $47.8 million, $8.2 million, $64.4 million and $(1.7) million for
fiscal years 1991, 1992 and 1993 and for the first quarter of fiscal year 1994,
respectively. Of the $64.4 million provided by operations in fiscal year 1993,
approximately $29.0 million resulted from an increase in current liabilities
primarily associated with higher manufacturing volumes and increased purchases
related to the modernization program. In addition, during fiscal year 1993 the
Company received income tax refunds of approximately $24.5 million related to
the carryback of calendar year 1992 and 1991 losses to prior years. The $1.7
million used for operating activities during the three months ended December 31,
1993 included approximately $11.7 million resulting from an increase in current
assets substantially offset by net income and depreciation and amortization of
approximately $7.8 million.
The Company expects its modernization program and capital maintenance and
other expenditures to require significant cash resources over the next several
years. Modernization program expenditures were approximately $269 million from
the inception of the program through December 31, 1993. The modernization
program currently provides for capital expenditures totaling approximately $118
million during fiscal years 1994 and 1995, including approximately $33 million
spent during the first quarter of fiscal year 1994. In
24
<PAGE> 26
addition, the Company expects to spend approximately $60 million for capital
maintenance and other projects during these years. See "The Modernization
Program."
Upon completion of the Refinancing, the Company believes it will have
sufficient liquidity and financial flexibility to complete the remaining
modernization and planned capital maintenance and other projects. The
Refinancing has been undertaken by the Company to replace the Private Debt with
the Senior Notes having a lower interest rate and a longer maturity. In
addition, the Refinancing will increase the Company's liquidity and financial
flexibility by providing improved access to borrowings under the Revolving
Credit Facility and by eliminating near-term principal sinking fund requirements
contained in the Private Debt. See "The Refinancing." The Company will continue
to incur substantial capital expenditures after completion of the modernization
program. Moreover, there can be no assurance that the costs of modernization or
capital maintenance and other projects will not exceed those currently
anticipated by the Company. See "Risk Factors -- Need to Modernize; Capital
Expenditures."
The Company will be required to make substantial interest and dividend
payments on the 11 1/8% Senior Notes, the Redeemable Preferred Stock or the
Exchange Debentures, and outstanding balances under the Revolving Credit
Facility, together with interest on the Senior Notes and any additional funding
necessary for the expected and future capital expenditures and other working
capital needs. The Company anticipates that, following consummation of the
Refinancing, its annual debt interest expense will be approximately $27 million
and that its annual preferred stock dividends will be approximately $6 million.
Dividends not paid in cash before April 1996 will be added to the liquidation
preference of the Redeemable Preferred Stock as discussed above. As of December
31, 1993, the Company had $16.1 million in cash and cash equivalents. Although
the Company believes that the cash and cash equivalents on hand, together with
anticipated cash from future operations, expected borrowings under the Revolving
Credit Facility and the remaining net proceeds of this offering after the
Refinancing, will provide sufficient liquidity for the Company to meet its debt
service requirements and to complete the remaining modernization and planned
capital maintenance and other projects, there can be no assurance that these
sources will be adequate to fund completion of these projects. The Company
continues to focus on cost control, revenue enhancement and cash flow
management.
The Company is nearing completion of the continuous casting facility and
related improvements. Although the Company has implemented measures designed to
minimize production interruptions and start-up difficulties, there can be no
assurance that such conditions will not occur as the continuous caster becomes
operational or that the start-up phase will not extend beyond the anticipated
six-month period. Moreover, the Company anticipates that in any event it will
temporarily incur significant start-up and transition costs as the remaining
projects included in the modernization program are completed and implemented.
The short-term and long-term liquidity of the Company is dependent upon
several factors, including the Company's ongoing operations, availability of
financing, foreign currency fluctuations, competitive and market forces,
modernization and environmental expenditures and general economic conditions.
Similarly, 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. Consequently, there can be
no assurance that the Company will have sufficient resources to fund all of its
planned and future modernization requirements and capital maintenance and other
projects or to satisfy other working capital and cash needs. See "Risk
Factors -- Need to Modernize; Capital Expenditures." In such event, the Company
intends to pursue alternative financing strategies, which may include additional
borrowings or the sale of equity securities. The Company has considered the
feasibility of creating a class of non-voting common stock that, among other
things, could be used in an equity offering. Should the Company determine to
proceed with any such financing strategies in the future, there can be no
assurance that the Company can obtain any consents or approvals that may be
required from existing lenders or stockholders or that such financings could be
consummated on terms favorable to the Company or at all.
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. See "Risk Factors -- Cost of Raw Materials."
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BUSINESS
BACKGROUND
The Company owns and operates the only integrated steel mill operating west
of the Mississippi River. The Company's mill manufactures hot-rolled sheet,
plate and pipe products for sale primarily in the western and central United
States.
The steel mill is located 45 miles south of Salt Lake City, Utah on
approximately 1,400 acres. The steel mill's facilities include four batteries of
63 coke ovens each (approximately 185 of which are presently in service), three
blast furnaces and two Q-BOP furnaces. The Company's coke ovens produce coke
from a blend of various grades of metallurgical coal. Coke is used as the
principal fuel for the Company's blast furnaces, which reduce iron ore to iron.
The Company generally operates only two of its three blast furnaces at a time.
The iron is then further refined and mixed with scrap metal and metallic alloys
in the Q-BOP furnaces to produce liquid steel. The liquid steel is poured into
ingot molds, which are rolled into slabs that are conditioned and either direct
rolled or allowed to cool and then reheated when further processed. These slabs
are finished into hot-rolled steel products (sheet, plate and pipe) in the
Company's finishing mills. The Company currently direct rolls approximately 55%
of its finished steel products. The Company is substantially replacing its
existing ingot casting process with a continuous casting facility and related
improvements. Construction of the continuous caster project is expected to be
completed in March 1994 followed by a start-up period of approximately six
months. The continuous caster and wide plate coiler projects are expected to
realize an estimated 13% improvement in yield which, together with other process
benefits, are estimated to reduce operating costs (excluding depreciation) by
approximately $39 per ton (assuming a product mix containing a higher percentage
of plate products than the Company's current mix and an annual production rate
of 1.9 million tons). See "The Modernization Program."
The Company acquired the steel mill and related facilities from USX on
August 31, 1987 at a price of approximately $44.1 million plus the assumption of
certain liabilities. USX had operated the mill from 1944 until 1986, when it
placed the mill on hot-idle status. The Company began shipping finished steel
products 33 days after the acquisition even though the mill had been on hot-idle
status for over a year and initially had no finished goods, work-in-process or
major raw material inventories. The rapid start-up schedule was aided by the
hiring of selected USX operating management personnel familiar with the mill,
many of whom continue to be responsible for the mill's day-to-day operations.
Since the Company began operations, its strategy has been to be a low-cost
producer and to optimize its product quality and mix.
Pursuant to the acquisition agreement between USX and the Company, USX
retained liability for retiree life insurance, health care and pension benefits
relating to employee service prior to the acquisition. USX also indemnified the
Company for costs due to any environmental condition existing on the Company's
real property as of the acquisition date that is determined to be in violation
of environmental laws, subject to the Company's sharing the first $20 million of
certain clean-up costs on an equal basis. The Company believes it has paid all
amounts necessary to satisfy its obligations under the cost-sharing arrangement.
The USX indemnity is a continuing obligation and is not by its terms subject to
termination after any specified time. Except for the foregoing cost-sharing
arrangement, the Company generally assumed all obligations relating to the
operation of the steel mill after the acquisition.
PRODUCTS
The Company's principal product lines are hot-rolled sheet, plate and pipe
products. The Company also sells semi-finished slabs from time to time, as well
as non-steel materials that are by-products of its steel-making operations.
The Company has a 132-inch combination continuous rolling mill, the widest
of its type in the world, which gives the Company the flexibility to alter its
mix of sheet and plate products in response to customer demands and changing
market conditions and the opportunity to maximize utilization of the facilities.
Generally, the Company manufactures products in response to specific customer
orders. During fiscal year 1993 and the quarter ended December 31, 1993, the
Company increased its percentage of sheet products
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(including large coils) sold pursuant to Geneva's product mix optimization
efforts. These efforts generally allow Geneva to focus on products with the
highest margin contribution based on throughput efficiency. The Company's
product sales mix for fiscal year 1989 through December 31, 1993 is shown below:
<TABLE>
<CAPTION>
THREE MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
---------------------------------------- ------------------
1989 1990 1991 1992 1993 1993
---- ---- ---- ---- ---- ------------------
<S> <C> <C> <C> <C> <C> <C>
Sheet.................. 56 % 42 % 42 % 45 % 56 % 64%
Plate.................. 33 46 42 41 31 25
Pipe................... 8 9 12 11 10 7
Non-steel.............. 3 3 4 3 3 4
---- ---- ---- ---- ---- ---
Total........ 100 % 100 % 100 % 100 % 100 % 100%
---- ---- ---- ---- ---- ---
---- ---- ---- ---- ---- ---
</TABLE>
Sheet. The mill produces hot-rolled sheet steel which is sold in sheet or
coil form in thicknesses of .06 to .50 of an inch and widths of 24 to 72 inches.
Maximum widths vary according to thickness. Included in the sheet products made
by the Company are cut length sheet, hot-rolled bands and tempered coil. Sheet
is used in a variety of applications such as storage tanks, light structural
components and supports, and welded tubing.
Plate. The Company's plate products consist of hot rolled carbon and
high-strength low alloy steel plate cut to length and finished, in widths
varying from 48 to 120 inches and in thicknesses varying from .19 of an inch to
3 inches. The Company produces both strip mill plate and finished plate. Plate
can be used for flat work such as floor plate with anti-skid surfaces and for
heavy steel structures such as storage tanks, railroad cars, ships and bridges.
Pipe. The Company produces electric resistance welded pipe ("ERW pipe")
ranging from approximately 7 to 16 inches in diameter. ERW pipe is manufactured
by heating and fusing the edges of the steel to form the pipe. The Company's ERW
pipe is used primarily in pipelines, including water, natural gas and oil
transmission and distribution systems, and in standard and structural pipe
applications.
Non-Steel. The Company also sells products produced by its foundry
operation and various by-products resulting from its steel-making activities.
MARKETING; PRINCIPAL CUSTOMERS
The Company sells its sheet and plate products primarily to steel service
centers and distributors, which in recent years have become one of the largest
customer groups in the domestic steel industry. Service centers and distributors
accounted for approximately 80% of the Company's sales in fiscal 1993. The
Company also sells its products to steel processors and various end-users,
including manufacturers of welded tubing, highway guardrail, storage tanks,
railcars, ships and agricultural and industrial equipment. The Company believes
that sales of its products, either directly or through service centers or
distributors, to automotive or appliance manufacturers have been immaterial. The
Company has developed a broad customer base. In fiscal year 1993, the Company
sold its products domestically to approximately 280 customers in 42 states and
abroad through exporters to approximately 6 customers in Canada and Mexico.
The Company sells its ERW pipe to end-users and through distributors
primarily in the western and central United States where demand for pipe
fluctuates in partial response to oil and gas industry cycles. The Company also
sells products in the export market. Export sales, which generally have lower
margins than domestic sales, accounted for approximately 5.5%, 5.9% and 1.9%,
respectively, of the Company's net sales during fiscal years 1991, 1992 and
1993, respectively. Export sales have decreased as a result of the Company's
involvement in certain trade cases in Canada and Mexico. Sales in Canada and
Mexico for fiscal year 1993 and the three months ended December 31, 1993 were
immaterial.
In November 1993, the United States Congress approved the North American
Free Trade Agreement ("NAFTA") designed to create a free-trade zone among the
United States, Canada and Mexico. NAFTA is expected to gradually eliminate
general tariffs on steel products among these countries. Although the long-term
impact of NAFTA is uncertain, the Company believes that the effect of NAFTA will
likely be positive
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<PAGE> 29
by broadening the potential market for its products and stimulating general
economic growth. NAFTA will not eliminate domestic trade laws in each of the
three countries governing the imposition of anti-dumping and countervailing
duties or resolve any of the existing trade cases involving the Company and
other steel producers. See "-- Competition and Other Market Factors."
The Company's principal direct marketing efforts are in the western United
States. Its proximity to this market gives the Company a considerable cost
advantage over competitors located in the central and eastern United States
which must incur higher transportation costs than the Company to deliver
products to customers in this region. Five sales representatives are employed in
this market, two of whom are located in the greater Los Angeles area, the
largest single market for steel in the western United States. Based on industry
information and the Company's own estimates, the Company believes that it sold
approximately 36% and 33% of the hot-rolled sheet and plate, respectively,
purchased in the eleven western states during the nine months ended September
30, 1993.
The Company also sells its products in the central United States, where it
believes there are attractive growth opportunities for the Company. The Company
currently has a small share of this market. Substantially all its sales in this
region are made through a sales arrangement with Mannesmann, the United States
steel marketing subsidiary of Mannesmann A.G., a major German industrial
company. The sales arrangement entitles Mannesmann to sell the Company's
products in 15 central states and to certain of the Company's customers in the
eastern United States and to receive a variable commission on its sales.
Mannesmann has an exclusive right to sell the Company's products in these areas,
except that the Company is entitled to make direct sales subject to a commission
payable to Mannesmann on certain sales. Within the 15 central states mentioned
above, Mannesmann is prohibited from selling products that compete with the
Company's products. The payment terms provide that Mannesmann make a production
prepayment. The prepayment is recorded as a production prepayment until the
product is shipped, at which time the sale is recorded. The arrangement may be
terminated upon six month's notice by either Mannesmann or the Company in
December 1995 and at three-year intervals thereafter. Mannesmann accounted for
approximately 27% and 41% of the Company's net sales in fiscal years 1992 and
1993, respectively. Any termination or disruption of the Company's arrangements
with Mannesmann could have a material adverse effect on the Company's results of
operations and financial condition.
The Company's strategy is to maintain its core market in the western United
States, where its market position is the strongest, and to increase growth in
the central region, while focusing on profit maximization. The Company believes
that service centers and distributors account for a substantially larger
proportion of its sales than of sales for the industry as a whole. In addition,
demand from this customer group historically has experienced wide fluctuations
due to substantial changes in the group's inventory levels. In view of these
factors, the Company intends to develop a more diverse customer base, including
steel processors and various end-users, while retaining strong relationships
with service center and distributor customers. The Company expects its
modernization program to play a critical role in the implementation of these
strategies by enabling the Company to provide higher quality products and to
gain access to a wider range of customers than previously permitted.
The Company generally produces steel in response to specific orders. As of
December 31, 1993, the Company had estimated total orders on hand for
approximately 260,000 tons compared to approximately 167,000 tons as of December
31, 1992. The Company does not believe that its orders on hand are necessarily
indicative of future operating results.
EMPLOYEES; LABOR AGREEMENT
The Company has a workforce of approximately 2,600 full-time employees, of
whom approximately 510 are salaried and approximately 2,090 are hourly. The
Company's 178 operating management personnel generally have had considerable
experience in the steel industry. Almost half have more than 20 years of
industry experience, with most of the remaining managers ranging in experience
from 10 to 20 years. The Company's senior operating managers have an average of
over 25 years of industry experience.
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<PAGE> 30
Substantially all of the Company's hourly employees are represented by the
United Steelworkers of America under a collective bargaining agreement that
expires in February 1995. The agreement replaced the prior contract which
terminated in August 1993. The new agreement resulted from extensive
negotiations and generally continued the provisions of the prior contract with
the exception of the economic terms discussed below. See "Risk Factors -- Labor
Agreement."
The new labor agreement implemented immediate wage increases of $.25 per
hour for all represented employees and an additional $.15 per hour increase
effective in September 1994. The agreement also contains a performance dividend
plan designed to reward employees for increased shipments of steel products.
Compensation under the plan includes a guaranteed $.33 per hour payment for all
represented workers in addition to the foregoing pay increases. The guaranteed
payment is based on an annual shipment rate of 1.5 million tons. As shipments
increase above this level, compensation under the plan will also increase.
The Company believes that its labor agreement is an important competitive
advantage. Although the Company's wage rates under the agreement are high by
local standards and comparable to regional competitors, its total hourly labor
costs are substantially below recent industry averages compiled by the American
Iron and Steel Institute. The Company's labor agreement has been a significant
factor in attracting a motivated workforce. Unlike labor agreements negotiated
by many other domestic integrated steel producers, the Company's labor agreement
does not contain traditional work rules, limits the Company's financial pension
obligations to a defined contribution plan, entitles the Company to reduce its
profit sharing obligations by an amount equal to a portion of its capital
expenditures, and does not require the Company to pay any retiree medical
expenses. The Company did not assume any pension obligations or retiree medical
obligations related to workers' service while the plant was owned by USX.
In addition to the wage increases described above, the Company has
increased salaries and wages for all non-union employees. Geneva has also
implemented a performance dividend plan for such employees that provides
additional compensation as increased shipment levels are met. Unlike the union
plan, however, there are no guaranteed payments.
The Company's profit sharing obligations under the labor agreement are
based on earnings before taxes and extraordinary items. Unlike the profit
sharing arrangements of many major domestic integrated steel producers, the
Company's profit sharing obligations are reduced by an amount equal to a portion
of its capital expenditures. The Company is required to contribute each year to
the profit sharing pool 10% of earnings before taxes and extraordinary items
after deducting 25% of the first $50 million of capital expenditures and 30% of
all additional capital expenditures in such year (including, in each case,
capital maintenance). Total profit sharing payments accrued in fiscal year 1991
was $0.7 million. No profit sharing amounts were accrued for fiscal years 1992
and 1993. All payments made to workers under the union performance dividend plan
are deducted from any profit sharing obligations otherwise required.
RAW MATERIALS AND RELATED SERVICES
The Company is strategically located near major deposits of many of the
principal raw materials used to make steel, including iron ore, high volatile
coal, limestone and natural gas. The Company believes that, in certain
instances, this proximity, together with its importance as a customer to
suppliers of these materials, enhances its ability to obtain competitive terms
for these raw materials. As the Company evaluates emerging technologies for the
production of iron and steel, it intends to focus on those technologies that
allow increased utilization of resources available in the western United States.
Iron Ore. The Company's steel-making process can use both iron ore and
iron ore pellets. In recent years, the Company has used an average mix of
approximately 30% iron ore and 70% iron ore pellets in its blast furnaces.
However, the Company is currently using a higher percentage of iron ore pellets
in an effort to maximize operating efficiencies of its blast furnaces in
response to increased production needs. The Company obtains its iron ore from
deposits at mines in Utah. The ore is mined by an independent contractor under
claims owned by the Company and transported by railroad to the steel mill. The
Company expects future costs of recovery of this ore to increase gradually as
the reserves are depleted.
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<PAGE> 31
The Company purchases iron ore pellets from USX pursuant to a contract
whereby USX is obligated to supply, and the Company is obligated to purchase,
58% of the Company's iron unit requirements through August 1994. The contract
provides for price adjustments on September 1 of each year, which adjustments
are tied to a published iron ore pellet price. As the Company increases
production levels, it may continue to use a higher percentage of iron ore
pellets. The Company has reached a preliminary agreement with USX concerning a
new contract that will contain higher pellet prices. Geneva is currently
negotiating with various railroads to obtain lower transportation costs in an
effort to offset the pellet price increases.
Coal and Coke. The coke batteries operated by the Company require a blend
of various grades of metallurgical coal. The Company currently obtains most of
its high volatile coal from a mine in central Utah owned by Sunnyside Coal
Company ("Sunnyside"). Shipments under the Company's contracts with Sunnyside
terminate in March 1994. Geneva does not presently anticipate renewing the
contracts with Sunnyside. The Company also currently purchases high volatile
coal from Pacific Basin Resources ("Pacific"), another western mine, under a
contract that expires in March 1997. The Company may in the future purchase
additional volumes of such coal from Pacific.
The Company currently purchases medium volatile coal under short-term
contracts from sources in the eastern United States. Although the Company
believes that medium volatile coal is available from several alternative eastern
suppliers, the Company is subject to price volatility resulting from
fluctuations in the spot market. In the future, the Company may, however,
purchase medium volatile coal under longer-term contracts and may also purchase
other grades of metallurgical coal from eastern sources. There can be no
assurance that the Company's blend of coal will not change or that its overall
cost of coal will not increase.
The Company is currently purchasing coke as a result of its increasing
steel production and decreasing capacity to produce its own coke. The ability of
other domestic integrated steel mills to produce coke is also decreasing,
thereby increasing the demand for purchased coke in the United States. The
Company purchases coke from Mitsubishi International Corporation pursuant to a
renewable agreement that expires in December 1995. The Company is currently
arranging additional sources of purchased coke. As the Company's consumption of
purchased coke increases, the Company's average cost of coke used in the
manufacturing process will be higher. See "Risk Factors -- Cost of Raw
Materials."
Energy. The Company's steel operations consume large amounts of oxygen,
electricity and natural gas. The Company purchases oxygen under a contract with
Big Three Industries, Inc. expiring in calendar year 1998. The oxygen is
delivered from an air separation plant located on the Company's premises but
owned by the supplier. In July 1990, the Company entered into an agreement with
Praxair, Inc. ("Praxair") to construct, own and operate a facility (the "Oxygen
Facility") at the steel mill for the production, compression, storage and
vaporization of additional oxygen, as well as nitrogen and argon. The contract
expires in 2006 and specifies that the cost associated with the construction and
operation of the Oxygen Facility be borne by Praxair. The Company is required to
pay a monthly charge for the right to receive 100% of the production of the
Oxygen Facility.
The Company generates a substantial portion of its electrical requirements
using a 50 megawatt rated generator located at the steel mill and currently
purchases the remainder of its electrical requirements from Utah Power & Light
Company ("UP&L") under a 90 megawatt interruptible power contract expiring in
1999. The contract provides for price increases tied to the cost of energy used
by the utility to produce electricity. The Company has recently executed a firm
power contract expiring in 1999 with UP&L under which the Company will be
entitled to purchase any additional electrical needs, up to 60 megawatts,
beginning in March 1994. The firm contract provides for energy charges and price
increases similar to the interruptible contract but also includes a
significantly higher capacity charge.
Natural gas is purchased at the wellhead in the Rocky Mountain region and
is transported to the steel mill by pipeline. The Rocky Mountain region has
substantial deposits of natural gas.
Other. The Company's mill is served by both the Southern Pacific
Transportation Company and the Union Pacific Railroad Company. The Company
believes that it is one of the largest western customers of each railroad. The
Company's location in the western United States facilitates backhauling, which
reduces
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freight costs. The Company also owns mining claims in a limestone quarry located
approximately 30 miles from the Company's plant. The limestone is mined by the
Company and transported by railroad to the mill.
The Company uses scrap metal obtained from its own operations and external
sources in its steel-making process. As the Company increases its production
volume, management anticipates that increased amounts of scrap will be
purchased.
The cost of the Company's raw materials, including energy, has been
susceptible in the past to fluctuations in price and availability. Worldwide
competition in the steel industry has frequently limited the ability of steel
producers to raise finished product prices to recover higher raw material costs.
The Company's future profitability will be adversely affected to the extent it
is unable to pass on higher raw material costs to its customers.
COMPETITION AND OTHER MARKET FACTORS
The Company competes with domestic and foreign steel producers on the basis
of price, quality and service. Many of the Company's competitors are larger,
have greater capital resources, more modern technology and larger sales
organizations than the Company. Intense worldwide sales competition exists for
all the Company's products. Both the industry and the Company face increasing
competition from producers of certain materials such as aluminum, composites,
plastics and concrete which compete with steel in many markets.
The Company believes that certain of its raw material arrangements,
particularly with respect to energy, and its current labor contract are
favorable in relation to those of the domestic steel industry as a whole. The
Company believes that its geographic location enhances its ability to compete in
the western United States, because its more distant domestic competitors in the
central and eastern United States must absorb considerable freight costs in
order to compete in the western region. The Company is, however, presently at a
competitive disadvantage with respect to product quality factors, particularly
with respect to sheet products. This disadvantage is due in large part to the
fact that the Company's steel mill was built during World War II and, before the
modernization program, incorporated only a few of the advances that have since
evolved in steel-making technology. The Company believes that its modernization
program will enhance the competitiveness of both its products and services.
However, standards of quality in the steel industry are rising as buyers
continually expect higher quality products. Foreign and domestic producers
continue to invest heavily to achieve increased production efficiencies and
product quality.
The steel industry is cyclical in nature and highly competitive. Although
domestic industry capacity has been substantially reduced in recent years,
overall throughput capacity and competition have begun to increase due to
construction of mini-mills, improvements in production efficiencies and the
restructuring of certain domestic integrated producers under federal bankruptcy
laws. See "Risk Factors -- Cyclicality, Competition and Other Industry Factors."
Foreign competition is a significant factor in the steel industry and has
adversely affected product prices in the United States and tonnage sold by
domestic producers. The intensity of foreign competition is substantially
affected by fluctuations in the value of the United States dollar against
several other currencies. The attractiveness of the United States steel markets
to foreign producers has been diminished during recent years by a substantial
decline in the value of the United States dollar relative to certain foreign
currencies. However, foreign exchange rates are subject to substantial
fluctuations, and there can be no assurance that this condition will continue to
exist. In addition, many foreign steel producers are controlled or subsidized by
foreign governments whose decisions concerning production and exports may be
influenced in part by political and social policy considerations as well as by
prevailing market conditions and profit opportunities. Existing trade laws and
regulations may be inadequate to prevent unfair trade practices whereby imports
could pose increasing problems for the domestic steel industry and the Company.
In June 1992, the Company joined with other domestic steel producers in
filing cases with the United States Department of Commerce and the ITC alleging
that producers in certain foreign countries had engaged in subsidization and
dumping practices in contravention of the United States trade laws and the
General
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<PAGE> 33
Agreement on Tariffs and Trade. On July 27, 1993, the ITC issued final injury
determinations in the flat-rolled cases. The ITC found injury in 97% of the
value of the subject imports in the cut-to-length plate product cases, 92% in
the higher-value-added corrosion resistant product cases, 37% in the cold-rolled
product cases and no injury in the hot-rolled products cases. Anti-dumping and
countervailing duties are being collected on all imports covered by the
affirmative ITC determinations. The domestic producers and many of the foreign
producers have appealed the ITC determinations to the United States Court of
International Trade. The failure to impose significant duties, or the lifting of
existing duties, could have an adverse effect on prevailing prices for the
Company's products affected thereby. As the modernization program nears
completion, the Company's product mix will likely shift toward plate products.
The ITC rulings pertaining to the plate cases have generally benefitted the
Company; however, the positive impact of such cases has been offset to the
extent other foreign plate producers have increased shipments into the domestic
market. The Company is concerned that the hot-rolled product market could come
under increased price and volume pressure from foreign imports. Certain domestic
steel producers, including Geneva, are monitoring this situation closely and may
bring additional cases if warranted by the circumstances. The Company and other
domestic plate producers are also considering the possibility of commencing
additional plate cases with respect to certain countries not covered by the
current cases.
During the past two years, steel producers in Canada and Mexico have filed
trade cases in their respective countries against domestic steel producers,
including the Company. Although the Canadian cases have been resolved in favor
of the Company and other domestic producers, such cases are subject to appeal
and other cases affecting the Company could be filed in the future. The Mexican
cases are at various stages of resolution. Sales by the Company and other
domestic producers to such countries could be adversely affected by trade
litigation, thereby increasing competition in domestic markets.
Integrated steel producers are facing increasing competitive pressures from
mini-mills. Mini-mills are generally smaller volume steel producers which use
ferrous scrap metal as their basic raw material and serve regional markets.
These operations generally produce lower margin, commodity type steel goods such
as bars, rods and structural products. A number of mini-mills also produce plate
and pipe products that compete directly with the Company's products. In
addition, two mini-mills have announced intentions to construct facilities that
will produce wide plate in coil form, thereby potentially competing with
products produced by the Company. Geneva believes, however, that such mills will
likely use technology with lower throughput efficiency, product yield and
surface quality. Geneva also believes that such mills will focus on different
grades of products and produce products with somewhat narrower widths. Recently
developed thin slab/direct rolling techniques have allowed mini-mills to produce
the types of sheet products that have traditionally been supplied by integrated
producers. Two mini-mills located in the midwestern United States produce these
types of sheet products. Moreover, several mini-mill operators have announced or
expressed an intention to construct new sheet product facilities in the western
United States and other regions that, if constructed, are expected to further
increase competition.
ENVIRONMENTAL MATTERS
Compliance with environmental laws and regulations is a significant factor
in the Company's business. The Company is subject to federal, state and local
environmental laws and regulations concerning, among other things, air
emissions, wastewater discharge, and solid and hazardous waste disposal. The
Company believes that it is in compliance in all material respects with all
currently applicable environmental regulations.
The Company has incurred substantial capital expenditures for environmental
control facilities, including the Q-BOP furnaces, the wastewater treatment
facility, the benzene mitigation equipment and the coke oven gas desulfurization
facility. The Company has budgeted a total of approximately $3.8 million for
environmental capital improvements in fiscal years 1994 and 1995. Of this
amount, approximately $3.5 million is included in the Company's capital
maintenance and other projects budget and the remaining $0.3 million is included
in the modernization program. Such improvements include the completion of a coke
oven gas desulfurization facility ($0.3 million), construction of a sinter plant
bag house ($2.7 million) and the installation of a coke flare system ($0.8
million). Environmental legislation and regulations have changed rapidly in
recent years and it is likely that the Company will be subject to increasingly
stringent environmental standards in the
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future. Although the Company has budgeted substantial expenditures for
environmental matters in connection with capital maintenance and other projects
and the modernization program, it is not possible at this time to predict the
amount of capital expenditures that may ultimately be required to comply with
all environmental laws and regulations.
In August 1993, the Company received notice that the Environmental
Protection Agency (the "EPA") was overfiling on certain notices of violation
that had previously been settled with the State of Utah for $21,000. The amount
of the claim that may be asserted by the EPA is unknown. The Company has met
informally with the EPA and believes that this matter may be resolved without
significant penalties being assessed. Because of the preliminary nature of the
proceedings, however, the Company is unable to predict the amount of any claim
or the eventual outcome of the proceedings.
Under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), EPA and the states have authority to impose
liability on waste generators, site owners and operators and others regardless
of fault or the legality of the original disposal activity. Other environmental
laws and regulations may also impose liability on the Company for conditions
existing prior to the Company's acquisition of the steel mill.
At the time of the Company's acquisition of the steel mill, the Company and
USX identified certain hazardous and solid waste sites and other environmental
conditions which existed prior to the acquisition. USX has agreed to indemnify
the Company (subject to the sharing arrangements described below) for any fines,
penalties, costs (including costs of clean-up, required studies, and reasonable
attorneys' fees), or other liabilities for which the Company becomes liable due
to any environmental condition existing on the Company's real property as of the
acquisition date that is determined to be in violation of any environmental law,
is otherwise required by applicable judicial or administrative action, or is
determined to trigger civil liability (the "Pre-existing Environmental
Liabilities"). The Company has provided a similar indemnity (but without any
similar sharing arrangement) to USX for conditions that may arise after the
acquisition. Although the Company has not completed a comprehensive analysis of
the extent of the Pre-existing Environmental Liabilities, such liabilities could
be material.
Under the acquisition agreement between the two parties, the Company and
USX agreed to share on an equal basis the first $20 million of costs incurred by
either party to satisfy any government demand for studies, closure, monitoring,
or remediation at specified waste sites or facilities or for other claims under
CERCLA or the Resource Conservation and Recovery Act. The Company is not
obligated to contribute more than $10 million for the clean-up of wastes
generated prior to the acquisition. The Company believes that it has paid the
full $10 million necessary to satisfy its obligations under the cost-sharing
arrangement. The Company's ability to obtain indemnification from USX in the
future will depend on factors which may be beyond the Company's control and may
be subject to dispute.
PROPERTIES
The Company's principal properties consist of the approximately 1,400-acre
site on which the steel mill and related facilities are located, the Company's
iron ore mines in southern Utah and the limestone quarry near the steel mill.
The Company also leases from the State of Utah, under a lease expiring in 2016,
a 300-acre site which includes a retention pond. The retention pond is a
significant part of the Company's water pollution control facilities. Although
the Company's facilities are generally suitable to its needs, the Company
believes that it must make significant capital investments to achieve levels of
productivity and quality attained by its competitors. See "Risk Factors -- Need
to Modernize; Capital Expenditures," "The Modernization Program" and
"Business -- Competition and Other Market Factors."
LEGAL PROCEEDINGS
Other than the matters described under "-- Competition and Other Market
Factors" and "-- Environmental Matters," the Company is a party to routine legal
proceedings incident to its business. In the opinion of management, none of the
proceedings to which the Company is currently a party are expected to have a
material adverse effect on the Company's business or financial condition.
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<PAGE> 35
MANAGEMENT
The following table sets forth certain information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- --------------------------------------------------
<S> <C> <C>
Joseph A. Cannon....... 44 Chairman of the Board and Chief Executive Officer
Robert J. Grow......... 44 President, Chief Operating Officer and Director
Richard D. Clayton..... 37 Executive Vice President, Vice President of
Environment and Director
Max E. Sorenson........ 44 Senior Vice President of Engineering and
Technology
Dennis L. Wanlass...... 45 Vice President, Treasurer and Chief Financial
Officer
Carl E. Ramnitz........ 47 Vice President of Human Resources
Philip E. Jones........ 58 Vice President of Customer Service and Marketing
Ken C. Johnson......... 35 Vice President, Secretary and General Counsel
Ralph F. Powers........ 59 Vice President of Manufacturing
A. Blaine Huntsman..... 57 Director
A. Thurl Jacobson...... 74 Director
Arch L. Madsen......... 80 Director
R. J. Shopf............ 60 Director
</TABLE>
JOSEPH A. CANNON has been a director of the Company since its inception in
February 1987, and has served as Chairman of the Board of Directors from March
1987 to the present. Mr. Cannon served as President of the Company from July
1987 to May 1991 and as Chief Executive Officer from July 1987 to July 1991 when
he resigned in order to run for the U.S. Senate. Mr. Cannon returned to the
Company as Chief Executive Officer in October 1992. From February 1985 to
September 1987, Mr. Cannon was engaged in the private practice of law with
Pillsbury, Madison & Sutro in its Washington, D.C. office, specializing in
environmental law. From May 1981 to February 1985, he was employed in various
capacities by and became Assistant Administrator of the Environmental Protection
Agency. As Assistant Administrator, Mr. Cannon was responsible for the
development, implementation and enforcement of federal air quality and radiation
regulations throughout the United States.
ROBERT J. GROW has been Chief Operating Officer of the Company since
December 1989 and was elected as President in May 1991. From August 1988 to
December 1989, he was employed by the Company in various capacities, including
Vice President, Executive Vice President and General Counsel. He has served as a
director of the Company from its inception. From 1976 to September 1987, Mr.
Grow was engaged in the private practice of law with the Salt Lake City, Utah
law firm of Kimball, Parr, Waddoups, Brown & Gee specializing in real property
and general corporate law. Mr. Grow also holds a B.S. degree in Electrical
Engineering from the University of Utah.
RICHARD D. CLAYTON has been a director of the Company since February 1993
and has served as Executive Vice President and Vice President of Environment
since November 1991. He was Vice President of Environment and Special Projects
of the Company from December 1989 through October 1991 and Vice President of
Energy and Special Projects from July 1989 to December 1989. From 1981 to July
1989, Mr. Clayton was engaged in the private practice of law with Kimball, Parr,
Waddoups, Brown & Gee, specializing in corporate counseling, real property and
tax law.
MAX E. SORENSON has been Senior Vice President of Engineering and
Technology of the Company since November 1991. He was Vice President of
Engineering from December 1989 through October 1991. Before joining the Company,
Mr. Sorenson was employed by Inland Steel Company, most recently as Manager of
Research and Development for Raw Materials and Primary Processes. Mr. Sorenson
holds a B.S. degree in
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<PAGE> 36
Metallurgical Engineering from the University of Utah and a Masters degree in
Industrial Management from Purdue University.
DENNIS L. WANLASS has been Vice President, Treasurer and Chief Financial
Officer of the Company since September 1989 and was Controller of the Company
from January 1988 to September 1989. Before joining the Company, Mr. Wanlass was
employed by Eastman Christensen, then a joint venture of Norton Company and
Texas Eastern, in various accounting and financial capacities. Mr. Wanlass is a
certified public accountant.
CARL E. RAMNITZ has been Vice President of Human Resources since October
1988 and was Vice President of Human Resources and Public Affairs of the Company
from September 1987 to September 1988. Prior to joining the Company, he was
employed by USX Corporation ("USX") for 18 years in various employment and labor
related capacities, most recently as Manager of Employee Relations at the Geneva
Steel plant before it was acquired by the Company and at USX's Pittsburg,
California steel plant.
PHILIP E. JONES has been Vice President of Customer Service and Marketing
of the Company since September 1990. From October 1989 to September 1990, Mr.
Jones was Senior Director of Customer Service, Marketing and Sales of the
Company and was Manager of Customer Technical Services from October 1987 to
October 1989. Prior to joining the Company, he was a consultant to Lone Star
Steel and had been employed by USX for 30 years, primarily at the Geneva Works
where he held several positions, including Chief Metallurgist for eight years.
Mr. Jones is a graduate of the University of Utah with a B.S. degree in
Metallurgical Engineering.
KEN C. JOHNSEN has been Vice President and General Counsel of the Company
since November 1991 and has served as Secretary of the Company since February
1992. He was Manager of Special Projects for the Company from February 1991
through October 1991. From 1986 to 1991, Mr. Johnsen was engaged in the private
practice of law with Kimball, Parr, Waddoups, Brown & Gee, specializing in
corporate counseling and civil litigation. Mr. Johnsen received his law degree
from Yale Law School and a B.A. degree in Finance from Utah State University.
RALPH F. POWERS has been Vice President of Manufacturing of the Company
since May 1992. From December 1991 until May 1992, Mr. Powers was General
Manager of Operational Improvements for the Company. Prior to joining the
Company, Mr. Powers was employed by USX and its related entities for more than
30 years, most recently as Project Director with USX Engineers and Consultants,
Inc., where he managed the commissioning, testing and start-up of an $850
million cold rolling facility in West Java, Indonesia.
A. BLAINE HUNTSMAN has been a director of the Company since December 1988.
Mr. Huntsman is currently Chairman of the Board and Chief Executive Officer of
Olympus Capital Corporation, a savings and loan holding company headquartered in
Salt Lake City, Utah, and has served in such capacities since December 1988 and
June 1988, respectively. Mr. Huntsman is also currently a director of Zion's
Cooperative Mercantile Institution, a retailing company located in Salt Lake
City, Utah, a position he has held since 1977. From 1971 to the present, he has
been employed by the University of Utah Graduate School of Business as a
Professor of Finance and, from 1975 to 1980, was Dean of the Graduate School of
Business and College of Business. He has served as a director of many private
and public companies including Huntsman Container Corporation, Huntsman Chemical
Corporation, Dean Witter Reynolds and Arcata Corporation.
A. THURL JACOBSON has been a director of the Company since November 1989
and served as a consultant to the Company from January 1989 to December 1991.
Mr. Jacobson was President and director of Amerada Hess Corporation when he
retired in 1972. Mr. Jacobson rejoined Amerada Hess Corporation as Group Vice
President of Exploration and Production from 1976 to 1986. He is currently an
independent petroleum operator and management consultant.
ARCH L. MADSEN has been a director of the Company since December 1988. Mr.
Madsen has been President Emeritus of Bonneville International Corporation, a
national communications company headquartered in Salt Lake City, Utah, since
July 1985 and served as founding President of such company from 1963 to
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<PAGE> 37
July 1985. He remains active in a number of national and international
broadcasting organizations, and is also active in various civic, educational and
charitable institutions.
R. J. SHOPF has been a director of the Company since September 1989 and
served as an independent advisor to the Company from March 1988 to September
1989. Mr. Shopf is currently the President and Chief Executive Officer of
Pioneer Chlor Alkali Investments, Inc. ("Pioneer"), a position he assumed in
August 1993. Mr. Shopf has also served as President of Imperial West Chemical
Company, an affiliate of Pioneer, since January 1992, and as President of All
Pure Chemical Company, also an affiliate of Pioneer, since October 1992. From
October 1992 to July 1993, Mr. Shopf was President of two companies affiliated
with Pioneer. From January 1989 to October 1992, he was President of Southwest
Business Associates, a consulting company (a position he previously held from
1984 to February 1988). From March 1988 to January 1989, Mr. Shopf was employed
by First Texas Merchant Banking Group, a division of Gibraltar Savings
Association, as Senior Vice President in charge of portfolio management.
DESCRIPTION OF THE SENIOR NOTES
The Senior Notes will be issued under an Indenture to be dated as of
, 1994 (the "Indenture") between the Company and Bankers Trust
Company, as trustee (the "Trustee"). A copy of the form of the Indenture has
been filed as an exhibit to the Registration Statement of which this Prospectus
is a part. The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and to all of the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the Trust Indenture Act, as in effect on the date of the Indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "Certain Definitions."
GENERAL
The Senior Notes will be issued only in registered form, without coupons,
in denominations of $1,000 and integral multiples of $1,000. Principal of,
premium, if any, and interest on the Senior Notes will be payable, and the
Senior Notes will be transferable, at the corporate trust office or agency of
the Trustee in the City of New York, New York. In addition, interest may be paid
by wire transfer (to Holders who own at least $1,000,000 in principal amount of
Senior Notes) or check mailed to the person entitled thereto as shown on the
register for the Senior Notes. No service charge will be made for any
registration of transfer or exchange of the Senior Notes, except for any tax or
other governmental charge that may be imposed in connection therewith.
MATURITY, INTEREST AND PRINCIPAL
The Senior Notes will be unsecured obligations of the Company, limited to
$125,000,000 aggregate principal amount and will mature on , 2004.
Interest on the Senior Notes will accrue at the rate of % per annum and
will be payable semi-annually on each and ,
commencing , 1994, to the holders of record of Senior Notes at the
close of business on and immediately preceding
such interest payment date. Interest on the Senior Notes will accrue from the
most recent date to which interest has been paid or, if no interest has been
paid, from the original date of issuance (the "Issue Date"). Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Interest on overdue principal and (to the extent permitted by law) on overdue
installments of interest will accrue at a rate equal to % per annum.
REDEMPTION
Optional Redemption. The Senior Notes will be redeemable, in whole or in
part, at the option of the Company, at any time on or after , 1999,
at the redemption prices (expressed as percentages of
36
<PAGE> 38
principal amount) set forth below plus accrued and unpaid interest to the
redemption date, if redeemed during the 12-month period beginning on
of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999..................................................
2000..................................................
2001..................................................
2002 and thereafter................................... 100.00%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate up
to 30% of the original principal amount of Senior Notes at any time and from
time to time prior to , 1997 at a redemption price equal to %
of the principal amount thereof plus accrued interest to the redemption date out
of the Net Proceeds of a Public Equity Offering, provided that such redemption
occurs within 90 days of such offering.
Selection and Notice. In the event that less than all of the Senior Notes
are to be redeemed at any time, selection of Senior Notes for redemption will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Senior Notes are listed or,
if the Senior Notes are not listed on a national securities exchange, by lot,
provided, however, that no Senior Notes of $1,000 or less shall be redeemed in
part. Notice of redemption shall be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each holder of Senior Notes
to be redeemed at its registered address. If any Senior Note is to be redeemed
in part only, the notice of redemption that relates to such Senior Note shall
state the portion of the principal amount thereof to be redeemed. A new Senior
Note in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Senior Note. On and after the redemption date, interest will cease to accrue on
Senior Notes or portions thereof called for redemption.
CHANGE OF CONTROL
In the event of a Change of Control (the date of such occurrence being the
"Change of Control Date"), the Company shall notify the holders in writing of
such occurrence and shall make an offer to purchase (the "Change of Control
Offer"), on a business day (the "Change of Control Payment Date") not later than
60 days following the Change of Control Date, all Senior Notes then outstanding
and free and clear of Liens (and not currently being redeemed) at a purchase
price equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date. Notice of a Change of
Control Offer shall be mailed by the Company to the holders not less than 30
days nor more than 45 days before the Change of Control Payment Date. The Change
of Control Offer is required to remain open for at least 20 business days and
until the close of business on the day before the Change of Control Payment
Date. For the definition of Change of Control, see "Certain
Definitions -- Change of Control" below. The Board of Directors of the Company
does not have the ability to waive any of the provisions governing a Change of
Control without the consent of the requisite percentage of holders of the Senior
Notes. The Change of Control provisions will not be applicable to a leveraged
buyout transaction by Permitted Persons (see the definition of "Change of
Control"), although the Indenture contains other covenants which limit the
ability to effect such a transaction. See "Certain Covenants."
The indenture pursuant to which the 11 1/8% Senior Notes were issued
requires the Company to make a change of control offer to purchase the 11 1/8%
Senior Notes on terms similar to the above-described Change of Control Offer.
Under the Revolving Credit Facility, certain changes of control and business
combinations, including any Person or group, other than existing holders of the
Company's Class B Common Stock, obtaining majority voting control of the Company
or a merger or consolidation of the Company (other than with a Subsidiary) in
which any voting stock of the Company is exchanged, are events of default which
could result in remedies against the Company, including termination of the
Company's ability to borrow thereunder or the acceleration of payment of amounts
outstanding thereunder.
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<PAGE> 39
There can be no assurance that the Company will have sufficient resources
or access to funds, whether from additional borrowings or the sale of equity
securities, to purchase all Senior Notes tendered in a Change of Control Offer
or fund its other obligations, discussed above, that may arise in the event of a
Change of Control. The agreements governing the Senior Notes, the 11 1/8% Senior
Notes and the Revolving Credit Facility limit the Company's ability to borrow
additional funds and may limit the Company's ability to repurchase the Senior
Notes in a Change of Control Offer. In the event of a Change of Control, the
Company would likely be required to obtain consents from holders of its
indebtedness to incur additional borrowings to fund its obligations that may
arise upon a Change of Control and to repurchase the Senior Notes. There can be
no assurance that the Company could obtain consents from such holders or lenders
for any such financings or purchases or that such financings could be
consummated on terms favorable to the Company or at all. The failure of the
Company to purchase Senior Notes tendered in a Change of Control Offer within 30
days after the obligation to purchase arises constitutes an Event of Default
under the Indenture which permits 25% of the holders of the Senior Notes to
direct the Trustee to accelerate the maturity of the Senior Notes. The Company's
obligations with respect to a Change of Control are absolute and unconditional.
Neither the Company's inability to repay all indebtedness outstanding under the
Revolving Credit Facility nor to obtain the requisite consents, if any, under
the Revolving Credit Facility to permit the repurchase of Senior Notes tendered
in a Change of Control Offer would limit the Company's obligation to repurchase
such Senior Notes or otherwise affect whether an Event of Default under the
Indenture has occurred if such Senior Notes are not so repurchased.
The Company will comply with any tender offer rules under the Exchange Act
which may then be applicable in connection with any Change of Control Offer
required to be made by the Company to repurchase the Senior Notes as a result of
a Change of Control.
RANKING
The Indebtedness of the Company evidenced by the Senior Notes will rank
pari passu in right of payment with the Working Capital Facility and all
existing or future senior Indebtedness of the Company. With respect to any
existing or future secured senior obligations of the Company, such senior
obligations will be senior in right of payment to the Senior Notes with respect
to the assets securing such senior obligations.
CERTAIN COVENANTS
The Indenture contains covenants, certain of which are set forth below,
which limit, among other things, the ability of the Company to engage in a
highly leveraged transaction whether such transaction is initiated or supported
by the Company, its management or Affiliates or an unrelated third party. These
include covenants which limit the amount of additional Indebtedness that may be
incurred by the Company or its Subsidiaries, which restrict the Company and its
Subsidiaries from creating Liens and which restrict mergers and consolidations
by the Company.
Limitation on Additional Indebtedness. The Indenture will provide that the
Company will not, and will not permit any of its Subsidiaries to, create, incur,
assume, guarantee or otherwise become liable for the payment of any Indebtedness
(including any Acquired Indebtedness), except for (each of which shall be given
independent effect):
(a) Indebtedness existing at the time the Senior Notes are issued;
(b) other Indebtedness not to exceed $20,000,000 in aggregate
principal amount at any one time outstanding;
(c) Indebtedness if, immediately after giving pro forma effect to the
incurrence thereof, the Consolidated Interest Coverage Ratio of the Company
would be greater than or equal to 1.5:1 on or prior to March 15, 1996 and
2.0:1 thereafter;
(d) Indebtedness outstanding from time to time under the Working
Capital Facility in aggregate principal amount not to exceed the sum of 85%
of the net book value of accounts receivable and proceeds
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<PAGE> 40
thereof and 65% of the net book value of inventory and proceeds thereof of
the Company and its Subsidiaries, in each case calculated on a consolidated
basis in accordance with GAAP;
(e) the Senior Notes;
(f) Indebtedness not to exceed $40,000,000 in aggregate principal
amount at any one time outstanding, the proceeds of which are applied
solely to expenditures made in the ordinary course of business, which are
accounted for as additions to property, plant and equipment in accordance
with GAAP and are useful in the type of business of the Company conducted
on the Issue Date;
(g) obligations arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, or from guaranties or
letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any Subsidiary pursuant to such agreements,
in any case incurred or assumed in connection with the disposition of any
business, assets or Subsidiary of the Company or such Subsidiary, other
than guaranties of obligations incurred by any Person acquiring all or any
portion of such business, assets or Subsidiary for the purpose of financing
such acquisition;
(h) obligations in respect of performance bonds and surety bonds
entered into in the ordinary course of business;
(i) obligations under currency hedging agreements and interest rate
hedging or swap agreements;
(j) obligations under guaranties of liabilities of employees, not to
exceed $5,000,000 in aggregate principal amount at any one time
outstanding;
(k) obligations under guaranties of Indebtedness of suppliers,
licensees, franchisees or customers, incurred in the ordinary course of
business, not to exceed $10,000,000 in aggregate principal amount at any
one time outstanding;
(l) Indebtedness incurred to repurchase shares of, or options to
purchase shares of, the Company's Capital Stock from employees of the
Company or any of its Subsidiaries or guaranties of Indebtedness incurred
in connection with borrowings by such employees exclusively for the purpose
of exercising options to purchase the Company's Capital Stock in an
aggregate amount not to exceed $3,000,000 at any one time outstanding;
(m) Indebtedness of a Subsidiary to the Company or another Subsidiary;
(n) Indebtedness of the Company owed to any Subsidiary, provided that
any such Indebtedness is unsecured and subordinated in right of payment to
the Senior Notes;
(o) Indebtedness represented by the Exchange Debentures issued on or
after March 15, 1996 in exchange for the Redeemable Preferred Stock;
(p) Indebtedness evidenced by Repurchase Agreements; and
(q) Indebtedness constituting replacements, renewals, refinancings and
extensions of the Indebtedness in (a), (c), (e), and (o) above, provided
that any such replacement, renewal, refinancing and extension (i) shall not
provide for any mandatory redemption, amortization or sinking fund
requirement in an amount greater than or at a time prior to the amounts and
times specified in the Indebtedness being replaced, renewed, refinanced or
extended, (ii) shall not exceed the principal amount (plus accrued interest
and prepayment premium, if any) of the Indebtedness being replaced,
renewed, refinanced or extended, and (iii) shall not rank, in right of
payment with respect to the Senior Notes, prior to the Indebtedness being
replaced, renewed, refinanced or extended.
Limitation on Investments, Loans and Advances. The Indenture will provide
that the Company will not make and will not permit any of its Subsidiaries to
make any capital contributions, advances or loans to, or investments or
purchases of Capital Stock in, any other Person (collectively, "Investments"),
except (i) Investments by the Company in or to any Subsidiary and Investments in
or to the Company or a Subsidiary by any Subsidiary (provided, that such
Investments by the Company in or to any Subsidiary pursuant to this clause (i)
shall not exceed, individually or in the aggregate, 10% of the total assets of
the
39
<PAGE> 41
Company and its Subsidiaries determined on a consolidated basis at the time such
Investment is made), (ii) Investments represented by accounts receivable created
or acquired in the ordinary course of business and any evidence of Indebtedness
received with respect to such accounts, (iii) advances to employees in the
ordinary course of business, (iv) Investments under or pursuant to interest rate
protection agreements, (v) Permitted Investments, (vi) Investments made pursuant
to the "Limitation on Restricted Payments" covenant below, and (vii) other
Investments not to exceed $6,000,000 in the aggregate in Unrestricted
Subsidiaries, in other Persons in which the Company or a Subsidiary and one or
more third parties have an ownership interest or in any other Person whether the
Company or a Subsidiary has any such interest, provided that if the Consolidated
Interest Coverage Ratio of the Company at the time any such Investment is made
is at least 1.5:1, Investments made pursuant to this clause (vii) shall not
exceed $20,000,000 in aggregate principal amount.
Limitation on Restricted Payments. The Indenture will provide that the
Company will not make, and will not permit any of its Subsidiaries to, directly
or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or after giving effect to such Restricted
Payment;
(b) at the time of such Restricted Payment the Company's Consolidated
Interest Coverage Ratio is at least 1.5:1 (provided, that this clause (b)
shall not apply to (A) the making or guaranteeing of any Investments
constituting Restricted Payments or (B) the payment of dividends on
Redeemable Preferred Stock); and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 50% of the Company's cumulative Consolidated
Net Income (or in the event such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) after December 31, 1993, (2) 100% of
the aggregate Net Proceeds and the Fair Market Value of marketable
securities or other property received by the Company from the issue or
sale, after the Issue Date, of Capital Stock (other than Disqualified
Stock) of the Company or any Indebtedness or other securities of the
Company convertible into or exercisable or exchangeable for Capital Stock
(other than Disqualified Stock) of the Company which has been so converted
or exercised or exchanged, as the case may be, (3) in the case of the
disposition or repayment of any Investment constituting a Restricted
Payment made after the Issue Date, an amount equal to the lesser of the
return of capital invested for such Investment and the cost thereof, in
either case less the cost of such disposition, and (4) $20,000,000. For
purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its Fair Market
Value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the retirement of any shares of Capital Stock of the Company or
subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Stock), or out of, the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Capital Stock of the Company (other than Disqualified Stock) or
by the payment of cash not to exceed $1,000,000 for fractional shares, (iii) the
redemption or retirement of subordinated Indebtedness of the Company in exchange
for, by conversion into, or out of the Net Proceeds of, a substantially
concurrent sale or incurrence of subordinated Indebtedness (other than any
subordinated Indebtedness owed to a Subsidiary) of the Company that is
contractually subordinated in right of payment to the Senior Notes, (iv) the
retirement of any shares of Disqualified Stock by conversion into, or by
exchange for, shares of Disqualified Stock, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Disqualified Stock, (v) the retirement of the Redeemable
Preferred Stock in exchange for the Exchange Debentures, (vi) the repurchase of
the Redeemable Preferred Stock or Exchange Debentures at a price not to exceed
101% of liquidation value plus accrued dividends or principal amount plus
accrued interest, as the case may be, within 120 days after the occurrence of a
Change of Control (provided, that before repurchasing any such Redeemable
Preferred Stock, Exchange Debentures
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or the 11 1/8% Senior Notes, the Company shall have first or simultaneously made
a Change of Control Offer for all Senior Notes and repurchased all Senior Notes
tendered pursuant thereto), and (vii) the repurchase of shares of, or options to
purchase shares of, Capital Stock of the Company or any Subsidiary from the
employees of the Company or any Subsidiary pursuant to the terms of the form of
agreements under which employees purchase, or are granted the option to
purchase, shares of Capital Stock of the Company or any Subsidiary not to exceed
$2,000,000 in any fiscal year. In determining the amount of Restricted Payments
permissible under clause (c) above, amounts expended pursuant to clauses (i),
(ii), (vi) and (vii) above shall be included as Restricted Payments.
Limitation on Liens. The Indenture will provide that the Company will not,
and will not permit any of its Material Subsidiaries to, directly or indirectly,
create, incur, assume or suffer to exist any Lien of any kind upon any of its
property or assets now owned or hereafter acquired by it, unless the Senior
Notes also are equally and ratably secured by such Lien, except for:
(a) any Lien existing as of the Issue Date;
(b) any Lien on the accounts receivable, inventory, general
intangibles and proceeds therefrom of the Company and its Subsidiaries
securing Indebtedness (and related payment and performance obligations)
under the Working Capital Facility, currency hedging agreements and
interest rate hedging or swap agreements;
(c) any Lien arising by reason of (i) any judgment, decree or order of
any court, so long as such Lien is being contested in good faith and any
appropriate legal proceedings which may have been duly initiated for the
review of such judgment, decree or order shall not have been finally
terminated or the period within which such proceedings may be initiated
shall not have expired, (ii) taxes not yet delinquent or which are being
contested in good faith, (iii) security for payment of workers'
compensation or other insurance, (iv) security for the performance of
tenders, contracts (other than contracts for the payment of borrowed money)
or leases, (v) deposits to secure public or statutory obligations, or in
lieu of surety or appeal bonds entered into in the ordinary course of
business, (vi) operation of law in favor of carriers, warehousemen,
landlords, mechanics, materialmen, laborers, employees, suppliers or
similar Persons, incurred in the ordinary course of business for sums which
are not yet delinquent or are being contested in good faith by negotiations
or by appropriate proceedings which suspend the collection thereof, and
(vii) security for obligations of the Company or any Material Subsidiary
with respect to surety, appeal, reclamation, performance or other similar
bonds;
(d) purchase money mortgages or pledges or other purchase money Liens
upon any property acquired by the Company or any Subsidiary after the Issue
Date acquired or held by such entity in the ordinary course of business and
securing solely the purchase price of such property or Indebtedness
(including related performance or payment obligations) incurred solely for
the purpose of financing the acquisition of such property (but only to the
extent the Indebtedness secured by such Liens shall otherwise be permitted
under the covenants set forth herein), which Liens shall not secure
Indebtedness, in aggregate principal amount, in excess of $80,000,000;
(e) easements, reservations, licenses, rights-of-way, zoning
restrictions and covenants, conditions and restrictions and other similar
encumbrances or title defects which, in the aggregate, do not materially
detract from the use of the property subject thereto or materially
interfere with the ordinary conduct of the business of the Company or any
of its Subsidiaries;
(f) leases and subleases of property which do not interfere with the
ordinary conduct of the business of the Company or any of its Subsidiaries,
and which are made on customary and usual terms applicable to similar
properties;
(g) Liens for property taxes for property that the Company or any
Subsidiary has determined to abandon, provided that (i) if the book value
of such property shall at the date of determination exceed $500,000, the
Board of Directors of the Company or any Subsidiary, as the case may be,
shall have determined that the fair market value of such property as of the
date of determination does not exceed the
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then outstanding amount of the property tax for such property and (ii) the
sole recourse for such tax, assessment, charge or levy is to such property;
(h) Liens on the assets or property of a Subsidiary of the Company
existing at the time such Subsidiary became a Subsidiary of the Company and
not incurred as a result of (or in connection with or in anticipation of)
such Subsidiary becoming a Subsidiary of the Company, provided such Liens
do not extend to or cover any property or assets of the Company or any of
its other Subsidiaries (other than the property or assets so acquired);
(i) Liens securing Indebtedness (including related payment and
performance obligations) which is incurred to refinance Indebtedness which
has been secured by a Lien permitted under the Indenture and is permitted
to be refinanced under the Indenture, provided that such Liens do not
extend to or cover any property or assets of the Company or any of its
Subsidiaries not securing the Indebtedness so refinanced; and
(j) Liens securing Indebtedness or other obligations of the Company or
any Subsidiary not in excess of $10,000,000 in the aggregate.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. The Indenture will provide that the Company will not, and will
not permit any Subsidiary of the Company to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Subsidiary of the
Company to (a) pay dividends, in cash or otherwise, or make any other
distributions on its Capital Stock or any other interest or participation in its
profits owned by, or pay any Indebtedness owed to, the Company or a Subsidiary
of the Company, (b) make any loans or advances to the Company or any Subsidiary
of the Company or (c) transfer any of its properties or assets to the Company or
to any Subsidiary of the Company, except, in each case, for such encumbrances or
restrictions existing under, contemplated by or by reason of (or similar to
those existing in) (i) the Senior Notes and the Indenture, (ii) any restrictions
existing under or contemplated by agreements in effect on the Issue Date,
including, without limitation, restrictions under the Working Capital Facility
as in effect on the Issue Date, (iii) any restrictions, with respect to a
Subsidiary of the Company that is not a Subsidiary of the Company on the Issue
Date, in existence at the time such Person becomes a Subsidiary of the Company
(but not created in contemplation of such Person becoming a Subsidiary), (iv)
customary non-assignment provisions contained in contracts and agreements to
which a Subsidiary is or becomes a party, and (v) any restrictions existing
under any agreement that refinances or replaces an agreement containing a
restriction permitted by clause (i), (ii) or (iii) above; provided that the
terms and conditions of any such restrictions are not materially less favorable
to the holders of the Senior Notes than those under or pursuant to the agreement
being replaced or the agreement evidencing the Indebtedness refinanced.
Limitation on Sale-Leaseback Transactions. The Indenture will provide that
the Company will not, and will not permit any of its Subsidiaries to, enter into
any Sale-Leaseback Transaction, except with another Subsidiary of the Company,
unless (i) after giving effect to any such Sale-Leaseback Transaction at the
time such Transaction is entered into, the Company shall be in compliance with
the "Limitation on Additional Indebtedness" covenant described above (with the
Company's lease obligations being treated as Indebtedness for purposes of
ascertaining compliance with this covenant), (ii) the Net Proceeds of such
Sale-Leaseback Transaction are at least equal to the Fair Market Value of such
property (determined by the Company's Board of Directors), and (iii) the Company
or such Subsidiary shall apply the Net Cash Proceeds of such sale as provided
under the "Disposition of Proceeds of Asset Sales" covenant below.
Limitation on Issuance and Sale of Capital Stock of Subsidiaries. The
Indenture will provide that the Company will not permit any Subsidiary to issue
any Capital Stock (other than to the Company or to a Subsidiary) or permit any
Person (other than the Company or a Subsidiary) to own any Capital Stock of any
Subsidiary; provided, however, that the Company and any Subsidiary may, in any
single transaction, sell all, but not less than all, of the issued and
outstanding Capital Stock of any Subsidiary to any Person.
Disposition of Proceeds of Asset Sales. The Indenture will provide that
the Company will not, and will not permit any of its Subsidiaries to, directly
or indirectly, make any Asset Sale unless (i) such Asset Sale is
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for Fair Market Value, (ii) either (A) the Net Proceeds therefrom consist of at
least 80% cash or Permitted Investments, or Indebtedness of the Company or its
Subsidiary assumed by the purchaser and the Company or its Subsidiary is
released from such Indebtedness or (B) after giving effect to such Asset Sale
the Company and its Subsidiaries hold in the aggregate no more than $5,000,000
of Net Proceeds, other than cash and Permitted Investments received in Asset
Sales, and (iii) the Company or such Subsidiary, as the case may be, shall apply
such Net Cash Proceeds as follows:
(i) first, to the extent such Net Cash Proceeds are received from an
Asset Sale involving the sale, transfer or disposition of inventory,
accounts receivable or intangibles ("Working Capital Proceeds"), to satisfy
all mandatory repayment obligations under the Working Capital Facility
arising by reason of such Asset Sale, and
(ii) second, out of any Working Capital Proceeds remaining after
application pursuant to the preceding paragraph (i), together with any Net
Cash Proceeds received from an Asset Sale not involving the sale, transfer
or disposition of inventory, accounts receivable, intangibles, or proceeds
therefrom (the "Available Amount"), the Company shall make an offer to
purchase (the "Asset Sale Offer") from all holders, ratably (based on the
then outstanding principal amounts thereof), of Senior Notes and any other
senior Indebtedness of the Company then outstanding which requires such
purchase, up to a maximum principal amount (expressed as a multiple of
$1,000) of Senior Notes and such other senior Indebtedness equal to the
Available Amount at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase; provided, however, that the Company will not be required to apply
pursuant to this paragraph (ii) Net Cash Proceeds received from any Asset
Sale if, and only to the extent that, such Net Cash Proceeds are committed
in writing to be applied to acquire property or assets (and costs related
to such acquisition) in lines of business related to the Company's and its
Subsidiaries' business at such time within 270 days of such Asset Sale, and
are so applied within 360 days of such Asset Sale; and provided, further,
that the Company may defer the Asset Sale Offer until there is an aggregate
unutilized Available Amount equal to or in excess of $2,500,000 resulting
from one or more Asset Sales (at which time, the entire unutilized
Available Amount, and not just the amount in excess of $2,500,000, shall be
applied as required pursuant to this paragraph). The Asset Sale Offer shall
remain open for a period of at least 20 business days. To the extent the
Asset Sale Offer is not fully subscribed to by the Senior Noteholders and
holders of such other senior Indebtedness, the Company may use such
unutilized portion of the Available Amount for any purpose consistent with
the other terms of the Indenture.
Limitation on Transactions with Affiliates. The Indenture will provide
that the Company will not, and the Company will not permit, cause, or suffer any
Subsidiary of the Company to, conduct any business or enter into any transaction
or series of transactions with or for the benefit of any of their respective
Affiliates (each, an "Affiliate Transaction"), except in good faith and on terms
that are fair to the Company or such Subsidiary, as the case may be, and except
distributions permitted by the "Limitation on Restricted Payments" covenant. All
Affiliate Transactions (and each series of related Affiliate Transactions which
are similar or part of a common plan) involving aggregate payments or other
market value in excess of $2,000,000 shall be approved by the Board of Directors
of the Company or any such Subsidiary, as the case may be, such approval to be
evidenced by a Board Resolution stating that the Board of Directors have in good
faith determined that such transaction complies with the foregoing provisions.
The foregoing covenant shall not apply to transactions between the Company and
its Subsidiaries or among such Subsidiaries.
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
The Indenture will provide that the Company shall not consolidate with or
merge with or into or sell, assign, convey, lease, transfer or otherwise dispose
of all or substantially all of its properties and assets as an entirety to any
Person or group of Affiliated Persons in a single transaction or through a
series of transactions, unless: (a) either (i) the Company shall be the
continuing or surviving Person, or (ii) the resulting, surviving or transferee
Person (the "surviving entity") shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia; (b) the surviving entity shall expressly assume, by a supplemental
indenture executed and delivered to the Trustee, in form and substance
reasonably
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satisfactory to the Trustee, all of the obligations of the Company under the
Senior Notes and the Indenture; (c) immediately before and immediately after
giving effect to such transaction, or series of transactions (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions), no
Default or Event of Default shall have occurred and be continuing; and (d)
immediately after giving effect to such transaction or series of transactions on
a pro forma basis, the Company could incur $1.00 of Indebtedness under the
"Limitation on Additional Indebtedness" covenant.
There is no precise established meaning of the phrase "all or substantially
all of its properties and assets" as set forth in the foregoing discussion (or
in the definition of "Change of Control"). Accordingly, the ability of a holder
of the Senior Notes to enforce this provision of the Indenture following a sale,
assignment, conveyance, lease, transfer or other disposition of less than all of
the Company's properties and assets to another person may, to some extent, be
uncertain.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture:
(i) the default in the payment of any interest on the Senior Notes
when it becomes due and payable or of the principal of the Senior Notes
pursuant to an offer to purchase required by the Indenture and the
continuance of such default for a period of 30 days;
(ii) the default in the payment of the principal of, or premium, if
any, on the Senior Notes when due;
(iii) default in the performance of or breach of any covenant in the
Indenture (other than defaults specified in clause (i) or (ii) above), and
continuance of such default or breach for a period of 30 days after written
notice to the Company by the Trustee or to the Company and the Trustee by
the holders of at least 25% in aggregate principal amount of the
outstanding Senior Notes;
(iv) failure by the Company or any Material Subsidiary (a) to make any
payment when due (after giving effect to any applicable grace period) with
respect to one or more classes or issues of other Indebtedness in an
aggregate principal amount of $10,000,000 or more at the date of
determination; or (b) to perform any term, covenant, condition, or
provision of one or more classes or issues of other Indebtedness in an
aggregate principal amount of $10,000,000 or more at the date of
determination, which failure, in the case of either clause (a) or clause
(b), results in an acceleration of the maturity thereof;
(v) one or more final judgments, orders or decrees for the payment of
money in excess of $10,000,000, either individually or in an aggregate
amount, shall be entered against the Company or any of its Material
Subsidiaries or any of their respective properties and shall not be
discharged and there shall have been a period of 60 days during which a
stay of enforcement of such judgment or order, by reason of pending appeal
or otherwise, shall not be in effect; or
(vi) certain events of bankruptcy or insolvency with respect to the
Company or any Material Subsidiary shall have occurred.
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) occurs and is continuing, then the
holders of at least 25% in principal amount of the outstanding Senior Notes may,
by written notice, and the Trustee upon the request of the holders of not less
than 25% in principal amount of the outstanding Senior Notes shall, declare the
principal of, premium, if any, and accrued interest on all the Senior Notes to
be due and payable immediately. Upon any such declaration such principal shall
become due and payable immediately. If an Event of Default specified in (vi)
occurs with respect to the Company and is continuing, then the principal of,
premium, if any, and accrued interest on, all the Senior Notes shall ipso facto
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any holder.
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After a declaration of acceleration, the holders of a majority in aggregate
principal amount of outstanding Senior Notes may, by notice to the Trustee,
rescind such declaration of acceleration if all existing Events of Default,
other than the nonpayment of accelerated principal, have been cured or waived,
other than nonpayment of principal of, premium, if any, and accrued interest on
the Senior Notes that has become due solely as a result of such acceleration and
if the rescission of acceleration would not conflict with any judgment or
decree. The holders of a majority in principal amount of the outstanding Senior
Notes also have the right to waive past defaults under the Indenture, except a
default in the payment of the principal of, premium, if any, or interest on any
Senior Note, or in respect of a covenant or a provision which cannot be modified
or amended without the consent of all holders.
No holder of any of the Senior Notes has any right to institute any
proceeding with respect to the Indenture or any remedy thereunder, unless the
holders of at least 25% in principal amount of the outstanding Senior Notes have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as Trustee, the Trustee has failed to institute such
proceeding within 60 days after receipt of such notice and the Trustee has not
within such 60-day period received directions inconsistent with such written
request by holders of a majority in principal amount of the outstanding Senior
Notes. Such limitations do not apply, however, to a suit instituted by a holder
of a Senior Note for the enforcement of the payment of the principal of,
premium, if any, or accrued interest on such Senior Note on or after the
respective due dates expressed in such Senior Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent Person would
exercise under the circumstances in the conduct of such Person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
shall have offered to such Trustee reasonable security or indemnity. Subject to
certain provisions concerning the rights of the Trustee, the holders of a
majority in principal amount of the outstanding Senior Notes have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee.
DEFEASANCE
The Company may at any time terminate all of its obligations with respect
to the Senior Notes ("defeasance"), except for certain obligations, including
those regarding any trust established for a defeasance and obligations to
register the transfer or exchange of the Senior Notes, to replace mutilated,
destroyed, lost or stolen Senior Notes and to maintain agencies in respect of
Senior Notes. The Company may at any time terminate its obligations under
certain covenants set forth in the Indenture, some of which are described under
"Certain Covenants" above, and any omission to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the Senior
Notes issued under the Indenture ("covenant defeasance"). In order to exercise
either defeasance or covenant defeasance, the Company must irrevocably deposit
in trust, for the benefit of the holders of the Senior Notes, with the Trustee
money or U.S. government obligations, or a combination thereof, in such amounts
as will be sufficient to pay the principal of, and premium, if any, and interest
on the Senior Notes to redemption or maturity and comply with certain other
conditions, including the delivery of an opinion as to certain tax matters.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of Senior
Notes) as to all outstanding Senior Notes when either (a) all such Senior Notes
theretofore authenticated and delivered (except lost, stolen or destroyed Senior
Notes which have been replaced or paid and Senior Notes for whose payment money
has theretofore been deposited in trust or segregated and held in trust by the
Company and thereafter repaid to the Company or discharged from such trust) have
been delivered to the Trustee for cancellation; or (b) (i) all such Senior Notes
not theretofore delivered to the Trustee for cancellation have become due and
payable and the Company has
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irrevocably deposited or caused to be deposited with the Trustee as trust funds
in the trust for such purpose an amount of money sufficient to pay and discharge
the entire indebtedness on the Senior Notes not theretofore delivered to the
Trustee for cancellation, for principal, premium, if any, and accrued interest
to the date of such deposit, (ii) the Company has paid all sums payable by it
under the Indenture, and (iii) the Company has delivered irrevocable
instructions to the Trustee to apply the deposited money toward the payment of
the Senior Notes at maturity or the redemption date, as the case may be. In
addition, the Company must deliver an Officers' Certificate and an Opinion of
Counsel stating that all conditions precedent to satisfaction and discharge have
been complied with.
AMENDMENTS AND WAIVERS
From time to time the Company, when authorized by resolutions of its Board
of Directors, and the Trustee may, without the consent of the holders of the
Senior Notes, amend, waive or supplement the Indenture or the Senior Notes for
certain specified purposes, including, among other things, curing ambiguities,
defects or inconsistencies, maintaining the qualification of the Indenture under
the Trust Indenture Act, and making any change that does not adversely affect
the rights of any holder. Other amendments and modifications of the Indenture or
the Senior Notes may be made by the Company and the Trustee with the consent of
the holders of not less than a majority of the aggregate principal amount of the
outstanding Senior Notes; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Senior Note
affected thereby, (i) reduce the principal amount outstanding, extend the fixed
maturity, or alter the redemption provisions of the Senior Notes, (ii) reduce
the percentage in principal amount outstanding of Senior Notes, who must consent
to an amendment, supplement or waiver under the Indenture or the Senior Notes,
(iii) waive a default in payment with respect to the Senior Notes, (iv) reduce
the rate or extend the time for payment of interest on the Senior Notes, (v)
change the currency in which the Senior Notes or any premium or the accrued
interest thereon is payable, (vi) impair the right to institute suit for the
enforcement of any payment on or with respect to the Senior Notes, or (vii)
adversely affect the ranking of the Senior Notes.
REGARDING THE TRUSTEE
Bankers Trust Company will serve as Trustee under the Indenture.
GOVERNING LAW
The Indenture will provide that the Indenture and the Senior Notes will be
governed by and construed in accordance with the internal laws of the State of
New York.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Subsidiary of the Company or assumed in connection with an
Asset Acquisition by such Person, including, without limitation, Indebtedness
incurred in connection with, or in anticipation of, such Person becoming a
Subsidiary of the Company or such acquisition.
"Affiliate" of any specified Person means any other Person which, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with, such specified Person. For the purposes of this definition,
"control," when used with respect to any Person, means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
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"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise), or purchase or
acquisition of Capital Stock, by the Company or any of its Subsidiaries in any
other Person, or acquisition or purchase of Capital Stock by the Company or any
of its Subsidiaries in any other Person, in either case pursuant to which such
Person shall become a Subsidiary of the Company or any of its Subsidiaries or
shall be merged with or into the Company or any of its Subsidiaries or (ii) any
acquisition by the Company or any of its Subsidiaries of the assets of any
Person which constitute substantially all of an operating unit or business of
such Person.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
or other disposition to any Person other than the Company or a Subsidiary of the
Company, in one transaction or a series of related transactions, of (i) any
Capital Stock of any Subsidiary of the Company or (ii) any other property or
asset of the Company or any Subsidiary of the Company, in each case, other than
inventory in the ordinary course of business and other than such isolated
transactions which do not involve aggregate consideration in excess of $500,000
individually. For the purposes of this definition, the term "Asset Sale" shall
not include (x) sales of receivables not a part of a sale of the business from
which they arose, (y) any disposition of properties and assets of the Company or
any Subsidiary that is governed under and complies with the "Consolidation,
Merger, Conveyance, Transfer or Lease" or the "Limitation on Sale-Leaseback
Transactions" covenants or (z) transfers of assets to any Person solely in
exchange for assets which are related to the Company's business and which have a
Fair Market Value at least equal to the Fair Market Value of the assets
transferred.
"Board Resolution" means a copy of a resolution certified by the Secretary,
an Assistant Secretary or any Vice President of the Company, as appropriate, to
have been duly adopted by the Board of Directors of the Company, as appropriate,
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock.
"Change of Control" means (i) the direct or indirect sale, lease, exchange
or other transfer of all or substantially all of the assets of the Company to
any Person or entity or group of Persons or entities acting in concert as a
partnership or other group (a "Group of Persons") other than an Affiliate of the
Company or a Permitted Person, (ii) the merger or consolidation of the Company
with or into another corporation with the effect that the then existing
shareholders of the Company hold less than 50% of the combined voting power of
the then outstanding securities of the surviving corporation of such merger or
the corporation resulting from such consolidation ordinarily (and apart from
rights arising under special circumstances) having the right to vote in the
election of directors, or (iii) a Person or Group of Persons (other than a
Permitted Person) shall, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing more than 50% of the combined voting
power of the then outstanding securities of the Company ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors. For purposes of the foregoing, a "Permitted Person"
shall mean any holder or a group consisting solely of holders of the Class B
Common Stock of the Company on the Issue Date, any spouse or child of such
holder or any Person who is an Affiliate of such holder or such spouse or child.
The definition of "Change of Control" does not include (x) a Person or Group of
Persons receiving proxies entitling it to vote more than 50% of voting power of
securities having the right to vote in the election of directors unless such
Person or Group of Persons also beneficially owns such securities or (y) a
change of control in the Board of Directors occurring as a result of a proxy
contest. For the avoidance of doubt, in construing the foregoing provisions,
indirect ownership of an entity and indirect holding of interests or voting
power of an entity, such as through a holding company or otherwise, shall
constitute ownership of such entity and holding of interests or voting power of
such entity within the meaning of the foregoing.
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"Consolidated Cash Flow" means, with respect to any Person (including its
Subsidiaries) for any period, the Consolidated Net Income of such Person for
such period increased (to the extent deducted in determining Consolidated Net
Income) by the sum of (i) all income taxes of such Person paid or accrued in
accordance with GAAP for such period (other than income taxes attributable to
extraordinary, unusual or non-recurring gains or losses), (ii) all interest
expense of such Person paid or accrued in accordance with GAAP (net of any
interest income) for such period (including amortization of original issue
discount and the interest portion of deferred payment obligations), (iii)
depreciation, and (iv) amortization, including, without limitation, amortization
of capitalized debt issuance costs.
"Consolidated Interest Coverage Ratio" means, with respect to any Person,
the ratio of (i) Consolidated Cash Flow of such Person for the two full fiscal
quarters for which financial statements are available that immediately precede
the date of the proposed transaction or other circumstances giving rise to the
need to calculate the Consolidated Interest Coverage Ratio (the "Transaction
Date") to (ii) all cash and non-cash interest expense of such Person and its
Subsidiaries determined in accordance with GAAP (net of any interest income of
such Person and its Subsidiaries and excluding deferred financing fees of such
Person and its Subsidiaries) for such two full fiscal quarter period plus all
cash and non-cash interest capitalized by such Person and its Subsidiaries in
accordance with GAAP for such two full fiscal quarter period. For purposes of
this definition, if the Transaction Date is to occur prior to the date on which
the Company's consolidated financial statements for the two full fiscal quarters
subsequent to the Issue Date are first available, "Consolidated Cash Flow" and
the items referred to in the preceding clause (ii) shall be calculated, in the
case of the Company, after giving effect on a pro forma basis as if the Senior
Notes outstanding on the Transaction Date were issued on the first day of such
two full fiscal quarter period. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated Cash Flow" and the
items referred to in the preceding clause (ii) shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence and/or retirement of any Indebtedness of such Person or any of its
Subsidiaries at any time during the period (the "Reference Period") (A)
commencing on the first day of the two full fiscal quarter period for which
financial statements are available that precedes the Transaction Date and (B)
ending on and including the Transaction Date, including, without limitation, the
incurrence and/or retirement of the Indebtedness giving rise to the need to make
such calculation, as if such incurrence and/or retirement occurred on the first
day of the Reference Period; provided that if such person or any of its
Subsidiaries directly or indirectly guarantees Indebtedness of a third Person,
the above clause shall give effect to the incurrence of such guaranteed
Indebtedness as if such Person or Subsidiary had directly incurred such
guaranteed Indebtedness and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of the Company or any of its Subsidiaries
(including any Person who becomes a Subsidiary as a result of the Asset
Acquisition) incurring Acquired Indebtedness) occurring during the Reference
Period and any retirement of Indebtedness in connection with such Asset
Acquisitions, as if such Asset Sale or Asset Acquisition and/or retirement
occurred on the first day of the Reference Period. Furthermore, in calculating
the denominator (but not the numerator) of this "Consolidated Interest Coverage
Ratio," (1) interest on Indebtedness determined on a fluctuating basis as of the
Transaction Date and which will continue to be so determined thereafter shall be
deemed to accrue at a fixed rate per annum equal to the rate of interest on such
Indebtedness in effect on the date Consolidated Interest Coverage Ratio is
calculated; (2) if interest on any Indebtedness to be incurred on the
Transaction Date may optionally be determined at an interest rate based upon a
factor of a prime or similar rate, a eurocurrency interbank offered rate, or
other rates, then the interest rate based upon a factor of a prime or similar
rate shall be deemed to have been in effect; and (3) notwithstanding clause (1)
above, interest on Indebtedness determined on a fluctuating basis, to the extent
such interest is to be covered by agreements relating to interest rate
protection obligations, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "other Person") in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the net income of such other Person to
be consolidated into the net income of the Person in question in
48
<PAGE> 50
accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Subsidiary, (b)
the Net Income of any Subsidiary of the Person in question that is subject to
any restriction or limitation on the payment of dividends or the making of other
distributions shall be excluded to the extent of such restriction or limitation,
(c) (i) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (ii) any
net gain (but not loss) resulting from an Asset Sale by the Person in question
or any of its Subsidiaries other than in the ordinary course of business shall
be excluded, and (d) extraordinary gains and losses shall be excluded.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is exchangeable for Indebtedness, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Senior Notes.
"Fair Market Value" or "fair value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the transaction. Fair
Market Value shall be determined by the Board of Directors acting in good faith
and shall be evidenced by a Board Resolution delivered to the Trustee with
respect to all assets or property having a Fair Market Value in excess of
$1,000,000.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, which are applicable as of the date of
determination.
"Indebtedness" means, with respect to any Person, without duplication, (i)
any liability, contingent or otherwise, of such Person (A) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (B) evidenced by a note, debenture or
similar debt instrument or letter of credit (including a purchase money
obligation), or (C) for the payment of money relating to a capitalized lease
obligation or other obligation relating to the payment of the deferred purchase
price of property; (ii) any liability of others of the kind described in the
preceding clause (i) which the Person has guaranteed or which is otherwise its
contractual liability; (iii) any obligation secured by a Lien to which the
property or assets of such Person are subject, whether or not the obligations
secured thereby shall have been assumed by or shall otherwise be such Person's
legal liability; and (iv) any and all deferrals, renewals, extensions and
refundings of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (i), (ii) or (iii).
Notwithstanding the foregoing, the liability or obligation of a Person under any
appeal or reimbursement obligation entered into with respect to any judgment
shall not constitute Indebtedness. For the avoidance of doubt, in construing the
foregoing definition, guaranties by the Company or any of its Subsidiaries of
Indebtedness, which Indebtedness is incurred by the Company or any of its
Subsidiaries pursuant to, and in compliance with, the "Limitation on Additional
Indebtedness" covenant, shall not constitute Indebtedness within the meaning of
the foregoing definition.
"Indenture" means the instrument underlying the Senior Notes as originally
executed and delivered or, if amended or supplemented as herein provided, as so
amended or supplemented or both.
"Lien" means any mortgage, lien (statutory or other), pledge, security
interest, encumbrance, claim, hypothecation, assignment for security, or other
security agreement of any kind or nature whatsoever. For purposes of the
Indenture, a Person shall be deemed to own subject to a Lien any property which
it has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property.
49
<PAGE> 51
"Material Subsidiary" means, at any particular time, any Subsidiary of any
Person that (a) accounted for more than 10% of the consolidated revenues of such
Person and its Subsidiaries on a consolidated basis for the most recently
completed fiscal year of such Person or (b) was the owner of more than 10% of
the assets of such Person and its Subsidiaries on a consolidated basis as at the
end of such fiscal year, all as shown on the consolidated financial statements
of such Person and its Subsidiaries for such fiscal year.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations when received in the form of cash or cash
equivalents (except to the extent that such obligations with respect to
Indebtedness are financed or sold with recourse to the Company or any of its
Subsidiaries) net of (i) brokerage commissions and other reasonable fees and
expenses (including fees and expenses of counsel and investment bankers) related
to such Asset Sale; (ii) provisions for all taxes payable as a result of such
Asset Sale; (iii) payments made to retire Indebtedness secured by the assets
subject to such Asset Sale (including retirements of Indebtedness under the
Working Capital Facility) to the extent required pursuant to the terms of such
Indebtedness; and (iv) appropriate amounts to be provided by the Company or any
of its Subsidiaries, as the case may be, as a reserve, in accordance with GAAP
against any liabilities associated with such Asset Sale and retained by the
Company or any of its Subsidiaries, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Company, the aggregate net proceeds received by the Company, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or surrender
of outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Stock, the net book value of such outstanding
securities on the date of such exchange, exercise, conversion or surrender (plus
any additional amount required to be paid by the holder to the Company upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares and less all expenses
incurred by the Company in connection therewith).
"Permitted Investments" means (i) obligations of or guaranteed by the U.S.
government due within one year; (ii) certificates of deposit or eurodollar
deposits due within one year with a commercial bank having capital funds of at
least $100,000,000 or more; (iii) commercial paper rated A-2, P-2 or better by
Standard & Poor's Corporation or Moodys Investor Services, Inc.; (iv) money
market preferred stocks which, at the date of acquisition and at all times
thereafter, are accorded either of the two highest ratings by Standard & Poor's
Corporation or Moodys Investor Services, Inc.; (v) debt of or guaranteed by any
state or political subdivision that is rated A or better and (vi) Repurchase
Agreements.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Public Equity Offering" means a public offering by the Company of shares
of its common stock (however designated and whether voting or non-voting) and
any and all rights, warrants or options to acquire such common stock.
"Repurchase Agreements" means repurchase agreements, reverse repurchase
agreements or similar agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition;
provided that the terms of such agreements comply with the guidelines set forth
in Federal Financial Agreements of Depository Institutions with Securities and
Others (or any successor guidelines), as adopted by the Controller of the
Currency.
50
<PAGE> 52
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Subsidiary of the Company or any payment made to the direct
or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock), and (y) in the case of Subsidiaries of the Company,
dividends or distributions payable to the Company or to a Subsidiary of the
Company), (ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its Subsidiaries (other than
Capital Stock owned by the Company or a Wholly-Owned Subsidiary of the Company,
excluding Disqualified Stock), (iii) the making of any principal payment on, or
the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness which is subordinated in
right of payment to the Senior Notes (other than subordinated Indebtedness of
the Company outstanding as of the Issue Date and other than subordinated
Indebtedness acquired in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year of the
date of acquisition), and (iv) the making of any Investment or guarantee of any
Investment in any Person other than as is permitted under clauses (i)-(v) and
(vii) in the "Limitation on Investments, Loans and Advances" covenant.
"Sale-Leaseback Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"Subsidiary" means (i) a corporation a majority of whose Capital Stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by the Company, by a Subsidiary of the Company or
by the Company and a Subsidiary of the Company or (ii) any other Person (other
than a corporation) in which the Company, a Subsidiary of the Company or the
Company and a Subsidiary of the Company, directly or indirectly, at the date of
determination thereof, have at least a majority ownership interest.
Notwithstanding the foregoing, an Unrestricted Subsidiary shall not be deemed a
Subsidiary of the Company other than for purposes of the definition of
Unrestricted Subsidiary, unless the Company shall have designated an
Unrestricted Subsidiary as a "Subsidiary" by written notice to the Trustee. An
Unrestricted Subsidiary may be designated as a Subsidiary at any time by the
Company by written notice to the Trustee, provided, that, if such Unrestricted
Subsidiary is an obligor of any Indebtedness, immediately after giving effect to
such designation, the Company could incur $1.00 of Indebtedness under the
"Limitation on Additional Indebtedness" covenant.
"Unrestricted Subsidiary" means, any Subsidiary of the Company which at the
time of creation or acquisition thereof (and at no other time) by the Company is
designated by written notice to the Trustee as an Unrestricted Subsidiary. An
Unrestricted Subsidiary may be designated as a Subsidiary at a later date as
provided above.
"Working Capital Facility" means the Revolving Credit Agreement, dated as
of April 29, 1992, among the Company, the financial institutions party thereto,
Citibank, N.A., as Issuer, and Citicorp USA, Inc., as Agent, and under any other
agreement, instrument, facility or arrangement intended to provide working
capital (including any asset securitization facility involving the sale of
accounts receivable) as the same may at any time be amended, amended and
restated, supplemented or otherwise modified, including any refinancing,
refunding, replacement or extension thereof and whether by the same or any other
lender or groups of lenders.
51
<PAGE> 53
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
between the Company and Citicorp Securities, Inc., Citibank Canada Securities
Limited, Citibank International plc and Salomon Brothers Inc (collectively, the
"Underwriters"), the Company has agreed to sell to each of the Underwriters, and
the Underwriters have severally agreed to purchase from the Company, the
aggregate principal amount of Senior Notes set forth opposite their respective
names below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF SENIOR NOTES
----------- ----------------
<S> <C>
Citicorp Securities, Inc. ........................................... $
Citibank Canada Securities Limited...................................
Citibank International plc...........................................
Salomon Brothers Inc.................................................
----------------
Total...................................................... $125,000,000
----------------
----------------
</TABLE>
The nature of the Underwriters' obligations are such that they are
committed to purchase all of the Senior Notes if any are purchased. The
Underwriters propose to offer the Senior Notes directly to the public at the
public offering price set forth on the cover page of this Prospectus. The
Underwriters have advised the Company that sales of the Senior Notes may be made
to certain selected dealers at a concession not in excess of % per Senior
Note. After the initial public offering of the Senior Notes, the public offering
price concession with respect to the Senior Notes may be changed.
The Company has been advised by Citicorp Securities, Inc. and Salomon
Brothers Inc that they presently intend to make a market in the Senior Notes,
subject to applicable laws and regulations; however, they are not obligated to
do so and any market-making activities with respect to the Senior Notes may be
discontinued at any time without notice. There can be no assurance that an
active public market for the Senior Notes will develop.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect of such
liabilities.
Citibank International plc, a United Kingdom broker-dealer, and Citibank
Canada Securities Limited have each agreed that, as part of the distribution of
the Senior Notes offered hereby and subject to certain exceptions, they will not
offer or sell any Senior Notes within the United States, its territories or
possessions or to persons who are residents therein.
Each Underwriter has represented and agreed that (i) it has not offered or
sold and will not offer or sell in the United Kingdom, by means of any document,
any Senior Notes other than to persons whose ordinary business is to buy or sell
shares or debentures, whether as principal or agent (except in circumstances
which do not constitute an offer to the public within the meaning of the Company
Act 1985, as amended), (ii) it has complied with and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Senior Notes in, from, or otherwise
involved the United Kingdom and (iii) it has only issued or passed on and will
only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Senior Notes to a person who is of a kind
described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988 or is a person to whom the document may
otherwise lawfully be issued or passed on.
Citicorp Securities, Inc., its affiliates and Salomon Brothers Inc have
performed financial advisory and other services for the Company in the past, for
which they received customary compensation. Citicorp USA, Inc., an affiliate of
Citicorp Securities, Inc., is the agent under the Revolving Credit Facility.
52
<PAGE> 54
LEGAL MATTERS
Certain legal matters in connection with the issuance of the Senior Notes
offered hereby will be passed upon for the Company by Ken C. Johnsen, Vice
President, Secretary and General Counsel of the Company, and Kimball, Parr,
Waddoups, Brown & Gee, a professional corporation, Salt Lake City, Utah. Ken C.
Johnsen was engaged in the private practice of law with Kimball, Parr, Waddoups,
Brown & Gee until February 1991. Certain legal matters in connection with the
Senior Notes offered hereby will be passed upon for the Underwriters by Cahill
Gordon & Reindel (a partnership including a professional corporation), New York,
New York.
EXPERTS
The financial statements and schedules included (or incorporated by
reference) in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen & Co., independent public accountants, as
indicated in their reports with respect thereto, and are included (or
incorporated by reference) herein in reliance upon the authority of said firm as
experts in accounting and auditing in giving said reports.
53
<PAGE> 55
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-3
Balance Sheets at September 30, 1992 and 1993 and at December 31, 1993 (unaudited).... F-4
Statements of Income for the years ended September 30, 1991, 1992 and 1993 and for the
(unaudited) three months ended December 31, 1992 and 1993........................... F-6
Statements of Stockholders' Equity for the years ended September 30, 1991, 1992 and
1993 and for the (unaudited) three months ended December 31, 1993................... F-7
Statements of Cash Flows for the years ended September 30, 1991, 1992 and 1993 and for
the (unaudited) three months ended December 31, 1992 and 1993....................... F-8
Notes to Financial Statements......................................................... F-10
</TABLE>
F-1
<PAGE> 56
(This page intentionally left blank)
F-2
<PAGE> 57
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Geneva Steel Company:
We have audited the accompanying balance sheets of Geneva Steel Company (a
Utah corporation) as of September 30, 1992 and 1993, and the related statements
of income, stockholders' equity and cash flows for each of the three years in
the period ended September 30, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Geneva Steel Company as of
September 30, 1992 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1993 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Salt Lake City, Utah
November 1, 1993 (except with
respect to the matter discussed in Note 2,
as to which the date is December 21, 1993)
F-3
<PAGE> 58
GENEVA STEEL COMPANY
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------- DECEMBER 31,
1992 1993 1993
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 3,122 $ 64,267 $ 16,130
Accounts receivable, less allowance for doubtful
accounts of $3,413, $2,983 and $2,510,
respectively........................................ 50,405 46,257 52,114
Inventories............................................ 59,272 63,230 65,346
Income taxes receivable................................ 15,239 -- --
Prepaid expenses and other............................. 4,663 1,426 5,177
Deferred income taxes.................................. -- -- 5,823
-------- -------- ------------
Total current assets........................... 132,701 175,180 144,590
-------- -------- ------------
Property, Plant and Equipment:
Land................................................... 1,931 1,931 1,931
Buildings.............................................. 3,725 3,725 3,725
Machinery and equipment................................ 288,253 369,490 416,073
Mineral property and development costs................. 7,142 8,425 8,425
-------- -------- ------------
301,051 383,571 430,154
Less accumulated depreciation.......................... (48,254) (68,981) (74,623)
-------- -------- ------------
Net property, plant and equipment.............. 252,797 314,590 355,531
-------- -------- ------------
Other Assets............................................. 4,964 8,614 8,215
-------- -------- ------------
$390,462 $498,384 $508,336
-------- -------- ------------
-------- -------- ------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-4
<PAGE> 59
GENEVA STEEL COMPANY
BALANCE SHEETS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------- DECEMBER 31,
1992 1993 1993
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable....................................... $ 33,878 $ 52,982 $ 45,056
Accrued payroll and related taxes...................... 7,924 8,578 11,127
Accrued liabilities.................................... 7,067 11,810 12,831
Production prepayments................................. 5,999 10,000 10,000
Accrued interest payable............................... 1,504 1,533 7,816
Accrued pension and profit sharing costs............... 675 1,110 1,322
-------- -------- ------------
Total current liabilities...................... 57,047 86,013 88,152
-------- -------- ------------
Long-Term Debt........................................... 178,182 224,991 224,991
-------- -------- ------------
Deferred Income Taxes.................................... 13,401 15,619 21,528
-------- -------- ------------
Commitments and Contingencies (Note 4)
Redeemable Preferred Stock, Series B, no par value,
400,000 shares authorized, issued and outstanding, with
an aggregate liquidation value of $43,099 and $44,607,
respectively........................................... -- 35,986 37,665
-------- -------- ------------
Stockholders' Equity:
Preferred stock, no par value, 3,600,000 shares
authorized for all series, excluding Series B, none
issued.............................................. -- -- --
Common stock:
Class A, no par value, 60,000,000 shares authorized,
14,189,871, 14,360,886 and 14,390,886 shares
issued, respectively.............................. 85,180 86,094 86,264
Class B, no par value, 50,000,000 shares authorized,
24,305,288, 22,595,138 and 22,295,138 shares
issued and outstanding, respectively.............. 12,830 11,929 11,770
Warrants to purchase Class A common stock.............. -- 5,360 5,360
Retained earnings...................................... 64,676 52,542 52,573
Less 1,587,300, 1,533,719 and 1,519,741 Class A common
stock treasury shares, respectively, at cost........ (20,854) (20,150) (19,967)
-------- -------- ------------
Total stockholders' equity..................... 141,832 135,775 136,000
-------- -------- ------------
$390,462 $498,384 $508,336
-------- -------- ------------
-------- -------- ------------
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-5
<PAGE> 60
GENEVA STEEL COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------- ---------------------
1991 1992 1993 1992 1993
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................................... $445,981 $420,026 $465,181 $101,149 $127,099
Cost of sales................................. 393,180 406,291 443,458 99,468 115,626
-------- -------- -------- -------- --------
Gross margin................................ 52,801 13,735 21,723 1,681 11,473
Selling, general and administrative
expenses.................................... 21,881 22,322 20,621 4,635 5,682
-------- -------- -------- -------- --------
Income (loss) from operations............... 30,920 (8,587) 1,102 (2,954) 5,791
-------- -------- -------- -------- --------
Other income (expense):
Interest and other income................... 3,464 807 1,885 70 433
Interest expense............................ (6,165) (13,695) (17,096) (3,570) (3,472)
-------- -------- -------- -------- --------
(2,701) (12,888) (15,211) (3,500) (3,039)
-------- -------- -------- -------- --------
Income (loss) before provision (benefit) for
income taxes................................ 28,219 (21,475) (14,109) (6,454) 2,752
Provision (benefit) for income taxes.......... 10,665 (8,383) (5,503) (2,517) 1,042
-------- -------- -------- -------- --------
Net income (loss)............................. 17,554 (13,092) (8,606) (3,937) 1,710
Less redeemable preferred stock dividends and
accretion for original issue discount....... -- -- 3,466 -- 1,679
-------- -------- -------- -------- --------
Net income (loss) applicable to common
shares...................................... $ 17,554 $(13,092) $(12,072) $ (3,937) $ 31
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Net income (loss) per common share............ $ 1.17 $ (.87) $ (.80) $ (.26) $ .002
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Weighted average shares outstanding........... 15,034 15,021 15,059 15,036 15,095
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE> 61
GENEVA STEEL COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SHARES ISSUED AMOUNT WARRANTS
----------------------- ----------------- TO PURCHASE
COMMON COMMON COMMON COMMON COMMON RETAINED TREASURY
CLASS A CLASS B CLASS A CLASS B CLASS A EARNINGS STOCK TOTAL
---------- ---------- ------- ------- ----------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1990.... 13,954,871 26,655,288 $81,646 $13,367 $ -- $60,390 $(21,895) $133,508
Capitalization to common stock
of S Corporation stockholders
distributions for income
taxes returned to Company.... -- -- 2,829 696 -- -- -- 3,525
Conversion of Class B common
stock into Class A common
stock........................ 125,000 (1,250,000) 653 (653 ) -- -- -- --
Costs in connection with
secondary offering of Class A
common stock................. -- -- (531 ) -- -- -- -- (531)
Exercise of options to purchase
Class A common stock......... -- -- -- -- -- (74 ) 434 360
Net income..................... -- -- -- -- -- 17,554 -- 17,554
---------- ---------- ------- ------- ----------- -------- -------- --------
Balance at September 30, 1991.... 14,079,871 25,405,288 84,597 13,410 -- 77,870 (21,461) 154,416
Exercise of options to purchase
Class A common stock......... -- -- -- -- -- (102 ) 607 505
Capitalization to common stock
of S Corporation stockholders
distributions for income
taxes returned to Company.... -- -- 2 1 -- -- -- 3
Conversion of Class B common
stock into Class A common
stock........................ 110,000 (1,100,000) 581 (581 ) -- -- -- --
Net loss....................... -- -- -- -- -- (13,092 ) -- (13,092)
---------- ---------- ------- ------- ----------- -------- -------- --------
Balance at September 30, 1992.... 14,189,871 24,305,288 85,180 12,830 -- 64,676 (20,854) 141,832
Capitalization to common stock
of S Corporation stockholders
distributions for income
taxes returned to Company.... -- -- 9 2 -- -- -- 11
Conversion of Class B common
stock into Class A common
stock........................ 171,015 (1,710,150) 903 (903 ) -- -- -- --
Issuance of Class A common
stock to employee savings
plan......................... -- -- 2 -- -- (62 ) 704 644
Redeemable preferred stock
dividends.................... -- -- -- -- -- (3,099 ) -- (3,099)
Redeemable preferred stock
accretion for original issue
discount..................... -- -- -- -- -- (367 ) -- (367)
Issuance of 1,132,000 warrants
to purchase Class A common
stock in connection with
issuance of redeemable
preferred stock.............. -- -- -- -- 5,360 -- -- 5,360
Net loss....................... -- -- -- -- -- (8,606 ) -- (8,606)
---------- ---------- ------- ------- ----------- -------- -------- --------
Balance at September 30, 1993.... 14,360,886 22,595,138 86,094 11,929 5,360 52,542 (20,150) 135,775
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Unaudited
Conversion of Class B common
stock into Class A common
stock........................ 30,000 (300,000) 159 (159 ) -- -- -- --
Issuance of Class A common
stock to employee savings
plan......................... -- -- 11 -- -- -- 183 194
Redeemable preferred stock
dividends.................... -- -- -- -- -- (1,508 ) -- (1,508)
Redeemable preferred stock
accretion for original issue
discount..................... -- -- -- -- -- (171 ) -- (171)
Net income..................... -- -- -- -- -- 1,710 -- 1,710
---------- ---------- ------- ------- ----------- -------- -------- --------
Balance at December 31, 1993
(Unaudited).................... 14,390,386 22,295,138 $86,264 $11,770 $ 5,360 $52,573 $(19,967) $136,000
---------- ---------- ------- ------- ----------- -------- -------- --------
---------- ---------- ------- ------- ----------- -------- -------- --------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-7
<PAGE> 62
GENEVA STEEL COMPANY
STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
----------------------------------- ---------------------
1991 1992 1993 1992 1993
--------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Increase (Decrease) in Cash and Cash
Equivalents
Cash flows from operating activities:
Net income (loss).......................... $ 17,554 $(13,092) $ (8,606) $ (3,937) $ 1,710
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............ 14,728 21,136 23,150 5,408 6,128
Deferred income tax provision............ 2,728 11,899 2,218 2,634 86
(Increase) decrease in current assets --
Accounts receivable, net............... 21,379 (4,575) 4,148 2,842 (5,857)
Inventories............................ (5,365) 10,085 (3,958) (3,020) (2,116)
Income taxes receivable................ -- (15,239) 15,239 (953) --
Prepaid expenses and other............. (832) 449 3,237 933 (3,751)
Increase (decrease) in current
liabilities --
Accounts payable....................... 6,563 (1,298) 19,104 (1,501) (7,926)
Accrued payroll and related taxes...... (226) (4,027) 654 1,940 2,549
Accrued liabilities.................... (2,486) (501) 4,743 (1,075) 1,021
Production prepayments................. -- 5,999 4,001 2,389 --
Accrued interest payable............... 489 (15) 29 4,514 6,283
Accrued pension and profit sharing
costs............................... (9,194) (177) 435 14 212
Income taxes payable................... 2,444 (2,444) -- -- --
--------- -------- -------- -------- --------
Net cash provided by (used for) operating
activities............................... 47,782 8,200 64,394 10,188 (1,661)
--------- -------- -------- -------- --------
Cash flows from investing activities:
Proceeds from sale of marketable
securities............................. 3,212 -- -- -- --
Purchase of property, plant and
equipment.............................. (113,410) (66,617) (82,534) (10,356) (46,583)
--------- -------- -------- -------- --------
Net cash used for investing activities..... (110,198) (66,617) (82,534) (10,356) (46,583)
--------- -------- -------- -------- --------
Cash flows from financing activities:
Proceeds from long-term debt............... 50,000 163,382 325,313 109,469 --
Payments on long-term debt................. (2,514) (145,660) (278,504) (118,127) --
Proceeds from issuance of redeemable
preferred stock, net of offering costs... -- -- 32,521 -- --
Proceeds from issuance of warrants to
purchase Class A common stock, net of
offering costs........................... -- -- 5,360 -- --
Payments for deferred loan costs........... (2,500) (2,318) (6,062) (57) (88)
Bank overdraft............................. -- -- -- 5,647 --
S Corporation stockholders distributions
for income taxes returned to Company..... 3,525 3 11 -- --
Proceeds from exercise of options to
purchase Class A common stock............ 360 505 -- -- --
Class A common stock secondary offering
costs.................................... (531) -- -- -- --
Issuance of Class A common stock to
employee savings plan.................... -- -- 644 114 195
Other...................................... 3 30 2 -- --
--------- -------- -------- -------- --------
Net cash provided by (used for) financing
activities............................... 48,343 15,942 79,285 (2,954) 107
--------- -------- -------- -------- --------
</TABLE>
F-8
<PAGE> 63
GENEVA STEEL COMPANY
STATEMENTS OF CASH FLOW -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
----------------------------------- ---------------------
1991 1992 1993 1992 1993
--------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net increase (decrease) in cash and cash
equivalents.............................. $ (14,073) $(42,475) $ 61,145 $ (3,122) $(48,137)
Cash and cash equivalents at beginning of
period..................................... 59,670 45,597 3,122 3,122 64,267
--------- -------- -------- -------- --------
Cash and cash equivalents at end of period... $ 45,597 $ 3,122 $ 64,267 $ -- $ 16,130
--------- -------- -------- -------- --------
--------- -------- -------- -------- --------
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest (net of amount capitalized)..... $ 5,677 $ 12,787 $ 14,655 $ -- $ --
Income taxes............................. 5,465 -- -- -- --
</TABLE>
Supplemental schedule of noncash financing activities:
For the year ended September 30, 1993 and the three months ended December 31,
1993, the Company increased the redeemable preferred stock liquidation
preference by $3,099 and $1,508 respectively, in lieu of paying a cash
dividend. In addition, for the same periods, redeemable preferred stock was
increased by $367 and $171, respectively, for the accretion required over
time to amortize the original issue discount on the redeemable preferred
stock incurred at the time of issuance.
The accompanying notes to financial statements are an integral part of these
statements.
F-9
<PAGE> 64
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid income-earning securities with an initial maturity, at time of
purchase, of ninety days or less to be cash equivalents. Cash equivalents are
stated at cost plus accrued interest, which approximates fair market value.
The Company's cash management system utilizes a revolving credit facility
with a syndicate of banks. During periods when amounts are outstanding on the
revolving credit facility, the syndicate of banks requires that cash receipts be
remitted directly to the lead bank in payment of such outstanding amounts
through a lockbox account and, as disbursements are made, the Company borrows
against the revolving credit facility (See Note 2).
Inventories
Inventories include costs of material, labor and manufacturing overhead.
Inventories are stated at the lower of cost (using a weighted-average method) or
market value. The composition of inventories was as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------- DECEMBER 31,
1992 1993 1993
------- ------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials...................... $16,711 $20,138 $ 26,918
Semi-finished and finished goods... 32,835 34,462 29,783
Operating materials................ 9,726 8,630 8,645
------- ------- ------------
$59,272 $63,230 $ 65,346
------- ------- ------------
------- ------- ------------
</TABLE>
Operating materials consist primarily of production molds, platforms for
the production molds and furnace lining refractories. Operating materials are
normally consumed within one year and are accounted for as inventory.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the
straight-line method over their estimated useful lives as follows:
<TABLE>
<S> <C>
Buildings............................................. 31.5 years
Machinery and Equipment............................... 3-30 years
</TABLE>
Interest related to the construction or major rebuild of facilities is
capitalized and amortized over the estimated life of the related asset.
Capitalization of interest ceases when the asset is placed in service. The
Company capitalized approximately $8,342, $5,774, and $7,696 of interest during
the years ended September 30, 1991, 1992 and 1993, respectively.
Maintenance and repairs are charged to expense as incurred and costs of
improvements and betterments are capitalized. Upon disposal, related costs and
accumulated depreciation are removed from the accounts and resulting gains or
losses are reflected in income.
Major spare parts for machinery and equipment are capitalized and included
in machinery and equipment in the accompanying financial statements. Spare parts
are depreciated using the straight-line method over the useful lives of the
related machinery and equipment.
F-10
<PAGE> 65
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Costs incurred in connection with the construction or major rebuild of
facilities are capitalized as construction in progress. No depreciation is
recognized on these assets until placed in service. As of September 30, 1992 and
1993 and December 31, 1993, approximately $60,996, $130,567 and $154,780,
respectively, of construction in progress was included in machinery and
equipment in the accompanying financial statements.
Mineral property and development costs are depleted using the units of
production method based upon estimated recoverable reserves. Accumulated
depletion is included in accumulated depreciation in the accompanying financial
statements.
Other Assets
Other assets consist of deferred loan costs incurred in connection with
obtaining long-term financing. These costs are being amortized on a
straight-line basis over the term of the applicable financing agreement.
Accumulated amortization totaled $1,201, $2,582 and $3,069 at September 30, 1992
and 1993 and at December 31, 1993, respectively.
Production Prepayments
The Company has production prepayment terms with a major customer. The
prepayment is recorded as a production prepayment until the product is shipped,
at which time the sale is recorded.
Revenue Recognition
Sales are recognized when the product is shipped to the customer. Sales are
reduced by the amount of customer claims. At September 30, 1992 and 1993 and at
December 31, 1993, reserves for customer claims of $1,769, $1,811 and $1,811,
respectively, are included in the allowance for doubtful accounts in the
accompanying financial statements.
Income Taxes
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting For Income Taxes."
SFAS No. 109 supersedes SFAS No. 96. Effective October 1, 1993, the Company
adopted SFAS No. 109. The Company previously adopted SFAS No. 96, and therefore,
the impact of adopting SFAS No. 109 did not have a significant impact on the
Company's financial statements. In accordance with the provisions of SFAS No.
109, as of December 31, 1993, the Company reclassified current deferred tax
items (as defined by SFAS No. 109) of $5,823 to a current deferred tax asset in
the accompanying financial statements. These items were netted in the deferred
income tax liabilities in previous periods. As of December 31, 1993, the
realizability of the deferred tax assets requires no valuation allowance. The
Company recognizes a liability or asset for the deferred tax consequences of all
temporary differences between the tax basis of assets or liabilities and their
reported amounts in the financial statements that will result in taxable or
deductible amounts in future years when the reported amounts of the assets or
liabilities are recovered or settled.
Net Income (Loss) Per Common Share
Net income (loss) per common share is based upon the weighted average
number of common and common equivalent shares outstanding during the periods
presented. Common equivalent shares consist of warrants and options to purchase
Class A common stock which have a dilutive effect when applying the treasury
stock method. Class B common stock is included in the weighted average number of
common shares outstanding at one share for every ten shares outstanding as the
Class B common stock can be converted into Class A common stock at this same
rate. Also, the Class B common stock is entitled to one-tenth of the
F-11
<PAGE> 66
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
dividends and other distributions paid to Class A common stockholders. The
holders of both classes of common stock are entitled to one vote per share.
The net income (loss) for the year ended September 30, 1993 and the three
months ended December 31, 1993 was adjusted for redeemable preferred stock
dividends and accretion required over time to amortize the original issue
discount on the redeemable preferred stock incurred at the time of issuance.
Unaudited Information
The accompanying unaudited financial data as of December 31, 1993 and for
the three-month periods ended December 31, 1992 and 1993 have been prepared on
substantially the same basis as the annual financial statements. In the opinion
of management, the unaudited information contains all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the financial position
and results of operations as of such date and for such periods.
Reclassifications
Certain reclassifications have been made in the prior periods' financial
statements to conform to the current period presentation.
2. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
-------------------- -------------
1992 1993 1993
----
(UNAUDITED)
-----------
<S> <C> <C> <C>
Senior term notes issued publicly, interest payable
semi-annually at 11.125%, principal due March 15, 2001,
unsecured.............................................. $ -- $135,000 $ 135,000
Senior term notes issued to a group of institutional
investors, interest payable semi-annually at 11.40%,
principal payable in either five equal annual
installments or $19,000 annually until paid, at the
option of the investors, beginning March 1, 1995,
unsecured.............................................. 95,000 64,410 64,410
Senior term notes issued to a group of institutional
investors, interest payable semi-annually at 10.55%,
principal payable in either five equal annual
installments or $10,000 annually until paid, at the
option of the investors, beginning September 1, 1995,
unsecured.............................................. 50,000 22,623 22,623
Subordinated term notes issued to institutional
investors, interest
payable semi-annually at 13.00%, principal payable in
either five annual installments or $1,500 annually
until paid, at the option of the investors, beginning
March 1, 1995, unsecured............................... 15,000 2,958 2,958
Revolving credit facility from a syndicate of banks,
interest payable as described below, due February 28,
1995, secured by accounts receivable and inventories... 18,182 -- --
-------- -------- -----------
$178,182 $224,991 $ 224,991
-------- -------- -----------
-------- -------- -----------
</TABLE>
F-12
<PAGE> 67
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate amounts of principal maturities of long-term debt as of
September 30, 1993 were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
--------------------------------------------------------
<S> <C>
1994.................................................... $ --
1995.................................................... 30,500
1996.................................................... 30,458
1997.................................................... 21,623
1998.................................................... 7,410
Thereafter.............................................. 135,000
--------
$224,991
--------
--------
</TABLE>
The Company has a $50,000 three year revolving credit facility from a
syndicate of banks led by Citicorp USA, Inc., as agent (the "Revolving Credit
Facility"). As of September 30, 1993 and December 31, 1993, no amount was
outstanding on the Revolving Credit Facility. Interest is payable, at the
Company's option, at either the base rate plus 1.50% (7.5% at December 31, 1993)
or one, three or six month LIBOR plus 3%. Interest is payable monthly on base
rate, one month LIBOR and six month LIBOR advances and at the end of the
interest rate period on three month LIBOR advances. The amount available to the
Company under the Revolving Credit Facility is the lesser of the borrowing limit
or the sum of (i) 85% of acceptable accounts receivable plus (ii) the lesser of
approximately 50 to 55%, in the aggregate, of acceptable inventories not to
exceed 50% of the borrowing limit. The Company pays a monthly commitment fee
based on an annual rate of .50% of the average unused portion of the borrowing
limit under the Revolving Credit Facility. This Revolving Credit Facility is
collateralized by the Company's accounts receivable, inventories, certain
general intangibles and proceeds thereof. The Revolving Credit Facility expires
in February 1995. Management believes it will be necessary to replace or extend
such facility at that time.
On March 16, 1993, the Company issued publicly $135,000 of 11 1/8% Senior
Notes (the "11 1/8% Senior Notes"). In connection with the issuance of the
11 1/8% Senior Notes, the Company repurchased $70,009 principal amount of senior
and subordinated privately-placed term debt at par. The 11 1/8% Senior Notes
mature in 2001, are unsecured and require interest payments semi-annually on
March 15 and September 15. After March 1998, the 11 1/8% Senior Notes are
redeemable, in whole or in part, at the option of the Company, subject to
certain redemption premiums.
In December 1993, the Company filed a registration statement with the
Securities and Exchange Commission relating to a proposed public offering of
$125,000 aggregate principal amount of Senior Notes Due 2004 (the "New Senior
Notes"). Assuming the successful completion of the proposed offering, the
estimated net proceeds will be used primarily to repay an aggregate of $89,991
principal amount of senior and subordinated privately-placed term debt bearing a
weighted average interest rate of 11.24% (the "Private Debt"), plus contractual
prepayment premiums currently estimated at approximately $15,000 and accrued
interest of approximately $5,000 (the "Refinancing"). The prepayment premiums
will be expensed as an extraordinary item, net of related income tax effect, at
the time the offering is consummated. The New Senior Notes are intended to
replace the Private Debt with indebtedness having a lower interest rate and a
longer maturity. The Refinancing is also expected to increase the Company's
liquidity and financial flexibility by providing the Company with full access to
its existing $50,000 Revolving Credit Facility and by eliminating near-term
principal sinking fund requirements contained in the Private Debt. The Private
Debt includes restrictions that currently limit borrowings under the Revolving
Credit Facility to a total of $20,000.
F-13
<PAGE> 68
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During the years ended September 30, 1991, 1992 and 1993, the Company
retired certain term loans and revolving credit facilities. Deferred loan costs
applicable to debt retired were written-off by the Company and are included in
the accompanying financial statements.
The debt instruments governing the Revolving Credit Facility, the Private
Debt and the 11 1/8% Senior Notes contain cross default and other customary
provisions. Financial covenants contained in one or more of these instruments
include, among other things, a limitation on dividends and distributions on
capital stock of the Company, a tangible net worth maintenance requirement, a
current ratio maintenance requirement, a leverage ratio maintenance requirement,
an interest coverage requirement, a cumulative cash flow requirement, a
cumulative capital expenditure limitation, a limitation on the incurrence of
additional indebtedness unless certain financial tests are satisfied, a
limitation on mergers, consolidations and dispositions of assets and a
limitation on liens. Based on such covenants, as of September 30, 1993 and
December 31, 1993, approximately $50,542 and $50,572, respectively, of the
Company's retained earnings balance was restricted from payment of cash
dividends. As of September 30, 1993, the Company was in compliance with the
covenants and tests contained in these debt instruments.
The Company estimates that the aggregate fair market value of its debt and
related obligations was approximately $231,372 as of September 30, 1993. These
estimates were based on quoted market prices or current rates offered for debt
with similar terms and maturities.
3. INCOME TAXES
The provision (benefit) for income taxes as of September 30, 1991, 1992 and
1993 consisted of the following:
<TABLE>
<CAPTION>
1991 1992 1993
------- -------- -------
<S> <C> <C> <C>
Current tax provision (benefit)
Federal............................................ $ 6,755 $(17,634) $(6,201)
State.............................................. 1,182 (2,648) (1,520)
------- -------- -------
7,937 (20,282) (7,721)
------- -------- -------
Deferred tax provision
Federal............................................ 2,378 10,374 1,424
State.............................................. 350 1,525 794
------- -------- -------
2,728 11,899 2,218
------- -------- -------
Provision (benefit) for income taxes................. $10,665 $ (8,383) $(5,503)
------- -------- -------
------- -------- -------
</TABLE>
F-14
<PAGE> 69
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax provision results from temporary differences in the
recognition of revenues and expenses for income tax and financial reporting
purposes including the effect of enacted tax rate changes. The components of the
deferred tax provision as of September 30, 1991, 1992 and 1993 were as follows:
<TABLE>
<CAPTION>
1991 1992 1993
------ ------- -------
<S> <C> <C> <C>
Tax depreciation in excess of financial reporting
depreciation......................................... $2,548 $ 9,862 $ 8,338
Alternative minimum tax credit carryforward............ -- -- (4,134)
Accrued insurance costs not currently deductible for
tax.................................................. -- -- (1,171)
Mineral property development costs capitalized for
financial
reporting and expensed for tax....................... -- 1,736 10
Inventory costs capitalized for tax and expensed for
financial reporting.................................. (795) 39 (721)
Accrued vacation expense not currently deductible for
tax.................................................. (23) (259) (109)
Operating materials capitalized for financial reporting
and
expensed for tax..................................... 103 544 (420)
Allowance for doubtful accounts expensed but not
currently
deductible for tax until realized.................... 551 (184) 134
Federal income tax rate changes........................ -- -- 372
Other.................................................. 344 161 (81)
------ ------- -------
$2,728 $11,899 $ 2,218
------ ------- -------
------ ------- -------
</TABLE>
The provision (benefit) for income taxes as a percentage of income (loss)
for the years ended September 30, 1991, 1992 and 1993 differs from the statutory
federal income tax rate due to the following:
<TABLE>
<CAPTION>
1991 1992 1993
---- ----- -----
<S> <C> <C> <C>
Statutory federal income tax rate........................ 34.0% (34.0)% (34.8)%
State income taxes, net of federal income tax benefit.... 3.3 (3.3) (3.3)
Other.................................................... .5 (1.7) (0.9)
---- ----- -----
Effective tax rate....................................... 37.8% (39.0)% (39.0)%
---- ----- -----
---- ----- -----
</TABLE>
The Company has an alternative minimum tax credit carryforward for tax
reporting purposes of approximately $4,134.
4. COMMITMENTS AND CONTINGENCIES
Modernization Program
The Company has initiated substantial capital expenditures to modernize its
steelmaking, casting, rolling and finishing facilities, thereby reducing overall
operating costs, broadening the Company's product line, improving product
quality and increasing throughput capacity. Modernization program expenditures
were approximately $56,000, $61,000 and $33,000 for the years ended September
30, 1992 and 1993 and for the three months ended December 31, 1993,
respectively. The Company currently plans to make modernization program
expenditures aggregating approximately $118,000 during fiscal years 1994 and
1995. In addition, the Company intends to spend approximately $60,000 for
continuing capital maintenance and other projects during these periods.
Legal Matters
The Company is subject to various legal matters, which it considers normal
for its business activities. Management believes that these matters will not
have a material impact on the financial condition of the Company.
F-15
<PAGE> 70
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Environmental Matters
Compliance with environmental laws and regulations is a significant factor
in the Company's business. The Company is subject to federal, state and local
environmental laws and regulations concerning, among other things, air
emissions, wastewater discharge, and solid and hazardous waste disposal. The
Company believes that it is in compliance in all material respects with all
currently applicable environmental regulations.
The Company has incurred substantial capital expenditures for environmental
control facilities, including the Q-BOP furnaces, the wastewater treatment
facility, the benzene mitigation equipment and the coke oven gas desulfurization
facility. The Company has budgeted a total of approximately $3,800 for
environmental capital improvements in fiscal years 1994 and 1995. Of this
amount, approximately $3,500 is included in the Company's capital maintenance
and other projects budget and the remaining $300 is included in the
modernization program budget. Such improvements include the completion of a coke
oven gas desulfurization facility, construction of a sinter plant baghouse, and
the installation of a flare coke system. Environmental legislation and
regulations have changed rapidly in recent years and it is likely that the
Company will be subject to increasingly stringent environmental standards in the
future. Although the Company has budgeted substantial expenditures for
environmental matters in connection with capital maintenance and other projects
and the modernization program, it is not possible at this time to predict the
amount of capital expenditures that may ultimately be required to comply with
all environmental laws and regulations.
In August 1993, the Company received notice that the Environmental
Protection Agency (the "EPA") was overfiling on certain notices of violation
that had previously been settled with the State of Utah for $21. The amount of
the claim that may be asserted by the EPA is unknown. The Company has met
informally with the EPA and believes that this matter may be resolved without
significant penalties being assessed. Because of the preliminary nature of the
proceedings, however, the Company is unable to predict the amount of any claim
or the eventual outcome of the proceedings.
Under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), EPA and the states have authority to impose
liability on waste generators, site owners and operators and others regardless
of fault or the legality of the original disposal activity. Other environmental
laws and regulations may also impose liability on the Company for conditions
existing prior to the Company's acquisition of the steel mill.
At the time of the Company's acquisition of the steel mill, the Company and
USX Corporation ("USX") identified certain hazardous and solid waste sites and
other environmental conditions which existed prior to the acquisition. USX has
agreed to indemnify the Company (subject to the sharing arrangements described
below) for any fines, penalties, costs (including costs of clean-up, required
studies and reasonable attorney's fees), or other liabilities for which the
Company becomes liable due to any environmental condition existing on the
Company's real property as of the acquisition date that is determined to be in
violation of any environmental law, is otherwise required by applicable judicial
or administrative action, or is determined to trigger civil liability (the
"Pre-existing Environmental Liabilities"). The Company has provided a similar
indemnity (but without any similar sharing arrangement) to USX for conditions
that may arise after the acquisition. Although the Company has not completed a
comprehensive analysis of the extent of the Pre-existing Environmental
Liabilities, such liabilities could be material.
Under the acquisition agreement between the two parties, the Company and
USX agreed to share on an equal basis the first $20,000 of costs incurred by
either party to satisfy any government demand for studies, closure, monitoring,
or remediation at specified waste sites or facilities or for other claims under
CERCLA or the Resource Conservation and Recovery Act. The Company is not
obligated to contribute more than $10,000 for the clean-up of wastes generated
prior to the acquisition. The Company believes that it has paid the full $10,000
necessary to satisfy its obligations under the cost-sharing arrangement. The
Company's ability to
F-16
<PAGE> 71
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
obtain indemnification from USX in the future will depend on factors which may
be beyond the Company's control and may be subject to dispute.
Purchase Commitments
Effective September 27, 1988, the Company entered into an agreement, which
was subsequently amended on June 8, 1990, to purchase a minimum of approximately
207 million standard cubic feet of oxygen each month at an average price of nine
hundred eighty seven dollars per million cubic feet. The contract expires on
April 1, 1998. The contract price is adjusted semi-annually based on the change
in the Producer Price Index for Industrial Commodities ("PPI"). The Company has
agreed to pay all sales and excise taxes levied against the supplier.
Effective September 1, 1989, the Company entered into an agreement to
purchase electrical power through January 31, 1999. The contract specifies that
the Company will pay a monthly demand and back-up facilities charge based on
stated minimum monthly kilowatts and rate per kilowatt. The rate for the demand
charge is adjusted annually based on the change in the supplier's per megawatt
fixed transmission investment. The rate for the facilities charge will remain
constant over the term of the contract. Under this contract, the Company is
committed to pay approximately $2,057 in each fiscal year 1994 through 1998 and
approximately $686 in fiscal year 1999.
Effective March 1, 1991, the Company entered into a three-year agreement to
purchase 550,000 tons of high-volatile metallurgical-grade coking coal in each
contract year (March 1 to February 28). During the third contract year, the
Company is paying thirty six dollars and thirty eight cents per ton.
Effective April 1, 1991, the Company entered into a six-year agreement to
purchase a minimum of 120,000 tons of high-volatile metallurgical-grade coking
coal in the first contract year (April 1 to March 31) and 180,000 tons in each
subsequent contract year. The contract specifies that the Company will pay
nineteen dollars and fifty cents per ton for the first contract year. This
purchase price is adjusted annually in each subsequent contract year based on
the change in the PPI. During the third contract year, the Company is paying
nineteen dollars and seventy three cents per ton.
Effective July 12, 1990, the Company entered into an agreement, which was
subsequently amended in December 1992, to purchase 100% of the oxygen, nitrogen
and argon produced at a facility located at the Company's steel mill which is
owned and operated by an independent party. The contract expires in September
2006 and specifies that the Company will pay a base monthly charge that is
adjusted semi-annually each January 1 and July 1 based upon a percentage of the
change in the PPI ($416 at September 30, 1993).
Effective January 12, 1993, the Company entered into a three year agreement
to purchase a minimum of 152,000 tons of metallurgical coke per year. The
contract expires on December 31, 1995. The parties have agreed that the purchase
price for each ton of coke during the second and third contract years will be
ninety dollars fifty cents and ninety two dollars, respectively.
Letters of Credit
As of September 30, 1993 and December 31, 1993, the Company had an
outstanding letter of credit pursuant to the Revolving Credit Facility of
approximately $2,700.
5. REDEEMABLE PREFERRED STOCK
On March 16, 1993, the Company issued $40,000 of 14% Cumulative Redeemable
Exchangeable Preferred Stock (the "Redeemable Preferred Stock") and related
warrants to purchase an aggregate of 1,132,000 shares of Class A common stock.
F-17
<PAGE> 72
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Redeemable Preferred Stock consists of 400,000 shares, no par value,
with a liquidation preference of approximately one hundred eight dollars per
share as of September 30, 1993. Dividends accrue at a rate equal to 14% per
annum of the liquidation preference and, except as provided below, are payable
quarterly in cash from funds legally available therefor. For dividend periods
ending before April 1996, the Company may, at its option, add dividends to the
liquidation preference in lieu of payment in cash. During the year ended
September 30, 1993 and the three months ended December 31, 1993, the Company
increased the liquidation value of the Redeemable Preferred Stock to $43,099 and
$44,607, respectively, by adding dividends to the liquidation preference. After
March 1994, the Redeemable Preferred Stock is exchangeable, at the Company's
option, into subordinated debentures of the Company due 2003 (the "Exchange
Debentures"). The Company is obligated to redeem all of the Redeemable Preferred
Stock in March 2003 from funds legally available therefor. The Company's ability
to incur debt resulting from the exchange of the Redeemable Preferred Stock for
Exchange Debentures and to pay cash dividends on the Redeemable Preferred Stock
is subject to compliance with the covenants and tests contained in the indenture
governing the 11 1/8% Senior Notes, the Private Debt and in the Revolving Credit
Facility, including a prohibition under the Revolving Credit Facility on issuing
the Exchange Debentures prior to March 1995. After March 1998, both the
Redeemable Preferred Stock and Exchange Debentures will be redeemable, at the
Company's option, subject to certain redemption premiums. The warrants to
purchase Class A common stock are exercisable at eleven dollars per share,
subject to adjustment in certain circumstances, and expire in March 2000.
The Company estimates that the aggregate fair market value of its
Redeemable Preferred Stock was approximately $45,600 at September 30, 1993 based
on limited trading data. The Company estimates that the aggregate fair market
value of its warrants to purchase Class A common stock was approximately $5,360
at September 30, 1993 based on various option models.
6. STOCK OPTIONS
Effective January 2, 1990, the Company granted options to purchase 330,000
shares of Class A common stock to key employees at an exercise price of ten
dollars and ninety-one cents per share. On January 2, 1992, 40% of the stock
options became exercisable and an additional 20% become exercisable each January
2 thereafter through 1995. The stock options remain exercisable until the
earlier of 90 days after the employee's termination of employment or ten years
from the date such stock options were granted.
During the years ended September 30, 1991 and 1992, the Company amended its
stock option agreements with two former employees of the Company. Pursuant to
these amendments, the Company agreed to vest all of the former employees options
to purchase an aggregate of 99,000 shares of Class A common stock and permit
exercise of such options at any time through the tenth anniversary of the date
the options were granted. As of September 30, 1993, 33,000 of these options to
purchase Class A common stock had been exercised.
Effective July 20, 1990, the Company's Board of Directors adopted a Key
Employee Plan (the "Employee Plan") which was approved by the Company's
stockholders in January 1991. The Employee Plan provides that incentive and
nonstatutory stock options to purchase Class A common stock and corresponding
stock appreciation rights may be granted. The Employee Plan provides for
issuance of up to 1,000,000 shares of Class A common stock, with no more than
750,000 shares of Class A common stock cumulatively available upon exercise of
incentive stock options. Effective August 6, 1992 and March 3, 1993, the Company
granted incentive stock options to purchase an aggregate of 125,000 and 155,900
shares of Class A common stock, respectively, under the Employee Plan.
The Employee Plan Committee (the "Committee") shall determine the time or
times when each incentive or nonstatutory stock option vests and becomes
exercisable; provided no stock option shall be exercisable within six months of
the date of grant (except in the event of death or disability) and no incentive
stock option shall be exercisable after the expiration of ten years from the
date of grant. The exercise price of
F-18
<PAGE> 73
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
incentive stock options to purchase Class A common stock shall be at least the
fair market value of the Class A common stock on the date of grant. The exercise
price of nonstatutory options to purchase Class A common stock is determined by
the Committee.
Stock option activity for the years ended September 30, 1991, 1992 and 1993
consisted of the following:
<TABLE>
<CAPTION>
NUMBER
OF PRICE PER
SHARES SHARE RANGE
------- ------------
<S> <C> <C>
Outstanding at September 30, 1990................... 330,000 $ 10.91
Exercised........................................... (33,000) 10.91
------- ------------
Outstanding at September 30, 1991................... 297,000 10.91
Granted............................................. 125,000 7.88-8.66
Exercised........................................... (46,200) 10.91
------- ------------
Outstanding at September 30, 1992................... 375,800 7.88-10.91
Granted............................................. 155,900 11.75-12.93
Cancelled........................................... (1,700) 7.88-11.75
------- ------------
Outstanding at September 30, 1993................... 530,000 $ 7.88-12.93
------- ------------
------- ------------
</TABLE>
Options to purchase 33,000, 132,000 and 177,600 shares of Class A common
stock were exercisable on September 30, 1991, 1992 and 1993, respectively.
7. EMPLOYEE BENEFIT PLANS
Union Pension Plan
Effective September 1, 1987, and as amended and restated, the Company
adopted a qualified noncontributory defined contribution pension plan which
provides benefits for all eligible employees covered by a collective bargaining
agreement. The Company contributed 4% of each participant's compensation to this
plan during the years ended September 30, 1991, 1992 and 1993. Total
contributions by the Company for the years ended September 30, 1991, 1992 and
1993 were $2,951, $2,900 and $2,675, respectively. The participants vest in
these contributions at 20% for each year of service and become fully vested
after five years. Credit for service with United States Steel Corporation is
included in determining the vesting service requirement.
Management Employee Savings and Pension Plan
Effective September 1, 1987, and as amended and restated, the Company
adopted a savings and pension plan which provides benefits for all eligible
employees not covered by a collective bargaining agreement. This plan is
comprised of two qualified plans: (1) a management employee savings 401(k) plan
with a cash or deferred compensation arrangement and discretionary matching
contributions and (2) a noncontributory defined contribution pension plan.
Participants may direct the investment of funds related to their deferred
compensation in this plan. The employee savings plan provides for discretionary
matching contributions as determined each plan year by the Company's Board of
Directors. The Board of Directors elected to match each participant's
contribution to the employee savings plan up to 4% of their compensation for
fiscal years 1991, 1992 and 1993. In addition, the pension plan provided for
contributions by the Company of 4% of each participant's compensation for fiscal
years 1991, 1992 and 1993. During fiscal years 1991, 1992 and 1993, total
contributions by the Company were $1,402, $1,467 and $1,567, respectively. The
participants vest in the Company's contributions at 20% for each year of service
and become fully vested after five years. Participants with service prior to
January 1, 1988 are fully vested.
F-19
<PAGE> 74
GENEVA STEEL COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Profit Sharing and Bonus Programs
The Company has a profit sharing program for full-time union represented
employees. Participants receive payments based upon operating income reduced by
an amount equal to a portion of the Company's capital expenditures. Also, the
Board of Directors approved the payment of management bonuses during fiscal year
1991. Total profit sharing and bonus payments accrued during the year ended
September 30, 1991 was approximately $670. No profit sharing and bonus payments
were accrued in the years ended September 30, 1992 and 1993.
During the year ended September 30, 1993, the Company implemented a
performance dividend plan designed to reward full-time union represented
employees for increased shipments. As shipments increase above an annualized
rate of 1.5 million tons, compensation under this plan increases. Payments made
under the performance dividend plan are deducted from any profit sharing
obligations to the extent such obligations exceed the performance plan payments
in any given fiscal year. During the year ended September 30, 1993, the Company
also implemented a similar performance dividend plan for non-union employees.
Supplemental Executive Plans
The Company maintains insurance and retirement agreements with certain of
the management employees and executive officers. Pursuant to the insurance
agreements, the Company pays the annual premiums and receives certain policy
proceeds upon the death of the retired management employee or executive officer.
Pursuant to the retirement agreements, the Company provides for the payment of
supplemental benefits to certain management employees and executive officers
upon retirement.
8. MAJOR CUSTOMER (DISTRIBUTOR) AND INTERNATIONAL SALES
During the years ended September 30, 1991, 1992, and 1993, the Company
derived approximately 25%, 27% and 41% percent, respectively, of its net sales
through one customer, who is a distributor to other companies. International
sales during the years ended September 30, 1991, 1992 and 1993 did not exceed
10%.
9. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
A summary of quarterly financial information for the years ended September
30, 1992 and 1993 is as follows:
<TABLE>
<CAPTION>
1992 QUARTERS FIRST SECOND THIRD FOURTH
---------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................... $ 97,231 $107,879 $113,526 $101,390
Gross margin............................ 951 4,113 5,592 3,079
Net loss................................ (4,807) (2,979) (1,980) (3,326)
Net loss per common share............... (.32) (.20) (.13) (.22)
</TABLE>
<TABLE>
<CAPTION>
1993 QUARTERS FIRST SECOND THIRD FOURTH
---------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................... $101,149 $115,542 $124,954 $123,536
Gross margin............................ 1,681 1,702 7,595 10,745
Net income (loss)....................... (3,937) (4,568) (1,029) 928
Net loss applicable to common shares.... (3,937) (4,829) (2,607) (699)
Net loss per common share............... (.26) (.32) (.17) (.05)
</TABLE>
F-20
<PAGE> 75
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SENIOR NOTES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SENIOR NOTES BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................ 2
Incorporation of Certain Information
By Reference....................... 2
Prospectus Summary................... 3
Risk Factors......................... 7
The Refinancing...................... 11
The Modernization Program............ 11
Use of Proceeds...................... 16
Capitalization....................... 17
Selected Financial Data.............. 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 20
Business............................. 26
Management........................... 34
Description of the Senior Notes...... 36
Underwriting......................... 52
Legal Matters........................ 53
Experts.............................. 53
Index to Financial Statements........ F-1
- --------------------------------------------
- --------------------------------------------
</TABLE>
- --------------------------------------------
- --------------------------------------------
$125,000,000
[GENEVA STEEL LOGO]
% SENIOR NOTES DUE 2004
------------------------
PROSPECTUS
------------------------
CITICORP SECURITIES, INC.
SALOMON BROTHERS INC
, 1994
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth expenses in connection with the issuance and
distribution of the Senior Notes being registered, other than underwriting
discounts and commissions payable by the Company. All of the amounts shown are
estimates, except the SEC registration fee and the NASD fee.
<TABLE>
<CAPTION>
AMOUNT
--------
<S> <C>
SEC registration fee.............................................. $ 43,104
NASD fee.......................................................... 13,000
Accounting fees and expenses...................................... 65,000
Legal fees and expenses........................................... 125,000
Printing expenses................................................. 75,000
Rating agency fees................................................ 75,000
Blue sky fees and expenses........................................ 20,000
Trustee fees and expenses......................................... 20,000
Miscellaneous expenses............................................ 138,896
--------
Total................................................... $575,000
--------
--------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 16-10a-902 ("Section 902") of the Utah Revised Business Corporation
Act (the "Revised Act") provides that a corporation may indemnify any individual
who was, is, or is threatened to be made a named defendant or respondent (a
"Party") in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and whether formal or
informal (a "Proceeding"), because he is or was a director of the corporation or
is or was serving at its request as a director, officer, partner, trustee,
employee, fiduciary or agent of another corporation or other person or of an
employee benefit plan (an "Indemnified Director"), against any obligation
incurred with respect to a Proceeding, including any judgment, settlement,
penalty, fine or reasonable expenses (including attorneys' fees), incurred in
the Proceeding if his conduct was in good faith, he reasonably believed that his
conduct was in, or not opposed to, the best interests of the corporation, and,
in the case of any criminal Proceeding, he had no reasonable cause to believe
his conduct was unlawful; except that (i) indemnification under Section 902 in
connection with Proceeding by or in the right of the corporation is limited to
payment of reasonable expenses (including attorneys' fees) incurred in
connection with the proceeding and (ii) the corporation may not indemnify a
director in connection with a Proceeding by or in the right of the corporation
in which the director was adjudged liable to the corporation, or in connection
with any other Proceeding charging that the director derived an improper
personal benefit, whether or not involving action in his official capacity, in
which Proceeding he was adjudged liable on the basis that he derived an improper
personal benefit.
Section 16-10a-903 ("Section 903") of the Revised Act provides that, unless
limited by its articles of incorporation, a corporation shall indemnify a
director who was successful, on the merits or otherwise, in the defense of any
Proceeding, or in the defense of any claim, issue or matter in the proceeding,
to which he was a Party because he is or was a director of the corporation,
against reasonable expenses (including attorneys' fees) incurred by him in
connection with the Proceeding or claim with respect to which he has been
successful.
In addition to the indemnification provided by Sections 902 and 903,
Section 16-10a-905 ("Section 905") of the Revised Act provides that, unless
otherwise limited by a corporation's articles of incorporation, a director may
apply for indemnification to the court conducting the Proceeding or to another
court of competent jurisdiction. On receipt of an application and after giving
any notice the court considers necessary, (i) the court may order mandatory
indemnification under Section 903, in which case the court shall also order the
corporation to pay the director's reasonable expenses to obtain court-ordered
indemnification, or
II-1
<PAGE> 77
(ii) upon the court's determination that the director is fairly and reasonably
entitled to indemnification in view of all the relevant circumstances and
regardless of whether the director met the applicable standard of conduct set
forth in Section 902, the court may order indemnification as the court
determines to be proper, except that indemnification with respect to certain
Proceedings resulting in a director being found liable for certain actions
against the corporation may be limited to reasonable expenses (including
attorneys' fees) incurred by the director.
Section 16-10a-904 ("Section 904") of the Revised Act provides that a
corporation may pay for or reimburse the reasonable expenses (including
attorneys' fees) incurred by a director who is a Party to a Proceeding in
advance of the final disposition of the Proceeding if (i) the director furnishes
the corporation a written affirmation of his good faith belief that he has met
the applicable standard of conduct described in Section 902, (ii) the director
furnishes to the corporation a written undertaking, executed personally or in
his behalf, to repay the advance if it is ultimately determined that he did not
meet the required standard of conduct, and (iii) a determination is made that
the facts then known to those making the determination would not preclude
indemnification under Section 904.
Section 16-10a-907 of the Revised Act provides that, unless a corporation's
articles of incorporation provide otherwise, (i) an officer of the corporation
is entitled to mandatory indemnification under Section 903 and is entitled to
apply for court ordered indemnification under Section 905, in each case to the
same extent as a director, (ii) the corporation may indemnify and advance
expenses to an officer, employee, fiduciary or agent of the corporation to the
same extent as a director, and (iii) a corporation may also indemnify and
advance expenses to an officer, employee, fiduciary or agent who is not a
director to a greater extent than the right of indemnification granted to
directors, if not inconsistent with public policy, and if provided for by its
articles of incorporation, bylaws, general or specific action of its board of
directors or contract.
The Registrant's Articles of Incorporation provide that the Registrant will
indemnify each person who is or was a director, officer, employee or agent of
the Registrant, or is or was serving at the request of the Registrant as a
director, officer, employee or agent of another corporation or business
association, to the maximum extent permitted from time to time by law.
The Registrant's Articles of Incorporation provide that the liability of
directors of the Registrant for monetary damages for any action taken or any
failure to take any action, as a director, is eliminated to the fullest extent
permitted by Utah law. The extent to which Utah law permits director liability
to be eliminated is governed by section 16-10a-841 of the Revised Act, which
provides that the liability of a director may not be eliminated or limited for
(i) the amount of financial benefit received by a director to which he is not
entitled; (ii) an intentional infliction of harm on the corporation or its
stockholders; (iii) a violation of Section 16-10a-842 of the Revised Act which
prohibits unlawful distributions by a corporation to its shareholders; or (iv)
an intentional violation of criminal law.
The Bylaws of the Registrant provide that the Registrant will pay expenses
(including attorneys' fees) incurred by any person who is or was a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative (an "Action") by reason of the fact that he is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including,
without limitation, any employee benefit plan of the corporation for which such
person is or was serving as trustee, plan administrator or other fiduciary (an
"Indemnified Party") in defending any such Action, in advance of the final
disposition of such Action upon receipt of a written undertaking by or on behalf
of the Indemnified Director to repay the Registrant therefor in the event that
it is ultimately determined that such person was not entitled under applicable
law to indemnification from the Registrant. Under the Bylaws, the Registrant may
impose such reasonable requirements as the Board or stockholders may deem
appropriate in the circumstances, as conditions to the advance of such expenses.
The Bylaws further provide that the Registrant, by action of its Board and
without regard to any interest members of the Board may have in such action, may
purchase insurance on behalf of any Indemnified Director covering liability
incurred by such person arising out of his status as an Indemnified Director,
whether or not the Registrant has the power to indemnify such person for such
liability under applicable law.
II-2
<PAGE> 78
The Company maintains insurance from commercial carriers against certain
liabilities which may be incurred by its directors and officers.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
REGULATION S-K
EXHIBIT NO. DESCRIPTION
- -------------- -----------
<S> <C>
1 Form of Underwriting Agreement.
4 Form of Indenture between the Company and Bankers Trust Company, as Trustee,
including a form of Senior Note.
5 Opinion of Kimball, Parr, Waddoups, Brown & Gee, a professional corporation, as
to the legality of the securities offered.
12 Statement re computation of ratio of earnings to fixed charges.
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Kimball, Parr, Waddoups, Brown & Gee (included in exhibit 5).
24 Powers of attorney (included on page II-4 hereof).+
25 Statement of eligibility of Bankers Trust Company, as Trustee.
</TABLE>
- ---------------
+ Previously filed.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933 (the "Securities Act"), each filing
of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Vineyard, State of Utah, on January 12, 1994.
GENEVA STEEL COMPANY
By: JOSEPH A. CANNON*
(Joseph A. Cannon,
Chairman of the Board and Chief
Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ------------------------- ------------------
<S> <C> <C>
JOSEPH A. CANNON* Chairman of the Board and January 12, 1994
______________________ Chief Executive Officer
(Joseph A. Cannon) (Principal Executive
Officer)
ROBERT J. GROW* President and Chief January 12, 1994
__________________ Operating Officer and
(Robert J. Grow) Director
RICHARD D. CLAYTON* Executive Vice President, January 12, 1994
____________________ Vice President of
(Richard D. Clayton) Environment and Director
DENNIS L. WANLASS* Vice President, Treasurer January 12, 1994
______________________ and Chief Financial
(Dennis L. Wanlass) Officer (Principal
Financial and Accounting
Officer)
A. BLAINE HUNTSMAN* Director January 12, 1994
____________________
(A. Blaine Huntsman)
A. THURL JACOBSON* Director January 12, 1994
______________________
(A. Thurl Jacobson)
ARCH L. MADSEN* Director January 12, 1994
____________________
(Arch L. Madsen)
R. J. SHOPF* Director January 12, 1994
_____________________
(R. J. Shopf)
* BY DENNIS L. WANLASS
_____________________
(Attorney-in-Fact)
</TABLE>
II-4
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
REGULATION S-K NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
- -------------- ------------------------------------------------------------------- -----------
<S> <C> <C>
1 Form of Underwriting Agreement.
4 Form of Indenture between the Company and Bankers Trust Company, as
Trustee, including a form of Senior Note.
5 Opinion of Kimball, Parr, Waddoups, Brown & Gee, a professional
corporation, as to the legality of the securities offered.
12 Statement re computation of ratio of earnings to fixed charges.
23.1 Consent of Arthur Andersen & Co.
23.2 Consent of Kimball, Parr, Waddoups, Brown & Gee (included in
exhibit 5).
24 Powers of attorney (included on page II-4 hereof).+
25 Statement of eligibility of Bankers Trust Company, as Trustee.
</TABLE>
- ---------------
+ Previously filed.
<PAGE> 1
GENEVA STEEL COMPANY
$125,000,000
____% Senior Notes Due 2004
UNDERWRITING AGREEMENT
<PAGE> 2
, 1994
Citicorp Securities, Inc.
Citibank Canada Securities Limited
Citibank International plc
Salomon Brothers Inc
c/o Citicorp Securities, Inc.
399 Park Avenue
New York, NY 10043
Ladies and Gentlemen:
Geneva Steel Company, a Utah corporation (the
"Company"), proposes to issue and sell to you (the
"Underwriters") $125,000,000 aggregate principal amount of
its ____% Senior Notes Due 2004 (the "Securities"). The
Securities are to be issued pursuant to an indenture to be
dated as of _________, 1994 (the "Indenture") between the
Company and Bankers Trust Company, as trustee (the "Trustee").
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, each
of the several Underwriters that:
(a) A registration statement on Form S-3 (File No.
33-51619) with respect to the Securities, including a
prospectus subject to completion, has been filed by the
Company with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended
(the "Act"), and one or more amendments to such
registration statement may have been so filed. After the
execution of this Agreement, the Company will file with
the Commission either (i) if such registration statement,
as it may have been amended, has been declared by the
Commission to be effective under the Act, a prospectus in
1
<PAGE> 3
the form most recently included in an amendment to such
registration statement (or, if no such amendment shall
have been filed, in such registration statement), with
such changes or insertions as are required by Rule 430A
under the Act, as permitted by Rule 424(b) under the Act
and as have been provided to and approved by the
Underwriters prior to the execution of this Agreement, or
(ii) if such registration statement, as it may have been
amended, has not been declared by the Commission to be
effective under the Act, an amendment to such registration
statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the
Underwriters prior to the execution of this Agreement. As
used in this Agreement, the term "Registration Statement"
means such registration statement, as amended at the time
when it was or is declared effective, including (A) all
financial statements and schedules and exhibits thereto,
and (B) any information omitted therefrom pursuant to Rule
430A under the Act and included in the Prospectus (as
hereinafter defined); the term "Preliminary Prospectus"
means each prospectus subject to completion filed with
such registration statement or any amendment thereto
(including the prospectus subject to completion, if any,
included in the Registration Statement or any amendment
thereto at the time it was or is declared effective); and
the term "Prospectus" means the prospectus first filed
with the Commission pursuant to Rule 424(b) under the Act
or, if no prospectus is required to be filed pursuant to
said Rule 424(b), such term means the prospectus included
in the Registration Statement.
(b) The Commission has not issued any order
preventing or suspending the use of any Preliminary
Prospectus. When the Registration Statement or any
amendment thereto was or is declared effective, it
(i) contained or will contain all statements required to
be stated therein in accordance with, and complied or will
comply in all material respects with the requirements of,
the Act and the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), and the respective rules and
regulations of the Commission thereunder and (ii) did not
or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order
to make the statements therein not misleading. On the
date when the Prospectus or any amendment or supplement
thereto is filed with the Commission pursuant to Rule
424(b) (or, if the Prospectus or such amendment or
supplement is not required to be so filed, on the date
when the Registration Statement or the amendment thereto
containing such amendment or supplement to the Prospectus
was or is declared effective), on the date when the
Prospectus is otherwise amended or supplemented and on the
Closing Date (as hereinafter defined), the Prospectus, as
amended or supplemented at any such time, (i) contained or
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<PAGE> 4
will contain all statements required to be stated therein
in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and
the Trust Indenture Act and the respective rules and
regulations of the Commission thereunder and (ii) did not
or will not include any untrue statement of a material
fact or omit to state any material fact necessary in order
to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The foregoing provisions of this paragraph (b) do not
apply to (i) statements or omissions made in the
Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information
furnished to the Company by any Underwriter specifically
for use therein or (ii) the Statement of Eligibility and
Qualification on Form T-1 of the Trustee (the "Form T-1")
filed as an exhibit to the Registration Statement.
(c) (i) The Company has delivered to you a true and
correct copy of the Revolving Credit Agreement dated as of
April 29, 1992, and as amended and supplemented, between
the Company, the lenders listed therein, Citibank, N.A.,
as issuer, and Citicorp USA, Inc., as agent, together with
all schedules and exhibits thereto (collectively, the
"Credit Agreement") and there have been no material
amendments, alterations, modifications or waivers of any
of the provisions of the Credit Agreement that have not
previously been delivered to you; (ii) each of the
representations and warranties given by the Company in the
Credit Agreement are true and correct in all material
respects as of the date hereof and will be true and
correct in all material respects on and as of the Closing
Date, except insofar as such representations and
warranties speak only as of a prior date, and (iii) there
exists as of the date hereof and on and as of the Closing
Date (after giving effect to the transactions contemplated
by this Agreement) no condition which would constitute a
Default or an Event of Default (each as defined in the
Credit Agreement) under the Credit Agreement.
(d) No party has the right to include securities
held or beneficially owned by such party in the
Registration Statement. There is no party possessing the
right to demand that the Company register securities owned
by such parties, except (i) as disclosed in the
Registration Statement and Prospectus, (ii) the
registration rights held by Joseph Cannon and Robert Grow
with respect to capital stock of the Company and (iii) the
registration rights held by the holders of certain
warrants issued by the Company.
(e) The Company has only one subsidiary, Crystal
Springs Coal, Inc., a Utah corporation (the "Subsidiary").
3
<PAGE> 5
2. Purchase and Sale. Subject to the terms and
conditions and in reliance upon the representations and
warranties of the Company herein set forth, the Company agrees
to sell to each Underwriter, and each Underwriter agrees,
severally and not jointly, to purchase from the Company, at a
purchase price of % of the principal amount thereof, the
principal amount of the Securities set forth opposite such
Underwriters name on Schedule I hereto.
3. Delivery and Payment. Delivery of and payment
for the Securities shall be made at 10:00 A.M., New York City
time, on _____________ ___, 1994, or such later date and time,
if any, as the Underwriters and the Company shall mutually
agree (such date and time of delivery and payment for the
Securities being herein called the "Closing Date"). Delivery
of the Securities shall be made to the Underwriters against
payment by the Underwriters of the purchase price thereof to or
upon the order of the Company by certified or official bank
check or checks drawn on or by a New York Clearing House bank
and payable in next day funds. Delivery of the Securities in
definitive form shall be made at such location as the
Underwriters shall reasonably designate at least two business
days in advance of the Closing Date and payment for the
Securities shall be made at the office of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York. Certificates for
the Securities shall be registered in such names and in such
denominations as the Underwriters may request not less than two
full business days in advance of the Closing Date.
The Company agrees to have the Securities available
for inspection, checking and packaging by the Underwriters in
New York, New York, not later than 1:00 P.M. on the business
day prior to the Closing Date.
4. Offering by Underwriters. It is understood that
the several Underwriters propose to offer the Securities for
sale to the public as set forth in the Prospectus.
5. Covenants of the Company. The Company covenants
and agrees with each of the Underwriters that:
(a) The Company will use its best efforts to cause
the Registration Statement, if not effective at the time
of execution of this Agreement, and any amendments thereto
to become effective as promptly as possible. If required,
the Company will file the Prospectus (properly completed
in accordance with Rule 430A, if applicable) and any
amendment or supplement thereto with the Commission in the
manner and within the time period required by Rule 424(b)
under the Act and will provide evidence to the
Underwriters of such timely filing. During any time when
a prospectus relating to the Securities is required to be
delivered under the Act, the Company (i) will comply with
all requirements imposed upon the Company by the Act, the
4
<PAGE> 6
Trust Indenture Act and the respective rules and
regulations of the Commission thereunder to the extent
necessary to permit the continuance of sales of or
dealings in the Securities in accordance with the
provisions hereof and of the Prospectus, as then amended
or supplemented, and (ii) will not file with the
Commission the prospectus or the amendment referred to in
the second sentence of Section 1(a) hereof, any amendment
or supplement to such prospectus or any amendment to the
Registration Statement of which the Underwriters shall not
previously have been advised and furnished with a copy for
a reasonable period of time prior to the proposed filing
and as to which filing the Underwriters shall not have
given their consent (which shall not be unreasonably
withheld). The Company will prepare and file with the
Commission, in accordance with the rules and regulations
of the Commission, promptly upon request by the
Underwriters or counsel for the Underwriters, any
amendments to the Registration Statement or amendments or
supplements to the Prospectus that may be necessary or
advisable in connection with the distribution of the
Securities by the Underwriters, and will use its best
efforts to cause any such amendment to the Registration
Statement to be declared effective by the Commission as
promptly as possible. The Company will advise the
Underwriters, promptly after receiving notice thereof, of
the time when the Registration Statement or any amendment
thereto has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been
filed and will provide evidence satisfactory to the
Underwriters of each such filing or effectiveness.
(b) The Company will advise the Underwriters
promptly after receiving notice, or obtaining knowledge
thereof (and if requested by the Underwriters will confirm
such advice in writing), of (i) when the Registration
Statement, if not effective at the time of the execution
of this Agreement, and any amendment (including any
post-effective amendments) thereto, shall have become
effective, (ii) when the Prospectus, and any supplement
thereto, shall have been filed with the Commission
pursuant to Rule 424(b), (iii) the issuance by the
Commission of any stop order suspending the effectiveness
of the Registration Statement or any post-effective
amendment thereto or any order preventing or suspending
the use of any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto or the institution,
threat or contemplation of any proceedings for any such
purpose, (iv) the suspension of the qualification or
exemption from qualification of the Securities for
offering or sale in any jurisdiction or the institution,
threat or contemplation of any proceedings for any such
purpose, or (v) any request made by the Commission for
amending the Registration Statement, for amending or
5
<PAGE> 7
supplementing any Preliminary Prospectus or the Prospectus
or for additional information. The Company will use its
best efforts to prevent the issuance of any such stop
order and, if any such stop order is issued, to obtain the
withdrawal thereof as promptly as possible.
(c) The Company will use its reasonable best efforts
to arrange for the registration or qualification of the
Securities for offering and sale and the determination of
their eligibility for investment under the securities or
blue sky laws of such jurisdictions as the Underwriters
may designate and will continue such qualifications in
effect for as long as may be necessary to complete the
distribution of the Securities, provided, however, that in
connection therewith the Company shall not be required to
qualify to do business as a foreign corporation or as a
broker-dealer, to take any action to qualify the
Securities for sale in any jurisdiction outside the United
States or to execute a general consent to service of
process in any jurisdiction.
(d) If, at any time when a prospectus relating to
the Securities is required to be delivered under the Act,
any event occurs as a result of which the Prospectus, as
then amended or supplemented, would include any untrue
statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made,
not misleading, or if for any other reason it is necessary
at any time to amend or supplement the Prospectus to
comply with the Act or the Trust Indenture Act or the
respective rules or regulations of the Commission
thereunder or any other law, the Company, subject to
Section 5(a) hereof, will prepare and file with the
Commission, at the Company's expense, an amendment to the
Registration Statement or an amendment or supplement to
the Prospectus that corrects such statement or omission or
effects such compliance.
(e) The Company will provide to each of the
Underwriters and to counsel for the Underwriters, without
charge, a signed copy of the registration statement
originally filed with respect to the Securities and each
amendment thereto, including any post-effective amendment
thereto (in each case including financial statements and
schedules and exhibits thereto) and documents incorporated
by reference therein (including exhibits incorporated
therein by reference to the extent not previously
furnished to you).
(f) So long as a prospectus relating to the
Securities is required to be delivered under the Act, the
Company will provide to each Underwriter as many copies of
each Preliminary Prospectus or the Prospectus or any
6
<PAGE> 8
amendment or supplement thereto as such Underwriter may
reasonably request. The Company consents to the use of
the Preliminary Prospectus and the Prospectus and any
amendment or supplement thereto by you and by all dealers
to whom the Securities may be sold, both in connection
with the offering or sale of the Securities and for such
period of time thereafter as delivery of a prospectus
relating to the Securities is required under the Act.
(g) The Company, as soon as practicable, will make
generally available to its security holders and to the
Underwriters a consolidated earnings statement or
statements of the Company and its subsidiaries that
satisfies the provisions of Section 11(a) of the Act and
Rule 158 promulgated thereunder.
(h) The Company will furnish to each Underwriter
copies of any reports or other communications that the
Company shall send to the Trustee or the holders of the
Securities pursuant to the Indenture.
(i) Prior to the Closing Date, the Company will
furnish to the Underwriters, as soon as they have been
prepared by the Company, a copy of any unaudited interim
consolidated financial statements (or audited consolidated
financial statements) of the Company for any period
subsequent to the period covered by the most recent
financial statements of the Company appearing in the
Registration Statement and the Prospectus.
(j) The Company will apply the net proceeds from the
sale of the Securities as set forth under "Use of
Proceeds" in the Prospectus.
6. Expenses.
(a) The Company will pay all costs and expenses
incident to the performance of its obligations under this
Agreement, whether or not the transactions contemplated herein
are consummated or this Agreement is terminated pursuant to
Section 10 hereof, including, but not limited to, all costs and
expenses incident to (i) the printing or other production of
documents (including word processing and duplication) with
respect to such transactions, including any costs of printing
or producing the registration statement originally filed with
respect to the Securities and any amendment thereto, any
Preliminary Prospectus and the Prospectus and any amendment or
supplement thereto, the Indenture, the Form T-1, this
Agreement, any dealer agreement and such other agreements
related to the distribution of the Securities and any Blue Sky
or legal investment memoranda (which shall include the
reasonable disbursements of counsel for the Underwriters
relating thereto), (ii) all arrangements relating to the
delivery to the Underwriters and to dealers to whom the
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<PAGE> 9
Securities may be sold of copies of the foregoing documents,
(iii) the fees and disbursements of the counsel, accountants
and any other experts or advisors retained by the Company,
(iv) preparation, issuance and delivery to the Underwriters of
any certificates evidencing the Securities, (v) the
qualification of the Securities and determination of their
eligibility for investment under state securities and blue sky
laws, including filing fees and fees and disbursements of
counsel for the Underwriters (including any local counsel
retained to render any opinion required by any state securities
or blue sky authorities), relating thereto, (vi) the fees and
disbursements of the Trustee, (vii) the filing fees of the
Commission and the National Association of Securities Dealers,
Inc. relating to the Securities, (viii) any fees charged by
investment rating agencies for the rating of the Securities and
(ix) the expenses of using a Citicorp airplane incident to
meetings with prospective investors in the Securities.
(b) If the sale of the Securities provided for
herein is not consummated because any condition to the
obligations of the Underwriters set forth in Section 7 hereof
is not satisfied, because this Agreement is terminated pursuant
to Section 10 hereof or because of any failure, refusal or
inability on the part of the Company to perform all obligations
and satisfy all conditions on its part to be performed or
satisfied hereunder other than by reason of a default by any
Underwriter, the Company will reimburse the Underwriters upon
demand for all out-of-pocket expenses (including fees and
disbursements of counsel) that shall have been incurred by them
in connection with the proposed purchase and sale of the
Securities. The Company shall not in any event be liable to
any Underwriter for the loss of anticipated profits from the
transactions covered by this Agreement.
7. Conditions of the Underwriters' Obligations.
The obligations of the Underwriters to purchase and pay for the
Securities shall be subject, in the Underwriters' sole
discretion, to the accuracy of the representations and
warranties of the Company contained herein as of the date
hereof and as of the Closing Date as if made on and as of the
Closing Date, to the accuracy of the statements of the
Company's officers made in certificates delivered pursuant to
the provisions hereof, to the performance by the Company of its
covenants and agreements hereunder and to the following
additional conditions:
(a) If the Registration Statement or any amendment
thereto filed prior to the Closing Date has not been
declared effective as of the time of execution hereof, the
Registration Statement or such amendment shall have been
declared effective not later than 11 A.M., New York City
time, on the date on which the amendment to the
registration statement originally filed with respect to
the Securities or to the Registration Statement, as the
8
<PAGE> 10
case may be, containing information regarding the initial
public offering price of the Securities has been filed
with the Commission, or such later time and date as shall
have been consented to by the Underwriters; if required,
the Prospectus and any amendment or supplement thereto
shall have been filed with the Commission in the manner
and within the time period required by Rule 424(b) under
the Act; no stop order suspending the effectiveness of the
Registration Statement or any post-effective amendment
thereto shall have been issued, and no proceedings for
that purpose shall have been instituted or threatened or,
to the knowledge of the Company or the Underwriters, shall
be contemplated by the Commission; and the Company shall
have complied with any request of the Commission for
additional information (to be included in the Registration
Statement or the Prospectus or otherwise).
(b) The Underwriters shall have received an opinion,
dated the Closing Date, of Kimball, Parr, Waddoups, Brown
& Gee, counsel for the Company, to the effect that:
(i) the Company and its Subsidiary each
has been duly incorporated and is validly existing as
a corporation in good standing under the laws of the
State of Utah;
(ii) the Company has all requisite
corporate power to own or lease its respective
properties and conduct its businesses as described in
the Registration Statement and the Prospectus, and
the Company has all requisite corporate power to
enter into this Agreement and the Indenture and to
carry out all the terms and provisions hereof and
thereof to be carried out by it and to execute, issue
and deliver the Securities and to incur and perform
the obligations to be incurred or performed by it
provided for therein;
(iii) the authorized capitalization of the
Company is as set forth in the Registration Statement
and the Prospectus;
(iv) the execution and delivery of the
Indenture have been duly authorized by all necessary
corporate action of the Company, and the Indenture
has been duly executed and delivered by the Company,
has been duly qualified under the Trust Indenture Act
and, assuming due authorization, execution and
delivery by the Trustee, is a legal, valid, binding
and enforceable instrument of the Company, subject to
applicable bankruptcy, insolvency, moratorium,
reorganization and similar laws affecting creditors'
rights generally and general principles of equity
(whether considered in a proceeding at law or in
9
<PAGE> 11
equity);
(v) the execution and delivery of this
Agreement have been duly authorized by all necessary
corporate action of the Company, and this Agreement
has been duly executed and delivered by the Company;
(vi) the execution and delivery of the
Securities have been duly authorized by all necessary
corporate action of the Company and the Securities
have been duly executed and delivered by the Company
and, assuming due authentication by the Trustee, are
the legal, valid, binding and enforceable obligations
of the Company, entitled to the benefits of the
Indenture, subject to applicable bankruptcy,
insolvency, moratorium, reorganization and similar
laws affecting creditors' rights generally and
general principles of equity (whether considered in a
proceeding at law or in equity);
(vii) the charter documents of the Company
do not entitle any holder of securities of the
Company the right to have such securities registered
under the Registration Statement and to the best
knowledge of such counsel, no holders of securities
of the Company are entitled to have such securities
registered under the Registration Statement;
(viii) the statements set forth under the
heading "Description of the Senior Notes" in the
Prospectus, insofar as such statements purport to
summarize certain provisions of the Indenture and the
Securities, provide a fair summary of such provisions
and the information with respect thereto required
under the Act; and the statements set forth under the
headings "Risk Factors -- Environmental Regulation"
and "Business -- Environmental Matters" in the
Prospectus, insofar as such statements constitute a
summary of legal matters, documents or proceedings
referred to therein provide a fair summary of such
legal matters, documents and proceedings and the
information with respect thereto required under the
Act;
(ix) to the best knowledge of such counsel,
no legal or governmental proceedings are pending to
which the Company is a party or to which the property
of the Company is subject, that are required to be
described in the Registration Statement or the
Prospectus and are not described therein as required,
and no such proceedings have been threatened against
the Company or with respect to any of its properties;
and no contract, agreement or other document is
required to be described in the Registration
Statement or the Prospectus or to be filed as an
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<PAGE> 12
exhibit to the Registration Statement that is not
described therein or filed as required;
(x) the issuance, offering and sale of the
Securities to the Underwriters by the Company
pursuant to this Agreement, the compliance by the
Company with the other provisions of this Agreement,
the Indenture and the Securities and the consummation
of the other transactions herein and therein
contemplated do not (A) require the consent,
approval, authorization, registration or
qualification of or with any governmental authority,
except such as have been obtained or such as may be
required under state securities or blue sky laws, or
(B) conflict with or result in a breach of violation
of any of the terms and provisions of, or constitute
a default (or an event that with the passage of time,
notice or both would constitute a default), or result
in the creation or imposition of any lien, charge or
encumbrance on the property or assets of the Company
or the charter documents or by-laws of the Company,
the Revolving Credit Facility (as defined in the
Prospectus) or the agreements pursuant to which the
Company's existing senior and subordinated notes were
issued or any indenture, mortgage, deed of trust or
lease or other agreement or instrument (including,
without limitation, any collective bargaining
agreement or labor agreement or any agreement
ancillary thereto) known to such counsel, to which
the Company is a party or by which the Company or any
of its properties are bound, or any statute or any
judgment, decree, order, rule or regulation of any
court or other governmental authority or any
arbitrator known to such counsel and applicable to
the Company except that the issuance of the
Securities will constitute a default of the Private
Debt (as defined in the Prospectus), which debt is
concurrently with the Closing being called for
prepayment and proceeds from the Securities
sufficient to make such payment placed in escrow for
such purpose, and except that any acceleration of
such Private Debt as a result of such default would,
until such Private Debt is paid by the Company,
constitute an event of default under the Revolving
Credit Facility and other debt agreements of the
Company;
(xi) the Company is not an "investment
company" or a company "controlled by" an "investment
company" as such terms are defined in the Investment
Company Act of 1940, as amended;
(xii) neither the consummation of the
transactions contemplated hereby nor the sale,
issuance, execution or delivery of the Securities
11
<PAGE> 13
will violate Regulation G (12 C.F.R. Part 207), T (12
C.F.R. Part 220), U (12 C.F.R. Part 221) or X (12
C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System;
(xiii) the Registration Statement is
effective under the Act; any required filing of the
Prospectus, and any supplements thereto, pursuant to
Rule 424(b) has been made in a manner and within the
time period required by Rule 424(b); and, to the best
knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement or
any post-effective amendment thereto has been issued,
and no proceedings for that purpose have been
instituted or threatened or contemplated by the
Commission; and
(xiv) the Registration Statement and the
Prospectus (in each case not including the Form T-1
and the financial statements and schedules and other
financial and statistical information contained
therein, as to which such counsel need express no
opinion) and the Indenture comply as to form in all
material respects with the applicable requirements of
the Act and the Trust Indenture Act and the
respective rules and regulations of the Commission
thereunder.
In addition, such counsel shall state that such
counsel has participated in conferences with officers and
other representatives of the Company, representatives of
the independent public accountants and representatives of
the Underwriters at which the contents of the Registration
Statement and Prospectus were discussed and, although such
counsel is not passing upon and does not assume any
responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement
and Prospectus (except as otherwise indicated above) on
the basis of the foregoing, no facts have come to the
attention of such counsel that lead them to believe that
either the Registration Statement, at the time the
Registration Statement became effective or as of the
Closing Date, contained an untrue statement of a material
fact or omitted to state a material fact necessary to make
the statements therein not misleading or that the
Prospectus as of its date or as of the Closing Date,
contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading (it being understood that such
counsel need express no opinion with respect to the
financial statements and schedules and other financial and
statistical data included in the Registration Statement or
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<PAGE> 14
Prospectus).
In rendering any such opinion, such counsel may rely,
as to matters of fact, to the extent such counsel deems
proper, on certificates of responsible officers of the
Company and public officials and, as to matters involving
the application of laws of any jurisdiction other than the
State of Utah, and the federal laws of the United States,
to the extent such counsel deems proper and specifies in
such opinion and to the extent such opinion is
satisfactory in form and scope to counsel for the
Underwriters, upon the opinion of other counsel qualified
in such jurisdictions whom they believe are reliable and
who are satisfactory to counsel for the Underwriters.
Copies of such opinion shall be delivered to the
Underwriters and counsel for the Underwriters.
References to the Registration Statement and the
Prospectus in this paragraph (b) shall include any
amendment or supplement thereto at the date of such
opinion.
(c) The Underwriters shall have received an opinion,
dated the Closing Date, of Cahill Gordon & Reindel,
counsel for the Underwriters, with respect to the issuance
and sale of the Securities, the Registration Statement,
the Prospectus, the Indenture and such other related
matters as the Underwriters may reasonably require, and
the Company shall have furnished to such counsel such
documents as they may reasonably request for the purpose
of enabling them to pass upon such matters.
(d) The Underwriters shall have received from Arthur
Andersen & Co. a letter or letters dated, respectively,
the date hereof and the Closing Date, in form and
substance satisfactory to the Underwriters, to the effect
that:
(i) they are independent accountants with
respect to the Company within the meaning of the Act
and the applicable rules and regulations thereunder;
(ii) in their opinion the audited
consolidated financial statements and schedules
included in the Registration Statement and the
Prospectus comply in form in all material respects
with the applicable accounting requirements of the
Act and the related published rules and regulations
thereunder;
(iii) on the basis of a reading of the
latest available interim unaudited consolidated
financial statements of the Company made available by
the Company, carrying out certain specified
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<PAGE> 15
procedures (which do not constitute an examination
made in accordance with generally accepted auditing
standards) that would not necessarily reveal matters
of significance with respect to the comments set
forth in this paragraph (iii), a reading of the
minute books of the shareholders, the board of
directors and committees thereof of the Company, and
inquiries of certain officials of the Company who
have responsibility for financial and accounting
matters, nothing came to their attention that caused
them to believe that:
(A) the interim unaudited consolidated
financial statements of the Company included in
the Registration Statement and the Prospectus do
not comply as to form in all material respects
with the applicable accounting requirements of
the Act and the related published rules and
regulations thereunder, or are not in conformity
with generally accepted accounting principles
applied on a basis substantially consistent with
that of the audited consolidated financial
statements included in the Registration
Statement and the Prospectus;
(B) at a specific date not more than five
business days prior to the date of such letter,
there were any changes in the capital stock or
long-term debt of the Company or any decreases
in net current assets or stockholders' equity of
the Company, in each case compared with amounts
shown on the September 30, 1993 balance sheet,
or for the period from October 1, 1993 to such
specified date there were any decreases, as
compared with the corresponding period in the
preceding year in sales, net revenues, operating
income, net income before taxes and
extraordinary items or total or per share
amounts of net income of the Company, except in
all instances for changes, decreases or
increases as is set forth in such letter; and
(iv) they have carried out certain
specified procedures, not constituting an audit, with
respect to certain amounts, percentages and financial
information designated by the Underwriters that are
derived from the general accounting records of the
Company and are included in the Registration
Statement and the Prospectus and in Exhibit 12 to the
Registration Statement, and have compared such
amounts, percentages and financial information with
such records of the Company and with information
derived from such records and have found them to be
in agreement, excluding any questions of legal
14
<PAGE> 16
interpretation.
In the event that the letters referred to above set
forth any such changes, decreases or increases, it shall
be a further condition to the obligations of the
Underwriters that such letters shall be accompanied by a
written explanation of the Company as to the significance
thereof, unless the Underwriters deem such explanation
unnecessary.
References to the Registration Statement and the
Prospectus in this paragraph (d) with respect to either
letter referred to above shall include any amendment or
supplement thereto at the date of such letter.
(e) Subsequent to the date hereof or, if earlier,
the dates as of which information is given in the
Registration Statement (exclusive of any amendment
thereto) and the Prospectus (exclusive of any supplement
thereto), there shall not have been (i) any changes,
decreases or increases specified in paragraph (d) of this
Section 7 or (ii) any change, or any development involving
a prospective change, in or affecting the business or
properties of the Company the effect of which, in any case
referred to in clause (i) or (ii) above, is, in the sole
judgment of the Underwriters, so material and adverse as
to make it impractical or inadvisable to proceed with the
public offering or the delivery of the Securities as
contemplated by the Registration Statement (exclusive of
any amendment thereto) and the Prospectus (exclusive of
any supplement thereto).
(f) The Company shall have furnished to the
Underwriters a certificate of the Company, signed by the
Chairman of the Board, the President or the Executive Vice
President and the principal financial or accounting
officer of the Company, dated the Closing Date, to the
effect that the signers of such certificate have carefully
examined the Registration Statement, the Prospectus, any
supplement to the Prospectus and this Agreement and that:
(i) the representations and warranties of
the Company in this Agreement are true and correct in
all material respects on and as of the Closing Date
with the same effect as if made on the Closing Date
and the Company has complied with all the agreements
and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing
Date;
(ii) no stop order suspending the
effectiveness of the Registration Statement or any
post-effective amendment thereto has been issued and
no proceedings for that purpose have been instituted
15
<PAGE> 17
or, to the best of the Company's knowledge,
threatened or contemplated; and
(iii) since the date of the most recent
financial statements included in the Registration
Statement or the Prospectus (exclusive of any
supplement thereto), there has been no material
adverse change in the condition (financial or other),
earnings, business, properties, prospects or results
of operations of the Company, whether or not arising
from transactions in the ordinary course of business,
except as set forth in or contemplated by the
Prospectus (exclusive of any supplement thereto).
(g) After the execution and delivery of this
Agreement, there shall not have been any downgrading in
the ratings of the Company's debt securities by any
"nationally recognized statistical rating agency" (as
defined in Rule 436(g) under the Act) or any notice given
thereby of, or any other action thereby threatening, any
intended or potential downgrading in any such rating or of
a possible change in any such rating that does not
indicate the direction of the possible change or any
action thereby placing the Company under special
surveillance.
(h) On or before the Closing Date, the Underwriters
and counsel for the Underwriters shall have received such
further certificates, documents or other information as
they may have reasonably requested from the Company.
(i) On the Closing Date, the Company shall cause to
be delivered notices of prepayment to each holder of
Private Debt (as defined in the Prospectus) pursuant to
the respective instrument governing each issuance of such
Private Debt, and funds sufficient to repay the Private
Debt, including prepayment premiums and accrued interest,
shall have been deposited with __________ in an escrow
account specifically designated to repay such Private
Debt.
If any of the conditions specified in this Section 7
shall not have been fulfilled in all material respects when and
as provided in this Agreement, or if any of the opinions and
certificates mentioned above or elsewhere in this Agreement
shall not be in all material respects reasonably satisfactory
in form and substance to the Underwriters and counsel for the
Underwriters, this Agreement and all obligations of the
Underwriters hereunder may be cancelled at, or any time prior
to, the Closing Date by the Underwriters. Notice of such
cancellation shall be given to the Company in writing or by
telephone, facsimile transmission or telegraph confirmed in
writing. The Company shall furnish to the Underwriters such
conformed copies of such opinions, certificates, letters and
documents in such quantities as the Underwriters and counsel
16
<PAGE> 18
for the Underwriters shall reasonably request.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold
harmless each Underwriter, the directors, officers, employees
and agents of each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act (each, an
"Indemnified Party") against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter, such
director, officer, employee or agent, or such controlling
person may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions, suits or proceedings in respect
thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement originally filed with respect to the
Securities or any amendment thereto or any Preliminary
Prospectus or the Prospectus or any amendment or supplement
thereto or the omission or alleged omission to state in such
registration statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto, a material fact required to be stated
therein or necessary to make the statements therein not
misleading, and will reimburse, as incurred, each such
Indemnified Party for any legal or other expenses reasonably
incurred by them in connection with investigating, defending
against or appearing as a third-party witness in connection
with any such loss, claim, damage, liability or action in
respect thereof; provided, however, that the Company will not
be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any
untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by
the Underwriters specifically for use therein; provided,
further, that the Company will not be liable to any Indemnified
Party with respect to any such untrue statement or omission
made in any Preliminary Prospectus that is corrected in the
Prospectus (or any amendment or supplement thereto) if the
person asserting any such loss, claim, damage or liability
purchased Securities from such Underwriter but was not sent or
given a copy of the Prospectus (as amended or supplemented) at
or prior to the written confirmation of the sale of such
Securities to such person in any case where such delivery of
the Prospectus (as amended or supplemented) is required by the
Act and the untrue statement or alleged untrue statement of a
material fact, or the omission or alleged omission to state a
material fact, that is found to be or is alleged to be the
basis of liability in such Preliminary Prospectus was corrected
17
<PAGE> 19
in the Prospectus as amended or supplemented and if such
Underwriter would not have been liable had a copy of such
Prospectus been so sent or given, unless such failure to
deliver the Prospectus (as amended or supplemented) was a
result of noncompliance by the Company with Section 5(f) of
this Agreement. This indemnity agreement will be in addition
to any liability which the Company may otherwise have. The
Company will not settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not such Indemnified Party is a
party to such claim, action, suit or proceeding), without the
prior written consent of such Underwriter, unless such
settlement, compromise or consent includes an unconditional
release of all such Indemnified Parties from all liability
arising from such claim, action, suit or proceeding.
(b) Each Underwriter will indemnify and hold
harmless the Company, each of its directors and officers who
signed the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act against any losses,
claims, damages or liabilities to which the Company or any such
director, officer or controlling person may become subject
under the Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions, suits or
proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or the omission or the
alleged omission to state therein a material fact required to
be stated in the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or necessary to make the
statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information
furnished to the Company by such Underwriter specifically for
use therein; and, subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred,
any legal or other expenses reasonably incurred by the Company
or any such director, officer, or controlling person in
connection with investigating or defending or appearing as a
third-party witness in connection with any such loss, claim,
damage, liability or any action in respect thereof. This
indemnity agreement will be in addition to any liability which
such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any
action or proceeding (including a governmental investigation),
such indemnified party will, if a claim in respect thereof is
18
<PAGE> 20
to be made against the indemnifying party under this Section 8,
notify the indemnifying party of the commencement thereof; but
the omission so to notify the indemnifying party (i) will not
relieve it from any liability under paragraph (a) or (b) above
unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii)
will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b)
above. In case any such action is brought against any
indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, that
if the defendants in any such action include both the
indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there
may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying
party shall not have the right to direct the defense of such
action on behalf of such indemnified party or parties and such
indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so
to assume the defense thereof and approval by such indemnified
party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party
under this Section 8 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred
by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next
preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be
liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but
substantially similar actions in the same jurisdiction arising
out of the same general allegations or circumstances,
designated by the Underwriters in the case of paragraph (a) of
this Section 8, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or
(ii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the
indemnifying party. After such notice from the indemnifying
party to such indemnified party, the indemnifying party will
not be liable for the costs and expenses of any settlement of
such action effected by such indemnified party without the
consent of the indemnifying party (which consent shall not, in
light of such action and the defenses available to the
19
<PAGE> 21
indemnified party, be unreasonably withheld), unless such
indemnified party waived its rights under this Section 8, in
which case the indemnified party may effect such a settlement
without such consent. An indemnifying party may require an
indemnified party to provide an undertaking to reimburse the
indemnifying party for all fees and expenses incurred by such
indemnified party and reimbursed by the indemnifying party to
the extent that it is finally judicially determined that such
indemnified party is not entitled to indemnification under
Section 8(a) or 8(b), as the case may be.
(d) In circumstances in which the indemnity
agreement provided for in the preceding paragraphs of this
Section 8 is unavailable or insufficient to hold harmless an
indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages
or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the
one hand and the indemnified party on the other from the
offering of the Securities or (ii) if the allocation provided
by the foregoing clause (i) is not permitted by applicable law,
not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the
statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by
the Company on the one hand and the Underwriters on the other
shall be deemed to be in the same proportion as the total
proceeds from the offering (net of underwriting discount but
before deducting expenses) received by the Company bear to the
total underwriting discounts and commissions received by the
Underwriters. The relative fault of the parties shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates
to information supplied by the Company or the Underwriters, the
parties' relative intents, knowledge, access to information and
opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the
circumstances. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities
referred to in this paragraph shall be deemed to include,
subject to the limitations set forth herein, any legal or other
expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or
claim. Each of the Company and the Underwriters agrees that it
would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other
method of allocation that does not take into account the
20
<PAGE> 22
equitable considerations referred to in the first sentence of
this paragraph (d). Notwithstanding any other provision of
this paragraph (d), no Underwriter shall be obligated to make
contributions hereunder that in the aggregate exceed the total
public offering price of the Securities purchased by such
Underwriter under this Agreement, less the aggregate amount of
any damages that such Underwriter has otherwise been required
to pay in respect of the same or any substantially similar
claim, and no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters'
obligations to contribute are several and not joint, and
contributions among Underwriters shall be governed by the
Citicorp Securities Markets, Inc. Master Agreement Among
Underwriters. For purposes of this paragraph (d), each person,
if any, who is an officer, director or employee of, or who
controls, any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as such Underwriter, and each director
of each of the Company, each officer of the Company who signed
the Registration Statement and each person, if any, who
controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, shall have the same
rights to contribution as such Registrant.
9. Survival. The respective representations,
warranties, agreements, covenants, indemnities and other
statements of the Company, its respective officers and the
Underwriters set forth in this Agreement or made by or on
behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its
officers or directors or any Indemnified Party, and
(ii) delivery of and payment for the Securities. The
respective agreements, covenants, indemnities and other
statements set forth in Sections 6 and 8 hereof shall remain in
full force and effect, regardless of any termination or
cancellation of this Agreement.
10. Termination. (a) This Agreement may be
terminated in the sole discretion of the Underwriters by notice
to the Company given prior to delivery and payment for the
Securities if at or prior to the delivery and payment for the
Securities:
(i) trading in securities on the New York
Stock Exchange, American Stock Exchange or the NASDAQ
National Market System shall have been suspended or
minimum prices shall have been established on the New
York Stock Exchange, American Stock Exchange or the
NASDAQ National Market System;
(ii) a general banking moratorium shall
21
<PAGE> 23
have been declared by New York or United States
authorities; or
(iii) there shall have been an outbreak or
escalation of hostilities or any other calamity or
crisis having an effect on the financial markets or
the market for the Securities and other similar
securities that, in the sole judgment of the
Underwriters, makes it impracticable to proceed with
the public offering or the delivery of the Securities
as contemplated by the Registration Statement, as
amended as of the date hereof.
(b) Termination of this Agreement pursuant to this
Section 10 shall be without liability of any party to any other
party except as provided in Section 9 hereof.
11. Information Supplied By Underwriters. The
statements set forth in the last paragraph on the front cover
page and under the heading "Underwriting" in any Preliminary
Prospectus or the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information
furnished by any Underwriters to the Company for the purposes
of Sections 1(b) and 8 hereof. The Underwriters confirm that
such statements (to such extent) are correct.
12. Notices. Notice given pursuant to any of the
provisions of this Agreement shall be in writing and shall be
mailed or delivered (a) to the Company at the office of the
Company at:
Geneva Steel Company
10 South Geneva Road
Vineyard, Utah 84058
Attention: Ken Johnsen
with a copy to:
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street
Suite 1300
Salt Lake City, Utah 84111
Attention: Richard Brown
David Angerbauer
or (b) to the Underwriters at:
Citicorp Securities, Inc.
399 Park Avenue
New York, New York 10043
Attention: High-Yield Finance Group
22
<PAGE> 24
with a copy to:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attention: Donald A. Bendernagel, Esq.
Vice President
Any notice given hereunder may be made by telecopier or
telephone, but if so made shall be subsequently confirmed in
writing.
13. Successors. This Agreement shall inure to the
benefit of and shall be binding upon the Underwriters, the
Company and its respective successors and legal
representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or
in respect of this Agreement, or any provisions herein
contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and
exclusive benefit of such persons and for the benefit of no
other person except that (i) the indemnities of the Company
contained in Section 8 of this Agreement shall also be for the
benefit of any Indemnified Party and (ii) the indemnities of
the Underwriters contained in Section 8 of this Agreement shall
also be for the benefit of the directors of the Company, the
directors and officers of the Company who have signed the
Registration Statement and any person or persons who control
the Company within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Securities
from the Underwriters shall be deemed a successor because of
such purchase.
14. APPLICABLE LAW. THIS AGREEMENT SHALL BE DEEMED
TO HAVE BEEN MADE IN THE STATE OF NEW YORK. THE VALIDITY AND
INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS
SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAWS.
15. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the
Company a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement between
the several Underwriters and the Company in accordance with its
23
<PAGE> 25
terms.
Very truly yours,
GENEVA STEEL COMPANY
By:
Name:
Title:
Confirmed and accepted as of
the date first above written:
CITICORP SECURITIES, INC.
CITIBANK CANADA SECURITIES LIMITED
CITIBANK INTERNATIONAL PLC
SALOMON BROTHERS INC
By: CITICORP SECURITIES, INC.
By: _________________________________
Name:
Title:
24
<PAGE> 26
Schedule I
Aggregate Principal
Amount of Securities
Underwriter to be Purchased
Citicorp Securities, Inc. $
Citibank Canada Securities Limited $
Citibank International plc $
Salomon Brothers Inc $
______________________
Total................. $
<PAGE> 1
_______________________________________________________________
GENEVA STEEL COMPANY,
as Issuer,
and
BANKERS TRUST COMPANY,
as Trustee
_______________________
INDENTURE
Dated as of ____________, 1994
_______________________
_____________________________________________________________
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Section Indenture Section
310(a)(1 ) ........................... 7.10
(a)(2) ........................... 7.10
(a)(3) ........................... N.A.
(a)(4) ........................... N.A.
(b) .............................. 7.8; 7.10; 10.2
(c) .............................. N.A.
311(a) .............................. 7.11
(b) .............................. 7.11
(c) .............................. N.A.
312(a) .............................. 2.5
(b) .............................. 10.3
(c) .............................. 10.3
313(a) .............................. 7.6
(b)(1) ........................... 7.6
(b)(2) ........................... 7.6
(c) .............................. 7.6; 10.2
(d) .............................. 7.6
314(a) .............................. 4.7; 10.2
314(b) .............................. N.A.
(c)(1) ........................... 10.4
(c)(2) ........................... 10.4
(c)(3) ........................... N.A.
(d) .............................. N.A.
(e) .............................. 10.5
(f) .............................. N.A.
315(a) .............................. 7.1(b)
(b) .............................. 7.5; 10.2
(c) .............................. 7.1(a)
(d) .............................. 7.1(c)
(e) .............................. 6.11
316(a) (last sentence) .............. 2.9
(a)(1)(A) ........................ 6.5
(a)(1)(B) ........................ 6.4
(a)(2) ........................... N.A.
(b) .............................. 6.7
317(a)(1) ........................... 6.8
(a)(2) ........................... 6.9
(b) .............................. 2.4
318(a) .............................. 10.1
____________________
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of this Indenture.
<PAGE> 3
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS AND
INCORPORATION BY REFERENCE
1.1 Definitions ....................................... 1
1.2 Incorporation by Reference of Trust
Indenture Act ................................... 15
1.3 Rules of Construction ............................. 16
ARTICLE II
THE SECURITIES
2.1 Form and Dating ................................... 16
2.2 Execution and Authentication ...................... 16
2.3 Registrar and Paying Agent ........................ 17
2.4 Paying Agent To Hold Money in Trust ............... 18
2.5 Securityholder Lists .............................. 18
2.6 Transfer and Exchange ............................. 19
2.7 Replacement Securities ............................ 19
2.8 Outstanding Securities ............................ 20
2.9 Treasury Securities ............................... 21
2.10 Temporary Securities .............................. 21
2.11 Cancellation ...................................... 21
2.12 Defaulted Interest ................................ 22
2.13 CUSIP Number ...................................... 22
2.14 Deposit of Moneys ................................. 22
ARTICLE III
REDEMPTION
3.1 Notices to Trustee ................................ 22
3.2 Selection of Securities To Be
Redeemed ........................................ 23
3.3 Notice of Redemption .............................. 23
3.4 Effect of Notice of Redemption .................... 24
3.5 Deposit of Redemption Price ....................... 25
3.6 Securities Redeemed in Part ....................... 25
ARTICLE IV
COVENANTS
4.1 Payment of Securities ............................. 25
4.2 Corporate Existence ............................... 26
4.3 Payment of Taxes and Other Claims ................. 26
4.4 Maintenance of Properties; Insurance;
Books and Records; Compliance with
Law ............................................. 26
4.5 Compliance Certificates ........................... 27
4.6 Reports ........................................... 28
4.7 Further Assurance to the Trustee .................. 28
4.8 Limitation on Additional Indebtedness ............. 29
4.9 Limitation on Sale-Leaseback
Transactions .................................... 31
4.10 Limitation on Liens ............................... 31
4.11 Limitation on Restricted Payments ................. 33
4.12 Disposition of Proceeds of Asset
Sales ........................................... 36
4.13 Limitation on Transactions with
Affiliates ...................................... 40
4.14 Change of Control ................................. 40
4.15 Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries .................................... 42
4.16 Conflicting Agreements ............................ 43
4.17 Waiver of Usury Laws .............................. 43
4.18 Limitation on Investments, Loans and
Advances ........................................ 44
4.19 Limitation on Issuance and Sale of
Capital Stock of Subsidiaries ................... 44
ARTICLE V
SUCCESSOR CORPORATION
5.1 When Company May Merge, Etc. ...................... 45
5.2 Successor Entity Substituted ...................... 45
ARTICLE VI
DEFAULT AND REMEDIES
6.1 Events of Default ................................. 46
6.2 Acceleration ...................................... 48
6.3 Other Remedies .................................... 49
6.4 Waiver of Past Default ............................ 49
6.5 Control by Majority ............................... 40
6.6 Limitation on Suits ............................... 50
6.7 Rights of Holders To Receive Payment .............. 50
6.8 Collection Suit by Trustee ........................ 51
6.9 Trustee May File Proofs of Claim .................. 51
6.10 Priorities ........................................ 52
6.11 Undertaking for Costs ............................. 52
ARTICLE VII
TRUSTEE
7.1 Duties of Trustee ................................. 53
7.2 Rights of Trustee ................................. 54
7.3 Individual Rights of Trustee ...................... 55
7.4 Trustee's Disclaimer .............................. 56
7.5 Notice of Defaults ................................ 56
7.6 Reports by Trustee to Holders ..................... 56
7.7 Compensation and Indemnity ........................ 56
7.8 Replacement of Trustee ............................ 58
7.9 Successor Trustee by Merger, Etc. ................. 59
7.10 Eligibility; Disqualification ..................... 59
7.11 Preferential Collection of Claims
Against Company ................................. 59
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
8.1 Termination of Company's Obligations .............. 60
8.2 Legal Defeasance and Covenant
Defeasance ...................................... 61
8.3 Application of Trust Money ........................ 65
8.4 Repayment to Company .............................. 65
8.5 Reinstatement ..................................... 66
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
9.1 Without Consent of Holders ........................ 66
9.2 With Consent of Holders ........................... 67
9.3 Compliance with Trust Indenture Act ............... 68
9.4 Revocation and Effect of Consents ................. 68
9.5 Notation on or Exchange of Securities ............. 69
9.6 Trustee To Sign Amendments, Etc. .................. 70
ARTICLE X
MISCELLANEOUS
10.1 Trust Indenture Act Controls ...................... 70
10.2 Notices ........................................... 70
10.3 Communications by Holders with Other
Holders ......................................... 71
10.4 Certificate and Opinion of Counsel as
to Conditions Precedent ......................... 71
10.5 Statements Required in Certificate and
Opinion of Counsel .............................. 72
10.6 Rules by Trustee, Paying Agent,
Registrar ....................................... 72
10.7 Legal Holidays .................................... 72
10.8 Governing Law ..................................... 73
10.9 No Recourse Against Others ........................ 73
10.10 Successors ........................................ 73
10.11 Duplicate Originals ............................... 73
10.12 Separability ...................................... 73
10.13 Table of Contents, Headings, Etc. ................. 73
SIGNATURES ............................................... 74
EXHIBIT A - Form of Security
<PAGE> 4
INDENTURE dated as of , 1994, between GENEVA
STEEL COMPANY, a Utah corporation, as Issuer (the "Company"),
and BANKERS TRUST COMPANY, a New York banking corporation, as
Trustee (the "Trustee").
The Company has duly authorized the execution and
delivery of this Indenture to provide for the issuance of the
% Senior Notes Due 2004 of the Company (the "Securities")
to be issued as provided for in this Indenture.
The parties hereto agree as follows for the benefit
of each other and for the equal and ratable benefit of the
Holders of the Securities:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 Definitions.
"Account" has the meaning assigned to that term in
the UCC.
"Acquired Indebtedness" means Indebtedness of a
Person existing at the time such Person becomes a Subsidiary of
the Company or assumed in connection with an Asset Acquisition
by such Person, including, without limitation, Indebtedness
incurred in connection with, or in anticipation of, such Person
becoming a Subsidiary of the Company or such acquisition.
"Affiliate" means, with respect to any specified
Person, any other Person which, directly or indirectly,
controls, is controlled by or is under direct or indirect
common control with, such specified Person. For the purposes
of this definition, "control", when used with respect to any
Person, means the power to direct the management and policies
of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, and
the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Affiliate Transaction" has the meaning provided in
Section 4.13.
"Agent" means any Registrar, Paying Agent or
co-registrar.
"Asset Acquisition" means (i) any capital
contribution (by means of transfers of cash or other property
to others or payments for property or services for the account
or use of others, or otherwise), or purchase or acquisition of
Capital Stock, by the Company or any of its Subsidiaries in any
other Person, or acquisition or purchase of Capital Stock by
the Company or any of its Subsidiaries in any other Person, in
either case, pursuant to which such Person shall become a
Subsidiary of the Company or any of its Subsidiaries or shall
be merged with or into the Company or any of its Subsidiaries
<PAGE> 5
or (ii) any acquisition by the Company or any of its
Subsidiaries of the assets of any Person which constitute
substantially all of an operating unit or business of such
Person.
"Asset Sale" means any direct or indirect sale,
conveyance, transfer, lease or other disposition to any Person
(including by way of merger) other than the Company or a
Subsidiary of the Company, in one transaction or a series of
related transactions, of (i) any Capital Stock of any
Subsidiary of the Company or (ii) any other property or asset
of the Company or any Subsidiary of the Company, in each case,
other than Inventory in the ordinary course of business and
other than such isolated transactions which do not involve
aggregate consideration in excess of $500,000 individually (any
consideration other than cash to be valued in good faith by the
Company's Board of Directors). For the purposes of this
definition, the term "Asset Sale" shall not include (x) sales
of receivables not a part of a sale of the business from which
they arose, (y) any disposition of properties and assets of the
Company or any Subsidiary that is governed under and complies
with Section 4.9 or 5.1 hereof or (z) transfers of assets to
any Person solely in exchange for assets which are related to
the Company's business and which have a Fair Market Value at
least equal to the Fair Market Value of the assets transferred.
"Asset Sale Offer" has the meaning provided in
Section 4.12(a)(ii).
"Asset Sale Payment Date" means, with respect to any
Available Amount from an Asset Sale, the earliest of (x) the
330th day following receipt of such Available Amount if no
written commitments to apply such Available Amount to a use
other than an Asset Sale Offer have been entered into within
270 days of such Asset Sale, (y) the 360th day following
receipt of such Available Amount and (z) such earlier date on
which an Asset Sale Offer shall expire.
"Available Amount" has the meaning provided in
Section 4.12(a)(ii).
"Bankruptcy Law" means Title 11 of the United States
Code or any other bankruptcy, insolvency or similar federal or
state law for the relief, reorganization, adjustment or
recomposition of debtors.
"Board of Directors" means the Board of Directors of
the Company or any committee of such Board of Directors
authorized to act for it hereunder.
"Board Resolution" means a copy of a resolution
certified by the Secretary, an Assistant Secretary or any
Vice-President of the Company to have been duly adopted by the
Board of Directors of the Company and to be in full force and
<PAGE> 6
effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day except a Saturday, a
Sunday or any day on which banking institutions in Salt Lake
City, Utah and the City of New York, State of New York are
required or authorized by law or other governmental action to
be closed.
"Capital Stock" means, with respect to any Person,
any and all shares, interests, participations, rights in, or
other equivalents (however designated and whether voting or
non-voting) of, such Person's capital stock, whether
outstanding on the Issue Date or issued after the Issue Date,
and any and all rights, warrants or options exchangeable for or
convertible into such capital stock.
"Capitalized Lease Obligation" means any obligation
to pay rent or other amounts under a lease of (or other
agreement conveying the right to use) any property (whether
real, personal or mixed) that is required to be classified and
accounted for as a capital lease obligation under GAAP, and,
for the purposes of this Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof
at such date, determined in accordance with GAAP.
"Change of Control" means (i) the direct or indirect
sale, lease, exchange or other transfer of all or substantially
all of the assets of the Company to any Person or entity or
group of Persons or entities acting in concert as a partnership
or other group (a "Group of Persons") other than an Affiliate
of the Company or a Permitted Person, (ii) the merger or
consolidation of the Company with or into another corporation
with the effect that the then existing shareholders of the
Company hold less than 50% of the combined voting power of the
then outstanding securities of the surviving corporation of
such merger or the corporation resulting from such
consolidation ordinarily (and apart from rights arising under
special circumstances) having the right to vote in the election
of directors, and (iii) a Person or Group of Persons (other
than a Permitted Person) shall, as a result of a tender or
exchange offer, open market purchases, privately negotiated
purchases or otherwise, have become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing more than 50% of the
combined voting power of the then outstanding securities of the
Company ordinarily (and apart from rights arising under special
circumstances) having the right to vote in the election of
directors. For purposes of the foregoing, a "Permitted Person"
shall mean any holder or a group consisting solely of holders
of the Class B Common Stock of the Company on the Issue Date,
any spouse or child of such holder or any person who is an
Affiliate of such holder or such spouse or child. For the
avoidance of doubt, in construing the foregoing, indirect
ownership of an entity and indirect holding of interests or
<PAGE> 7
voting power of an entity, such as through a holding company or
otherwise, shall constitute ownership of such entity and
holding of interests or voting power of such entity within the
meaning of the foregoing.
"Change of Control Date" has the meaning provided in
Section 4.14 of this Indenture.
"Change of Control Offer" has the meaning provided in
Section 4.14 of this Indenture.
"Change of Control Payment Date" has the meaning
provided in Section 4.14 of this Indenture.
"Common Stock" means, with respect to any Person, any
and all shares, interests or other participations in, and other
equivalents (however designated and whether voting or
nonvoting) of, such Person's common stock, whether outstanding
on the Issue Date or issued after such date, and includes,
without limitation, all series and classes of such common
stock.
"Company" means the party named as such in this
Indenture until a successor replaces it in accordance with the
provisions of this Indenture and, thereafter, means the
successor.
"Consolidated Cash Flow" means, with respect to any
Person (including its Subsidiaries) for any period, the
Consolidated Net Income of such Person for such period
increased (to the extent deducted in determining Consolidated
Net Income) by the sum of (i) all United States Federal, state
and foreign income taxes of such Person paid or accrued in
accordance with GAAP for such period (other than income taxes
attributable to extraordinary, unusual or non-recurring gains
or losses), (ii) all interest expense of such Person paid or
accrued in accordance with GAAP (net of any interest income)
for such period (including amortization of original issue
discount and the interest portion of deferred payment
obligations), (iii) depreciation, and (iv) amortization,
including, without limitation, amortization of capitalized debt
issuance costs.
"Consolidated Interest Coverage Ratio" means, with
respect to any Person, the ratio of (i) Consolidated Cash Flow
of such Person for the two full fiscal quarters for which
financial statements are available that immediately precede the
date of the proposed transaction or other circumstances giving
rise to the need to calculate the Consolidated Interest
Coverage Ratio (the "Transaction Date") to (ii) all cash and
non-cash interest expense of such Person and its Subsidiaries
determined in accordance with GAAP (net of any interest income
of such Person and its Subsidiaries and excluding deferred
financing fees of such Person and its Subsidiaries) for such
<PAGE> 8
two full fiscal quarter period plus all cash and non-cash
interest capitalized by such Person and its Subsidiaries in
accordance with GAAP for such two fiscal quarter period. For
purposes of this definition, if the Transaction Date is to
occur prior to the date on which the Company's consolidated
financial statements for the two full fiscal quarters
subsequent to the Issue Date are first available, "Consolidated
Cash Flow" and the items referred to in the preceding clause
(ii) shall be calculated, in the case of the Company, after
giving effect on a pro forma basis as if the Securities
outstanding on the Transaction Date were issued on the first
day of such two full fiscal quarter period. In addition to and
without limitation of the foregoing, for purposes of this
definition, "Consolidated Cash Flow" and the items referred to
in the preceding clause (ii) shall be calculated after giving
effect on a pro forma basis for the period of such calculation
to (i) the incurrence and/or retirement of any Indebtedness of
such Person or any of its Subsidiaries at any time during the
period (the "Reference Period") (A) commencing on the first day
of the two full fiscal quarter period for which financial
statements are available that precedes the Transaction Date and
(B) ending on and including the Transaction Date, including,
without limitation, the incurrence and/or retirement of the
Indebtedness giving rise to the need to make such calculation,
as if such incurrence and/or retirement occurred on the first
day of the Reference Period; provided that if such Person or
any of its Subsidiaries directly or indirectly guarantees
Indebtedness of a third Person, the above clause shall give
effect to the incurrence of such guaranteed Indebtedness as if
such Person or Subsidiary had directly incurred such guaranteed
Indebtedness and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving
rise to the need to make such calculation as a result of the
Company or any of its Subsidiaries (including any Person who
becomes a Subsidiary as a result of the Asset Acquisition)
incurring Acquired Indebtedness) occurring during the Reference
Period and any retirement of Indebtedness in connection with
such Asset Acquisitions, as if such Asset Sale or Asset
Acquisition and/or retirement occurred on the first day of the
Reference Period. Furthermore, in calculating the denominator
(but not the numerator) of this "Consolidated Interest Coverage
Ratio," (1) interest on Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter shall be deemed to
accrue at a fixed rate per annum equal to the rate of interest
on such Indebtedness in effect on the Transaction Date; (2) if
interest on any Indebtedness to be incurred on the Transaction
Date may optionally be determined at an interest rate based
upon a factor of a prime or similar rate, a eurocurrency
interbank offered rate, or other rates, then the interest rate
based upon a factor of a prime or similar rate shall be deemed
to have been in effect; and (3) notwithstanding clause (1)
above, interest on Indebtedness determined on a fluctuating
basis, to the extent such interest is covered by agreements
<PAGE> 9
relating to Interest Rate Protection Obligations, shall be
deemed to accrue at the rate per annum resulting after giving
effect to the operation of such agreements.
"Consolidated Net Income" means, with respect to any
Person, for any period, the aggregate of the Net Income of such
Person and its Subsidiaries for such period, on a consolidated
basis, determined in accordance with GAAP; provided, however,
that (a) the Net Income of any Person (the "Other Person") in
which the Person in question or any of its Subsidiaries has a
less than a 100% interest (which interest does not cause the
Net Income of such other Person to be consolidated into the Net
Income of the Person in question in accordance with GAAP) shall
be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary,
(b) the Net Income of any Subsidiary of the Person in question
that is subject to any restriction or limitation on the payment
of dividends or the making of other distributions shall be
excluded to the extent of such restriction or limitation,
(c) (i) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition and (ii) any net gain (but not loss) resulting from
an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business
shall be excluded and (d) extraordinary gains and losses shall
be excluded.
"Custodian" has the meaning provided in Section
6.1(b).
"Default" means any event that is, or after the
giving of notice or the passage of time or both would be, an
Event of Default.
"Disqualified Stock" means, with respect to any
Person, any Capital Stock of such Person which, by its terms
(or by the terms of any security into which it is convertible
or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is exchangeable for
Indebtedness, or is redeemable at the option of the holder
thereof, in whole or in part, on or prior to the Maturity Date
of the Securities.
"Event of Default" has the meaning provided in
Section 6.1.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time and the rules and
regulations promulgated thereunder by the SEC.
"Exchange Debentures" has the meaning provided in
Section 4.8.
"Existing Senior Notes" means the Company's (i) 11.4%
<PAGE> 10
Senior Notes issued pursuant to Note Agreements dated as of
March 1, 1990, (ii) 10.55% Senior Notes issued pursuant to Note
Agreements dated as of August 15, 1991 and (iii) 11 1/8% Senior
Notes due 2001 issued pursuant to the indenture dated as of
March 15, 1993.
"Fair Market Value" or "fair value" means, with
respect to any asset or property, the price which could be
negotiated in an arm's-length free market transaction, for
cash, between a willing seller and a willing buyer, neither of
whom is under undue pressure or compulsion to complete the
transaction. Fair Market Value shall be determined by the
Board of Directors acting in good faith and shall be evidenced
by a Board Resolution delivered to the Trustee with respect to
all assets or property having a Fair Market Value in excess of
$1,000,000.
"GAAP" means generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the
accounting profession of the United States of America, which
are applicable as of the date of determination.
"Holder" or "Securityholder" means the Person in
whose name a Security is registered on the Registrar's books.
"incur" means, with respect to any Indebtedness, to
directly or indirectly, create, incur, assume, issue, guarantee
or otherwise become liable for or with respect to such
Indebtedness; and the terms "incurred," "incurrence" and
"incurring" have meanings correlative to the foregoing;
provided, however, that a change in GAAP that results in an
obligation of any Person that exists at such time becoming
Indebtedness of such Person shall not be deemed an incurrence
of such Indebtedness by such Person.
"Indebtedness" means, with respect to any Person,
without duplication, (i) any liability, contingent or
otherwise, of such Person (A) for borrowed money (whether or
not the recourse of the lender is to the whole of the assets of
such Person or only to a portion thereof), (B) evidenced by a
note, debenture or similar debt instrument or letter of credit
(including a purchase money obligation) or (C) for the payment
of money relating to a Capitalized Lease Obligation or other
obligation relating to payment of the deferred purchase price
of property; (ii) any liability of others of the kind described
in the preceding clause (i) which the Person has guaranteed or
which is otherwise its contractual liability; (iii) any
obligation secured by a Lien to which the property or assets of
such Person are subject, whether or not the obligations secured
<PAGE> 11
thereby shall have been assumed by or shall otherwise be such
Person's legal liability; and (iv) any and all deferrals,
renewals, extensions and refundings of, or amendments,
modifications or supplements to, any liability of the kind
described in any of the preceding clauses (i), (ii) or (iii).
Notwithstanding the foregoing, the liability or obligation of a
Person under any appeal or reimbursement obligation entered
into with respect to any judgment shall not constitute
Indebtedness. For the avoidance of doubt, in construing the
foregoing definition, guaranties by the Company or any of its
Subsidiaries of Indebtedness, which Indebtedness is incurred by
the Company or any of its Subsidiaries pursuant to, and in
compliance with, Section 4.8 hereof, shall not constitute
Indebtedness within the meaning of the foregoing definition.
"Indenture" means this Indenture as amended or
supplemented from time to time pursuant to the terms hereof.
"interest," when used with respect to any Security,
means the amount of all interest accruing on such Security,
including all interest accruing subsequent to the occurrence of
any events specified in Sections 6.1(a)(vi) and (vii) or which
would have accrued but for any such event.
"Interest Payment Date," when used with respect to
any Security, means the stated maturity of an installment of
interest specified in such Security.
"Interest Rate" when used with respect to any
Security, means the rate per annum specified in such Security
as the rate of interest accruing on the principal amount of
such Security.
"Interest Rate Protection Obligations" means the
obligations of any Person pursuant to any arrangement with any
other Person whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments
calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic
payments made by such Person calculated by applying a fixed or
a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps,
floors, collars and similar agreements.
"Inventory" has the meaning assigned to that term in
the UCC.
"Investments" has the meaning provided in
Section 4.18.
"Issue Date" means the date on which the Securities
are originally issued.
<PAGE> 12
"Legal Holiday" means any day other than a Business
Day.
"Lien" means any mortgage, lien (statutory or other),
pledge, security interest, encumbrance, hypothecation,
assignment for security, or other security agreement of any
kind or nature whatsoever. For purposes of this Indenture, a
Person shall be deemed to own subject to a Lien any property
which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such
property.
"Material Subsidiary" means, at any particular time,
any Subsidiary of any Person that (a) accounted for more than
10% of the consolidated revenues of such Person and its
Subsidiaries on a consolidated basis for the most recently
completed fiscal year of such Person or (b) was the owner of
more than 10% of the assets of such Person and its Subsidiaries
on a consolidated basis as at the end of such fiscal year, all
as shown on the consolidated financial statements of such
Person and its Subsidiaries for such fiscal year.
"Maturity Date," when used with respect to any
Security, means the date specified in such Security as the
fixed date on which the principal of such Security is due and
payable.
"Net Cash Proceeds" means, with respect to any Asset
Sale, the proceeds thereof in the form of cash or cash
equivalents, including payments in respect of deferred payment
obligations when received in the form of cash or cash
equivalents (except to the extent that such obligations with
respect to Indebtedness are financed or sold with recourse to
the Company or any of its Subsidiaries) net of (i) brokerage
commissions and other reasonable fees and expenses (including
fees and expenses of counsel and investment bankers) related to
such Asset Sale; (ii) provisions for all taxes payable as a
result of such Asset Sale; (iii) payments made to retire
Indebtedness secured by the assets subject to such Asset Sale
(including retirements of Indebtedness under the Working
Capital Facility) to the extent required pursuant to the terms
of such Indebtedness; and (iv) appropriate amounts to be
provided by the Company or any of its Subsidiaries, as the case
may be, as a reserve, in accordance with GAAP, against any
liabilities associated with such Asset Sale and retained by the
Company or any of its Subsidiaries, as the case may be, after
such Asset Sale, including, without limitation, pension and
other post-employment benefit liabilities, liabilities related
to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale.
"Net Income" means, with respect to any Person for
any period, the net income (loss) of such Person determined in
accordance with GAAP.
<PAGE> 13
"Net Proceeds" means (a) in the case of any sale of
Capital Stock by the Company, the aggregate net proceeds
received by the Company, after payment of expenses, commissions
and the like incurred in connection therewith, whether such
proceeds are in cash or in property (valued at the Fair Market
Value thereof, as determined in good faith by the Board of
Directors, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding
securities of any kind for or into shares of Capital Stock of
the Company which is not Disqualified Stock, the net book value
of such outstanding securities on the date of such exchange,
exercise, conversion or surrender (plus any additional amount
required to be paid by the holder to the Company upon such
exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional
shares, and less all expenses incurred by the Company in
connection therewith).
"Officer" means the Chairman, the President, any Vice
President, the Chief Financial Officer, the General Counsel,
the Treasurer, the Secretary, the Chief Accounting Officer or
the Controller of the Company.
"Officer's Certificate" means a certificate signed by
an Officer.
"Opinion of Counsel" means a written opinion from
legal counsel, which may include counsel to the Company.
"Paying Agent" has the meaning provided in
Section 2.3 except that, for the purposes of Section 4.14 and
Articles III and VIII, the Paying Agent shall not be the
Company, any Subsidiary of the Company or any of their
respective Affiliates.
"Permitted Investments" means (i) obligations of or
guaranteed by the U.S. government due within one year;
(ii) certificates of deposit or eurodollar deposits due within
one year with a commercial bank having capital funds of at
least $100,000,000 or more; (iii) commercial paper rated A-2,
P-2 or better by Standard & Poor's Corporation or Moody's
Investors Service, Inc.; (iv) money market preferred stocks
which, at the date of acquisition and at all times thereafter,
are accorded either of the two highest ratings by Standard &
Poor's Corporation or Moody's Investors Service, Inc.; (v) debt
of or guaranteed by any state or political subdivision that is
rated A or better; and (vi) Repurchase Agreements.
"Permitted Liens" means, with respect to any Person,
any Lien arising by reason of (a) any judgment, decree or order
of any court, so long as such Lien is being contested in good
faith and any appropriate legal proceedings which may have been
duly initiated for the review of such judgment, decree or order
shall not have been finally terminated or the period within
<PAGE> 14
which such proceedings may be initiated shall not have expired;
(b) taxes not yet delinquent or which are being contested in
good faith; (c) security for payment of workers' compensation
or other insurance; (d) security for the performance of
tenders, contracts (other than contracts for the payment of
borrowed money) or leases; (e) deposits to secure public or
statutory obligations, or in lieu of surety or appeal bonds
entered into in the ordinary course of business; (f) operation
of law in favor of carriers, warehousemen, landlords,
mechanics, materialmen, laborers, employees, suppliers or
similar Persons, incurred in the ordinary course of business
for sums which are not yet delinquent or are being contested in
good faith by negotiations or by appropriate proceedings which
suspend the collection thereof; and (g) security for
obligations of the Company or any Material Subsidiary with
respect to surety, appeal, reclamation, performance or other
similar bonds.
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
"principal" of a debt security means the principal
amount of the security plus, when appropriate, the premium, if
any, on the security.
"Private Debt" means the aggregate approximately $90
million principal amount of privately placed senior and
subordinated Indebtedness to be repaid with the proceeds from
the sale of the Securities.
"Public Equity Offering" means a public offering by
the Company of shares of its common stock (however designated
and whether voting or non-voting) and any and all rights,
warrants or options to acquire such common stock.
"Redeemable Preferred Stock" has the meaning provided
in Section 4.8.
"Redemption Date" means, with respect to any
Security, the Maturity Date of such Security or the date on
which such Security is to be redeemed by the Company pursuant
to the terms of the Securities.
"Registrar" has the meaning provided in Section 2.3.
"Repurchase Agreements" means repurchase agreements,
reverse repurchase agreements or similar agreements relating to
marketable direct obligations issued or unconditionally
guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the
date of acquisition; provided that the terms of such agreements
<PAGE> 15
comply with the guidelines set forth in Federal Financial
Agreements of Depository Institutions with Securities and
Others (or any successor guidelines), as adopted by the
Comptroller of the Currency.
"Restricted Payment" means any of the following:
(i) the declaration or payment of any dividend or any other
distribution or payment on or in respect of the Capital Stock
of the Company or any Subsidiary of the Company or any payment
made to the direct or indirect holders (in their capacities as
such) of Capital Stock of the Company or any Subsidiary of the
Company (other than (x) dividends or distributions payable
solely in Capital Stock (other than Disqualified Stock) or in
options, warrants or other rights to purchase Capital Stock
(other than Disqualified Stock) and (y) in the case of
Subsidiaries of the Company, dividends or distributions payable
to the Company or to a Subsidiary of the Company), (ii) the
purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company or any of its
Subsidiaries (other than Capital Stock owned by the Company or
a Wholly-Owned Subsidiary of the Company excluding Disqualified
Stock), (iii) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other
acquisition or retirement for value, prior to any scheduled
maturity, scheduled repayment or scheduled sinking fund
payment, of any Indebtedness which is subordinated in right of
payment to the Securities (other than subordinated Indebtedness
of the Company outstanding as of the Issue Date and other than
subordinated Indebtedness acquired in anticipation of
satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of
acquisition), and (iv) the making of any Investment or
guarantee of any Investment in any Person other than pursuant
to clauses (i) through (v) and (vii) of Section 4.18.
"Sale-Leaseback Transaction" means any arrangement
with any Person providing for the leasing by the Company or any
Subsidiary of the Company of any real or tangible personal
property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing.
"SEC" means the Securities and Exchange Commission
and shall include any successor organization.
"Securities" means the % Senior Notes Due 2004
issued, authenticated and delivered under this Indenture, as
amended or supplemented from time to time pursuant to the terms
of this Indenture.
"Subsidiary" means (i) a corporation a majority of
whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or
indirectly, owned by the Company, by a Subsidiary of the
Company or by the Company and a Subsidiary of the Company or
<PAGE> 16
(ii) any other Person (other than a corporation) in which the
Company, a Subsidiary of the Company or the Company and a
Subsidiary of the Company, directly or indirectly, at the date
of determination thereof, have at least a majority ownership
interest. Notwithstanding the foregoing, an Unrestricted
Subsidiary shall not be deemed a Subsidiary of the Company
other than for purposes of the definition of Unrestricted
Subsidiary, unless the Company shall have designated an
Unrestricted Subsidiary as a "Subsidiary" by written notice to
the Trustee. An Unrestricted Subsidiary may be designated as a
Subsidiary at any time by the Company by written notice to the
Trustee, provided, that, if such Unrestricted Subsidiary is an
obligor of any Indebtedness, immediately after giving effect to
such designation, the Company could incur $1.00 of Indebtedness
pursuant to Section 4.8.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.
Code {{ 77aaa-77bbbb) as in effect on the date of this
Indenture.
"Trustee" means the party named as such in this
Indenture until a successor replaces it in accordance with the
provisions of this Indenture and thereafter means such
successor.
"Trust Officer" means when used with respect to the
Trustee means the Chairman or any Vice-Chairman of the Board of
Directors, the Chairman or any Vice-Chairman of the Executive
Committee of the Board of Directors, the Chairman of the Trust
Committee, the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, any Assistant
Treasurer, the Cashier, any Assistant Cashier, any Trust
Officer or Assistant Trust Officer, the Controller or any
Assistant Controller or any other officer of the Trustee
customarily performing functions similar to those performed by
any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other
officer of the Trustee to whom such matter is referred because
of his or her knowledge of and familiarity with the particular
subject.
"UCC" means the Uniform Commercial Code as the same
may, from time to time, be in effect in the State of Utah.
"U.S. Government Obligations" has the meaning
provided in Section 8.1(b).
"Unrestricted Subsidiary" means any Subsidiary of the
Company which at the time of creation or acquisition thereof
(and at no other time) by the Company is designated by written
notice to the Trustee as an Unrestricted Subsidiary. An
Unrestricted Subsidiary may be designated as a Subsidiary at a
later date as provided in the definition of Subsidiary.
<PAGE> 17
"Wholly-Owned Subsidiary" means any Subsidiary of the
Company, 100% of the outstanding Capital Stock of which (other
than Shares of Capital Stock representing any director's quali
fying shares or investments by foreign nationals mandated by
applicable law) is owned by the Company, by a Wholly-Owned
Subsidiary of the Company or by the Company and a Wholly-Owned
Subsidiary of the Company.
"Working Capital Facility" means the Revolving Credit
Agreement, dated as of April 29, 1992, among the Company, the
financial institutions party thereto, Citibank, N.A., as
Issuer, and Citicorp USA, Inc., as Agent, and any other
agreement, instrument, facility or arrangement intended to
provide working capital (including any asset securitization
facility involving the Sale of Accounts), as the same may at
any time be amended, amended and restated, supplemented or
otherwise modified, including any refinancing, refunding,
replacement or extension thereof and whether by the same or any
other lender or groups of lenders.
"Working Capital Proceeds" has the meaning provided
in Section 4.12.
SECTION 1.2 Incorporation by Reference
of Trust Indenture Act.
Whenever this Indenture refers to a provision of the
TIA, the provision shall be deemed incorporated by reference in
and made a part of this Indenture. The following TIA terms
used in this Indenture have the following meanings:
(a) "Commission" means the SEC;
(b) "indenture securities" means the Securities;
(c) "indenture security holder" means a
Securityholder;
(d) "indenture to be qualified" means this
Indenture;
(e) "indenture trustee" or "institutional trustee"
means the Trustee; and
(f) "obligor" on the indenture securities means the
Company or any other obligor on the Securities.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule and not otherwise defined herein have
the meanings so assigned to them therein.
SECTION 1.3 Rules of Construction.
<PAGE> 18
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is exclusive;
(c) words in the singular include the plural, and
words in the plural include the singular;
(d) "herein," "hereof" and other words of similar
import refer to this Indenture as a whole and not to any
particular Article, Section or other Subdivision; and
(e) unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder
shall be prepared in accordance with GAAP as in effect
from time to time, applied on a basis consistent with the
most recent audited consolidated financial statements of
the Company.
ARTICLE II
THE SECURITIES
SECTION 2.1 Form and Dating.
The Securities and the Trustee's certificates of
authentication with respect thereto shall be substantially in
the form set forth in Exhibit A annexed hereto, which is hereby
incorporated in and expressly made a part of this Indenture.
The Securities may have notations, legends or endorsements
required by law, rule, usage or agreement to which the Company
is subject. Each Security shall be dated the date of its
authentication. The terms and provisions contained in the
Securities shall constitute, and are expressly made, a part of
this Indenture.
SECTION 2.2 Execution and Authentication.
Two Officers shall execute the Securities on behalf
of the Company by either manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or
reproduced on the Securities.
If an Officer whose signature is on a Security no
longer holds that office at the time the Trustee authenticates
the Security or at any time thereafter, the Security shall be
valid nevertheless.
A Security shall not be valid until an authorized
signatory of the Trustee manually signs the certificate of
authentication on the Security. Such signature shall be
<PAGE> 19
conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate Securities for
original issue in an aggregate principal amount not to exceed
$125,000,000, upon receipt of an Officer's Certificate signed
by two Officers directing the Trustee to authenticate the
Securities and certifying that all conditions precedent to the
issuance of the Securities contained herein have been complied
with. The aggregate principal amount of Securities outstanding
at any time may not exceed $125,000,000 except as provided in
Section 2.7.
The Trustee may appoint an authenticating agent
reasonably acceptable to the Company to authenticate
Securities. Unless limited by the terms of such appointment,
an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such
agent. Such authenticating agent shall have the same rights as
the Trustee in any dealings hereunder with the Company or with
any of the Company's Affiliates.
SECTION 2.3 Registrar and Paying Agent.
The Company shall maintain an office or agency (which
shall be located in the Borough of Manhattan in The City of New
York, State of New York) where Securities may be presented for
registration of transfer or for exchange (the "Registrar"), an
office or agency (which shall be located in the Borough of
Manhattan in The City of New York, State of New York) where
Securities may be presented for payment (the "Paying Agent")
and an office or agency where notices and demands to or upon
the Company in respect of the Securities and this Indenture may
be served. The Registrar shall keep a register of the
Securities and of their transfer and exchange. The Company may
have one or more co-registrars and one or more additional
paying agents. The term "Paying Agent" includes any additional
paying agent.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
shall incorporate the provisions of the TIA. Such agreement
shall implement the provisions of this Indenture that relate to
such Agent. The Company shall notify the Trustee of the name
and address of any such Agent. If the Company fails to
maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such and shall be
entitled to appropriate compensation in accordance with
Section 7.7.
The Company initially appoints the Trustee, as
Registrar, Paying Agent and agent for service of notices and
<PAGE> 20
demands in connection with the Securities.
SECTION 2.4 Paying Agent To Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit
of the Securityholders or the Trustee all money held by the
Paying Agent for the payment of principal of or interest on the
Securities, and the Company (by means of an Officer's
Certificate) and the Paying Agent (if different than the
Trustee) shall notify the Trustee of any default by the Company
in making any such payment. Money held in trust by the Paying
Agent need not be segregated except as required by law and in
no event shall the Paying Agent be liable for any interest on
any money received by it hereunder; provided, however, that if
the Company, any Subsidiary or any of their respective
Affiliates act as Paying Agent, it shall segregate such money
and hold it in a separate trust fund under this Indenture. The
Company at any time may require the Paying Agent (if different
than the Trustee) to pay all money held by it to the Trustee
and account for any funds disbursed and the Trustee may at any
time during the continuance of any Event of Default specified
in Section 6.1(a)(i), (ii) or (iii), upon written request to
the Paying Agent, require the Paying Agent to pay forthwith all
money so held by it to the Trustee and to account for any funds
disbursed. Upon making such payment, the Paying Agent shall
have no further liability for the money delivered to the
Trustee.
SECTION 2.5 Securityholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of the Securityholders. If the Trustee
is not the Registrar, the Company shall furnish to the Trustee
at least five Business Days before each Interest Payment Date,
and at such other times as the Trustee may reasonably request
in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of
the Securityholders.
SECTION 2.6 Transfer and Exchange.
When Securities are presented to the Registrar or a
co-registrar with a request from the Holder of such Securities
to register the transfer or to exchange them for an equal
principal amount of Securities of other authorized
denominations, the Registrar shall register the transfer or
make the exchange as requested; provided, that every Security
presented or surrendered for registration of transfer or
exchange shall be duly endorsed or be accompanied by a written
instrument of transfer in form satisfactory to the Company and
the Registrar, duly executed by the Holder thereof or his
<PAGE> 21
attorneys duly authorized in writing. To permit registrations
of transfers and exchanges, the Company shall issue and execute
and the Trustee shall authenticate new Securities evidencing
such transfer or exchange at the Registrar's request. No
service charge shall be made to the Securityholder for any
registration of transfer or exchange. The Company may require
from the Securityholder payment of a sum sufficient to cover
any transfer taxes or other governmental charge that may be
imposed in relation to a transfer or exchange, but this
provision shall not apply to any exchange pursuant to
Section 2.10, 3.6, 4.12, 4.14 or 9.5 (in which events the
Company will be responsible for the payment of such taxes).
The Trustee shall not be required to exchange or register a
transfer of any Security for a period of 15 days immediately
preceding the first mailing of notice of redemption of
Securities to be redeemed or of any Security selected, called
or being called for redemption except, in the case of any
Security where public notice has been given that such Security
is to be redeemed in part, the portion thereof not to be
redeemed. The Securities shall also be subject to any
restrictions on transfer set forth on the face of such
Securities.
SECTION 2.7 Replacement Securities.
If a mutilated Security is surrendered to the
Registrar or the Trustee or if the Holder of a Security claims
that the Security has been lost, destroyed or wrongfully taken,
the Company shall issue and the Trustee shall authenticate a
replacement Security if the Holder of such Security furnishes
to the Company and to the Trustee evidence reasonably
acceptable to them of the ownership and the destruction, loss
or theft of such Security. If required by the Trustee or the
Company, an indemnity bond shall be posted, sufficient in the
judgment of both to protect the Company, the Trustee or any
Paying Agent from any loss that any of them may suffer from the
replacement of such lost, destroyed or wrongfully taken
Security. The Company may charge such Holder for the Company's
expenses in replacing such Security and the Trustee may charge
the Company for the Trustee's expenses in replacing such
Security. Every replacement Security shall constitute an
additional obligation of the Company.
Without limiting the provisions of Section 2.6, in
case any such mutilated, destroyed, lost or stolen Security has
become or is to become due and payable within 15 days, the
Company in its discretion may, instead of issuing a new
Security, pay such Security.
The provisions of this Section are exclusive and
shall preclude (to the extent lawful) all other rights and
remedies with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities.
<PAGE> 22
SECTION 2.8 Outstanding Securities.
The Securities outstanding at any time are all
Securities that have been authenticated by the Trustee except
for (a) those cancelled by it, (b) those delivered to it for
cancellation, (c) to the extent set forth in Sections 8.1 and
8.2, on or after the date on which the conditions set forth in
Section 8.1 or 8.2 have been satisfied, those Securities
theretofore authenticated and delivered by the Trustee
hereunder and (d) those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding
because the Company or one of its Affiliates holds the
Security.
If a Security is replaced pursuant to Section 2.7, it
ceases to be outstanding unless each of the Trustee and the
Company receives proof satisfactory to it that the replaced
Security is held by a bona fide purchaser in whose hands such
Security is a legal, valid and binding obligation of the
Company.
If the Paying Agent holds, in its capacity as such,
on the Maturity Date or on any optional redemption date, money
sufficient to pay the principal of, and accrued interest on
such Securities payable on that date and is not prohibited from
paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Securities
cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9 Treasury Securities.
In determining whether the Holders of the required
principal amount of Securities have concurred in any
declaration of acceleration or notice of default or direction,
waiver or consent or any amendment, modification or other
change to this Indenture, Securities owned by the Company, any
Subsidiary or Affiliate of the Company shall be disregarded as
though they were not outstanding, except that for the purposes
of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent or any
amendment, modification or other change to this Indenture, only
Securities that the Trustee actually knows are so owned shall
be so disregarded.
SECTION 2.10 Temporary Securities.
Until definitive Securities are prepared and ready
for delivery, the Company may prepare and the Trustee shall
authenticate temporary Securities. Temporary Securities shall
be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive
Securities in exchange for temporary Securities. Until such
exchange, temporary Securities shall be entitled to the same
rights, benefits and privileges as definitive Securities.
SECTION 2.11 Cancellation.
The Company at any time may deliver Securities to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them
for registration of transfer, exchange or payment. The Trustee
shall cancel all Securities surrendered for registration of
transfer, exchange, payment, replacement or cancellation and
shall (subject to the record-retention requirements of the
Exchange Act) dispose of cancelled Securities unless the
Company directs the Trustee in writing to return such
Securities to the Company, and, if so disposed, shall deliver a
certificate of disposition thereof to the Company. The Company
may not reissue or resell, or issue new Securities to replace,
Securities that the Company has redeemed or paid, or that have
been delivered to the Trustee for cancellation.
SECTION 2.12 Defaulted Interest.
If the Company defaults on a payment of interest on
the Securities, it shall pay the defaulted interest, plus (to
the extent permitted by law) any interest payable on the
defaulted interest, in accordance with the terms hereof, to the
Persons who are Securityholders on a subsequent special record
date, which date shall be at least five Business Days prior to
the payment date. The Company shall fix, or cause to be fixed,
such special record date and payment date in a manner
satisfactory to the Trustee. At least 15 days before such
special record date, the Company shall mail, or cause to be
mailed, to each Securityholder, with a copy to the Trustee, a
notice that states the special record date, the payment date
and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid.
SECTION 2.13 CUSIP Number.
The Company in issuing the Securities may use a
"CUSIP" number and, if so, such CUSIP number shall be included
in notices of redemption or exchange as a convenience to
Holders; provided, however, that any such notice may state that
no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities,
and that reliance may be placed only on the other
identification numbers printed on the Securities. The Company
will promptly notify the Trustee of any change in the CUSIP
number.
SECTION 2.14 Deposit of Moneys.
On each Interest Payment Date and Maturity Date, the
<PAGE> 23
Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date or Maturity
Date, as the case may be, in a timely manner which permits the
Trustee to remit payment to the Holders on such Interest
Payment Date or Maturity Date, as the case may be.
ARTICLE III
REDEMPTION
SECTION 3.1 Notices to Trustee.
If the Company elects to redeem Securities pursuant
to paragraph 5 of the Securities, it shall notify the Trustee
and the Paying Agent in writing of the Redemption Date and the
principal amount of Securities to be redeemed.
The Company shall give each notice provided for in
this Section 3.1 at least 45 days before the Redemption Date
and at least 10 days prior to the date notice pursuant to
Section 3.3 will be mailed to the Holders (unless a shorter
notice shall be agreed to by the Trustee in writing), together
with an Officer's Certificate stating that such redemption will
comply with the conditions contained herein and in the
Securities.
SECTION 3.2 Selection of Securities
To Be Redeemed.________
If less than all of the Securities are to be
redeemed, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the principal
national securities exchange, if any, on which the Securities
are listed or, if the Securities are not listed on a national
securities exchange by lot. The Trustee shall make the
selection from the Securities outstanding and not previously
called for redemption. The Trustee shall promptly notify the
Company in writing of such Securities selected for redemption
and, in the case of Securities selected for partial redemption,
the principal amount to be redeemed. The Trustee may select
for redemption portions of the principal amount of Securities
that have denominations larger than $1,000. Securities and
portions of them the Trustee selects shall be in principal
amounts of $1,000 or integral multiples of $1,000. Provisions
of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for
redemption.
SECTION 3.3 Notice of Redemption.
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail or cause the mailing of
a notice of redemption by first class mail to each Holder of
<PAGE> 24
Securities to be redeemed and the Trustee and any Paying Agent.
The notice shall identify the Securities to be
redeemed and shall state:
(a) the Redemption Date;
(b) the redemption price and the amount of accrued
interest, if any, to be paid;
(c) the name and address of the Paying Agent;
(d) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption
price and accrued interest, if any;
(e) that, unless the Company defaults in making the
redemption payment, interest on Securities called for
redemption ceases to accrue on and after the Redemption
Date and the only remaining right of the Holders of such
Securities is to receive payment of the redemption price
upon surrender to the Paying Agent of the Securities
redeemed;
(f) if any Security is to be redeemed in part, the
portion of the principal amount (equal to $1,000 or any
integral multiple thereof) of such Security to be redeemed
and that, on or after the Redemption Date, upon surrender
of such Security, a new Security or Securities in
aggregate principal amount equal to the unredeemed portion
thereof will be issued without charge to the
Securityholder;
(g) if less than all of the Securities are to be
redeemed, the identification of the particular Securities
(or portion thereof) to be redeemed, as well as the
aggregate principal amount of Securities to be redeemed
and the aggregate principal amount of Securities estimated
to be outstanding after such partial redemption; and
(h) the CUSIP number, if any, pursuant to
Section 2.13.
At the Company's request, the Trustee shall give the
notice of redemption in the Company's name and at the Company's
expense.
SECTION 3.4 Effect of Notice of Redemption.
Once notice of redemption is mailed, Securities
called for redemption become due and payable on the Redemption
Date and at the redemption price. Upon surrender to the Paying
Agent, such Securities shall be paid at the redemption price
plus accrued interest to the Redemption Date, but interest
installments whose maturity is on or prior to such Redemption
<PAGE> 25
Date will be payable on the relevant Interest Payment Dates to
the Holders of record at the close of business on the relevant
record dates referred to in the Securities.
SECTION 3.5 Deposit of Redemption Price.
On the Redemption Date, the Company shall have
deposited with the Paying Agent in immediately available funds
money sufficient to pay the redemption price of and accrued
interest on all Securities or portions thereof to be redeemed
on that date.
If any Security surrendered for redemption in the
manner provided in the Securities shall not be so paid on the
Redemption Date due to the failure of the Company to deposit
sufficient funds with the Paying Agent, interest will continue
to accrue from the Redemption Date until such payment is made
on the unpaid principal and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the
date and in the manner provided in the Securities.
SECTION 3.6 Securities Redeemed in Part.
Upon surrender to the Paying Agent of a Security that
is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder a new Security equal in
principal amount to the unredeemed portion of the Security
surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1 Payment of Securities.
The Company shall pay the principal of and interest
on the Securities on the dates and in the manner provided in
the Securities and this Indenture.
An installment of principal or interest shall be
considered paid on the date due if the Trustee or the Paying
Agent holds on such date immediately available funds designated
for and sufficient to pay such installments.
The Company shall pay interest on overdue principal
and (to the extent permitted by law) on overdue installments of
interest at the rate borne by the Securities.
SECTION 4.2 Corporate Existence.
Subject to Article V, the Company shall do or cause
to be done, at its own cost and expense, all things necessary
to and will cause each of its Subsidiaries to, preserve and
keep in full force and effect the corporate or partnership
<PAGE> 26
existence and rights (charter and statutory), licenses and/or
franchises of the Company and each of its Subsidiaries;
provided, however, that neither the Company nor any of its
Subsidiaries shall be required to preserve any such existence,
rights, licenses or franchises if the Board of Directors of the
Company shall reasonably determine that the preservation
thereof is no longer desirable in the conduct of the business
of the Company and the loss thereof is not adverse in any
material respect to the Holders.
SECTION 4.3 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent,
(a) all taxes, assessments and governmental charges levied or
imposed upon its or its Subsidiaries' income, profits or
property and (b) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a Lien upon its
property; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim whose amount,
applicability or validity or the payment thereof is being
contested in good faith by appropriate negotiations or
proceedings and for which amounts adequate reserves (in the
good faith judgment of the Board of Directors of the Company)
have been made.
SECTION 4.4 Maintenance of Properties; Insurance;
Books and Records; Compliance with Law.
(a) The Company shall, and shall cause each of its
Subsidiaries to, at all times cause all properties used or
useful in the conduct of its business to be maintained and kept
in good condition, repair and working order (reasonable wear
and tear and shut-downs for maintenance, repairs and
improvements and obsolescence excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements
thereto (obsolescence excepted).
(b) The Company and each of its Subsidiaries shall
maintain insurance (including self-insurance) in such amounts
and covering such risks as are usually and customarily carried
with respect to companies similarly situated in the industry
and with similar facilities according to their respective
locations.
(c) The Company shall, and shall cause each of its
Subsidiaries to, keep proper books of record and account, in
which full and correct entries shall be made of all financial
transactions and the assets and business of the Company and
each Subsidiary of the Company, in accordance with GAAP.
(d) The Company shall, and shall cause each of its
<PAGE> 27
Subsidiaries to, comply with all statutes, laws, ordinances, or
government rules and regulations to which it is subject, non-
compliance with which is reasonably likely to materially
adversely affect the business, prospects, earnings, properties,
assets or condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole.
SECTION 4.5 Compliance Certificates.
(a) The Company shall deliver to the Trustee, within
45 days after the end of each of the first three quarters of
the Company's fiscal year, and within 90 days after the end of
such fiscal year an Officer's Certificate, signed by the
Company's principal executive officer, principal financial
officer or principal accounting officer, stating (i) that a
review of the activities of the Company during the preceding
fiscal quarter or year, as the case may be, has been made under
the supervision of the signing Officer with a view to
determining whether the Company has kept, observed, performed
and fulfilled its obligations under this Indenture, and
(ii) that, to the best knowledge of the Officer signing such
certificate, the Company is not in default in the performance
or observance of any of the terms or provisions hereof (or, if
a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which such officer
may have knowledge).
(b) So long as (and to the extent) not contrary to
the then current recommendations of the American Institute of
Certified Public Accountants, the annual financial statements
delivered pursuant to Section 4.6 shall be accompanied by a
written statement of the Company's independent public
accountants that (i) their audit examination has included a
review of the terms of this Indenture and the Securities as
they relate to accounting matters, and (ii) in connection with
their audit nothing has come to their attention that would lead
them to believe that the Company was not in compliance with the
provisions of this Indenture insofar as they relate to
accounting matters or, if any such non-compliance exists,
specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the
Securities are outstanding, deliver to the Trustee, not later
than 30 days after an Officer becomes aware of any Default or
Event of Default, an Officer's Certificate specifying such
Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
SECTION 4.6 Reports.
The Company shall file with the SEC the annual
<PAGE> 28
reports, quarterly reports and the information, documents and
other reports required to be filed with the SEC pursuant to
Sections 13 and 15 of the Exchange Act, whether or not the
Company has a class of securities registered under the Exchange
Act. In accordance with the provisions of TIA 314(a), at any
time that the Company has a class of securities registered
under the Exchange Act, the Company shall file with the
Trustee, within 15 days after it files them with the SEC,
copies of the annual reports and of the information, documents
and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe)
which the Company is required to file with the SEC pursuant to
Section 13 or 15 of the Exchange Act. The Company also shall
comply with the other provisions of TIA 314(a). In addition,
the Company shall cause its annual report to stockholders and
any quarterly or other financial reports furnished by it to
stockholders generally to be filed with the Trustee and mailed,
no later than the date such materials are mailed or made
available to the Company's stockholders, to the Holders at
their addresses as set forth in the register of securities
maintained by the Registrar.
SECTION 4.7 Further Assurance to the Trustee.
The Company shall, upon request of the Trustee,
execute and deliver such further instruments and do such
further acts as may reasonably be necessary or proper to carry
out more effectively the provisions of this Indenture.
SECTION 4.8 Limitation on Additional Indebtedness.
The Company shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, incur any
Indebtedness (including any Acquired Indebtedness), except for
the following (each of which shall be given independent
effect):
(i) Indebtedness under the Securities
and this Indenture;
(ii) Indebtedness outstanding from time
to time pursuant to the Working Capital Facility
in aggregate principal amount not to exceed the
sum of 85% of the net book value of the Accounts
and proceeds thereof and 65% of the net book value
of Inventory and proceeds thereof of the Company
and its Subsidiaries, in each case calculated in
accordance with GAAP;
(iii) other Indebtedness not to exceed
$20,000,000 in aggregate principal amount at any
one time outstanding;
(iv) Indebtedness outstanding on the
<PAGE> 29
Issue Date;
(v) Indebtedness if, immediately after
giving pro forma effect to the incurrence thereof,
the Consolidated Interest Coverage Ratio of the
Company would be greater than or equal to 1.5:1 on
or prior to March 15, 1996 and 2.0:1 thereafter;
(vi) Indebtedness not to exceed $40,000,000
in aggregate principal amount at any one time
outstanding, the proceeds of which are applied
solely to expenditures made in the ordinary course
of business, which are accounted for as additions
to property, plant and equipment in accordance
with GAAP and are useful in the type of business
of the Company conducted on the Issue Date;
(vii) obligations arising from agreements
providing for indemnification, adjustment of
purchase price or similar obligations, or from
guaranties or letters of credit, surety bonds or
performance bonds securing any obligations of the
Company or any Subsidiary pursuant to such
agreements, in any case incurred or assumed in
connection with the disposition of any business,
assets or Subsidiary of the Company or such
Subsidiary, other than guaranties of obligations
incurred by any Person acquiring all or any
portion of such business, assets or Subsidiary for
the purpose of financing such acquisition;
(viii) obligations in respect of
performance bonds and surety bonds entered into in
the ordinary course of business of the Company or
any Subsidiary;
(ix) obligations under currency hedging
agreements and Interest Rate Protection
Obligations;
(x) obligations under guaranties of
liabilities of employees, not to exceed $5,000,000
in aggregate principal amount at any one time
outstanding;
(xi) obligations under guaranties of
Indebtedness of suppliers, licensees, franchisees
or customers, incurred in the ordinary course of
business, not to exceed $10,000,000 in aggregate
principal amount at any one time outstanding;
(xii) Indebtedness incurred to repurchase
shares of, or options to purchase shares of, the
Company's Capital Stock from employees of the
<PAGE> 30
Company or any of its Subsidiaries or guaranties
by the Company of Indebtedness incurred in
connection with borrowings by such employees
exclusively for the purpose of exercising options
to purchase the Company's Capital Stock in an
aggregate amount not to exceed $3,000,000 at any
one time outstanding;
(xiii) Indebtedness of a Subsidiary to the
Company or another Subsidiary;
(xiv) Indebtedness represented by the
Subordinated Debentures Due 2003 (the "Exchange
Debentures") issued on or after March 15, 1996 in
exchange for the Company's Cumulative Redeemable
Exchangeable Preferred Stock (the "Redeemable
Preferred Stock");
(xv) Indebtedness of the Company owed to
any Subsidiary, provided that any such
Indebtedness is unsecured and subordinated in
right of payment to the Securities;
(xvi) Indebtedness evidenced by
Repurchase Agreements; and
(xvii) Indebtedness constituting
replacements, renewals, refinancings and
extensions of the Indebtedness incurred under
clauses (i), (iv), (v) and (xiv) above; provided,
that any such replacement, renewal, refinancing
and extension (A) shall not provide for any
mandatory redemption, amortization or sinking fund
requirement in an amount greater than or at a time
prior to the amounts and times specified in the
Indebtedness being replaced, renewed, refinanced
or extended, (B) shall not exceed the principal
amount (plus accrued interest) of the Indebtedness
being replaced, renewed, refinanced or extended,
and (C) shall not rank, in right of payment with
respect to the Securities, prior to the
Indebtedness being replaced, renewed, refinanced
or extended.
SECTION 4.9 Limitation on Sale-Leaseback
Transactions.
(a) The Company shall not, and shall not permit any
of its Subsidiaries to, enter into any Sale-Leaseback
Transaction, except with another Subsidiary of the Company.
(b) Notwithstanding paragraph (a) of this
Section 4.9, the Company and its Subsidiaries may enter into
Sale-Leaseback Transactions if (i) after giving pro forma
<PAGE> 31
effect to any such Sale-Leaseback Transaction at the time such
transaction is entered into, the Company is in compliance with
Section 4.8 (with the Company's lease obligations being treated
as Indebtedness for purposes of ascertaining compliance with
this Section 4.9), (ii) the Net Proceeds of such Sale-Leaseback
Transaction are at least equal to the Fair Market Value of such
property (determined by the Company's Board of Directors), and
(iii) the Company or such Subsidiary shall apply the Net Cash
Proceeds of such sale as provided in Section 4.12.
SECTION 4.10 Limitation on Liens.
The Company shall not, and shall not permit, cause or
suffer any of its Material Subsidiaries to, directly or
indirectly, create, incur, assume or suffer to exist any Lien
of any kind upon any of its property or assets now owned or
hereafter acquired by it unless the Securities are also equally
and ratably secured by such Lien, except for the following:
(i) Liens existing as of the Issue
Date;
(ii) purchase money mortgages or pledges
or other purchase money Liens upon any property
acquired by the Company or any Subsidiary after
the Issue Date acquired or held by such entity in
the ordinary course of business and securing
solely the purchase price of such property or
Indebtedness (including related performance or
payment obligations) incurred solely for the
purpose of financing the acquisition of such
property (but only to the extent the Indebtedness
secured by such Liens shall otherwise be permitted
under this Indenture), which Liens shall not
secure Indebtedness, in aggregate principal
amount, in excess of $80,000,000;
(iii) Liens on the assets or property of
a Subsidiary of the Company existing at the time
such Subsidiary became a Subsidiary of the Company
and not incurred as a result of (or in connection
with or in anticipation of) such Subsidiary
becoming a Subsidiary of the Company; provided
such Liens do not extend to or cover any property
or assets of the Company or any of its other
Subsidiaries (other than the property or assets so
acquired);
(iv) Liens on the Inventory, Accounts,
general intangibles, and proceeds therefrom of the
Company and its Subsidiaries securing Indebtedness
(and related payment and performance obligations)
under the Working Capital Facility, agreements
relating to Interest Rate Protection Obligations
<PAGE> 32
and currency hedging or swap agreements;
(v) easements, reservations, licenses,
rights-of-way, zoning restrictions and covenants,
conditions and restrictions and other similar
encumbrances or title defects which, in the
aggregate, do not materially detract from the use
of the property subject thereto or materially
interfere with the ordinary conduct of the
business of the Company or any of its
Subsidiaries;
(vi) Liens for property taxes for
property that the Company or any Subsidiary has
determined to abandon, provided that (i) if the
book value of such property shall at the date of
determination exceed $500,000, the Board of
Directors of the Company or any Subsidiary, as the
case may be, shall have determined that the fair
market value of such property as of the date of
determination does not exceed the then outstanding
amount of the property tax for such property and
(ii) the sole recourse for such tax, assessment,
charge or levy is to such property;
(vii) leases and subleases of property
which do not interfere with the ordinary conduct
of the business of the Company or any of its
Subsidiaries, and which are made on customary and
usual terms applicable to similar properties;
(viii) Liens securing Indebtedness
(including related payment and performance
obligations) which is incurred to refinance
Indebtedness which has been secured by a Lien
permitted under this Indenture and is permitted to
be refinanced under this Indenture; provided that
such Liens do not extend to or cover any property
or assets of the Company or any of its
Subsidiaries not securing the Indebtedness so
refinanced;
(ix) Permitted Liens; and
(x) Liens securing Indebtedness or
other obligations of the Company or any Subsidiary
not in excess of $10,000,000 in the aggregate.
SECTION 4.11 Limitation on Restricted Payments.
(a) Subject to Section 4.11(b), the Company shall
not make, and shall not cause, suffer or permit any of its
Subsidiaries to, directly or indirectly, make any Restricted
Payment, unless:
<PAGE> 33
(i) no Default or Event of Default shall have
occurred and be continuing at the time of or after giving
effect to such Restricted Payment;
(ii) at the time of such Restricted Payment the
Company's Consolidated Interest Coverage Ratio is at least
1.5:1 (provided, that this clause (ii) shall not apply to
(A) the making or guaranteeing of any Investments
constituting Restricted Payments or (B) the payment of
dividends on Redeemable Preferred Stock); and
(iii) immediately after giving effect to such
Restricted Payment, the aggregate of all Restricted
Payments declared or made after the Issue Date does not
exceed the sum of (A) 50% of the Company's cumulative
Consolidated Net Income (or in the event such Consolidated
Net Income shall be a deficit, minus 100% of such deficit)
after December 31, 1993, (B) 100% of the aggregate Net
Proceeds and the Fair Market Value of marketable
securities or other property received by the Company from
the issue or sale, after the Issue Date, of Capital Stock
(other than Disqualified Stock) of the Company or any
Indebtedness or other securities of the Company
convertible into or exercisable or exchangeable for
Capital Stock (other than Disqualified Stock) of the
Company which has been so converted or exercised or
exchanged, as the case may be, (C) in the case of the
disposition or repayment of any Investment constituting a
Restricted Payment made after the Issue Date, an amount
equal to the lesser of the return of capital invested for
such Investment and the cost thereof, in either case less
the cost of such disposition, and (D) $20,000,000. For
purposes of determining under this clause (iii) the amount
expended for Restricted Payments, cash distributed shall
be valued at the face amount thereof and property other
than cash shall be valued at its Fair Market Value.
(b) The provisions of Section 4.11(a) shall not
prohibit:
(i) the payment of any distribution within 60
days after the date of declaration thereof, if at such
date of declaration such payment would comply with the
provisions of this Indenture;
(ii) the retirement of any shares of Capital
Stock of the Company or subordinated Indebtedness of the
Company by conversion into, or by or in exchange for,
shares of Capital Stock (other than Disqualified Stock),
or out of, the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock (other than
Disqualified Stock) of the Company or by the payment of
cash not to exceed $1,000,000 for fractional shares;
<PAGE> 34
(iii) the redemption or retirement of
subordinated Indebtedness of the Company in exchange for,
by conversion into, or out of the Net Proceeds of, a
substantially concurrent sale or incurrence of
subordinated Indebtedness (other than any subordinated
Indebtedness owed to a Subsidiary) of the Company that is
contractually subordinated in right of payment to the
Securities;
(iv) the retirement of any shares of
Disqualified Stock by conversion into, or by exchange for,
shares of Disqualified Stock, or out of the Net Proceeds
of the substantially concurrent sale (other than to a
Subsidiary of the Company) of other shares of Disqualified
Stock;
(v) the retirement of the Redeemable Preferred
Stock in exchange for the Exchange Debentures;
(vi) the repurchase of the Redeemable Preferred
Stock or Exchange Debentures at a price not to exceed 101%
of liquidation value plus accrued dividends or principal
amount plus accrued interest, as the case may be, within
120 days after the occurrence of a Change of Control
(provided, that before repurchasing any such Redeemable
Preferred Stock or Exchange Debentures the Company shall
have first or simultaneously made a Change of Control
Offer for all Securities and repurchased all Securities
tendered pursuant thereto); or
(vii) the repurchase of shares of, or options to
purchase shares of, Capital Stock of the Company or any
Subsidiary from the employees of the Company or any
Subsidiary pursuant to the terms of the form of agreements
under which employees purchase, or are granted the option
to purchase, shares of Capital Stock of the Company or any
Subsidiary not to exceed $2,000,000 in any fiscal year.
In determining the amount of Restricted Payments
permissible under clause (iii) of paragraph (a) above, the
amounts expended pursuant to clauses (i), (ii), (vi) and (vii)
of paragraph (b) above after the Issue Date shall be included
as Restricted Payments.
SECTION 4.12 Disposition of Proceeds of Asset Sales.
(a) The Company shall not, and shall not permit any
of its Subsidiaries to, make any Asset Sale unless (i) such
Asset Sale is for Fair Market Value, (ii) either (A) the Net
Proceeds therefrom consist of at least 80% cash or Permitted
Investments, or Indebtedness of the Company or its Subsidiary
assumed by the purchaser and the Company or its Subsidiary is
released from such Indebtedness or (B) after giving effect to
<PAGE> 35
such Asset Sale the Company and its Subsidiaries hold in the
aggregate no more than $5,000,000 of Net Proceeds, other than
cash and Permitted Investments, received in Asset Sales, and
(iii) the Company or such Subsidiary, as the case may be, shall
apply any Net Cash Proceeds therefrom as follows:
(i) first, to the extent such Net Cash Proceeds
are received from an Asset Sale involving the sale,
transfer or disposition of Inventory, Accounts or
intangibles ("Working Capital Proceeds"), to satisfy all
mandatory repayment obligations, if any, under the Working
Capital Facility arising by reason of such Asset Sale; and
(ii) second, out of any Working Capital Proceeds
remaining after application pursuant to the preceding
paragraph (i), together with any Net Cash Proceeds
received from an Asset Sale not involving the sale,
transfer or disposition of Inventory, Accounts or
intangibles or proceeds therefrom (the "Available
Amount"), the Company shall make an offer to purchase (the
"Asset Sale Offer") from all holders, ratably (based on
the then outstanding principal amounts thereof) of the
Securities and the Existing Senior Notes and any other
senior Indebtedness of the Company then outstanding which
requires such purchase, up to a maximum principal amount
(expressed as a multiple of $1,000) of Securities, the
Existing Senior Notes and such other senior Indebtedness
equal to the Available Amount at a purchase price equal to
100% of the principal amount thereof plus accrued and
unpaid interest thereon, if any, to the date of purchase,
provided, however, that the Company will not be required
to apply pursuant to this clause (ii) Net Cash Proceeds
received from any Asset Sale if, and only to the extent
that, such Net Cash Proceeds are committed in writing to
be applied to acquire or construct property or assets (and
costs related to such acquisition) in lines of business
related to the Company's and its Subsidiaries' business at
such time within 270 days of such Asset Sale, and are so
applied within 360 days of such Asset Sale; and, provided,
further, that the Company may defer the Asset Sale Offer
until there is an aggregate unutilized Available Amount
equal to or in excess of $2,500,000 resulting from one or
more Asset Sales (at which time, the entire unutilized
Available Amount, and not just the amount in excess of
$2,500,000, shall be applied as required pursuant to this
clause (ii)). The Asset Sale Offer shall remain open for
a period of at least 20 business days. To the extent the
Asset Sale Offer is not fully subscribed to by the
Securityholders and holders of Existing Senior Notes and
such other senior Indebtedness, the Company may use such
unutilized portion of the Available Amount for any purpose
consistent with the other terms of the Indenture.
(b) The Company shall provide the Trustee with
notice of the Asset Sale Offer at least 30 days before any
<PAGE> 36
notice of any Asset Sale Offer is mailed to Holders of the
Securities (unless the Trustee agrees to a shorter period,
which agreement shall not be unreasonably withheld). Notice of
an Asset Sale Offer shall be mailed by the Company to all
Holders of Securities not less than 30 days nor more than 60
days before the Asset Sale Payment Date at their last
registered address with a copy to the Trustee and the Paying
Agent. The Asset Sale Offer shall remain open from the time of
mailing for at least 20 Business Days and until at least 5:00
p.m., New York City time, on the Business Day next preceding
the Asset Sale Payment Date. The notice, which shall govern
the terms of the Asset Sale Offer, shall include such
disclosures as are required by law and shall state:
(i) that the Asset Sale Offer is being
made pursuant to this Section 4.12;
(ii) the purchase price (including the
amount of accrued interest, if any) for each
Security and the Asset Sale Payment Date;
(iii) that any Security not tendered or
accepted for payment will continue to accrue
interest in accordance with the terms thereof;
(iv) that, unless the Company defaults
on making the payment, any Security accepted for
payment pursuant to the Asset Sale Offer shall
cease to accrue interest after the Asset Sale
Payment Date;
(v) that Holders electing to have
Securities purchased pursuant to an Asset Sale
Offer will be required to surrender their
Securities to the Paying Agent at the address
specified in the notice prior to 5:00 p.m., New
York City time, on the Business Day next preceding
the Asset Sale Payment Date and must complete any
form letter of transmittal proposed by the Company
and acceptable to the Trustee and the Paying
Agent;
(vi) that Holders will be entitled to
withdraw their election if the Paying Agent
receives, not later than 5:00 p.m., New York City
time, on the Business Day next preceding the Asset
Sale Payment Date, a telex, facsimile transmission
or letter setting forth the name of the Holder,
the principal amount of Securities the Holder
delivered for purchase, the Security certificate
number (if any) and a statement that such Holder
is withdrawing his election to have such
Securities purchased;
<PAGE> 37
(vii) that if Securities, Existing Senior
Notes and such other senior Indebtedness in a
principal amount in excess of the Available Amount
are tendered pursuant to the Asset Sale Offer, the
Company shall purchase Securities, Existing Senior
Notes and such other senior Indebtedness on a pro
rata basis among the Securities, Existing Senior
Notes and such other senior Indebtedness based
first, as among the Securities, the issues of
Existing Senior Notes and such other senior
Indebtedness, on the then outstanding principal
amounts of the Securities, each issue of Existing
Senior Notes and such other senior Indebtedness
and second, as among the Securities, based on the
principal amounts of the Securities tendered (with
such adjustments as may be deemed appropriate by
the Company so that only Securities in
denominations of $1,000 or integral multiples of
$1,000 shall be acquired);
(viii) that Holders whose Securities are
purchased only in part will be issued new
Securities equal in principal amount to the
unpurchased portion of the Securities surrendered;
and
(ix) the instructions that Holders must
follow in order to tender their Securities.
On or before the Asset Sale Payment Date, the Company
shall (i) accept for payment, on a pro rata basis among the
Securities, Existing Senior Notes, and other senior
Indebtedness (subject to adjustment as contemplated by clause
(vii) above), Securities, Existing Senior Notes and other
senior Indebtedness or portions thereof tendered pursuant to
the Asset Sale Offer, (ii) deposit with the Paying Agent on the
Asset Sale Payment Date money, in immediately available funds,
in an amount sufficient to pay the purchase price of all
Securities, Existing Senior Notes and other senior Indebtedness
or portions thereof so tendered and accepted (but not in excess
of the Available Amount) and (iii) deliver to the Paying Agent
the Securities so accepted together with an Officer's
Certificate setting forth the Securities, Existing Senior Notes
and other senior Indebtedness or portions thereof tendered to
and accepted for payment by the Company. The Paying Agent
shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the purchase price, and
the Trustee shall promptly authenticate and mail or deliver to
such Holders a new Security equal in principal amount to any
unpurchased portion of the Security surrendered. Any
Securities not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. To the extent
an Asset Sale Offer is not fully subscribed to by the Holders
and the holders of Existing Senior Notes and other senior
<PAGE> 38
Indebtedness, the Company may use any unutilized portion of the
Available Amount for any purpose consistent with the terms of
this Indenture. The Paying Agent shall promptly deliver to the
Company the balance of any such Available Amount held by the
Paying Agent after payment to the holders of Securities as
aforesaid.
The Company shall comply, to the extent applicable,
with the requirements of any applicable securities laws or
regulations in connection with the repurchase of Securities,
Existing Senior Notes and other senior Indebtedness pursuant to
the Asset Sale Offer. To the extent that the provisions of any
securities laws or regulations conflict with provisions of this
Section 4.12, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.12 by virtue
thereof.
(c) No transaction or action otherwise permitted
under this Section 4.12 shall occur until the Trustee shall
have received an Officer's Certificate as to (i) the Company's
compliance with this Section 4.12 and (ii) the fulfillment of
all conditions precedent to such transaction or action.
SECTION 4.13 Limitation on Transactions with
Affiliates.
The Company shall not, and shall not permit, cause or
suffer any Subsidiary of the Company to, conduct any business
or enter into any transaction or series of transactions with or
for the benefit of any of their respective Affiliates (each an
"Affiliate Transaction"), except in good faith and on terms
that are fair to the Company or such Subsidiary, as the case
may be, and except for any distributions permitted by
Section 4.11. All Affiliate Transactions (and each series of
related Affiliate Transactions which are similar or part of a
common plan) involving aggregate payments or other market value
in excess of $2,000,000 shall be approved by the Board of
Directors of the Company or any such Subsidiary, as the case
may be, such approval to be evidenced by a Board Resolution
stating that the Board of Directors have determined in good
faith that such transaction complies with the provisions of
this Section 4.13. Notwithstanding the foregoing, this
Section 4.13 shall not apply to transactions between the
Company and its Subsidiaries or among such Subsidiaries.
SECTION 4.14 Change of Control.
In the event of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company
shall notify the holders of Securities in writing of such
occurrence and shall make an offer to purchase (the "Change of
Control Offer") on a Business Day (the "Change of Control
Payment Date") not later than 60 days following the Change of
Control Date, all Securities then outstanding (and not
<PAGE> 39
currently being redeemed) at a purchase price equal to 101% of
the principal amount thereof plus accrued and unpaid interest,
if any, to the Change of Control Payment Date.
Notice of a Change of Control Offer shall be mailed
by the Company not less than 30 days nor more than 45 days
before the Change of Control Payment Date to the holders of
Securities at their last registered addresses with a copy to
the Trustee and the Paying Agent. The Change of Control Offer
shall remain open from the time of mailing for at least 20
Business Days and until 5:00 p.m., New York City time, on the
Business Day next preceding the Change of Control Payment Date.
The notice, which shall govern the terms of the Change of
Control Offer, shall include such disclosures as are required
by law and shall state:
(a) that a Change of Control Offer is being made
pursuant to this Section 4.14 and that all Securities
tendered in whole or in part (and not concurrently being
redeemed) will be accepted for payment;
(b) the purchase price (including the amount of
accrued interest, if any) for each Security and the Change
of Control Payment Date;
(c) that any Security not tendered for payment will
continue to accrue interest in accordance with the terms
thereof;
(d) that, unless the Company defaults on making the
payment, any Security accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(e) that Holders electing to have Securities
purchased pursuant to a Change of Control Offer will be
required to surrender their Securities to the Paying Agent
at the address specified in the notice prior to 5:00 p.m.,
New York City time, on the Business Day next preceding the
Change of Control Payment Date and must complete any form
letter of transmittal proposed by the Company and
acceptable to the Trustee and the Paying Agent;
(f) that Holders of Securities will not be entitled
to withdraw their election once made without the consent
of the Company;
(g) that Holders whose Securities are purchased only
in part will be issued Securities equal in principal
amount to the unpurchased portion of the Securities
surrendered;
(h) the instructions that Holders must follow in
order to tender their Securities; and
<PAGE> 40
(i) information concerning the business of the
Company, the most recent annual and quarterly reports of
the Company filed with the Commission pursuant to the
Exchange Act (or, if the Company is not required to file
any such reports with the Commission, the comparable
reports prepared pursuant to Section 4.6), a description
of material developments in the Company's business,
information with respect to pro forma historical financial
information after giving effect to such Change of Control
and such other information concerning the circumstances
and relevant facts regarding Change of Control and Change
of Control Offer as would, in the good faith judgment of
the Company, be material to a Holder of Securities in
connection with the decision of such Holder as to whether
or not it should tender Securities pursuant to the Change
of Control Offer.
On the Change of Control Payment Date, the Company
shall (i) accept for payment Securities or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent money sufficient to pay the purchase
price of all Securities or portions thereof so tendered and
accepted and (iii) deliver to the Trustee the Securities so
accepted together with an Officer's Certificate setting forth
the Securities or portions thereof tendered to and accepted for
payment by the Company. The Paying Agent shall promptly mail
or deliver to the Holders of Securities so accepted payment in
an amount equal to the purchase price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new
Security equal in principal amount to any unpurchased portion
of the Security surrendered. Any portions of Securities not so
tendered shall be promptly mailed or delivered by the Company
to the Holder thereof.
The Company shall comply, to the extent applicable,
with the requirements of any applicable securities laws or
regulations in connection with the repurchase of Securities
pursuant to a Change of Control Offer. To the extent that the
provisions of any securities laws or regulations conflict with
provisions of this Section 4.14, the Company shall comply with
the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.14
by virtue thereof.
SECTION 4.15 Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries.____________________
The Company shall not, and shall not permit any
Subsidiary to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual
encumbrance or consensual restriction of any kind on the
ability of any Subsidiary to (a) pay dividends, in cash or
<PAGE> 41
otherwise, or make any other distributions on its Capital Stock
or any other interest or participation in its profits owned by,
or pay any Indebtedness owed to, the Company or a Subsidiary,
(b) make any loans or advances to the Company or any Subsidiary
or (c) transfer any of its properties or assets to the Company
or to any Subsidiary, except, in each case, for such
encumbrances or restrictions existing under, contemplated by or
by reason of (or similar to those existing in) (i) the
Securities or this Indenture, (ii) any restrictions existing
under or contemplated by agreements in effect on the Issue
Date, including, without limitation, restrictions under the
Working Capital Facility as in effect on the Issue Date,
(iii) any restrictions, with respect to a Subsidiary that is
not a Subsidiary on the Issue Date, in existence at the time
such Person becomes a Subsidiary or immediately thereafter (but
not created in contemplation of such Person becoming a
Subsidiary), (iv) customary non-assignment provisions contained
in contracts and agreements to which a Subsidiary is or becomes
a party and (v) any restrictions existing under any agreement
that refinances or replaces an agreement containing a
restriction permitted by clause (i), (ii) or (iii) above,
provided that the terms and conditions of any such restrictions
are not materially less favorable to the Holders than those
under or pursuant to the agreement being replaced or the
agreement evidencing the Indebtedness being refinanced.
SECTION 4.16 Conflicting Agreements.
The Company shall not, and shall not permit any of
its Subsidiaries to, enter into any agreement or instrument
that by its terms expressly prohibits the Company from making
any payments on or in respect of the Securities required by the
terms thereof and of this Indenture, as in effect from time to
time.
SECTION 4.17 Waiver of Usury Laws.
The Company covenants (to the extent permitted by
law) that it will not at any time insist upon, plead or in any
manner whatsoever claim or take the benefit or advantage of,
any usury law or other law that would prohibit or forgive the
Company from paying all or any portion of the principal of or
interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and
(to the extent permitted by law) the Company hereby expressly
waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had
been enacted.
SECTION 4.18 Limitation on Investments,
Loans and Advances._______
<PAGE> 42
The Company shall not make and shall not permit any
of its Subsidiaries to make any capital contributions, advances
or loans to, or investments or purchases of Capital Stock in,
any other Person (collectively, "Investments"), except:
(i) Investments by the Company in or to any Subsidiary and
Investments in or to the Company or a Subsidiary by any
Subsidiary (provided that such Investments by the Company in or
to any Subsidiary pursuant to this clause (i) shall not exceed,
individually or in the aggregate, 10% of the total assets of
the Company and its Subsidiaries determined on a consolidated
basis at the time such Investment is made); (ii) Investments
represented by Accounts created or acquired in the ordinary
course of business and any evidence of Indebtedness received
with respect to such Accounts; (iii) advances to employees in
the ordinary course of business; (iv) Investments under or
pursuant to agreements relating to Interest Rate Protection
Obligations; (v) Investments made pursuant to and as permitted
by Section 4.11; (vi) Permitted Investments; and (vii) other
Investments not to exceed $6,000,000 in the aggregate in
Unrestricted Subsidiaries, in other Persons in which the
Company or a Subsidiary and one or more third parties have an
ownership interest or in any other Person, whether the Company
or a Subsidiary has any such interest, provided that if the
Consolidated Interest Coverage Ratio of the Company at the time
any such Investment is made is at least 1.5:1, Investments made
pursuant to this clause (vii) shall not exceed $20,000,000 in
aggregate principal amount.
SECTION 4.19 Limitation on Issuance and Sale
of Capital Stock of Subsidiaries.
The Company shall not permit any Subsidiary to issue
any Capital Stock (other than to the Company or to a
Subsidiary) or permit any Person (other than the Company or a
Subsidiary) to own any Capital Stock of any Subsidiary;
provided, however, that the Company and any Subsidiary may, in
any single transaction, sell all, but not less than all, of the
issued and outstanding Capital Stock of any Subsidiary of the
Company to any Person.
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 When Company May Merge, Etc.
The Company shall not consolidate with or merge with
or into or sell, assign, convey, lease, transfer or otherwise
dispose of all or substantially all of its properties and
assets as an entirety to any Person or group of Affiliated
Persons in a single transaction or through a series of
transactions unless:
<PAGE> 43
(a) either (i) the Company shall be the continuing
or surviving Person, or (ii) the resulting, surviving or
transferee Person (the "surviving entity") shall be a
corporation organized and existing under the laws of the
United States, any State thereof or the District of
Columbia;
(b) the surviving entity shall expressly assume, by
a supplemental indenture executed and delivered to the
Trustee, in form and substance reasonably satisfactory to
the Trustee all of the obligations of the Company under
the Securities and this Indenture;
(c) immediately before and immediately after giving
effect to such transaction or series of transactions on a
pro forma basis (including, without limitation, any
Indebtedness incurred by the Company or the surviving
entity or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions),
no Default or Event of Default shall have occurred and be
continuing; and
(d) immediately after giving effect to such
transaction or series of transactions on a pro forma
basis, the Company could incur $1.00 of Indebtedness as
permitted under Section 4.8.
SECTION 5.2 Successor Entity Substituted.
Upon any consolidation, merger or any transfer of all
or substantially all of the assets of the Company in accordance
with Section 5.1, the surviving entity formed by such
consolidation or into which the Company is merged or to which
such transfer is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under
this Indenture with the same effect as if such surviving entity
had been named as the Company herein.
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1 Events of Default.
(a) An "Event of Default" occurs if:
(i) the Company defaults in the payment
of any interest on the Securities when it becomes
due and payable or of the principal of the
Securities pursuant to an offer to purchase
required hereunder and any such Default continues
for a period of 30 days;
(ii) the Company defaults in the payment
of the principal of the Securities when the same
<PAGE> 44
becomes due and payable;
(iii) the Company defaults in the
performance of, or breaches, any covenant in this
Indenture (other than defaults or breaches
specified in clause (i) or (ii) above), and such
default or breach continues for a period of 30
days after written notice to the Company by the
Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal
amount of the outstanding Securities;
(iv) failure by the Company or any
Material Subsidiary (A) to make any payment when
due (after giving effect to any applicable grace
period) with respect to one or more classes or
issues of other Indebtedness in an aggregate
principal amount of $10,000,000 or more at the
date of determination; or (B) to perform any term,
covenant, condition or provision of one or more
classes or issues of other Indebtedness in an
aggregate principal amount of $10,000,000 or more
at the date of determination, which failure, in
the case of either clause (A) or (B), results in
an acceleration of the maturity thereof;
(v) one or more final judgments, orders
or decrees for the payment of money in excess of
$10,000,000, either individually or in an
aggregate amount, shall be entered against the
Company or any of its Material Subsidiaries or any
of their respective properties and shall not be
discharged and there shall have been a period of
60 days during which a stay of enforcement of such
judgment or order, by reason of pending appeal or
otherwise, shall not be in effect;
(vi) the Company or any Material
Subsidiary of the Company pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case or
proceeding,
(B) consents to the entry of an order
for relief against it in an involuntary case
or proceeding,
(C) consents to the appointment of a
Custodian of it or for all or substantially
all of its property,
(D) makes a general assignment for the
benefit of its creditors, or
<PAGE> 45
(E) shall generally not pay its debts
when such debts become due or shall admit in
writing its inability to pay its debts
generally; or
(vii) a court of competent jurisdiction
enters an order or decree under any Bankruptcy Law
that:
(A) is for relief against the Company
or any Material Subsidiary of the Company in
an involuntary case or proceeding,
(B) appoints a Custodian of the Company
or any Material Subsidiary of the Company for
all or substantially all of its properties,
or
(C) orders the liquidation of the
Company or any Material Subsidiary of the
Company,
and in each case the order or decree remains
unstayed and in effect for 60 days; provided,
however, that if the entry of such order or decree
is appealed and dismissed on appeal then the Event
of Default hereunder by reason of the entry of
such order or decree shall be deemed to have been
cured.
(b) For purposes of this Section 6.1, the term
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official charged with maintaining
possession or control over property for one or more creditors.
(c) Subject to the provisions of Sections 7.1 and
7.2, the Trustee shall not be charged with knowledge of any
Event of Default unless written notice thereof shall have been
given to a Trust Officer at the corporate trust office of the
Trustee by the Company or any other Person.
SECTION 6.2 Acceleration.
If an Event of Default (other than an Event of
Default specified in Section 6.1(a)(vi) or (vii) with respect
to the Company) occurs and is continuing, then the Holders of
at least 25% in aggregate principal amount of the outstanding
Securities may, by written notice to the Company and the
Trustee, and the Trustee upon the request of the Holders of not
less than 25% in aggregate principal amount of the outstanding
Securities shall, declare the principal of and accrued interest
on all the Securities to be due and payable immediately. Upon
any such declaration such principal amounts shall become due
<PAGE> 46
and payable immediately. If an Event of Default specified in
Section 6.1(a)(vi) or (vii) with respect to the Company occurs
and is continuing, then the principal of and accrued interest
on, all the Securities shall ipso facto become and be
immediately due and payable without any declaration or other
act on the part of the Trustee or any Holder.
After a declaration of acceleration, the Holders of a
majority in aggregate principal amount of outstanding
Securities may, by notice to the Trustee, rescind such
declaration of acceleration if all existing Events of Default,
have been cured or waived, other than the non-payment of
principal of and accrued interest on the Securities that has
become due solely as a result of such acceleration and if the
rescission of acceleration would not conflict with any judgment
or decree. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
SECTION 6.3 Other Remedies.
If an Event of Default occurs and is continuing, the
Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of or interest on
the Securities or to enforce the performance of any provision
of the Securities or this Indenture.
All rights of action and claims under this Indenture
or the Securities may be enforced by the Trustee even if the
Trustee does not possess any of the Securities or does not
produce any of them in the proceeding. A delay or omission by
the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the
right or remedy or constitute a waiver of or acquiescence in
the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative to the extent
permitted by law.
SECTION 6.4 Waiver of Past Default.
Subject to Sections 6.7 and 9.2, the Holders of at
least a majority in aggregate principal amount of the
outstanding Securities by written notice to the Trustee may
waive an existing Default or Event of Default and its
consequences, except a Default specified in Section 6.1(a)(i)
or (ii) or in respect of any provision hereof which cannot be
modified or amended without the consent of the Holder so
affected pursuant to Section 9.2. When a Default or Event of
Default is so waived, it shall be deemed cured and ceases.
SECTION 6.5 Control by Majority.
The Holders of at least a majority in principal
amount of the outstanding Securities may direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power
<PAGE> 47
conferred on it; provided, however, that the Trustee may refuse
to follow any direction that (i) conflicts with law or this
Indenture, (ii) the Trustee determines may be unduly
prejudicial to the rights of another Securityholder, or
(iii) may involve the Trustee in personal liability unless the
Trustee has indemnification satisfactory to it in its sole
discretion against any loss, expense or liability caused by its
following such direction; and provided, further, that the
Trustee may take any other action deemed proper by the Trustee
that is not inconsistent with such direction.
SECTION 6.6 Limitation on Suits.
A Securityholder may not pursue any remedy with
respect to this Indenture or the Securities unless:
(a) the Holder gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount
of the outstanding Securities make a written request to
the Trustee to pursue a remedy;
(c) such Holder or Holders offer and, if requested,
provide to the Trustee indemnity reasonably satisfactory
to the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request
within 60 days after receipt of the request and the offer
and, if requested, provision of indemnity; and
(e) during such 60-day period the Holders of a
majority in principal amount of the outstanding Securities
do not give the Trustee a direction inconsistent with the
request.
The foregoing limitations shall not apply to a suit
instituted by a Holder for the enforcement of the payment of
principal of or accrued interest on such Security on or after
the respective due dates set forth in such Security.
A Securityholder may not use this Indenture to
prejudice the rights of another Securityholder or to obtain a
preference or priority over such other Securityholder.
SECTION 6.7 Rights of Holders To Receive Payment.
Notwithstanding any other provision of this
Indenture, the right of any Holder to receive payment of
principal of and interest on a Security, on or after the
respective due dates expressed in the Security, or to bring
suit for the enforcement of any such payment on or after such
respective dates, is absolute and unconditional and shall not
be impaired or affected without the consent of such Holder.
<PAGE> 48
SECTION 6.8 Collection Suit by Trustee.
If an Event of Default specified in Section 6.1(a)(i)
or (ii) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Securities for
the whole amount of principal and accrued interest remaining
unpaid, together with interest overdue on principal and, to the
extent that payment of such interest is lawful, interest on
overdue installments of interest, in each case at the Interest
Rate and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
The Trustee shall be entitled and empowered to file
such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Securityholders allowed in any judicial
proceedings relative to the Company, the Subsidiaries of the
Company, their creditors or their property and shall be
entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable on any such
claims and to distribute the same, and any Custodian in any
such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such
payments directly to the Securityholders, to pay to the Trustee
any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, and any other amounts due the Trustee under
Section 7.7.
Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization,
arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Securityholder
in any such proceeding.
SECTION 6.10 Priorities.
If the Trustee collects any money pursuant to this
Article VI, it shall pay out such money in the following order:
First: to the Trustee for all amounts due under
Section 7.7;
<PAGE> 49
Second: to Holders for interest accrued on the
Securities, ratably, without preference or
priority of any kind, according to the amounts due
and payable on the Securities for interest;
Third: to Holders for principal amounts owing
under the Securities and other amounts owing to
the Holders with respect to the Securities,
ratably, without preference or priority of any
kind, according to the amounts due and payable on
the Securities for principal and other amounts
owing to the Holders with respect to the
Securities; and
Fourth: to the Company.
Notwithstanding Section 2.12, the Trustee, upon prior
written notice to the Company, may fix a record date and
payment date for any payment to Securityholders pursuant to
this Section 6.10.
SECTION 6.11 Undertaking for Costs.
In any suit for the enforcement of any right or
remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in
its discretion may require the filing by any party litigant in
the suit of an undertaking to pay the costs of the suit, and
the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a
suit by a Holder pursuant to Section 6.7, or a suit by Holders
of more than 10% in aggregate principal amount of the
outstanding Securities.
ARTICLE VII
TRUSTEE
SECTION 7.1 Duties of Trustee.
(a) If an Event of Default known to the Trustee has
occurred and is continuing, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture and use
the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in
the conduct of his own affairs.
(b) Except during the continuance of an Event of
Default actually known to the Trustee:
<PAGE> 50
(i) The Trustee need perform only those
duties as are specifically set forth in this
Indenture and no others and no implied covenants
or obligations shall be read into this Indenture
against the Trustee.
(ii) In the absence of bad faith on its
part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the
opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However,
in the case of any such certificates or opinions
which by any provision hereof are specifically
required to be furnished to the Trustee, the
Trustee shall examine such certificates and
opinions to determine whether or not they conform
on their face to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:
(i) This paragraph does not limit the
effect of paragraph (b) of this Section 7.1.
(ii) The Trustee shall not be liable for
any error of judgment made in good faith by a
Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the
pertinent facts.
(iii) The Trustee shall not be liable
with respect to any action it takes or omits to
take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers if
it shall have reasonable grounds for believing that repayment
of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any
way relates to the Trustee is subject to paragraphs (a), (b),
(c), (d) and (g) of this Section 7.1.
(f) The Trustee shall not be liable for interest on
any money received by it except as the Trustee may hereafter
agree in writing with the Company. Money held in trust by the
Trustee need not be segregated from other funds except to the
extent required by law.
(g) The Trustee may refuse to perform any duty or
exercise any right or power unless it is provided adequate
funds to enable it to do so and it receives indemnity
reasonably satisfactory to it in its sole discretion against
any loss, liability, fee or expense.
SECTION 7.2 Rights of Trustee.
Subject to Section 7.1:
(a) The Trustee may rely and shall be protected in
acting or refraining from acting upon any document
believed by it to be genuine and to have been signed or
presented by the proper Person. The Trustee shall not be
bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see
fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Company,
personally or by agent or attorney.
(b) Before the Trustee acts or refrains from acting
with respect to any matter contemplated by this Indenture,
it may require an Officer's Certificate or an Opinion of
Counsel, which shall conform to the provisions of Section
10.5. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and
agents and shall not be responsible for the misconduct or
negligence of any agent or attorney (other than the
negligence or willful misconduct of an agent who is an
employee of the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes
to be authorized or within its rights or powers, provided
that the Trustee's conduct does not constitute negligence.
(e) The Trustee may consult with counsel and the
advice or opinion of such counsel as to matters of law
shall be full and complete authorization and protection
from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance
with the advice or opinion of such counsel.
(f) Subject to clause (a) of Section 7.1 hereof, the
<PAGE> 51
Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the
request or direction of any Holder pursuant to this
Indenture, unless such Holder shall have offered to the
Trustee reasonable security or indemnity against the
costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction.
SECTION 7.3 Individual Rights of Trustee.
The Trustee in its individual capacity or any other
capacity may become the owner or pledgee of Securities and may
otherwise deal with the Company or its Subsidiaries and
Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However,
the Trustee is subject to Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the recitals contained herein or the
validity or adequacy of this Indenture or the Securities. It
shall not be accountable for the Company's use of the proceeds
from the issuance of the Securities, and it shall not be
responsible for any statement of the Company in this Indenture
or any document issued in connection with the sale of
Securities or any statement in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5 Notice of Defaults.
If a Default or an Event of Default with respect to
the Securities occurs and is continuing and is known to the
Trustee, the Trustee shall mail to each Securityholder notice
of the Default or Event of Default within 60 days after the
occurrence thereof. Except in the case of a Default or an
Event of Default in payment of principal of or interest on any
Security, the Trustee may withhold the notice to the
Securityholders if a committee of its Trust Officers in good
faith determines that withholding the notice is in the interest
of Securityholders.
SECTION 7.6 Reports by Trustee to Holders.
To the extent required by TIA 313(a), within 30
days after March 1 of each year commencing with the first such
day falling after the Issue Date, and for as long as there are
Securities outstanding hereunder, the Trustee shall mail to
each Securityholder a brief report dated as of such date that
complies with TIA 313(a). The Trustee also shall comply with
TIA 313(b), (c) and (d). A copy of such report at the time
of its mailing to Securityholders shall be filed with the SEC
and each stock exchange, if any, on which the Securities are
listed.
The Company shall promptly notify the Trustee if the
Securities become listed on any stock exchange, and the Trustee
shall comply with TIA 313(d).
<PAGE> 52
SECTION 7.7 Compensation and Indemnity.
The Company shall pay to the Trustee, the Paying
Agent and the Registrar from time to time reasonable
compensation for their respective services rendered hereunder
as such parties may agree among themselves. The Trustee's, the
Paying Agent's and the Registrar's compensation shall not be
limited by any law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee, the Paying
Agent and the Registrar upon request for all reasonable out-of-
pocket disbursements, expenses and advances (including fees and
expenses of agents and counsel) incurred or made by each of
them in addition to the compensation for their respective
services. Such expenses shall include the reasonable
compensation, reasonable out-of-pocket disbursements and
expenses of the Trustee's, the Paying Agent's and the
Registrar's agents and counsel.
The Company shall indemnify the Trustee, the Paying
Agent and the Registrar for, and hold each of them harmless
against, any claim or demand by a third party, or loss or
liability to a third party incurred by each of them arising out
of or in connection with the acceptance of this trust or the
administration of this Indenture and their respective duties
hereunder, and expenses (including but not limited to
attorneys' fees and expenses) relating to such claim, demand or
liability. Each of the Trustee, the Paying Agent and the
Registrar shall notify the Company promptly of any claim
asserted against it for which it may seek indemnity. However,
failure by the Trustee, the Paying Agent or the Registrar to so
notify the Company shall not relieve the Company of its
obligations hereunder. The Company need not reimburse any
expense or indemnify against any loss or liability incurred by
the Trustee, the Paying Agent or the Registrar through the
Trustee's, the Paying Agent's or the Registrar's, as the case
may be, own willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this
Section 7.7, each of the Trustee, the Paying Agent and the
Registrar shall have a lien prior to the Securities on all
money or property held or collected by it, in its capacity as
Trustee, Paying Agent or Registrar, as the case may be.
When any of the Trustee, the Paying Agent and the
Registrar incurs expenses or renders services after an Event of
Default specified in Section 6.1(a)(vi) or (vii) with respect
to the Company occurs and during the time it is continuing, the
<PAGE> 53
expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
SECTION 7.8 Replacement of Trustee.
The Trustee may resign at any time by so notifying
the Company in writing, such resignation to be effective upon
the appointment of a successor Trustee. The Holders of a
majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Trustee in writing and
may appoint a successor Trustee with the Company's consent,
which consent shall not be unreasonably withheld. The Company
may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an
insolvent;
(c) a Custodian, receiver or other public officer
takes charge of the Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy
exists in the office of the Trustee for any reason (the Trustee
in such event being referred to herein as the retiring
Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes
office, the Holders of a majority in principal amount of the
Securities may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written
acceptance of its appointment to the retiring Trustee and to
the Company. Immediately after that, the retiring Trustee
shall transfer all property held by it as Trustee to the
successor Trustee, the resignation or removal of the retiring
Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under
this Indenture. A successor Trustee shall mail notice of its
succession to each Securityholder.
If a successor Trustee does not take office within 60
days after the retiring Trustee resigns or is removed, the
retiring Trustee, the Company or the Holders of at least 25% in
principal amount of the outstanding Securities may petition any
court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any
Securityholder may petition any court of competent jurisdiction
for the removal of the Trustee and the appointment of a
successor Trustee.
<PAGE> 54
Notwithstanding replacement of the Trustee pursuant
to this Section 7.8, the Company's obligations under Section
7.7 shall continue for the benefit of the retiring Trustee.
No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article VII.
SECTION 7.9 Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts
into, or transfers all or substantially all of its corporate
trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation
or national banking association without any further act shall
be the successor Trustee provided such corporation shall be
otherwise qualified and eligible under this Article VII.
SECTION 7.10 Eligibility; Disqualification.
This Indenture shall always have a Trustee who
satisfies the requirements of TIA { 310(a)(1), (2) and (5).
The Trustee shall have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA
{ 310(b); provided, however, that there shall be excluded from
the operation of TIA { 310(b)(1) any indenture or indentures
under which other securities, or certificates of interest or
participation in other securities, of the Company are
outstanding if the requirements for such exclusion set forth in
TIA { 310(b)(1) are met. The provisions of TIA { 310 shall
apply to the Company, as obligor of the Securities.
SECTION 7.11 Preferential Collection of
Claims Against Company.___
The Trustee shall comply with TIA { 311(a), excluding
any creditor relationship listed in TIA { 311(b). A Trustee
who has resigned or been removed shall be subject to TIA
{ 311(a) to the extent indicated therein. The provisions of
TIA { 311 shall apply to the Company, as obligor on the
Securities.
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1 Termination of Company's Obligations.
The Company may terminate its obligations under the
Securities and this Indenture, except those obligations
referred to in the penultimate paragraph of this Section 8.1,
if all Securities previously authenticated and delivered (other
than destroyed, lost or stolen Securities which have been
<PAGE> 55
replaced or paid or Securities for whose payment money has
theretofore been deposited with the Trustee or the Paying Agent
in trust and thereafter repaid to the Company, as provided in
Section 8.4) have been delivered to the Trustee for
cancellation and the Company has paid all sums payable by it
hereunder, or if:
(a) either (i) pursuant to Article III, the Company
shall have given notice to the Trustee and mailed a notice
of redemption to each Holder of the redemption of all of
the Securities under arrangements reasonably satisfactory
to the Trustee for the giving of such notice or (ii) all
Securities have otherwise become due and payable
hereunder;
(b) the Company shall have irrevocably deposited or
caused to be deposited with the Trustee or a trustee
satisfactory to the Trustee, under the terms of an
irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds in trust
solely for the benefit of the Holders for that purpose,
money or direct non-callable obligations of, or non-
callable obligations guaranteed by, the United States of
America for the payment of which guarantee or obligation
the full faith and credit of the United States is pledged
("U.S. Government Obligations") maturing as to principal
and interest in such amounts and at such times as are
sufficient without consideration of any reinvestment of
such interest to pay principal of and interest on the
outstanding Securities to maturity or redemption, as the
case may be, provided that the Trustee shall have been
irrevocably instructed to apply such money or the proceeds
of such U.S. Government Obligations to the payment of said
principal and interest with respect to the Securities;
(c) the Company shall have paid all other sums
payable by it hereunder; and
(d) the Company shall have delivered to the Trustee
an Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent providing for the
termination of the Company's obligation under the
Securities and this Indenture have been complied with.
Notwithstanding the foregoing paragraph, the
Company's obligations in Sections 2.3, 2.5, 2.6, 2.7, 2.8, 4.1,
4.2, 7.7, 7.8, 8.4 and 8.5 in respect thereof shall survive
until the Securities are no longer outstanding. After the
Securities are no longer outstanding, the Company's obligations
in Sections 7.7, 8.4 and 8.5 in respect thereof shall survive.
After such delivery or irrevocable deposit the
Trustee upon request shall promptly acknowledge in writing the
<PAGE> 56
discharge of the Company's obligations under the Securities and
this Indenture except for those surviving obligations specified
above.
SECTION 8.2 Legal Defeasance and Covenant
Defeasance.
(a) The Company may, at its option by Board
Resolution, at any time, with respect to the Securities, elect
to have either paragraph (b) or paragraph (c) below be applied
to the outstanding Securities upon compliance with the
conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (b), the Company
shall be deemed to have been released and discharged from its
obligations with respect to the outstanding Securities on the
date the conditions set forth below are satisfied (hereinafter,
"legal defeasance"). For this purpose, such legal defeasance
means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the
outstanding Securities, which shall thereafter be deemed to be
"outstanding" only for the purposes of paragraph (e) below and
the other Sections of and matters under this Indenture referred
to in (i) and (ii) below, and to have satisfied all its other
obligations under such Securities and this Indenture insofar as
such Securities are concerned (and the Trustee, at the expense
of the Company, shall promptly execute proper instruments
acknowledging the same), except for the following which shall
survive until otherwise terminated or discharged hereunder:
(i) the rights of Holders of outstanding Securities to receive
solely from the trust fund described in paragraph (d) below and
as more fully set forth in such paragraph, payments in respect
of the principal of and interest on such Securities when such
payments are due, (ii) the Company's obligations with respect
to such Securities under Sections 2.3, 2.6, 2.7 and 4.2, and,
with respect to the Trustee, under Sections 7.7 and 7.8, (iii)
the rights, powers, trusts, duties and immunities of the
Trustee under this Indenture and (iv) this Section 8.2 and
Section 8.5. Subject to compliance with this Section 8.2, the
Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under
paragraph (c) below with respect to the Securities.
(c) Upon the Company's exercise under paragraph (a)
of the option applicable to this paragraph (c), the Company
shall be released and discharged from its obligations under any
covenant contained in Article V and in Sections 4.5 through
4.19 with respect to the outstanding Securities on and after
the date the conditions set forth below are satisfied
<PAGE> 57
(hereinafter, "covenant defeasance"), and the Securities shall
thereafter be deemed to be not "outstanding" for the purpose of
any direction, waiver, consent or declaration or act of Holders
(and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for
all other purposes hereunder. For this purpose, such covenant
defeasance means that, with respect to the outstanding
Securities, the Company may omit to comply with and shall have
no liability in respect of any term, condition or limitation
set forth in any such covenant, whether directly or indirectly,
by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to
any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event
of Default under Section 6.1, but, except as specified above,
the remainder of this Indenture and such Securities shall be
unaffected thereby.
(d) The following shall be the conditions to
application of either paragraph (b) or paragraph (c) above to
the outstanding Securities:
(i) the Company shall irrevocably have
deposited or caused to be deposited with the
Trustee (or another trustee satisfying the
requirements of Section 7.10 who shall agree to
comply with the provisions of this Section 8.2
applicable to it) as trust funds in trust for the
purpose of making the following payments and
dedicated solely to the benefit of the Holders of
such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the
scheduled payment of principal of and interest in
respect thereof in accordance with their terms
will provide, not later than one Business Day
before the due date of any payment, money in an
amount, or (C) a combination thereof, sufficient,
in the opinion of a nationally recognized firm of
independent public accountants expressed in a
written certification thereof delivered to the
Trustee, to pay and discharge and which shall be
applied by the Trustee (or other qualifying
trustee) to pay and discharge principal of and
interest on the outstanding Securities on the
Maturity Date of such principal or installment of
principal or interest or otherwise in accordance
with the terms of this Indenture and of such
Securities; provided, however, that the Trustee
(or other qualifying trustee) shall have received
an irrevocable written order from the Company
instructing the Trustee (or other qualifying
trustee) to apply such money or the proceeds of
such U.S. Government Obligations to said payments
with respect to the Securities;
<PAGE> 58
(ii) no Default or Event of Default or
event which with notice or lapse of time or both
would become a Default or an Event of Default with
respect to the Securities shall have occurred and
be continuing on the date of such deposit or,
insofar as Sections 6.1(a)(vi) and (vii) are
concerned, at any time during the period ending on
the 91st day after the date of such deposit (it
being understood that this condition shall not be
deemed satisfied until the expiration of such
period);
(iii) such legal defeasance or covenant
defeasance shall not result in a breach or
violation of, or constitute a Default or Event of
Default under, this Indenture or any other
agreement or instrument to which the Company is a
party or by which it is bound;
(iv) in the case of an election under
paragraph (b) above, the Company shall have
delivered to the Trustee an Opinion of Counsel
stating that the Holders of the outstanding
Securities will not recognize income, gain or loss
for Federal income tax purposes as a result of
such legal defeasance and will be subject to
Federal income tax on the same amounts, in the
same manner and at the same times as would have
been the case if such legal defeasance had not
occurred;
(v) in the case of an election under
paragraph (c) above, the Company shall have
delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the outstanding
Securities will not recognize income, gain or loss
for Federal income tax purposes as a result of
such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the
same manner and at the same times as would have
been the case if such covenant defeasance had not
occurred;
(vi) the Company shall have delivered to
the Trustee an Officer's Certificate and an
Opinion of Counsel, each stating that (A) all
conditions precedent provided for relating to
either the legal defeasance under paragraph (b)
above or the covenant defeasance under
paragraph (c) above, as the case may be, have been
complied with and (B) if any other Indebtedness of
the Company shall then be outstanding or
committed, such legal defeasance or covenant
<PAGE> 59
defeasance will not violate the provisions of the
agreements or instruments evidencing such
Indebtedness.
(e) All money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this
paragraph (e), the "Trustee") pursuant to paragraph (d) above
in respect of the outstanding Securities shall be held in trust
and applied by the Trustee, in accordance with the provisions
of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent (other than the Company)
as the Trustee may determine, to the Holders of such Securities
of all sums due and to become due thereon in respect of
principal and interest, but such money need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed
against the U.S. Government Obligations deposited pursuant to
paragraph (d) above or the principal and interest received in
respect thereof other than any such tax, fee or other charge
which by law is for the account of the Holders of the
outstanding Securities.
Anything in this Section 8.2 to the contrary
notwithstanding, the Trustee shall deliver or pay to the
Company from time to time upon the request, in writing, by the
Company any money or U.S. Government Obligations held by it as
provided in paragraph (d) above which, in the opinion of a
nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent legal
defeasance or covenant defeasance.
SECTION 8.3 Application of Trust Money.
The Trustee shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Sections
8.1 and 8.2, and shall apply the deposited money and the money
from U.S. Government Obligations in accordance with this
Indenture to the payment of principal of and interest on the
Securities.
SECTION 8.4 Repayment to Company.
Subject to Sections 7.7, 8.1 and 8.2, the Trustee
and/or the Paying Agent shall promptly pay to the Company, upon
receipt by the Trustee or the Paying Agent of an Officer's
Certificate, any excess money, determined in accordance with
Sections 8.2(d)(i) and (e), held by it at any time. The
Trustee and the Paying Agent shall pay to the Company upon
receipt by the Trustee or the Paying Agent, as the case may be,
<PAGE> 60
of an Officer's Certificate, any money held by it for the
payment of principal or interest that remains unclaimed for two
years after payment to the Holders is required; provided,
however, that the Trustee and the Paying Agent before being
required to make any payment may, but need not, at the expense
of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each
Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein, which shall
be at least 30 days from the date of such publication or
mailing, any unclaimed balance of such money then remaining
will be repaid to the Company. After payment to the Company,
Securityholders entitled to money must look solely to the
Company for payment as general creditors unless an applicable
abandoned property law designates another Person, and all
liability of the Trustee or Paying Agent with respect to such
money shall thereupon cease.
SECTION 8.5 Reinstatement.
With respect to the circumstances referred to in
Sections 8.1(b) and 8.2, if the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in
accordance with this Indenture by reason of any legal
proceeding or by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise
prohibiting such application, then and only then the Company's
obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had been made
pursuant to this Indenture until such time as the Trustee is
permitted to apply all such money or U.S. Government
Obligations in accordance with this Indenture; provided,
however, that if the Company has made any payment of principal
or interest on any Securities because of the reinstatement of
their obligations, the Company shall be subrogated to the
rights of the holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 Without Consent of Holders.
The Company, when authorized by a Board Resolution,
and the Trustee may amend, waive or supplement this Indenture
or the Securities without notice to or consent of any
Securityholder:
(a) to cure any ambiguity, defect or inconsistency,
provided that such amendment or supplement does not
adversely affect the rights of any Holder;
<PAGE> 61
(b) to provide for uncertificated Securities in
addition to or in place of certificated Securities;
(c) to comply with any requirements of the SEC under
the TIA;
(d) to evidence the succession in accordance with
Article V hereof of another Person to the Company and the
assumption by any such successor of the covenants of the
Company herein and in the Securities;
(e) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect
to the Securities in accordance with the provisions
hereof; or
(f) to make any change that does not adversely
affect the rights of any Holder.
SECTION 9.2 With Consent of Holders.
Subject to Section 6.7 and the provisions of this
Section 9.2, the Company and the Trustee may amend or
supplement this Indenture or the Securities with the written
consent of the Holders of at least a majority in aggregate
principal amount of the Securities then outstanding. Subject
to Section 6.7 and the provisions of this Section 9.2, the
Holders of, in the aggregate, at least a majority in aggregate
principal amount of the outstanding Securities affected may
waive compliance by the Company with any provision of this
Indenture or the Securities without notice to any other
Securityholder. However, without the consent of each
Securityholder affected, an amendment, supplement or waiver,
including a waiver pursuant to Section 6.4, may not:
(a) reduce the percentage in outstanding aggregate
principal amount of Securities the Holders of which must
consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(b) reduce the rate of, change the method of
calculation of, or extend the time for, payment of
interest on any Security;
(c) reduce the principal amount outstanding of or
extend the fixed maturity of any Security or alter the
redemption provisions with respect thereto;
(d) waive a default in the payment of the principal
of, and interest on, or redemption payment or an offer to
purchase required hereunder with respect to, any Security;
(e) make the principal of, and interest on, any
Security payable in any currency other than that stated in
<PAGE> 62
the Security;
(f) after the Company's obligation to purchase the
Securities in accordance with the Indenture following the
occurrence of a Change of Control, waive any default in
the performance thereof;
(g) adversely affect the ranking of the Securities;
(h) impair the right to institute suit for the
enforcement of any payment on or with respect to the
Securities; or
(i) modify this Section 9.2 or Section 6.4.
It shall not be necessary for the consent of the
Holders under this Section 9.2 to approve the particular form
of any proposed amendment, supplement or waiver, but it shall
be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this
Section 9.2 becomes effective, the Company shall mail to the
Holders affected thereby a notice briefly describing the
amendment, supplement or waiver. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amendment,
supplement or waiver.
SECTION 9.3 Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or
the Securities shall comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a
consent to it by a Holder is a continuing consent by the Holder
and every subsequent Holder of that Security or portion of that
Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder
may revoke the consent as to his Security or portion of a
Security. Such revocation shall be effective only if the
Trustee receives the notice of revocation before the date the
amendment, supplement or waiver becomes effective.
Notwithstanding the above, nothing in this paragraph shall
impair the right of any Securityholder under { 316(b) of the
TIA.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Holders entitled
to consent to any amendment, supplement or waiver. If a record
date is fixed, then notwithstanding the second and third
<PAGE> 63
sentences of the immediately preceding paragraph, those Persons
who were Holders at such record date (or their duly designated
proxies), and only those Persons, shall be entitled to consent
to such amendment, supplement or waiver or to revoke any
consent previously given, whether or not such Persons continue
to be Holders after such record date. Such consent shall be
effective only for actions taken within 90 days after such
record date.
After an amendment, supplement or waiver becomes
effective, it shall bind every Securityholder, unless it makes
a change described in any of clauses (a) through (h) of Section
9.2; if it makes such a change, the amendment, supplement or
waiver shall bind every subsequent Holder of a Security or
portion of a Security that evidences the same debt as the
consenting Holder's Security.
SECTION 9.5 Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the
terms of a Security, the Trustee shall (in accordance with the
specific direction of the Company) request the Holder of the
Security to deliver it to the Trustee. The Trustee shall (in
accordance with the specific direction of the Company) place an
appropriate notation on the Security about the changed terms
and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the
Security shall issue and the Trustee shall authenticate a new
Security that reflects the changed terms. Failure to make the
appropriate notation or issue a new Security shall not affect
the validity and effect of such amendment, supplement or
waiver.
SECTION 9.6 Trustee To Sign Amendments, Etc.
The Trustee shall sign any amendment, supplement or
waiver authorized pursuant to this Article IX if the amendment,
supplement or waiver does not adversely affect the rights,
duties or immunities of the Trustee. If it does adversely
affect the rights, duties or immunities of the Trustee, the
Trustee may, but need not, sign it. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive,
if requested, an indemnity satisfactory to it in its sole
discretion and to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution
of any amendment, supplement or waiver authorized pursuant to
this Article IX is authorized or permitted by this Indenture.
The Company may not sign an amendment until its Board of
Directors approves it.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Trust Indenture Act Controls.
<PAGE> 64
If any provision of this Indenture limits, qualifies
or conflicts with another provision which is deemed to be
included in this Indenture under the TIA, the required TIA
provision shall control.
If any provision of this Indenture modifies or
excludes any provision of the TIA that may be so modified or
excluded, the later provision shall be deemed to apply to this
Indenture as so modified or excluded, as the case may be.
SECTION 10.2 Notices.
Any notice or communication shall be sufficiently
given if in writing and delivered in Person or mailed by first-
class mail addressed as follows:
(a) if to the Company:
GENEVA STEEL COMPANY
10 South Geneva Road
Vineyard, Utah 84058
Attention: Chief Financial Officer
(b) if to the Trustee:
BANKERS TRUST COMPANY
Four Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Security
holder, including any notice delivered in connection with TIA
{ 310(b), TIA { 313(c), TIA { 314(a) and TIA { 315(b), shall be
mailed to him, first-class postage prepaid, at his address as
it appears on the registration books of the Registrar and shall
be sufficiently given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a
Securityholder or any defect in it shall not affect its
sufficiency with respect to other Securityholders. Except for
a notice to the Trustee, which is deemed given only when
received, if a notice or communication is mailed in the manner
provided above, it is duly given, whether or not the addressee
receives it.
SECTION 10.3 Communications by Holders with Other
Holders.____________________________
<PAGE> 65
Securityholders may communicate pursuant to TIA
{ 312(b) with other Securityholders with respect to their
rights under this Indenture or the Securities. The Company,
the Trustee, the Registrar and any other Person shall have the
protection of TIA { 312(c).
SECTION 10.4 Certificate and Opinion of Counsel
as to Conditions Precedent._______
Upon any request or application by the Company to the
Trustee to take any action under this Indenture, the Company
shall furnish to the Trustee at the request of the Trustee
(a) an Officer's Certificate in form and substance satisfactory
to the Trustee stating that, in the opinion of the signer, all
conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (b) an
Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of counsel, all such
conditions have been complied with and (c) where applicable, a
certificate or opinion by an independent certified public
accountant satisfactory to the Trustee that complies with TIA
{ 314(c).
SECTION 10.5 Statements Required in Certificate
and Opinion of Counsel.___________
Each certificate and Opinion of Counsel with respect
to compliance with a condition or covenant provided for in this
Indenture shall include:
(a) a statement that the Person making such
certificate or Opinion of Counsel has read such covenant
or condition;
(b) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
contained in such certificate or Opinion of Counsel are
based;
(c) a statement that, in the opinion of such Person,
he has made such examination or investigation as is
necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion
of such Person, such condition or covenant has been
complied with and such other opinions as the Trustee may
reasonably request.
SECTION 10.6 Rules by Trustee, Paying Agent,
Registrar._____________________
<PAGE> 66
The Trustee may make reasonable rules in accordance
with the Trustee's customary practices for action by or at a
meeting of Securityholders. The Paying Agent or Registrar may
make reasonable rules for its functions.
SECTION 10.7 Legal Holidays.
If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period.
SECTION 10.8 Governing Law.
The internal laws of the State of New York shall
govern this Indenture and the Securities without regard to
principles of conflict of laws.
SECTION 10.9 No Recourse Against Others.
A trustee, director, officer, employee, stockholder
or beneficiary, as such, of the Company shall not have any
liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation.
Each Securityholder by accepting a Security waives and releases
all such liability.
SECTION 10.10 Successors.
All agreements of the Company in this Indenture and
the Securities shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 10.11 Duplicate Originals.
The parties may sign any number of copies of this
Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 10.12 Separability.
In case any provision in this Indenture or in the
Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired
thereby, and a Holder shall have no claim therefor against any
party hereto.
SECTION 10.13 Table of Contents, Headings, Etc.
<PAGE> 67
The table of contents, cross-reference sheet and
headings of the Articles and Sections of this Indenture have
been inserted for convenience of reference only, and are not to
be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture to be duly executed as of the date first written
above.
GENEVA STEEL COMPANY
By_____________________________
Title:
BANKERS TRUST COMPANY
By_____________________________
Title:
<PAGE> 68
Exhibit A
GENEVA STEEL COMPANY
No. $
% SENIOR NOTE DUE 2004
GENEVA STEEL COMPANY promises to pay to
or registered assigns the principal sum of
Dollars on , 2004.
Interest Payment Dates: and
Record Dates: and
GENEVA STEEL COMPANY
_________________________________
Chief Executive Officer
_________________________________
President
Dated:
Trustee's Certificate of Authentication
This is one of the % Senior Notes Due 2004
referred to in the within-mentioned Indenture.
,
as Trustee
By:
Authorized Signatory
<PAGE> 69
(REVERSE OF SECURITY)
GENEVA STEEL COMPANY
% SENIOR NOTE DUE 2004
1. Interest. GENEVA STEEL COMPANY, a Utah
corporation (the "Company"), promises to pay, until the
principal hereof is paid or made available for payment,
interest on the principal amount set forth on the reverse side
hereof at a rate of % per annum. Interest on the Senior
Notes will accrue from and including the most recent date to
which interest has been paid or, if no interest has been paid,
from and including , 1994 through but excluding the
date on which interest is paid. Interest shall be payable in
arrears on each , , and at the stated
maturity, commencing , 1994. Interest will be
computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal
and on overdue interest (to the full extent permitted by law)
at a rate of % per annum.
2. Method of Payment. The Company will pay
interest on the Senior Notes (except defaulted interest) to the
Persons who are registered Holders of Senior Notes at the close
of business on the or preceding the
interest payment date. Holders must surrender Senior Notes to
a Paying Agent to collect principal payments. The Company will
pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public
and private debts. The Company may pay principal and interest
by check payable in such money. The Company may mail an
interest payment check to a Holder's registered address.
<PAGE> 70
3. Paying Agent and Registrar. Initially, Bankers
Trust Company will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar
without notice. Neither the Company nor any of its
Subsidiaries may act as Paying Agent, Registrar or
co-Registrar.
4. Indenture. The Company issued the Senior Notes
under an Indenture dated as of , 1994 (the "Indenture")
between the Company and Bankers Trust Company (the "Trustee").
This Senior Note is one of an issue of Senior Notes of the
Company issued, or to be issued, under the Indenture. The
terms of the Senior Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb). The
Senior Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of them.
Capitalized and certain other terms used herein and not
otherwise defined have the meanings set forth in the Indenture.
The Senior Notes are general unsecured obligations of the
Company limited in aggregate principal amount to $125,000,000.
The Indenture limits, among other things, the incurrence of
Indebtedness by the Company and its Subsidiaries; Sale-
Leaseback Transactions by the Company and its Subsidiaries; the
creation of Liens by the Company and its Subsidiaries;
purchases, redemptions, and other acquisitions or retirements
of Capital Stock of the Company and its Subsidiaries;
transactions by the Company and its Subsidiaries with their
respective Affiliates; and the ability of the Company or any of
its Subsidiaries to merge with or into another entity. The
limitations are subject to a number of important qualifications
and exceptions. The Company must report to the Trustee
quarterly on compliance with the limitations contained in the
Indenture.
5. Optional Redemption. The Company, at its
option, may redeem all or any of the Senior Notes, in whole or
in part, at any time on or after , 1999 at the
redemption prices (expressed in percentages of principal
amount) set forth below plus accrued and unpaid interest to the
Redemption Date, if redeemed during the 12-month period
beginning of the years indicated below:
Year Percentage
1999......................... %
2000......................... %
2001......................... %
2002......................... %
2003......................... 100%
Notwithstanding the foregoing, the Company may redeem
up to 30% of the original principal amount of Senior Notes at
any time prior to _______________, 1997 at a redemption price
equal to % of the principal amount thereof plus accrued
interest to the redemption date out of the Net Proceeds of a
Public Equity Offering, provided that such redemption occurs
within 90 days of such offering.
6. Notice of Redemption. Notice of redemption will
be mailed by first class mail at least 30 days but not more
than 60 days before the Redemption Date to each Holder of
Senior Notes to be redeemed at such Holder's registered
address. On and after the Redemption Date, unless the Company
defaults in making the redemption payment, interest ceases to
accrue on Senior Notes or portions thereof called for
redemption.
7. Offers To Purchase. Sections 4.12 and 4.14 of
the Indenture provide that after an Asset Sale or upon the
occurrence of a Change of Control, and subject to further
limitations contained therein, the Company shall make an offer
to purchase certain amounts of Senior Notes in accordance with
the procedures set forth in the Indenture.
8. Denominations, Transfer, Exchange. The Senior
Notes are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may
transfer or exchange Senior Notes in accordance with the
Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer
documents and to pay to it any taxes and fees required by law
or permitted by the Indenture. The Registrar need not transfer
or exchange any Senior Notes or portion of a Senior Note
selected for redemption, or transfer or exchange any Senior
Notes for a period of 15 days before a selection of Senior
Notes to be redeemed.
9. Persons Deemed Owners. The registered Holder of
a Senior Note may be treated as the owner of it for all
purposes.
10. Unclaimed Money. If money for the payment of
principal or interest remains unclaimed for two years, the
Trustee or Paying Agent will pay the money back to the Company
at its request. After that, Holders entitled to the money must
look to the Company for payment as general creditors unless an
"abandoned property" law designates another Person.
11. Amendment, Supplement, Waiver. The Company and
the Trustee may, without the consent of the Holders of any
outstanding Senior Notes, amend, waive or supplement the
Indenture or the Senior Notes for certain specified purposes,
including, among other things, curing ambiguities, defects or
inconsistencies, maintaining the qualification of the Indenture
under the Trust Indenture Act of 1939 or making any change that
does not adversely affect the rights of any Holder. Other
<PAGE> 71
amendments and modifications of the Indenture or the Senior
Notes may be made by the Company and the Trustee with the
consent of the Holders of not less than a majority of the
aggregate principal amount of the outstanding Senior Notes,
subject to certain exceptions requiring the consent of the
Holders of the particular Senior Notes to be affected.
12. Successor Corporation. When a successor
corporation assumes all the obligations of its predecessor
under the Senior Notes and the Indenture and the transaction
complies with the terms of Article V of the Indenture, the
predecessor corporation will be released from those
obligations.
13. Defaults and Remedies. Events of Default are
set forth in the Indenture. Subject to certain limitations in
the Indenture, if an Event of Default (other than an Event of
Default specified in Section 6.1(a)(vi) or (vii) of the
Indenture) (with respect to the Company) occurs and is
continuing, then the Holders of not less than 25% in aggregate
principal amount of the outstanding Senior Notes may, and the
Trustee upon the request of the Holders of not less than 25% in
aggregate principal amount of the outstanding Senior Notes
shall, declare the principal of and interest on all of the
Senior Notes to be due and payable immediately. If an Event of
Default specified in Section 6.1(a)(vi) or (vii) of the
Indenture (with respect to the Company) occurs and is
continuing, the principal of and interest on all of the Senior
Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the
Trustee or any Holder. Holders may not enforce the Indenture
or the Senior Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Senior Notes. Subject to certain
limitations, Holders of a majority in principal amount of the
then outstanding Senior Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing default (except a default in
payment of principal or interest) if it determines that
withholding notice is in their interests. The Company must
furnish annual and quarterly compliance certificates to the
Trustee.
14. Trustee Dealings with Company. The Trustee, in
its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its
Affiliates, as if it were not Trustee.
15. No Recourse Against Others. A director,
officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under
the Senior Notes or the Indenture or for any claim based on, in
<PAGE> 72
respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Senior Note waives and
releases all such liability. The waiver and release are part
of the consideration for the issue of the Senior Notes.
16. Discharge. The Company's obligations pursuant
to the Indenture will be discharged, except for obligations
pursuant to certain sections thereof, subject to the terms of
the Indenture, upon the payment of all the Senior Notes or upon
the irrevocable deposit with the Trustee of money or U.S.
Government Obligations sufficient to pay when due principal of
and interest on the Senior Notes to maturity or redemption, as
the case may be.
17. Authentication. This Senior Note shall not be
valid until the Trustee (or its authenticating agent) signs the
certificate of authentication on the other side of this Senior
Note.
18. Abbreviations. Customary abbreviations may be
used in the name of a Holder or an assignee, such as: TEN COM
( tenants in common), TENANT ( tenants by the entireties), JT
TEN ( joint tenants with right of survivorship and not as
tenants in common), CUST ( Custodian), and U/G/M/A ( Uniform
Gifts to Minors Act).
The Company will furnish to any Holder upon written
request and without charge a copy of the Indenture. Requests
may be made to:
GENEVA STEEL COMPANY
10 South Geneva Road
Vineyard, Utah 84058
Attention: Chief Financial Officer
<PAGE> 73
ASSIGNMENT FORM
If you the Holder want to assign this Senior Note, fill in the
form below and have your signature guaranteed:
I or we assign and transfer this Senior Note to
_______________________________________________________________
(Insert assignee's social security or tax ID number) __________
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
(Print or type assignee's name, address and zip code) and
irrevocably appoint
_______________________________________________________________
agent to transfer this Senior Note on the books of the Company.
The agent may substitute another to act for it.
_______________________________________________________________
Date:______________ Your signature:____________________________
(Sign exactly as your name
appears on the other side of
this Senior Note)
Signature Guarantee:___________________________________________
<PAGE> 74
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Senior Note purchased by the
Company pursuant to Section 4.12 or 4.14 of the Indenture,
check the Box: [ ]
If you wish to have a portion of this Senior Note
purchased by the Company pursuant to Section 4.12 or 4.14 of
the Indenture, state the amount:
$_____________
Date: ________________ Your Signature: ____________________
(Sign exactly as
your name appears on
the other side of
this Senior Note)
Signature Guarantee: _______________________
<PAGE> 1
January 12, 1994
The Board of Directors of
Geneva Steel Company
10 South Geneva Road
Vineyard, Utah 84058
Re: Geneva Steel Company - Registration Statement on Form S-3
(Registration No. 33-51619)
Gentlemen:
As counsel to Geneva Steel Company, a Utah corporation (the
"Company"), in connection with the registration under the Securities Act of
1933, as amended, of $125,000,000 aggregate principal amount of the Company's
Senior Notes Due 2004 (the "Senior Notes") pursuant to the Company's
Registration Statement on Form S-3, including amendments thereto (the
"Registration Statement"), we have examined the originals or certified,
conformed or reproduced copies of all such records, agreements, instruments and
documents as we have deemed necessary as the basis for the opinion expressed
herein. In all such examinations, we have assumed the genuineness of all
signatures on original or certified copies and the conformity to original or
certified copies of all copies submitted to us as conformed or reproduced
copies. As to various questions of fact relevant to the opinion hereinafter
expressed, we have relied upon certificates of public officials and statements
or certificates of officers or representatives of the Company and others.
Based upon the foregoing, we are of the opinion that the Senior Notes,
when duly executed by the Company and authenticated and delivered as provided
in that certain Indenture to be executed by the Company and Bankers Trust
Company, as trustee (the "Indenture"), relating to the Senior Notes, will be
the legal, valid, binding and enforceable obligations of the Company, entitled
to the benefits provided for in the Indenture, except as enforcement thereof
may be limited by general principles of equity (whether considered in a
proceeding at law or in equity) and by applicable bankruptcy, insolvency,
fraudulent conveyance, moratorium, reorganization or similar laws or judicial
decisions relating to or affecting creditors' rights generally.
<PAGE> 2
Board of Directors of
Geneva Steel Company
January 12, 1994
Page 2
We hereby consent to the reference to our name under the caption
"Legal Matters" in the Prospectus which constitutes a part of the Registration
Statement and to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
KIMBALL, PARR, WADDOUPS, BROWN & GEE
<PAGE> 1
EXHIBIT 12
GENEVA STEEL COMPANY
RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED DECEMBER
FISCAL YEAR ENDED SEPTEMBER 30, 31,
------------------------------------------------- ----------------
1989 1990 1991 1992 1993 1992 1993
------- ------- ------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings --
Income (loss) before
provision (benefit) for
income taxes............ $91,913 $62,687 $28,219 $(21,475) $(14,109) $(6,454) $2,752
Fixed charges less interest
capitalized............. 6,854 10,171 6,165 13,695 17,096 3,570 3,472
------- ------- ------- -------- -------- ------- ------
$98,767 $72,858 $34,384 $ (7,780) $ 2,987 $(2,884) $6,224
------- ------- ------- -------- -------- ------- ------
------- ------- ------- -------- -------- ------- ------
Fixed charges --
Interest expense........... $ 6,854 $10,171 $ 6,165 $ 13,695 $ 17,096 $ 3,570 $3,472
Capitalized interest....... 461 2,794 8,342 5,774 7,696 1,466 3,360
------- ------- ------- -------- -------- ------- ------
$ 7,315 $12,965 $14,507 $ 19,469 $ 24,792 $ 5,036 $6,832
------- ------- ------- -------- -------- ------- ------
------- ------- ------- -------- -------- ------- ------
Ratio of Earnings to Fixed
Charges.................... 13.5x 5.6x 2.4x --(a) --(a) --(a) --(a)
</TABLE>
- ---------------
(a) For the 1992 and 1993 fiscal years and for the three months ended December
31, 1992 and 1993, earnings were inadequate to cover fixed charges by $27.2
million, $21.8 million, $7.9 million and $0.6 million, respectively.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN & CO.
Salt Lake City, Utah
January 12, 1994
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER
THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-4941247
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) identification no.)
FOUR ALBANY STREET 10006
NEW YORK, NEW YORK (Zip Code)
(Address of principal executive offices)
</TABLE>
------------------------
GENEVA STEEL COMPANY
(Exact name of obligor as specified in the charter)
<TABLE>
<S> <C>
UTAH 93-0942346
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
10 SOUTH GENEVA ROAD 84058
VINEYARD, UTAH (Zip Code)
(Address of principal executive offices)
</TABLE>
------------------------
SENIOR NOTES
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to which it
is subject.
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
Federal Reserve Bank (2nd District)................................ New York, N.Y.
Federal Deposit Insurance Corporation.............................. Washington, D.C.
New York State Banking Department.................................. Albany, N.Y.
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
ITEMS 3. -- 15.
Not Applicable.
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 -- Restated Organization Certificate of Bankers Trust Company
dated August 7, 1990 and Certificate of Amendment of the
Organization Certificate of Bankers Trust Company dated June
23, 1992 -- Incorporated herein by reference to Exhibit 1
filed with Form T-1 Statement, Registration No. 33-48267.
EXHIBIT 2 -- Certificate of Authority to commence business -- Incorporated
herein by reference to Exhibit 2 filed with Form T-1
Statement, Registration No. 33-21047.
EXHIBIT 3 -- Authorization of the Trustee to exercise corporate trust
powers -- Incorporated herein by reference to Exhibit 2 filed
with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 4 -- Existing By-Laws of Bankers Trust Company, dated as amended on
January 21, 1992. -- Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement, Registration No.
33-48267.
EXHIBIT 5 -- Not applicable.
EXHIBIT 6 -- Consent of Bankers Trust Company required by Section 321(b) of
the Act. -- Incorporated herein by reference to Exhibit 4
filed with Form T-1 Statement, Registration No. 22-18864.
EXHIBIT 7 -- A copy of the latest report of condition of Bankers Trust
Company dated as of September 30, 1993 -- (Copy attached).
EXHIBIT 8 -- Not Applicable
EXHIBIT 9 -- Not Applicable
<PAGE> 3
BANKERS TRUST COMPANY
SCHEDULE RC -- BALANCE SHEET
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1993
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED,
REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE QUARTER.
ASSETS
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
---------------
<S> <C> <C>
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1)................. $ 1,750,000
b. Interest-bearing balances(2).......................................... 2,595,000
2. Securities (from Schedule RC-B).......................................... 4,514,000
3. Federal funds sold and securities purchased under agreements to resell in
domestic offices of the bank and of its Edge and Agreement subsidiaries,
and in IBFs:
a. Federal funds sold.................................................... 1,901,000
b. Securities purchased under agreements to resell....................... 366,000
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C)......... 16,851,000
b. LESS: Allowance for loan and lease losses............................. 1,412,000
c. LESS: Allocated transfer risk reserve................................. 0
d. Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b and 4.c)............................................. 15,439,000
5. Assets held in trading accounts.......................................... 30,848,000
6. Premises and fixed assets (including capitalized leases)................. 684,000
7. Other real estate owned (from Schedule RC-M)............................. 269,000
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)..................................................... 158,000
9. Customers' liability to this bank on acceptances outstanding............. 522,000
10. Intangible assets (from Schedule RC-M)................................... 11,000
11. Other assets (from Schedule RC-F)........................................ 8,516,000
---------------
12. Total assets (sum of items 1 through 11)................................. $67,573,000
---------------
---------------
</TABLE>
- ---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE> 4
BANKERS TRUST COMPANY
SCHEDULE RC -- BALANCE SHEET -- (CONTINUED)
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR SEPTEMBER 30, 1993
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED,
REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE QUARTER.
LIABILITIES
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<S> <C> <C> <C>
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E,
part I).................................................................. $ 8,459,000
(1) Noninterest-bearing(1)............................................... 2,923,000
(2) Interest-bearing..................................................... 5,536,000
b. In foreign offices, Edge and Agreement subsidiaries and IBFs
(from Schedule RC-E, part II)............................................ 14,096,000
(1) Noninterest-bearing.................................................. 645,000
(2) Interest-bearing..................................................... 13,451,000
14. Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and
in IBFs:
a. Federal funds purchased.................................................. 10,461,000
b. Securities sold under agreements to repurchase........................... 440,000
15. Demand notes issued to the U.S. Treasury...................................... 0
16. Other borrowed money.......................................................... 14,625,000
17. Mortgage indebtedness and obligations under capitalized leases................ 6,000
18. Bank's liability on acceptances executed and outstanding...................... 522,000
19. Subordinated notes and debentures............................................. 1,277,000
20. Other liabilities (from Schedule RC-G)........................................ 13,985,000
21. Total liabilities (sum of items 13 through 20)................................ 63,871,000
22. Limited-life preferred stock and related surplus.............................. 0
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus................................. 250,000
24. Common stock.................................................................. 702,000
25. Surplus (exclude all surplus related to preferred stock)...................... 498,000
26. a. Undivided profits and capital reserves................................... 2,566,000
b. LESS: Net unrealized loss on marketable equity securities................ 0
27. Cumulative foreign currency translation adjustments........................... (314,000)
28. Total equity capital (sum of items 23 through 27)............................. 3,702,000
--------------
29. Total liabilities, limited-life preferred stock, and equity capital
(sum of items 21, 22, and 28)................................................. $ 67,573,000
--------------
--------------
</TABLE>
- ---------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE> 5
BANKERS TRUST COMPANY
SCHEDULE RC -- MEMORANDUM
<TABLE>
<S> <C> <C>
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best / /
describes the most comprehensive level of auditing work performed for the
bank by independent external auditors as of any date during 1992
1 = Independent audit of the bank conducted in accordance with generally accepted
auditing standards by a certified public accounting firm which submits a report on
the bank
2 = Independent audit of the bank's parent holding company conducted in accordance with
generally accepted auditing standards by a certified public accounting firm which
submits a report on the consolidated holding company (but not on the bank
separately)
3 = Directors' examination of the bank conducted in accordance with generally accepted
auditing standards by a certified public accounting firm (may be required by state
chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may be
required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
</TABLE>
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
trustee, Bankers Trust Company, a corporation organized and existing under the
laws of the State of New York, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
The City of New York, and State of New York, on the 5th day of January 1994.
BANKERS TRUST COMPANY
By: VALERIE DUNBAR
Valerie Dunbar
Assistant Vice President
