<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File #1-10459
GENEVA STEEL COMPANY
(Exact name of registrant as specified in its charter)
UTAH 93-0942346
(State of Incorporation) (I.R.S. Employer Identification No.)
10 South Geneva Road
Vineyard, Utah
(Address of principal executive offices)
84058
(Zip Code)
Registrant's telephone number, including area code: (801) 227-9000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each class of the issuer's common
stock, as of the latest practicable date.
13,786,289 and 19,151,348 shares of Class A and Class B common stock,
respectively, outstanding as of April 30, 1997.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
ASSETS
- ------
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
--------- ---------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ -- $ 597
Accounts receivable, net 80,711 76,527
Inventories 97,478 93,139
Deferred income taxes 8,716 7,637
Prepaid expenses and other 15,417 15,410
Related party receivable 700 250
--------- ---------
Total current assets 203,022 193,560
--------- ---------
Property, plant and equipment:
Land 1,990 1,990
Buildings 16,109 16,109
Machinery and equipment 626,771 600,290
Mineral property and development costs 8,425 8,425
--------- ---------
653,295 626,814
Less accumulated depreciation (192,744) (172,291)
--------- ---------
Net property, plant and equipment 460,551 454,523
--------- ---------
Other assets 8,351 9,303
--------- ---------
$ 671,924 $ 657,386
========= =========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated balance sheets.
Page 2 of 19
<PAGE> 3
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, September 30,
1997 1996
----------- -------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 61,624 $ 59,575
Accrued liabilities 19,262 18,353
Accrued payroll and related taxes 11,930 10,867
Production prepayments 15,000 9,763
Accrued interest payable 4,628 4,746
Accrued dividends payable 9,321 4,682
Accrued pension and profit
sharing costs 1,640 2,259
--------- ---------
Total current liabilities 123,405 110,245
--------- ---------
Long-term debt 402,407 388,431
--------- ---------
Deferred income tax liabilities 8,716 10,446
--------- ---------
Redeemable preferred stock 55,801 55,437
--------- ---------
Stockholders' equity:
Preferred stock -- --
Common stock:
Class A 87,979 87,979
Class B 10,110 10,110
Warrants to purchase Class A
common stock 5,360 5,360
Retained earnings (deficit) (9,136) 5,077
Class A common stock held in
treasury, at cost (12,718) (15,699)
--------- ---------
Total stockholders' equity 81,595 92,827
--------- ---------
$ 671,924 $ 657,386
========= =========
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these condensed
consolidated balance sheets.
Page 3 of 19
<PAGE> 4
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 182,961 $ 159,131
Cost of sales 175,040 151,326
--------- ---------
Gross margin 7,921 7,805
Selling, general and administrative
expenses 5,405 6,166
--------- ---------
Income from operations 2,516 1,639
--------- ---------
Other income (expense):
Interest and other income 54 94
Interest expense (10,072) (8,626)
Other expense -- (558)
--------- ---------
(10,018) (9,090)
--------- ---------
Loss before benefit for income taxes (7,502) (7,451)
Benefit for income taxes (1,998) (2,766)
--------- ---------
Net loss (5,504) (4,685)
Less redeemable preferred stock dividends and
accretion for original issue discount 2,542 2,235
--------- ---------
Net loss applicable to common shares $ (8,046) $ (6,920)
========= =========
Net loss per common share $ (.52) $ (.45)
========= =========
Weighted average common shares outstanding 15,584 15,281
========= =========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated statements.
Page 4 of 19
<PAGE> 5
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net sales $ 352,702 $ 326,220
Cost of sales 331,851 306,213
--------- ---------
Gross margin 20,851 20,007
Selling, general and administrative
expenses 11,041 11,899
--------- ---------
Income from operations 9,810 8,108
--------- ---------
Other income (expense):
Interest and other income 229 272
Interest expense (19,774) (16,883)
Other expense -- (1,111)
--------- ---------
(19,545) (17,722)
--------- ---------
Loss before benefit for income taxes (9,735) (9,614)
Benefit for income taxes (2,822) (3,597)
--------- ---------
Net loss (6,913) (6,017)
Less redeemable preferred stock dividends and
accretion for original issue discount 5,003 4,399
--------- ---------
Net loss applicable to common shares $ (11,916) $ (10,416)
========= =========
Net loss per common share $ (.77) $ (.68)
========= =========
Weighted average common shares outstanding 15,531 15,267
========= =========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated statements.
Page 5 of 19
<PAGE> 6
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Increase (Decrease) in Cash and Cash Equivalents
1997 1996
-------- ------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,913) $ (6,017)
Adjustments to reconcile net loss
to net cash provided by (used for)
operating activities:
Depreciation 20,690 21,128
Amortization 956 843
Deferred income taxes (2,809) (3,597)
(Increase) decrease in current
assets--
Accounts receivable, net (4,184) 6,767
Inventories (4,339) (3,512)
Prepaid expenses and other (457) (9,923)
Increase (decrease) in current
liabilities--
Accounts payable 2,049 (7,886)
Accrued liabilities 120 (2,660)
Accrued payroll and related taxes 1,746 (62)
Production prepayments 5,237 5,000
Accrued interest payable (118) (6)
Accrued pension and profit
sharing costs (619) (179)
-------- --------
Net cash provided by (used for)
operating activities 11,359 (104)
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (26,782) (12,261)
Change in other assets -- (373)
-------- --------
Net cash used for investing activities $(26,782) $(12,634)
-------- --------
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated statements.
Page 6 of 19
<PAGE> 7
GENEVA STEEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term debt $ 37,841 $ 17,296
Payments on long-term debt (23,865) (11,852)
Change in bank overdraft 789 --
Other 61 (125)
-------- --------
Net cash provided by
financing activities 14,826 5,319
-------- --------
Net decrease in cash and cash
equivalents (597) (7,419)
Cash and cash equivalents at beginning
of period 597 12,808
-------- --------
Cash and cash equivalents at end
of period $ -- $ 5,389
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 19,212 $ 17,826
</TABLE>
Supplemental schedule of noncash financing activities:
For the six months ended March 31, 1997 and 1996, the Company increased
redeemable preferred stock by $364 and $356, respectively, for the accretion
required over time to amortize the original issue discount on the redeemable
preferred stock incurred at the time of issuance. In addition, the Company
increased the redeemable preferred stock liquidation preference by $3,690 in
lieu of paying a cash dividend during the six months ended March 31, 1996.
At March 31, 1997, the Company had accrued dividends payable of $9,321.
The accompanying notes to condensed consolidated financial statements are an
integral part of these condensed consolidated statements.
Page 7 of 19
<PAGE> 8
GENEVA STEEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars In Thousands)
(Unaudited)
- --------------------------------------------------------------------------
(1) INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The accompanying condensed consolidated financial statements of Geneva
Steel Company and Geneva Steel Funding Corporation, a wholly-owned subsidiary of
Geneva Steel Company (collectively, the "Company"), have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. The accompanying unaudited
condensed consolidated financial statements reflect all adjustments (consisting
only of normal recurring adjustments) which, in the opinion of management, are
necessary to present fairly the financial position and results of operations of
the Company.
It is suggested that these condensed consolidated financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's latest Annual Report on Form 10-K.
(2) INVENTORIES
<TABLE>
<CAPTION>
Inventories were comprised of the following components:
March 31, September 30,
1997 1996
------- -------
<S> <C> <C>
Raw materials $24,030 $31,064
Semi-finished and finished goods 65,757 53,604
Operating materials 7,691 8,471
------- -------
$97,478 $93,139
======= =======
</TABLE>
(3) NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is calculated based upon the weighted
average number of common and common equivalent shares outstanding during the
periods. Common equivalent shares consist of warrants and options to purchase
Class A common stock which have a dilutive effect when applying the treasury
stock method. Class B common stock is included in the weighted average number of
common shares outstanding at one share for every ten shares outstanding because
the Class B common stock is convertible to Class A common stock at this same
rate.
The net income (loss) for the three and six-month periods ended March 31,
1997 and 1996 was adjusted for redeemable preferred stock dividends and the
accretion required over time to amortize the original issue discount on the
redeemable preferred stock incurred at the time issuance.
Page 8 of 19
<PAGE> 9
(4) RELATED PARTY TRANSACTIONS
On February 13, 1997, the Company's Board of Directors approved the loan of
an additional $200 to the Company's Chief Executive Officer. The loan is secured
by interests in real and personal property owned by the Chief Executive Officer
and an affiliated entity.
(5) PRODUCTION PREPAYMENTS
A production prepayment arrangement with Mannesmann has historically
provided the Company with up to $9 million in added liquidity. The Company's
production prepayment arrangement with Mannesmann allows for its termination in
the event that the Company's stockholders' equity falls below $90 million. As
of March 31, 1997, the Company's stockholders' equity was $81.6 million. On
February 10, 1997, the Company received from Mannesmann the required 90 day
notice terminating the production prepayment arrangement. The Company continues
to discuss possible means of modifying the production prepayment arrangement
with Mannesmann.
(6) INSURANCE CLAIM RECEIVABLE
During the three months ended March 31, 1997, the Company recognized an
additional $3.7 million as a reduction in costs in connection with the
insurance claim associated with the January 1996 power outage. The Company
recognized the additional amount in connection with completing and submitting
its insurance claim, which was filed during the quarter. The Company has
recognized only a portion of the total expected claim recovery, which includes
both lost income and property damage. The Company received $5 million from its
first layer insurers in October 1996. At March 31, 1997, the Company had an
insurance claim receivable of $11 million included in prepaid expenses and
other in the accompanying financial statements. See "Part II Other Information,
Item 1. Legal Proceedings."
(7) CERTAIN RECLASSIFICATIONS
Certain reclassifications have been made in the prior period financial
statements to conform to the current period presentation.
Page 9 of 19
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain cost
and expense items to net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 95.7 95.1 94.1 93.9
----- ----- ----- -----
Gross margin 4.3 4.9 5.9 6.1
Selling, general and administrative
expenses 2.9 3.9 3.1 3.6
----- ----- ----- -----
Income from operations 1.4 1.0 2.8 2.5
----- ----- ----- -----
Other income (expense):
Interest and other income - 0.1 - 0.1
Interest expense (5.5) (5.4) (5.6) (5.2)
Other expense - (0.4) -- (0.3)
----- ----- ----- -----
(5.5) (5.7) (5.6) (5.4)
----- ----- ----- -----
Loss before benefit for income taxes (4.1) (4.7) (2.8) (2.9)
Benefit for income taxes (1.1) (1.8) (0.8) (1.1)
----- ----- ----- -----
Net loss (3.0)% (2.9)% (2.0)% (1.8)%
===== ===== ===== =====
</TABLE>
The following table sets forth the sales product mix as a percentage of net
sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sheet 34.2% 29.8% 36.3% 32.2%
Plate 41.5 45.2 40.6 39.8
Pipe 7.5 6.2 8.0 5.3
Slab 13.5 16.1 12.1 20.0
Non-Steel 3.3 2.7 3.0 2.7
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Page 10 of 19
<PAGE> 11
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1996
Net sales increased 15.0% due to an increase in shipments of approximately
59,100 tons, a shift in product mix to higher-priced pipe and sheet products
from lower-priced slab products and increased overall average selling prices
for the three months ended March 31, 1997 as compared to the same period in the
previous fiscal year. The weighted average sales price (net of transportation
costs) per ton of sheet, pipe and slab products increased by 3.2%, 2.6% and
4.3%, respectively, while the weighted average sales price of plate decreased
by 1.8% in the three months ended March 31, 1997 compared to the same period in
the previous fiscal year. The decrease in plate prices was due to pricing
pressure resulting from a surge of unfairly traded imports and other market
factors. Shipped tonnage of plate, pipe and sheet increased approximately
14,000 tons or 7.3%, 8,900 tons or 36.4% and 45,300 tons or 27.9%,
respectively, while shipped tonnage of slabs decreased approximately 9,100 tons
or 8.0%, between the two periods. Consistent with the Company's strategic
objectives, plate shipments have increased, in part through utilization of
outside processors to level and cut plate from coils. The Company is also
currently experiencing increased demand for pipe and hot-rolled bands. The
Company continues to sell slabs to maximize production from the continuous
caster while efforts to increase rolling mill throughput continue. The
Company is currently in the process of completing the rolling mill finishing
stands upgrade, which is expected to increase rolling mill throughput and
product quality.
In November 1996, the Company, together with another domestic plate
producer, filed anti-dumping petitions with the Department of Commerce and the
International Trade Commission against imports of cut-to-length carbon plate
from the Russian Federation, Ukraine, the People's Republic of China and the
Republic of South Africa (the "Plate Trade Cases"). The petitions allege large
dumping margins and also set forth the injury to the U.S. industry caused by
dumped imports from the subject countries. In its preliminary injury
determination, the International Trade Commission ("ITC") ruled unanimously in
late December that dumped imports of cut-to-length carbon plate were causing or
threatening to cause material injury to the domestic industry. The Department of
Commerce will issue preliminary determinations on June 3, 1997 that will set
bond rates in the amount of the preliminary dumping margins on plate imports
from the subject countries. They will also make determinations on allegations of
critical circumstances against China, Russia and Ukraine which can result in
duties retroactive to early March 1997. The final outcome of the Plate Trade
Cases is expected by November 1997. Failure to win the Plate Trade Cases would
have a material adverse effect upon the Company. Given that domestic demand for
plate continues to be strong, the Company expects that plate pricing and volume
will continue to improve as the amount of dumped products from these countries
declines. Increased imports from countries not subject to the Plate Trade Cases,
could, however, adversely affect plate pricing and volume.
Domestic competition remains intense and imported steel continues to
adversely affect the market. The Company sells substantially all of its products
in the spot market at prevailing market prices. The Company believes its
percentage of such sales is significantly higher than that of most of the other
domestic integrated producers. Consequently, the Company may be affected by
price increases or decreases more quickly than many of its competitors. The
Company intends to react to price increases or decreases in the market as
required by competitive conditions.
Page 11 of 19
<PAGE> 12
Cost of sales includes raw materials, labor costs, energy costs,
depreciation and other operating and support costs associated with the
production process. The Company's cost of sales, as a percentage of net sales,
increased to 95.7% for the three months ended March 31, 1997 from 95.1% for the
same period in the previous fiscal year. The overall average cost of sales per
ton shipped increased approximately $10 per ton between the two periods
primarily as a result of a shift in product mix to higher-cost plate, pipe and
sheet products from lower-cost slab products as well as an increase in
operating costs. Operating costs increased as a result of increased natural gas
and other fuel costs, increased hot metal costs associated with a blast furnace
reline, higher wages and benefits and other increased costs. The increase in
costs was partially offset by significant improvements in production yields and
throughput rates. The Company expects that production yields and throughput
will continue to improve in future periods. In addition, natural gas costs have
declined to more normal levels. The Company also recognized an additional $3.7
million as a reduction in costs in connection with the insurance claim
associated with the January 1996 power outage. The Company recognized the
additional amount in connection with completing and submitting its insurance
claim, which was filed during the quarter. The Company has recognized only a
portion of the total expected claim recovery, which includes both lost income
and property damage.
Depreciation costs included in cost of sales remained level for the three
months ended March 31, 1997 compared with the same period in the previous fiscal
year.
Selling, general and administrative expenses for the three months ended
March 31, 1997 decreased approximately $0.8 million as compared to the same
period in the previous fiscal year. These lower expenses resulted primarily from
decreased outside services. The Company has initiated a Company-wide effort to
effect a systemic and pervasive change with respect to corporate systems,
processes and structures. The effort uses a team approach to redesign various
business processes and aspects of the Company to be more effective and
efficient. During the quarter ended March 31, 1997, the Company's cost reduction
team completed a plan intended to reduce administrative and management costs by
approximately 20 percent as compared to calendar year 1996. As a part of that
plan, the Company terminated 39 administrative employees, and 12 contract
employees effective March 31, 1997.
Interest expense increased approximately $1.5 million during the three
months ended March 31, 1997 as compared to the same period in the previous
fiscal year as a result of significantly lower capitalized interest and higher
levels of borrowing. The higher levels of borrowing resulted, in part, from the
termination of the Company's receivables securitization facility.
In May 1996, the Company terminated its receivables securitization
facility in connection with an amendment to and restatement of the Company's
revolving credit facility. As a result, other expense decreased approximately
$0.6 million for the three months ended March 31, 1997, as compared with the
same period in the previous fiscal year.
For the three months ended March 31, 1997, the Company recognized a benefit
for income taxes by carrying back approximately $5.2 million of the $7.5 million
loss before benefit for income taxes against income from prior periods. As of
March 31, 1997, the Company had, for financial reporting purposes, a net
operating loss carryforward of approximately $2.3 million.
Page 12 of 19
<PAGE> 13
SIX MONTHS ENDED MARCH 31, 1997 COMPARED WITH SIX MONTHS ENDED MARCH 31, 1996
Net sales increased 8.1% due to increased shipments of approximately 39,500
tons, a shift in product mix to higher priced plate, pipe and sheet products
from lower-priced slab products and increased overall average selling prices for
the six months ended March 31, 1997 as compared to the same period in the
previous fiscal year. The weighted average sales price (net of transportation
costs) per ton of sheet and pipe products increased by 3.2% and 0.3%,
respectively, while the weighted average sales price of plate and slab products
decreased by 2.3% and 0.5%, respectively, in the six months ended March 31, 1997
compared to the same period in the previous fiscal year. Shipped tonnage of
plate, pipe and sheet increased approximately 43,200 tons or 12.6% , 26,600 or
63.6% and 64,900 tons or 18.2%, respectively, while shipped tonnage of slabs
decreased approximately 95,200 tons or 34.5% between the two periods.
The Company's cost of sales, as a percentage of net sales, increased to
94.1% for the six months ended March 31, 1997 from 93.9% for the same period in
the previous fiscal year. The overall average cost of sales per ton shipped
increased approximately $13 per ton between the two periods primarily as a
result of a shift in product mix to higher-cost plate, pipe and sheet products
from lower-cost slab products as well as an increase in operating costs.
Operating costs increased as a result of increased natural gas and other fuel
costs, hot metal costs associated with a blast furnace reline, higher wages and
benefits and other increased costs. These increased costs were partially offset
by significant improvements in production yields and throughput rates, and the
additional $3.7 million reduction in costs recognized in connection with the
insurance claim.
Depreciation costs included in cost of sales decreased approximately $0.4
million for the six months ended March 31, 1997 compared with the same period in
the previous fiscal year. This decrease was due to decreases in the asset base
resulting from some plant assets becoming fully depreciated.
Selling, general and administrative expenses for the six months ended March
31, 1997 decreased approximately $0.9 million as compared to the same period in
the previous fiscal year. The lower expenses resulted primarily from reduced
outside services.
Interest expense increased approximately $2.9 million for the six months
ended March 31, 1997 as compared to the same period in the previous fiscal year,
reflecting higher levels of borrowing, in part from the termination of the
Company's receivables securitization facility, and lower levels of capitalized
interest.
Other expense decreased approximately $1.1 million for the six months ended
March 31, 1997, as compared to the same period in the previous fiscal year as a
result of the termination in May 1996 of the Company's receivables
securitization facility.
For the six months ended March 31, 1997, the Company recognized a benefit
for income taxes by carrying back approximately $7.4 million of the $9.7 million
loss before benefit for income taxes against income from prior periods.
Page 13 of 19
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise from capital expenditures and
working capital requirements, including interest payments. The Company has met
these requirements principally from the sale of equity, the incurrence of
long-term indebtedness, including borrowings under the Company's credit
facilities, equipment lease financing and cash provided by operations. As of
March 31, 1997, the Company's eligible inventories and accounts receivable
supported access to $104.9 million under the revolving credit facility (the
"Revolving Credit Facility"). As of March 31, 1997, the Company had $77.4
million in borrowings and $8.4 million in letters of credit outstanding under
the Revolving Credit Facility, leaving $19.1 million in additional borrowing
availability.
The terms of the Revolving Credit Facility and of the Company's 11 1/8%
senior notes issued in March 1993 and 9 1/2% senior notes issued in February
1994 (collectively, the "Senior Notes") include cross default and other
customary provisions. Financial covenants contained in the Revolving Credit
Facility and/or the Senior Notes also include, among others, a limitation on
dividends and distributions on capital stock of the Company, a tangible net
worth requirement, a cash interest coverage requirement, a cumulative capital
expenditure limitation, limitations on the incurrence of additional indebtedness
unless certain financial tests are satisfied, a limitation on mergers,
consolidations and dispositions of assets and limitations on liens. In the event
of a change in control, the Company must offer to purchase all Senior Notes then
outstanding at a premium. The Company will likely seek amendments to the
Revolving Credit Facility in the future based on actual operating results.
The Company's ability to pay cash dividends on the 14% cumulative
redeemable exchangeable preferred stock (the "Redeemable Preferred Stock") is
subject to the covenants and tests contained in the indentures governing the
Senior Notes and in the Company's Revolving Credit Facility. Restricted payment
limitations under the Company's Senior Notes precluded payment of the preferred
stock dividends due on June 15, 1996, September 15, 1996, December 15, 1996 and
March 15, 1997. Unpaid dividends were approximately $9.3 million at March 31,
1997. Unpaid dividends accumulate until paid and accrue additional dividends at
a rate of 14% per annum. As a result of the Company's failure to pay dividends
on the Redeemable Preferred Stock in an amount equal to four full quarterly
dividends, the holders of the Redeemable Preferred Stock have the right to elect
not less than 25 percent of the members of the board of directors (two of eight
directors) and have scheduled a meeting on May 30, 1997 to do so. The right of
such holders to elect directors continues until the Company has paid all
dividends in arrears and has paid the dividends due for two consecutive quarters
thereafter. While not affecting net income/loss, dividends and the accretion
required over time to amortize the original issue discount associated with the
Redeemable Preferred Stock will negatively impact quarterly earnings per share
by approximately $.15 per share.
Besides financing activities, the Company's major source of liquidity has
been cash provided by operating activities. Net cash provided by operating
activities was $11.4 million for the six months ended March 31, 1997 compared
with net cash used for operating activities of $0.1 million for the six months
ended March 31, 1996. The sources of cash provided by operating activities
during the six months ended March 31, 1997, included depreciation and
amortization of $21.6 million, an increase in production prepayments of $5.2
million and an increase in accounts payable and other accrued liabilities of
$3.3 million. These sources of cash flow
Page 14 of 19
<PAGE> 15
were offset in part by an increase in accounts receivable of $4.2 million, an
increase in inventories of $4.3 million, a decrease in the deferred tax
liability of $2.8 million and a net loss of $6.9 million.
In addition to ongoing operations, the Company's near-term sources of
liquidity include resolving its outstanding insurance claim associated with a
January 1996 power outage and reducing inventories which increased during the
six months ended March 31, 1997. A production prepayment arrangement with
Mannesmann has historically provided the Company with up to $9 million in added
liquidity. The Company's production prepayment arrangement with Mannesmann
allows for its termination in the event that the Company's stockholders' equity
falls below $90 million. As of March 31, 1997, the Company's stockholders'
equity was $81.6 million. On February 10, 1997, the Company received from
Mannesmann the required 90 day notice terminating the production prepayment
arrangement. The Company continues to discuss possible means of modifying the
production prepayment arrangement with Mannesmann. Termination of the
arrangement would not affect Mannesmann's other obligations under its Sales
Representation Agreement with the Company.
Capital expenditures were approximately $26.8 million for the six months
ended March 31, 1997. Capital expenditures for fiscal year 1997 are estimated at
$40 million, which includes capital spending previously scheduled for fiscal
year 1996 for its No. 1 Blast Furnace reline. The No. 1 Blast Furnace reline was
completed and placed in service in early January 1997. Additional capital
projects for fiscal year 1997 consist of installation of certain rolling mill
finishing stand equipment, some repairs on the No. 2 Blast Furnace and various
other projects designed to reduce costs and increase product quality and
throughput. The Company anticipates that it may incur start-up and transition
costs when the rolling mill finishing stand equipment is installed and
implemented. Depending on market, operational, liquidity and other factors, the
Company may elect to adjust the design, timing and budgeted expenditures of its
capital plan. In addition, the Revolving Credit Facility contains certain
limitations on capital expenditures.
The Company formed a limited liability company with certain unrelated
parties, which in turn entered into a cooperative agreement with the United
States Department of Energy ("DOE") for the demonstration of a direct ironmaking
facility and associated power generation and air separation facilities. As of
March 31, 1997, the Company had spent approximately $975,000 in connection with
the project, which has been included in construction in progress in the
accompanying consolidated financial statements. Expenditures on the project are
subject to government cost share arrangements. Completion of the project remains
subject to several contingencies. Under certain circumstances, the Company may
be required to repay some or all of the government cost share funds in the event
the project is terminated.
The Company is required to make substantial interest and dividend payments
on the Senior Notes, outstanding balances under the Revolving Credit Facility
and its Redeemable Preferred Stock. Currently, the Company's annual cash
interest expense is approximately $39.2 million and its annual preferred stock
dividends are approximately $9.5 million.
FACTORS AFFECTING FUTURE RESULTS
The Company's future operations will be impacted by, among other factors,
pricing, product mix, throughput levels and production efficiencies. The
Company
Page 15 of 19
<PAGE> 16
has efforts underway to increase throughput and production efficiencies and to
continue shifting its product mix to higher-margin products. There can be no
assurance that the Company's efforts will be successful or that sufficient
demand will exist to support the Company's additional throughput capacity.
Pricing in future periods is a key variable to the Company's future operating
results that remains subject to significant uncertainty. Future pricing will be
affected by several factors including the level of imports, the outcome of the
Plate Trade Cases, future capacity additions and other market factors, including
increased domestic plate production capacity currently coming on line.
The short-term and long-term liquidity of the Company is also dependent
upon several factors, including availability of financing, foreign currency
fluctuations, competitive and market forces, capital expenditures and general
economic conditions. Moreover, the United States steel market is subject to
cyclical fluctuations that may affect the amount of cash internally generated by
the Company and the ability of the Company to obtain external financing.
Although the Company believes that the anticipated cash from future operations
and borrowings under the Revolving Credit Facility will provide sufficient
liquidity for the Company to meet its debt service requirements and to fund
ongoing operations, including required capital expenditures, there can be no
assurance that these or other possible sources will be adequate. As stated
above, pricing remains a key variable with respect to future operating results.
Moreover, because of the Company's current leverage situation, its financial
flexibility is limited.
Inflation can be expected to have an effect on many of the Company's
operating costs and expenses. Due to worldwide competition in the steel
industry, the Company may not be able to pass through such increased costs to
its customers.
This quarterly report may contain certain forward-looking statements with
respect to the Company that are subject to risks and uncertainties that include,
but are not limited to, those identified throughout this report, described from
time to time in the Company's other Securities and Exchange Commission filings
or discussed in the Company's press releases. Actual results may vary materially
from expectations.
Page 16 of 19
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On February 25, 1997, the Company filed a Verified Complaint in the Fourth
Judicial District Court for Utah County, State of Utah, against Commerce &
Industry Insurance Company ("Commerce & Industry"), a New York corporation,
seeking recovery under the Company's policy of insurance with Commerce &
Industry (the "Policy") of losses and damages to the Company's steel plant
arising out of a storm-related power outage occurring on January 24, 1996 (the
"Incident"). The Complaint was filed but not served on Commerce & Industry as
investigation and discussion of the Company's claims was ongoing. On April 9,
1997, the Company filed and caused to be served its first Amended Verified
Incident-related losses and damages properly payable under the policy in an
amount to be proven at trial, as well as the Company's reasonable attorneys'
fees and costs. On the same date, the Company submitted a Proof of Loss for its
claims to Commerce & Industry of approximately $99 million. The claims have been
and are expected to be the subject of extensive investigation and discussion and
there can be no assurance that the amounts ultimately recovered through
negotiation or litigation will approximate the amount of the claims asserted. As
permitted by the Policy, the Company secured insurance on the deductibles under
the Policy in the amount of $5 million from a separate group of insurers, all of
which has been paid to the Company.
On May 1, 1997, Commerce & Industry filed a Notice of Removal of the Action
to the United States District Court for the District of Utah, Central Division.
Commerce & Industry has not yet filed an answer to the First Amended Verified
Complaint.
The factual basis underlying the Company's claims is its position that the
Incident caused the loss of electricity and steam necessary to operate, control
and protect the Company's blast furnaces, stoves, coke batteries and other
critical functions and resulted in extensive damage to nearly every part of the
steel plant. The Company maintains that the Policy, which insures the Company
against loss from "all risks", provides insurance coverage to the Company for
the losses and damages it has suffered and is continuing to suffer on account of
the Incident. The Company has submitted schedules detailing its damages and
losses from the Incident in addition to cooperating fully with Commerce &
Industry in its investigation of its claims. Notwithstanding the information the
Company has provided to evidence the financial impact suffered by the Company as
a result of the Incident, Commerce & Industry has rejected major elements of the
Company's claim, including the portions of the claims dealing with the coke
battery, the blast furnaces and the stoves. The Company has filed the civil
action because of Commerce & Industry's refusal to fully compensate the Company
for its losses. The Company is continuing to provide additional information to
Commerce & Industry and is continuing discussions in an attempt to resolve the
claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant held its Annual Meeting of Shareholders on February 20,
1997. The shareholders elected the following Directors to serve until the next
annual meeting of shareholders: Joseph A. Cannon, Robert J. Grow, Richard D.
Clayton, R.J. Shopf, Alan C. Ashton, and K. Fred Skousen.
Page 17 of 19
<PAGE> 18
The shareholders voted to adopt the Geneva Steel Company 1996 Incentive
Plan by a vote of 23,231,843 shares for, 1,873,598 shares against and 164,993
shares abstained.
The shareholders also ratified the appointment of Arthur Andersen LLP as
independent auditors for fiscal year 1997 by a vote of 31,852,386 shares for,
212,109 shares against, 109,794 shares abstained and 109,794 broker-non votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C>
(a) Exhibits.
---------
10.1 Geneva Steel Company 1996 Incentive X
Plan
10.2 Promissory Notes and Collateral X
Agreements Evidencing Loans from the
Company to Joseph A. Cannon
27 Financial Data Schedule X
(b) Reports on Form 8-K.
</TABLE>
The Company did not filed any reports on Form 8-K during the three months
ended March 31, 1997.
Page 18 of 19
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENEVA STEEL COMPANY
By: /s/ DENNIS L. WANLASS
-------------------------------------------------
Vice President, Treasurer and
Chief Financial Officer
Dated: May 15, 1997
Page 19 of 19
<PAGE> 1
______________________________
GENEVA STEEL COMPANY
1996 INCENTIVE PLAN
______________________________
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. PURPOSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------
2. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
-----------
2.1 "Adjusted Fair Market Value" . . . . . . . . . . . . . . 1
2.2 "Affiliate" . . . . . . . . . . . . . . . . . . . . . . 1
2.3 "Agreement" . . . . . . . . . . . . . . . . . . . . . . 1
2.4 "Award" . . . . . . . . . . . . . . . . . . . . . . . . 1
2.5 "Board" . . . . . . . . . . . . . . . . . . . . . . . . 1
2.6 "Cause" . . . . . . . . . . . . . . . . . . . . . . . . 1
2.7 "Change in Capitalization" . . . . . . . . . . . . . . . 2
2.8 "Change in Control" . . . . . . . . . . . . . . . . . . 2
2.9 "Code" . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.10 "Committee" . . . . . . . . . . . . . . . . . . . . . . 3
2.11 "Company" . . . . . . . . . . . . . . . . . . . . . . . 3
2.12 "Director" . . . . . . . . . . . . . . . . . . . . . . . 3
2.13 "Director Option" . . . . . . . . . . . . . . . . . . . 3
2.14 "Disability" . . . . . . . . . . . . . . . . . . . . . . 3
2.15 "Division" . . . . . . . . . . . . . . . . . . . . . . . 4
2.16 "Dividend Equivalent Right" . . . . . . . . . . . . . . 4
2.17 "Eligible Director" . . . . . . . . . . . . . . . . . . 4
2.18 "Eligible Individual" . . . . . . . . . . . . . . . . . 4
2.19 "Employee Option" . . . . . . . . . . . . . . . . . . . 4
2.20 "Exchange Act" . . . . . . . . . . . . . . . . . . . . . 4
2.21 "Fair Market Value" . . . . . . . . . . . . . . . . . . 4
2.22 "Grantee" . . . . . . . . . . . . . . . . . . . . . . . 4
2.23 "Incentive Stock Option" . . . . . . . . . . . . . . . . 4
2.24 "Nonemployee Director" . . . . . . . . . . . . . . . . . 4
2.25 "Nonqualified Stock Option" . . . . . . . . . . . . . . 4
2.26 "Option" . . . . . . . . . . . . . . . . . . . . . . . . 4
2.27 "Optionee" . . . . . . . . . . . . . . . . . . . . . . . 4
2.28 "Outside Director" . . . . . . . . . . . . . . . . . . . 4
2.29 "Parent" . . . . . . . . . . . . . . . . . . . . . . . . 5
2.30 "Performance Awards" . . . . . . . . . . . . . . . . . . 5
2.31 "Performance Cycle" . . . . . . . . . . . . . . . . . . 5
2.32 "Performance Objectives" . . . . . . . . . . . . . . . . 5
2.33 "Performance Shares" . . . . . . . . . . . . . . . . . . 5
2.34 "Performance Units" . . . . . . . . . . . . . . . . . . 5
2.35 "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.36 "Pooling Transaction" . . . . . . . . . . . . . . . . . 5
2.37 "Restricted Stock" . . . . . . . . . . . . . . . . . . . 5
2.38 "Shares" . . . . . . . . . . . . . . . . . . . . . . . . 5
2.39 "Stock Appreciation Right" . . . . . . . . . . . . . . . 5
2.40 "Subsidiary" . . . . . . . . . . . . . . . . . . . . . . 5
2.41 "Successor Corporation" . . . . . . . . . . . . . . . . 5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
2.42 "Ten-Percent Stockholder" . . . . . . . . . . . . . . . . 5
2.43 "Termination of Employment" . . . . . . . . . . . . . . . 5
3. ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . 6
--------------
3.1 The Committee . . . . . . . . . . . . . . . . . . . . . . 6
3.2 The Committee Powers . . . . . . . . . . . . . . . . . . . 6
4. STOCK SUBJECT TO THE PLAN . . . . . . . . . . . . . . . . . . . . 7
-------------------------
4.1 Maximum Shares . . . . . . . . . . . . . . . . . . . . . . 7
4.2 Adjustments to Shares . . . . . . . . . . . . . . . . . . 7
4.3 Effect of Expiration, Cancellation or Termination . . . . 7
5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS . . . . . . . . . . . . . . 8
--------------------------------------
5.1 Authority of Committee . . . . . . . . . . . . . . . . . . 8
5.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 8
5.3 Maximum Duration . . . . . . . . . . . . . . . . . . . . . 8
5.4 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5 Modification . . . . . . . . . . . . . . . . . . . . . . . 8
6. OPTION GRANTS FOR NONEMPLOYEE DIRECTORS . . . . . . . . . . . . . 8
---------------------------------------
6.1 Grant . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . 9
6.3 Vesting . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.4 Duration . . . . . . . . . . . . . . . . . . . . . . . . . 9
7. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS . . . . . . . . . . 9
----------------------------------------------
7.1 Transferability . . . . . . . . . . . . . . . . . . . . . 9
7.2 Method of Exercise . . . . . . . . . . . . . . . . . . . . 10
7.3 Rights of Optionees . . . . . . . . . . . . . . . . . . . 10
7.4 Effect of Change in Control . . . . . . . . . . . . . . . 10
8. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . 11
-------------------------
8.1 Time of Grant . . . . . . . . . . . . . . . . . . . . . . 11
8.2 Stock Appreciation Right Related to an Option . . . . . . 11
8.3 Stock Appreciation Right Unrelated to an Option . . . . . 11
8.4 Method of Exercise . . . . . . . . . . . . . . . . . . . . 12
8.5 Form of Payment . . . . . . . . . . . . . . . . . . . . . 12
8.6 Modification . . . . . . . . . . . . . . . . . . . . . . . 12
8.7 Effect of Change in Control . . . . . . . . . . . . . . . 12
9. DIVIDEND EQUIVALENT RIGHTS . . . . . . . . . . . . . . . . . . . . 12
--------------------------
10. RESTRICTED STOCK . . . . . . . . . . . . . . . . . . . . . . . . . 13
----------------
10.1 Grant . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.2 Rights of Grantee . . . . . . . . . . . . . . . . . . . . 13
10.3 Non-transferability . . . . . . . . . . . . . . . . . . . 13
10.4 Lapse of Restrictions . . . . . . . . . . . . . . . . . . 13
10.5 Modification or Substitution . . . . . . . . . . . . . . . 14
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
10.6 Treatment of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.7 Delivery of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11. PERFORMANCE AWARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
------------------
11.1 Performance Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.2 Performance Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
11.3 Performance Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11.4 Effect of Change in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
11.5 Modification or Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
12. EFFECT OF A TERMINATION OF EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
-------------------------------------
13. ADJUSTMENT UPON CHANGES IN CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
-----------------------------------------
14. EFFECT OF CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
------------------------------
15. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
--------------
16. POOLING TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
--------------------
17. EFFECTIVE DATE, TERMINATION AND AMENDMENT OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------------------------------------------------
18. NON-EXCLUSIVITY OF THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
---------------------------
19. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
-----------------------
20. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
----------------------------------------------
20.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20.2 Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20.3 Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20.4 Securities Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20.5 Restrictions on Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
21. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
-------------
21.1 Multiple Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
21.2 Withholding of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
iii
<PAGE> 5
GENEVA STEEL COMPANY
1996 INCENTIVE PLAN
1. PURPOSE. The purpose of this Plan is to strengthen Geneva
Steel Company (the "Company"), by providing an incentive to its employees,
officers, consultants and directors and thereby encouraging them to devote
their abilities and industry to the success of the Company's business
enterprise. It is intended that this purpose be achieved by extending to
employees, officers, consultants and directors of the Company and its
Subsidiaries long-term incentives for high levels of performance and consistent
efforts through the grant of Incentive Stock Options, Nonqualified Stock
Options, Stock Appreciation Rights, Dividend Equivalent Rights, Performance
Awards and Restricted Stock (as each term is herein defined).
2. DEFINITIONS. For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a
Change in Control, the greater of (i) the highest price per Share paid to
holders of the Shares in any transaction (or series of transactions)
constituting or resulting in a Change in Control or (ii) the highest Fair
Market Value of a Share during the sixty (60) day period ending on the date of
a Change in Control.
2.2 "Affiliate" means any entity, directly or indirectly,
controlled by, controlling or under common control with the Company or any
corporation or other entity acquiring, directly or indirectly, all or
substantially all the assets and business of the Company, whether by operation
of law or otherwise.
2.3 "Agreement" means the written agreement between the
Company and an Optionee or Grantee evidencing the grant of an Option or Award
and setting forth the terms and conditions thereof.
2.4 "Award" means a grant of Restricted Stock, a Stock
Appreciation Right, a Performance Award, a Dividend Equivalent Right or any or
all of them.
2.5 "Board" means the Board of Directors of the Company.
2.6 "Cause" shall mean:
(a) for purposes of Section 6.4, (i) a willful
act which constitutes gross misconduct or fraud and which is materially
injurious to the Company or (ii) conviction of, or plea of "guilty" or "no
contest" to, a felony; and
(b) in all other cases, either (1) the definition
set forth in the employment agreement between the Optionee or Grantee, or in
absence thereof, (2)(i) intentional failure to perform reasonably assigned
duties, (ii) dishonesty or willful misconduct in the performance of duties,
(iii) involvement in a transaction in connection with the performance of duties
to the Company or any of its Subsidiaries which transaction is adverse to the
interests of the Company or any of its Subsidiaries and which is engaged in for
personal profit or (iv) willful violation of any law, rule or regulation in
connection with the performance of duties (other than traffic violations or
similar offenses).
1
<PAGE> 6
2.7 "Change in Capitalization" means any increase or
reduction in the number of Shares, or any change (including, but not limited
to, a change in value) in the Shares or exchange of Shares for a different
number or kind of shares or other securities of the Company or another
corporation, by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend, combination or exchange of shares, repurchase of
shares, change in corporate structure or otherwise.
2.8 "Change in Control" shall mean the occurrence during
the term of the Plan of any of the following events:
(1) An acquisition (other than directly from the
Company or pursuant to options granted under this Plan or otherwise by the
Company) of any voting securities of the Company (the "Voting Securities") by
any "Person" (as the term person is used for purposes of Section 13(d) or 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
immediately after which such Person has 'Beneficial Ownership' (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent
(20%) or more of the combined voting power of the Company's then outstanding
Voting Securities; provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are acquired in a "Non-Control
Acquisition" (as defined below) shall not constitute an acquisition which would
cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (A) an employee benefit plan (or a trust forming a part thereof)
maintained by (i) the Company or (ii) any corporation or other Person of which
a majority of its voting power or its equity securities or equity interest is
owned directly or indirectly by the Company (a "Company Subsidiary"), (B) the
Company or any Company Subsidiary, or (C) any Person in connection with a
"Non-Control Transaction" (as defined below);
(2) The individuals who, as of October 1, 1996,
are members of the Board of Directors (the "Incumbent Board"), cease for any
reason to constitute at least two-thirds of the Board of Directors; provided,
however, that if the election, or nomination for election by the Company's
stockholders, of any new director was approved by a vote of at least two-thirds
of the Incumbent Board, such new director shall, for purposes of the Plan, be
considered as a member of the Incumbent Board; provided, further, however, that
no individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under
the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors (a
"Proxy Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(3) Approval by stockholders of the Company of:
(A) A merger, consolidation or
reorganization involving the Company, unless
(i) the stockholders of the Company
immediately before such merger, consolidation or reorganization own, directly
or indirectly, immediately following such merger, consolidation or
reorganization, at least seventy-five percent (75%) of the combined voting
power of the outstanding voting securities of the corporation resulting from
merger or consolidation or reorganization (the "Surviving Corporation") in
substantially the same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or reorganization.
2
<PAGE> 7
(ii) the individuals who were
members of the Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or reorganization constitute
at least two-thirds of the members of the board of directors of the Surviving
Corporation.
(iii) no Person (other than the
Company or any Company Subsidiary, any employee benefit plan (or any trust
forming a part thereof) maintained by the Company, the Surviving Corporation or
any Company's Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of twenty percent
(20%) or more of the then outstanding Voting Securities) has Beneficial
Ownership of twenty percent (20%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities, and
(iv) a transaction described in
clauses (i) through (iii) shall herein be referred to as a "Non-Control
Transaction;"
(B) A complete liquidation or dissolution
of the Company; or
(C) An agreement for the sale or other
disposition of all or substantially all of the assets of the Company to any
Person (other than a transfer to a Company Subsidiary).
Notwithstanding the foregoing, a Change of Control
shall not be deemed to occur solely because any person (the "Subject Person")
acquired Beneficial Ownership of more than the permitted amount of the
outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company which, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares beneficially owned by
the Subject Person; provided, however, that if a Change in Control would occur
(but for the operation of this sentence) as a result of the acquisition of
Voting Securities by the Company, and after such share acquisition by the
Company, the Subject Person becomes the Beneficial Owner of any additional
Voting Securities which increases the percentage of the then outstanding Voting
Securities beneficially owned by the Subject Person, then a Change in Control
shall occur.
2.9 "Code" means the Internal Revenue Code of 1986, as
amended.
2.10 "Committee" means a committee, as described in
Section 3.1, appointed by the Board from time to time to administer the Plan
and to perform the functions set forth herein.
2.11 "Company" means Geneva Steel Company.
2.12 "Director" means a director of the Company.
2.13 "Director Option" means an Option granted pursuant to
Section 6.
2.14 "Disability" means:
(a) in the case of an Optionee or Grantee whose
employment with the Company or a Subsidiary is subject to the terms of an
employment agreement between such Optionee or Grantee and the Company or
Subsidiary, which employment agreement includes a definition of
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"Disability," the term "Disability" as used in this Plan or any Agreement shall
have the meaning set forth in such employment agreement during the period that
such employment agreement remains in effect; and
(b) in all other cases, the term "Disability" as
used in this Plan or any Agreement shall mean a physical or mental infirmity
which impairs the Optionee's or Grantee's ability to perform substantially his
or her duties for a period of one hundred eighty (180) consecutive days.
2.15 "Division" means any of the operating units or
divisions of the Company designated as a Division by the Committee.
2.16 "Dividend Equivalent Right" means a right to receive
all or some portion of the cash dividends that are or would be payable with
respect to Shares.
2.17 "Eligible Director" means a director of the Company
who is not an employee of the Company or any subsidiary thereof.
2.18 "Eligible Individual" means any director (other than
an Eligible Director), officer or employee of the Company or a Subsidiary, or
any consultant or advisor who is receiving cash compensation from the Company
or a Subsidiary, designated by the Committee as eligible to receive Options or
Awards subject to the conditions set forth herein.
2.19 "Employee Option" means an Option granted pursuant to
Section 5.
2.20 "Exchange Act" means the Securities Exchange Act of
1934, as amended.
2.21 "Fair Market Value" on any date means the closing
sales price for a Share on such date on the New York Stock Exchange or such
other stock exchange determined by the Company to be the primary market for the
Shares or, if there have been no published bid or asked quotations with respect
to Shares on such date, the Fair Market Value shall be the value established by
the Board in good faith and, in the case of an Incentive Stock Option, in
accordance with Section 422 of the Code.
2.22 "Grantee" means a person to whom an Award has been
granted under the Plan.
2.23 "Incentive Stock Option" means an Option satisfying
the requirements of Section 422 of the Code and designated by the Committee as
an Incentive Stock Option.
2.24 "Nonemployee Director" means a director of the
Company who is a 'nonemployee director' within the meaning of Rule 16b-3
promulgated under the Exchange Act.
2.25 "Nonqualified Stock Option" means an Option which is
not an Incentive Stock Option.
2.26 "Option" means a Nonqualified Stock Option, an
Incentive Stock Option, a Director Option, or any or all of them.
2.27 "Optionee" means a person to whom an Option has been
granted under the Plan.
2.28 "Outside Director" means a director of the Company
who is an 'outside director' within the meaning of Section 162(m) of the Code
and the regulations promulgated thereunder.
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2.29 "Parent" means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with respect to
the Company.
2.30 "Performance Awards" means Performance Units,
Performance Shares or either or both of them.
2.31 "Performance Cycle" means the time period specified
by the Committee at the time Performance Awards are granted during which the
performance of the Company, a Subsidiary or a Division will be measured.
2.32 "Performance Objectives" has the meaning set forth in
Section 11.
2.33 "Performance Shares" means Shares issued or
transferred to an Eligible Individual under Section 11.
2.34 "Performance Units" means Performance Units granted
to an Eligible Individual under Section 11.
2.35 "Plan" means the Geneva Steel Company 1996 Incentive
Plan, as amended and restated from time to time.
2.36 "Pooling Transaction" means an acquisition of the
Company in a transaction which is intended to be treated as a 'pooling of
interests' under generally accepted accounting principles.
2.37 "Restricted Stock" means Shares issued or transferred
to an Eligible Individual pursuant to Section 10.
2.38 "Shares" means the Class A Common Stock of the
Company, no par value.
2.39 "Stock Appreciation Right" means a right to receive
all or some portion of the increase in the value of the Shares as provided in
Section 8 hereof.
2.40 "Subsidiary" means any corporation which is a
subsidiary corporation (within the meaning of Section 424(f) of the Code) with
respect to the Company.
2.41 "Successor Corporation" means a corporation, or a
parent or subsidiary thereof within the meaning of Section 424(a) of the Code,
which issues or assumes a stock option in a transaction to which Section 424(a)
of the Code applies.
2.42 "Ten-Percent Stockholder" means an Eligible
Individual, who, at the time an Incentive Stock Option is to be granted to him
or her, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company, or of a Parent or a Subsidiary.
2.43 "Termination of Employment" means the later of (i) a
severance of the employer-employee relationship with the Company or (ii) the
resignation, removal or termination of an officer of the Company.
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3. ADMINISTRATION.
3.1 The Committee. The Plan shall be administered by the
Committee, which shall hold meetings at such times as may be necessary for the
proper administration of the Plan. The Committee shall keep minutes of its
meetings. A quorum shall consist of not fewer than two members of the
Committee and a majority of a quorum may authorize any action. Any decision or
determination reduced to writing and signed by a majority of all of the members
of the Committee shall be as fully effective as if made by a majority vote at a
meeting duly called and held. The Committee shall consist of at least two (2)
directors of the Company and may consist of the entire Board; provided,
however, that (A) if the Committee consists of less than the entire Board, each
member shall be a Nonemployee Director and (B) to the extent necessary for any
Option or Award intended to qualify as performance-based compensation under
Section 162(m) of the Code to so qualify, each member of the Committee, whether
or not it consists of the entire Board, shall be an Outside Director. No
member of the Committee shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to this Plan or
any transaction hereunder, except for liability arising from his or her own
willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the Committee
for all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
3.2 The Committee Powers. Subject to the express terms
and conditions set forth herein, the Committee shall have the power from time
to time to:
(a) determine those Eligible Individuals to whom
Employee Options shall be granted under the Plan and the number of such
Employee Options to be granted and to prescribe the terms and conditions (which
need not be identical) of each such Employee Option, including the purchase
price per Share subject to each Employee Option, and make any amendment or
modification to any Option Agreement consistent with the terms of the Plan;
(b) select those Eligible Individuals to whom
Awards shall be granted under the Plan and to determine the number of Stock
Appreciation Rights, Performance Awards, Shares of Restricted Stock and/or
Dividend Equivalent Rights to be granted pursuant to each Award, the terms and
conditions of each Award, including the restrictions or Performance Objectives
relating to Shares, the maximum value of each Performance Share and make any
amendment or modification to any Award Agreement consistent with the terms of
the Plan;
(c) to construe and interpret the Plan and the
Options and Awards granted hereunder and to establish, amend and revoke rules
and regulations for the administration of the Plan, including, but not limited
to, correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the extent
it shall deem necessary or advisable so that the Plan complies with applicable
law including Rule 16b-3 under the Exchange Act and the Code to the extent
applicable, and otherwise to make the Plan fully effective. All decisions and
determinations by the Committee in the exercise of this power shall be final,
binding and conclusive upon the Company, its Subsidiaries, the Optionees and
Grantees, and all other persons having any interest therein;
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(d) to determine the duration and purposes for
leaves of absence which may be granted to an Optionee or Grantee on an
individual basis without constituting a termination of employment or service
for purposes of the Plan;
(e) to exercise its discretion with respect to the
powers and rights granted to it as set forth in the Plan; and
(f) generally, to exercise such powers and to
perform such acts as are deemed necessary or advisable to promote the best
interests of the Company with respect to the Plan.
4. STOCK SUBJECT TO THE PLAN.
4.1 Maximum Shares. The maximum number of Shares that
may be made the subject of Options and Awards granted under the Plan is
1,500,000; provided, however, that in the aggregate, not more than one-third of
the number of allotted Shares may be made the subject of Restricted Stock
Awards under Section 10 of the Plan; and provided, further, that during the
term of the Plan (i) no Eligible Individual may be granted Options and Awards
(other than Awards described in clause (ii) below) in the aggregate in respect
of more than 150,000 Shares per calendar year, (ii) the maximum dollar amount
that any Eligible Individual may receive during the term of the Plan in respect
of Performance Units denominated in dollars may not exceed 100% of the
aggregate base salary of such Eligible Individual and (iii) the aggregate Fair
Market Value of the Shares with respect to which Incentive Stock Options
granted under the Plan become exercisable for the first time by an Optionee
during any calendar year shall not exceed $100,000. Upon a Change in
Capitalization, the maximum number of Shares referred to in the preceding
sentence shall be adjusted in number and kind pursuant to Section 13. The
Company shall reserve for the purposes of the Plan, out of its authorized but
unissued Shares or out of Shares held in the Company's treasury, or partly out
of each, such number of Shares as shall be determined by the Board.
4.2 Adjustments to Shares. Upon the granting of an
Option or an Award, the number of Shares available under Section 4.1 for the
granting of further Options and Awards shall be reduced as follows:
(a) In connection with the granting of an Option
or an Award (other than the granting of a Performance Unit denominated in
dollars), the number of Shares shall be reduced by the number of Shares in
respect of which the Option or Award is granted or denominated.
(b) In connection with the granting of a
Performance Unit denominated in dollars, the number of Shares shall be reduced
by an amount equal to the quotient of (i) the dollar amount in which the
Performance Unit is denominated, divided by (ii) the Fair Market Value of a
Share on the date the Performance Unit is granted.
4.3 Effect of Expiration, Cancellation or Termination.
Whenever any outstanding Option or Award or portion thereof expires, is
canceled or is otherwise terminated for any reason without having been
exercised or payment having been made in respect of the entire Option or Award,
the Shares allocable to the expired, canceled or otherwise terminated portion
of the Option or Award may again be the subject of Options or Awards granted
hereunder.
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5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS.
5.1 Authority of Committee. Subject to the provisions of
the Plan, the Committee shall have full and final authority to select those
Eligible Individuals who will receive Employee Options, and the terms and
conditions of the grant to such Eligible Individuals shall be set forth in an
Agreement.
5.2 Purchase Price. The purchase price [(WHICH MAY BE
NOT LESS THAN 80% OF THE FAIR MARKET VALUE ON THE DATE OF GRANT)] or the manner
in which the purchase price is to be determined for Shares under each Employee
Option shall be determined by the Committee and set forth in the Agreement;
provided, however, that the purchase price per Share under each Incentive Stock
Option shall not be less than 100% of the Fair Market Value of a Share on the
date the Employee Option is granted (110% in the case of an Incentive Stock
Option granted to a Ten-Percent Stockholder).
5.3 Maximum Duration. Employee Options granted hereunder
shall be for such term as the Committee shall determine, provided that an
Incentive Stock Option shall not be exercisable after the expiration of ten
(10) years from the date it is granted (five (5) years in the case of an
Incentive Stock Option granted to a Ten-Percent Stockholder) and a Nonqualified
Stock Option shall not be exercisable after the expiration of ten (10) years
from the date it is granted. The Committee may, subsequent to the granting of
any Employee Option, extend the term thereof, but in no event shall the term as
so extended exceed the maximum term provided for in the preceding sentence.
5.4 Vesting. Subject to Section 7.4, each Employee
Option shall become exercisable in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth in the
Agreement. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the Employee Option expires. The Committee may
accelerate the exercisability of any Employee Option or portion thereof at any
time.
5.5 Modification. No modification of an Employee Option
shall adversely alter or impair any rights or obligations under the Employee
Option without the Optionee's consent.
6. OPTION GRANTS FOR NONEMPLOYEE DIRECTORS.
6.1 Grant. Director Options shall be granted (i) to
Eligible Directors who become members of the Board after October 1, 1996 upon
election or appointment and (ii) to all Eligible Directors who are members of
the Board as follows:
(a) Each Eligible Director who becomes a Director
after January 1, 1997 shall, upon becoming a Director, be granted a Director
Option in respect of 4,000 Shares.
(b) Each Eligible Director shall be granted a
Director Option in respect of 2,000 Shares annually on the first business day
on or after January 1 of each calendar year that the Plan is in effect provided
that the Eligible Director is a Director on such date; provided, however, that
a Director shall not be entitled to receive an annual grant pursuant to this
Section 6.1(b) for the calendar year in which such Director is first elected or
appointed to the Board.
(c) All Director Options shall be evidenced by an
Agreement containing such other terms and conditions not inconsistent with the
provisions of this Plan as determined by the Board; provided, however, that
such terms shall not vary the price, amount or timing of Director Options
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provided under this Section 6, including provisions dealing with vesting,
forfeiture and termination of such Director Options.
6.2 Purchase Price. The purchase price for Shares under
each Director Option shall be equal to 100% of the Fair Market Value of such
Shares on the date the Director Option is granted.
6.3 Vesting. Subject to Sections 6.4 and 7.4, each
Director Option shall become fully vested and exercisable with respect to 40%
of the Shares subject thereto on the second anniversary of the date of grant
and 20% each year thereafter; provided, however, that the Optionee continues to
serve as a Director as of such date. If an Optionee ceases to serve as a
Director for any reason, the Optionee shall have no rights with respect to any
Director Option which has not then vested pursuant to the preceding sentence
and the Optionee shall automatically forfeit any Director Option which remains
unvested.
6.4 Duration. Each Director Option shall terminate on
the date which is the tenth anniversary of the date of grant, unless terminated
earlier as follows:
(a) If an Optionee's service as a Director
terminates for any reason other than Disability, death or Cause, the Optionee
may for a period of three (3) months after such termination exercise his or her
Option to the extent, and only to the extent, that such Option or portion
thereof was vested and exercisable as of the date the Optionee's service as a
Director terminated, after which time the Option shall automatically terminate
in full.
(b) If an Optionee's service as a Director
terminates by reason of the Optionee's resignation or removal from the Board
due to Disability, the Optionee may, for a period of one (1) year after such
termination, exercise his or her Option to the extent, and only to the extent,
that such Option or portion thereof was vested and exercisable, as of the date
the Optionee's service as Director terminated, after which time the Option
shall automatically terminate in full.
(c) If an Optionee's service as a Director
terminates for Cause, the Option granted to the Optionee hereunder shall
immediately terminate in full and no rights thereunder may be exercised.
(d) If an Optionee dies while a Director or
within three (3) months after termination of service as a Director as described
in clause (a) of this Section 6.4 or within twelve (12) months after
termination of service as a Director as described in clause (b) of this Section
6.4, the Option granted to the Optionee may be exercised at any time within
twelve (12) months after the Optionee's death by the person or persons to whom
such rights under the Option shall pass by will, or by the laws of descent or
distribution, after which time the Option shall terminate in full; provided,
however, that an Option may be exercised to the extent, and only to the extent,
that the Option or portion thereof was exercisable on the date of death or
earlier termination of the Optionee's services as a Director.
7. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
7.1 Transferability. Incentive Stock Options may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised during the lifetime of the Optionee, only by the Optionee. Other
Options or Awards shall be transferrable to the extent provided in the Option
or Award Agreement.
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7.2 Method of Exercise.
(a) The exercise of an Option shall be made only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid, as determined by the Committee in its discretion, in either of
the following forms (or any combination thereof): (i) cash or (ii) the transfer
of Shares to the Company upon such terms and conditions as determined by the
Committee. In addition, both Employee Options and Director Options may be
exercised through a registered broker-dealer pursuant to such cashless exercise
procedures (other than Share withholding) which are, from time to time, deemed
acceptable by the Committee. Any Shares transferred to the Company (or
withheld upon exercise) as payment of the purchase price under an Option shall
be valued at their Fair Market Value on the trading day preceding the date of
exercise of such Option. The Optionee shall deliver the Agreement evidencing
the Option to the Secretary of the Company who shall endorse thereon a notation
of such exercise and return such Agreement to the Optionee. No fractional
Shares (or cash in lieu thereof) shall be issued upon exercise of an Option and
the number of Shares that may be purchased upon exercise shall be rounded to
the nearest number of whole Shares.
(b) If the Fair Market Value of the Shares with
respect to which the Option is being exercised exceeds the exercise price of
such Option, an Optionee may, instead of exercising an Option as provided in
Section 7.2(a), request that the Committee authorize payment to the Optionee of
the difference between the Fair Market Value of part or all of the Shares which
are the subject of the Option and the exercise price of the Option, such
difference to be determined as of the date the Committee receives the request
from the Optionee. The Committee in its sole discretion may grant or deny such
a request from an Optionee with respect to part or all of the Shares as to
which the Option is then exercisable and, to the extent granted, shall direct
the Company to make the payment to the Optionee either in cash or in Shares or
in any combination thereof, provided, however, that any Share shall be
distributed based upon its Fair Market Value as of the date the Committee
received the request from the Optionee. An Option shall be deemed to have been
exercised and shall be canceled to the extent that the Committee grants a
request pursuant to this Section 7.2(b).
7.3 Rights of Optionees. No Optionee shall be deemed for
any purpose to be the owner of any Shares subject to any Option unless and
until (i) the Option shall have been exercised pursuant to the terms thereof,
(ii) the Company shall have issued and delivered Shares to the Optionee, and
(iii) the Optionee's name shall have been entered as a stockholder of record on
the books of the Company. Thereupon, the Optionee shall have full voting,
dividend and other ownership rights with respect to such Shares, subject to
such terms and conditions as may be set forth in the applicable Agreement.
7.4 Effect of Change in Control. In the event of a
Change in Control, all Options outstanding on the date of such Change in
Control shall become immediately and fully exercisable. In addition, to the
extent set forth in an Agreement evidencing the grant of an Employee Option, an
Optionee will be permitted to surrender to the Company for cancellation within
sixty (60) days after such Change in Control any Employee Option or portion of
an Employee Option to the extent not yet exercised and the Optionee will be
entitled to receive a cash payment in an amount equal to the excess, if any, of
(x) (A) in the case of a Nonqualified Stock Option, the greater of (1) the Fair
Market Value, on the date preceding the date of surrender, of the Shares
subject to the Employee Option or portion thereof surrendered or (2) the
Adjusted Fair Market Value of the Shares subject to the Employee Option or
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portion thereof surrendered or (B) in the case of an Incentive Stock Option,
the Fair Market Value, on the date preceding the date of surrender, of the
Shares subject to the Employee Option or portion thereof surrendered, over (y)
the aggregate purchase price for such Shares under the Employee Option or
portion thereof surrendered. In the event an Optionee's employment with, or
service as a Director of, the Company is terminated by the Company following a
Change in Control, each Option held by the Optionee that was exercisable as of
the date of termination of the Optionee's employment or service shall remain
exercisable for a period ending not before the earlier of (A) the first
anniversary of the termination of the Optionee's employment or service or (B)
the expiration of the stated term of the Option.
8. STOCK APPRECIATION RIGHTS. The Committee may in its
discretion, either alone or in connection with the grant of an Employee Option,
grant Stock Appreciation Rights in accordance with the Plan, the terms and
conditions of which shall be set forth in an Agreement. If granted in
connection with an Option, a Stock Appreciation Right shall cover the same
Shares covered by the Option (or such lesser number of Shares as the Committee
may determine) and shall, except as provided in this Section 8, be subject to
the same terms and conditions as the related Option.
8.1 Time of Grant. A Stock Appreciation Right may be
granted (i) at any time if unrelated to an Option, or (ii) if related to an
Option, either at the time of grant, or at any time thereafter during the term
of the Option.
8.2 Stock Appreciation Right Related to an Option.
(a) Subject to Section 8.7, a Stock Appreciation
Right granted in connection with an Option shall be exercisable at such time or
times and only to the extent that the related Options are exercisable, and will
not be transferable except to the extent the related Option may be
transferable. A Stock Appreciation Right granted in connection with an
Incentive Stock Option shall be exercisable only if the Fair Market Value of a
Share on the date of exercise exceeds the purchase price specified in the
related Incentive Stock Option Agreement.
(b) Upon the exercise of a Stock Appreciation
Right related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the per Share purchase price under the related Option, by (B) the number of
Shares as to which such Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including such a limit
in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.
(c) Upon the exercise of a Stock Appreciation
Right granted in connection with an Option, the Option shall be canceled to the
extent of the number of Shares as to which the Stock Appreciation Right is
exercised, and upon the exercise of an Option granted in connection with a
Stock Appreciation Right, the Stock Appreciation Right shall be canceled to the
extent of the number of Shares as to which the Option is exercised or
surrendered.
8.3 Stock Appreciation Right Unrelated to an Option. The
Committee may grant to Eligible Individuals Stock Appreciation Rights unrelated
to Options. Stock Appreciation Rights unrelated to Options shall contain such
terms and conditions as to exercisability (subject to Section 8.7), vesting and
duration as the Committee shall determine, but in no event shall they have a
term of greater than ten (10) years. Upon exercise of a Stock Appreciation
Right unrelated to an Option, the Grantee shall be
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entitled to receive an amount determined by multiplying (A) the excess of the
Fair Market Value of a Share on the date preceding the date of exercise of such
Stock Appreciation Right over the Fair Market Value of a Share on the date the
Stock Appreciation Right was granted, by (B) the number of Shares as to which
the Stock Appreciation Right is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable with
respect to any Stock Appreciation Right by including such a limit in the
Agreement evidencing the Stock Appreciation Right at the time it is granted.
8.4 Method of Exercise. Stock Appreciation Rights shall
be exercised by a Grantee only by a written notice delivered in person or by
mail to the Secretary of the Company at the Company's principal executive
office, specifying the number of Shares with respect to which the Stock
Appreciation Right is being exercised. If requested by the Committee, the
Grantee shall deliver the Agreement evidencing the Stock Appreciation Right
being exercised and the Agreement evidencing any related Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Agreement to the Grantee.
8.5 Form of Payment. Payment of the amount determined
under Sections 8.2(b) or 8.3 may be made in the discretion of the Committee
solely in whole Shares in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Shares. If the Committee decides to
make full payment in Shares and the amount payable results in a fractional
Share, payment for the fractional Share will be made in cash.
8.6 Modification. No modification of an Award shall
adversely alter or impair any rights or obligations under the Agreement without
the Grantee's consent.
8.7 Effect of Change in Control. In the event of a
Change in Control, all Stock Appreciation Rights shall become immediately and
fully exercisable. In addition, to the extent set forth in an Agreement
evidencing the grant of a Stock Appreciation Right, a Grantee will be entitled
to receive a payment from the Company in cash or stock, in either case, with a
value equal to the excess, if any, of (A) the greater of (x) the Fair Market
Value, on the date preceding the date of exercise, of the underlying Shares
subject to the Stock Appreciation Right or portion thereof exercised and (y)
the Adjusted Fair Market Value, on the date preceding the date of exercise, of
the Shares over (B) the aggregate Fair Market Value, on the date the Stock
Appreciation Right was granted, of the Shares subject to the Stock Appreciation
Right or portion thereof exercised. In the event a Grantee's employment with
the Company is terminated by the Company following a Change in Control each
Stock Appreciation Right held by the Grantee that was exercisable as of the
date of termination of the Grantee's employment shall remain exercisable for a
period ending not before the earlier of the first anniversary of (A) the
termination of the Grantee's employment or (B) the expiration of the stated
term of the Stock Appreciation Right.
9. DIVIDEND EQUIVALENT RIGHTS. Dividend Equivalent Rights may be
granted to Eligible Individuals in tandem with an Option or Award. The terms
and conditions applicable to each Dividend Equivalent Right shall be specified
in the Agreement under which the Dividend Equivalent Right is granted. Amounts
payable in respect of Dividend Equivalent Rights may be payable currently or
deferred until the lapsing of restrictions on such Dividend Equivalent Rights
or until the vesting, exercise, payment, settlement or other lapse of
restrictions on the Option or Award to which the Dividend Equivalent Rights
relate. In the event that the amount payable in respect of Dividend Equivalent
Rights are to be deferred, the Committee shall determine whether such amounts
are to be held in cash or reinvested in Shares or deemed (notionally) to be
reinvested in Shares. If amounts payable in respect of
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Dividend Equivalent Rights are to be held in cash, there may be credited at the
end of each year (or portion thereof) interest on the amount of the account at
the beginning of the year at a rate per annum as the Committee, in its
discretion, may determine. Dividend Equivalent Rights may be settled in cash
or Shares or a combination thereof, in a single installment or multiple
installments.
10. RESTRICTED STOCK.
10.1 Grant. The Committee may grant Awards to Eligible
Individuals of Restricted Stock, which shall be evidenced by an Agreement
between the Company and the Grantee. Each Agreement shall contain such
restrictions, terms and conditions as the Committee may, in its discretion,
determine and (without limiting the generality of the foregoing) such
Agreements may require that an appropriate legend be placed on Share
certificates. Awards of Restricted Stock shall be subject to the terms and
provisions set forth below in this Section 10.
10.2 Rights of Grantee. Shares of Restricted Stock
granted pursuant to an Award hereunder shall be issued in the name of the
Grantee as soon as reasonably practicable after the Award is granted provided
that the Grantee has executed an Agreement evidencing the Award, the
appropriate blank stock powers and, in the discretion of the Committee, an
escrow agreement and any other documents which the Committee may require as a
condition to the issuance of such Shares. If a Grantee shall fail to execute
the Agreement evidencing a Restricted Stock Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require within the time period
prescribed by the Committee at the time the Award is granted, the Award shall
be null and void. At the discretion of the Committee, Shares issued in
connection with a Restricted Stock Award shall be deposited together with the
stock powers with an escrow agent (which may be the Company) designated by the
Committee. Unless the Committee determines otherwise and as set forth in the
Agreement, upon delivery of the Shares to the escrow agent, the Grantee shall
have all of the rights of a stockholder with respect to such Shares, including
the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.
10.3 Non-transferability. Until all restrictions upon the
Shares of Restricted Stock awarded to a Grantee shall have lapsed in the manner
set forth in Section 10.4, such Shares shall not be sold, transferred or
otherwise disposed of and shall not be pledged or otherwise hypothecated, nor
shall they be delivered to the Grantee.
10.4 Lapse of Restrictions.
(a) Restrictions upon Shares of Restricted Stock
awarded hereunder shall lapse at such time or times and on such terms and
conditions as the Committee may determine. The Agreement evidencing the Award
shall set forth any such restrictions.
(b) Unless the Committee shall determine
otherwise at the time of the grant of an Award of Restricted Stock, the
restrictions upon Shares of Restricted Stock shall lapse upon a Change in
Control. The Agreement evidencing the Award shall set forth any such
provisions.
10.5 Modification or Substitution. Subject to the terms
of the Plan, the Committee may modify outstanding Awards of Restricted Stock or
accept the surrender of outstanding Shares of Restricted Stock (to the extent
the restrictions on such Shares have not yet lapsed) and grant new Awards in
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<PAGE> 18
substitution for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
10.6 Treatment of Dividends. At the time an Award of
Shares of Restricted Stock is granted, the Committee may, in its discretion,
determine that the payment to the Grantee of dividends, or a specified portion
thereof, declared or paid on such Shares by the Company shall be (i) deferred
until the lapsing of the restrictions imposed upon such Shares and (ii) held by
the Company for the account of the Grantee until such time. In the event that
dividends are to be deferred, the Committee shall determine whether such
dividends are to be reinvested in shares of Stock (which shall be held as
additional Shares of Restricted Stock) or held in cash. If deferred dividends
are to be held in cash, there may be credited at the end of each year (or
portion thereof) interest on the amount of the account at the beginning of the
year at a rate per annum as the Committee, in its discretion, may determine.
Payment of deferred dividends in respect of Shares of Restricted Stock (whether
held in cash or as additional Shares of Restricted Stock), together with
interest accrued thereon, if any, shall be made upon the lapsing of
restrictions imposed on the Shares in respect of which the deferred dividends
were paid, and any dividends deferred (together with any interest accrued
thereon) in respect of any Shares of Restricted Stock shall be forfeited upon
the forfeiture of such Shares.
10.7 Delivery of Shares. Upon the lapse of the
restrictions on Shares of Restricted Stock, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.
11. PERFORMANCE AWARDS.
11.1 Performance Objectives.
(a) Performance Objectives for Performance Awards
may be expressed in terms of (i) earnings per Share, (ii) Share price, (iii)
pre-tax profits, (iv) net earnings, (v) return on equity or assets, (vi)
revenues, (vii) EBITDA, (viii) market share or market penetration or (ix) any
combination of the foregoing, and may be determined before or after accounting
changes, special charges, foreign currency effects, acquisitions, divestitures
or other extraordinary events. Performance Objectives may be in respect of the
performance of the Company and its Subsidiaries (which may be on a consolidated
basis), a Subsidiary or a Division. Performance Objectives may be absolute or
relative and may be expressed in terms of a progression within a specified
range. The Performance Objectives with respect to a Performance Cycle shall be
established in writing by the Committee by the earlier of (i) the date on which
a quarter of the Performance Cycle has elapsed or (ii) the date which is ninety
(90) days after the commencement of the Performance Cycle, and in any event
while the performance relating to the Performance Objectives remains,
substantially uncertain.
(b) Prior to the vesting, payment, settlement or
lapsing of any restrictions with respect to any Performance Award made to a
Grantee who is subject to Section 162(m) of the Code, the Committee shall
certify in writing that the applicable Performance Objectives have been
satisfied.
11.2 Performance Units. The Committee, in its discretion,
may grant Awards of Performance Units to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee. Performance Units shall be denominated in Shares or a specified
dollar amount and, contingent upon the attainment of specified Performance
Objectives within the Performance Cycle, represent the right to receive payment
as provided in Section 11.2(b) of the specified dollar amount or a percentage
(which may be more than 100%) thereof depending on the
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<PAGE> 19
level of Performance Objective attainment; provided, however,that, the
Committee may at the time a Performance Unit is granted specify a maximum
amount payable in respect of a vested Performance Unit. Each Agreement shall
specify the number of Performance Units to which it relates, the Performance
Objectives which must be satisfied in order for the Performance Units to vest
and the Performance Cycle within which such Performance Objectives must be
satisfied.
(a) Subject to Sections 11.1(b) and 11.4, a
Grantee shall become vested with respect to the Performance Units to the extent
that the Performance Objectives set forth in the Agreement are satisfied for
the Performance Cycle.
(b) Payment to Grantees in respect of vested
Performance Units shall be made as soon as practicable after the last day of
the Performance Cycle to which such Award relates unless the Agreement
evidencing the Award provides for the deferral of payment, in which event the
terms and conditions of the deferral shall be set forth in the Agreement.
Subject to Section 11.4, such payments may be made entirely in Shares valued at
their Fair Market Value as of the last day of the applicable Performance Cycle
or such other date specified by the Committee, entirely in cash, or in such
combination of Shares and cash as the Committee in its discretion shall
determine at any time prior to such payment; provided, however, that if the
Committee in its discretion determines to make such payment entirely or
partially in Shares of Restricted Stock, the Committee must determine the
extent to which such payment will be in Shares of Restricted Stock and the
terms of such Restricted Stock at the time the Award is granted.
11.3 Performance Shares. The Committee, in its
discretion, may grant Awards of Performance Shares to Eligible Individuals, the
terms and conditions of which shall be set forth in an Agreement between the
Company and the Grantee. Each Agreement may require that an appropriate legend
be placed on Share certificates. Awards of Performance Shares shall be subject
to the following terms and provisions:
(a) The Committee shall provide at the time an
Award of Performance Shares is made the time or times at which the actual
Shares represented by such Award shall be issued in the name of the Grantee;
provided, however, that no Performance Shares shall be issued until the Grantee
has executed an Agreement evidencing the Award, the appropriate blank stock
powers and, in the discretion of the Committee, an escrow agreement and any
other documents which the Committee may require as a condition to the issuance
of such Performance Shares. If a Grantee shall fail to execute the Agreement
evidencing an Award of Performance Shares, the appropriate blank stock powers
and, in the discretion of the Committee, an escrow agreement and any other
documents which the Committee may require within the time period prescribed by
the Committee at the time the Award is granted, the Award shall be null and
void. At the discretion of the Committee, Shares issued in connection with an
Award of Performance Shares shall be deposited together with the stock powers
with an escrow agent (which may be the Company) designated by the Committee.
Except as restricted by the terms of the Agreement, upon delivery of the Shares
to the escrow agent, the Grantee shall have, in the discretion of the
Committee, all of the rights of a stockholder with respect to such Shares,
including the right to vote the Shares and to receive all dividends or other
distributions paid or made with respect to the Shares.
(b) Until any restrictions upon the Performance
Shares awarded to a Grantee shall have lapsed in the manner set forth in
Sections 11.3(c) or 11.4, such Performance Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee. The Committee may
also impose such other restrictions and conditions on the Performance Shares,
if any, as it deems appropriate.
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(c) Subject to Sections 11.1(b) and 11.4,
restrictions upon Performance Shares awarded hereunder shall lapse and such
Performance Shares shall become vested at such time or times and on such terms,
conditions and satisfaction of Performance Objectives as the Committee may, in
its discretion, determine at the time an Award is granted.
(d) At the time the Award of Performance Shares
is granted, the Committee may, in its discretion, determine that the payment to
the Grantee of dividends, or a specified portion thereof, declared or paid on
actual Shares represented by such Award which have been issued by the Company
to the Grantee shall be (i) deferred until the lapsing of the restrictions
imposed upon such Performance Shares and (ii) held by the Company for the
account of the Grantee until such time. In the event that dividends are to be
deferred, the Committee shall determine whether such dividends are to be
reinvested in shares of Stock (which shall be held as additional Performance
Shares) or held in cash. If deferred dividends are to be held in cash, there
may be credited at the end of each year (or portion thereof) interest on the
amount of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred dividends in
respect of Performance Shares (whether held in cash or in additional
Performance Shares), together with interest accrued thereon, if any, shall be
made upon the lapsing of restrictions imposed on the Performance Shares in
respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Performance
Shares shall be forfeited upon the forfeiture of such Performance Shares.
(e) Upon the lapse of the restrictions on
Performance Shares awarded the Committee shall cause a stock certificate to be
delivered to the Grantee, free of all restrictions hereunder.
11.4 Effect of Change in Control. In the event of a
Change in Control:
(a) With respect to Performance Units, unless
otherwise determined by the Committee, the Grantee shall (i) become vested in
all Performance Units and (ii) be entitled to receive in respect of all
Performance Units which become vested as a result of a Change in Control a cash
payment within ten (10) days after such Change in Control in an amount as
determined by the Committee at the time of the Award of such Performance Unit
and as set forth in the Agreement.
(b) With respect to Performance Shares, unless
otherwise determined by the Committee, restrictions shall lapse immediately on
all Performance Shares.
(c) The Agreements evidencing Performance Shares
and Performance Units shall provide for the treatment of such Awards (or
portions thereof) which do not become vested as the result of a Change in
Control, including, but not limited to, provisions for the adjustment of
applicable Performance Objectives.
11.5 Modification or Substitution. Subject to the terms
of the Plan, the Committee may modify outstanding Performance Awards or accept
the surrender of outstanding Performance Awards and grant new Performance
Awards in substitution for them. Notwithstanding the foregoing, no
modification of a Performance Award shall adversely alter or impair any rights
or obligations under the Agreement without the Grantee's consent.
12. EFFECT OF A TERMINATION OF EMPLOYMENT. An employment
agreement, if applicable, between an Optionee or Grantee and the Company shall
govern with respect to the terms and conditions
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<PAGE> 21
applicable to such Option or Award upon a termination or change in the status
of the employment of the Optionee or Grantee. However, in absence of an
employment agreement, the following shall apply:
(a) The Agreement evidencing the grant of each Option and
each Award shall set forth the terms and conditions applicable to such Option
or Award upon a termination or change in the status of the employment of the
Optionee or Grantee by the Company, a Subsidiary or a Division (including a
termination or change by reason of the sale of a Subsidiary or a Division),
which, except for Director Options, shall be as the Committee may, in its
discretion, determine at the time the Option or Award is granted or thereafter.
(b) Unless otherwise determined by the Committee at the
time of grant (and set forth in the Option Agreement) or at a later date,
except in the case of death and Disability as provided in paragraphs 12(c) and
12(d) below, if an Optionee of an Employee Option granted under the Plan has a
Termination of Employment with the Company or a Subsidiary, any unexercised
Employee Option held by such Optionee shall expire ninety (90) days after the
Optionee has a Termination of Employment for any reason other than a
termination for Cause or a Voluntary Termination (as defined below), and such
Employee Option may only be exercised by the Optionee or his Beneficiary to the
extent that the Employee Option or a portion thereof was exercisable on the
date of Termination of Employment; provided, however, no Employee Option may be
exercised after the expiration date specified for the particular Employee
Option in the Employee Option grant. If the Optionee's Termination of
Employment arises as a result of a termination for Cause or a Voluntary
Termination, then, unless the Committee determines otherwise at the time of the
Termination of Employment, any unexercised Options held by such Optionee shall
terminate and expire concurrently with the Optionee's Termination of
Employment. A "Voluntary Termination" shall mean the voluntary Termination of
Employment by an Optionee prior to five years of total Service (as defined
below) as an employee with the Company and its Subsidiaries. "Service" shall
mean total of years for which the Optionee, prior to or after first becoming an
Optionee, has 1,000 hours of service as an employee or otherwise with, or has
served as a director or officer of, the Company or a Subsidiary.
(c) Unless otherwise determined by the Committee at the
time of grant (and set forth in the Option Agreement) or at a later date, if an
Optionee dies while still employed by the Company, the shares which the
Optionee was entitled to exercise on the date of the Optionee's death under an
Option or Options granted under the Plan may be exercised at any time after the
Optionee's death by the Optionee's beneficiary; provided, however, that no
Option may be exercised after the earlier of: (i) one (1) year after the
Optionee's death or (ii) the expiration date specified for the particular
Option in the Option Agreement.
(d) Unless otherwise determined by the Committee at the
time of grant (and set forth in the Option Agreement) or at a later date, if an
Optionee becomes disabled within the meaning of Section 2.14 hereof, any
unexercised Employee Option held by such disabled Optionee shall expire one (1)
year after the Optionee has a Termination of Employment because of such
Disability and such Option may only be exercised by the Optionee or his
Beneficiary to the extent that the Employee Option or a portion thereof was
exercisable on the date of Termination of Employment because of such
Disability; provided, however, no Employee Option may be exercised after the
expiration date specified for the particular Employee Option in the Employee
Option grant.
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<PAGE> 22
13. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the
Committee shall conclusively determine the appropriate adjustments, if any, to
(i) the maximum number and class of Shares or other stock or securities with
respect to which Options or Awards may be granted under the Plan, (ii) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted to any Eligible Individual during the
term of the Plan, (iii) the number and class of Shares or other stock or
securities which are subject to outstanding Options or Awards granted under the
Plan and the purchase price therefor, if applicable, (iv) the number and class
of Shares or other securities in respect of which Director Options are to be
granted under Section 6 and (v) the Performance Objectives.
(b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, a
Grantee of an Award shall be entitled to, or an Optionee shall be entitled to
exercise an Option with respect to, new, additional or different shares of
stock or securities, such new, additional or different shares shall thereupon
be subject to all of the conditions, restrictions and performance criteria
which were applicable to the Shares subject to the Award or Option, as the case
may be, prior to such Change in Capitalization.
14. EFFECT OF CERTAIN TRANSACTIONS. Subject to Sections 7.4, 8.7,
10.4(b) and 11.4 or as otherwise provided in an Agreement, in the event of (i)
the liquidation or dissolution of the Company or (ii) a merger or consolidation
of the Company (a "Transaction"), the Plan and the Options and Awards issued
hereunder shall continue in effect in accordance with their respective terms,
except that following a Transaction each Optionee and Grantee shall be entitled
to receive in respect of each Share subject to any outstanding Options or
Awards, as the case may be, upon exercise of any Option or payment or transfer
in respect of any Award, the same number and kind of stock, securities, cash,
property or other consideration that each holder of a Share was entitled to
receive in the Transaction in respect of a Share; provided, however, that such
stock, securities, cash, property, or other consideration shall remain subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Options and Awards prior to such Transaction.
15. INTERPRETATION. Following the required registration of any
equity security of the Company pursuant to Section 12 of the Exchange Act:
(a) The Plan is intended to comply with Rule 16b-3
promulgated under the Exchange Act and the Committee shall interpret and
administer the provisions of the Plan or any Agreement in a manner consistent
therewith. Any provisions inconsistent with such Rule shall be inoperative and
shall not affect the validity of the Plan.
(b) Unless otherwise expressly stated in the relevant
Agreement, each Option, Stock Appreciation Right and Performance Award granted
under the Plan is intended to be performance-based compensation within the
meaning of Section 162(m)(4)(C) of the Code. The Committee shall not be
entitled to exercise any discretion otherwise authorized hereunder with respect
to such Options or Awards if the ability to exercise such discretion or the
exercise of such discretion itself would cause the compensation attributable to
such Options or Awards to fail to qualify as performance-based compensation.
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<PAGE> 23
16. POOLING TRANSACTIONS. Notwithstanding anything contained in
the Plan or any Agreement to the contrary, in the event of a Change in Control
which is also intended to constitute a Pooling Transaction, the Committee shall
take such actions, if any, as are specifically recommended by an independent
accounting firm retained by the Company to the extent reasonably necessary in
order to assure that the Pooling Transaction will qualify as such, including
but not limited to (i) deferring the vesting, exercise, payment, settlement or
lapsing of restrictions with respect to any Option or Award, (ii) providing
that the payment or settlement in respect of any Option or Award be made in the
form of cash, Shares or securities of a successor or acquiror of the Company,
or a combination of the foregoing, and (iii) providing for the extension of the
term of any Option or Award to the extent necessary to accommodate the
foregoing, but not beyond the maximum term permitted for any Option or Award.
17. EFFECTIVE DATE, TERMINATION AND AMENDMENT OF THE PLAN. The
effective date of this Plan shall be the date the Plan is adopted by the Board,
subject only to the approval by the affirmative vote of the holders of a
majority of the securities of the Company present, or represented, and entitled
to vote at a meeting of stockholders duly held in accordance with the
applicable laws of the State of Utah within twelve (12) months of the adoption
of the Plan by the Board.
No new Awards under the Plan shall be granted after the day preceding
the tenth anniversary of the date of its adoption by the Board and no Option or
Award may be granted thereafter. The Board may sooner terminate the Plan and
the Board may at any time and from time to time amend, modify or suspend the
Plan; provided, however, that: (a) no such amendment, modification, suspension
or termination shall impair or adversely alter any Options or Awards
theretofore granted under the Plan, except with the consent of the Optionee or
Grantee, nor shall any amendment, modification, suspension or termination
deprive any Optionee or Grantee of any Shares which he or she may have acquired
through or as a result of the Plan; and (b) to the extent necessary under
applicable law, no amendment shall be effective unless approved by the
stockholders of the Company in accordance with applicable law.
18. NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the
Board shall not be construed as amending, modifying or rescinding any
previously approved incentive arrangement or as creating any limitations on the
power of the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.
19. LIMITATION OF LIABILITY. As illustrative of the limitations
of liability of the Company, but not intended to be exhaustive thereof, nothing
in the Plan shall be construed to:
(i) give any person any right to be granted an Option or
Award other than at the sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to
Shares except as specifically provided in the Plan;
(iii) limit in any way the right of the Company to
terminate the employment of any person at any time; or
(iv) be evidence of any agreement or understanding,
expressed or implied, that the Company will employ any person at any particular
rate of compensation or for any particular period of time.
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20. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
20.1 Governing Law. Except as to matters of federal law,
the Plan and the rights of all persons claiming hereunder shall be construed
and determined in accordance with the laws of the State of Utah without giving
effect to conflicts of laws principles thereof.
20.2 Applicable Laws. The obligation of the Company to
sell or deliver Shares with respect to Options and Awards granted under the
Plan shall be subject to all applicable laws, rules and regulations, including
all applicable federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or appropriate by
the Committee.
20.3 Rules and Regulations. The Board may make such
changes as may be necessary or appropriate to comply with the rules and
regulations of any government authority, or to obtain for Eligible Individuals
granted Incentive Stock Options the tax benefits under the applicable
provisions of the Code and regulations promulgated thereunder.
20.4 Securities Regulations. Each Option and Award is
subject to the requirement that, if at any time the Committee determines, in
its discretion, that the listing, registration or qualification of Shares
issuable pursuant to the Plan is required by any securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the grant of an Option or Award or the issuance of Shares, no Options or
Awards shall be granted or payment made or Shares issued, in whole or in part,
unless listing, registration, qualification, consent or approval has been
effected or obtained free of any conditions as acceptable to the Committee.
20.5 Restrictions on Shares. Notwithstanding anything
contained in the Plan or any Agreement to the contrary, in the event that the
disposition of Shares acquired pursuant to the Plan is not covered by a then
current registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), and is not otherwise exempt from such registration,
such Shares shall be restricted against transfer to the extent required by the
Securities Act and Rule 144 or other regulations thereunder. The Committee may
require any individual receiving Shares pursuant to an Option or Award granted
under the Plan, as a condition precedent to receipt of such Shares, to
represent and warrant to the Company in writing that the Shares acquired by
such individual are acquired without a view to any distribution thereof and
will not be sold or transferred other than pursuant to an effective
registration thereof under said Act or pursuant to an exemption applicable
under the Securities Act or the rules and regulations promulgated thereunder.
The certificates evidencing any of such Shares shall be appropriately amended
to reflect their status as restricted securities as aforesaid.
21. MISCELLANEOUS.
21.1 Multiple Agreements. The terms of each Option or
Award may differ from other Options or Awards granted under the Plan at the
same time, or at some other time. The Committee may also grant more than one
Option or Award to a given Eligible Individual during the term of the Plan,
either in addition to, or in substitution for, one or more Options or Awards
previously granted to that Eligible Individual.
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<PAGE> 25
21.2 Withholding of Taxes.
(a) At such times as an Optionee or Grantee
recognizes taxable income in connection with the receipt of Shares or cash
hereunder (a "Taxable Event"), the Optionee or Grantee shall pay to the Company
an amount equal to the federal, state and local income taxes and other amounts
as may be required by law to be withheld by the Company in connection with the
Taxable Event (the "Withholding Taxes") prior to the issuance, or release from
escrow, of such Shares or the payment of such cash. The Company shall have the
right to deduct from any payment of cash to an Optionee or Grantee an amount
equal to the Withholding Taxes in satisfaction of the obligation to pay
Withholding Taxes. In satisfaction of the obligation to pay Withholding Taxes
to the Company, the Optionee or Grantee may make a written election (the "Tax
Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the Shares then issuable to him or her
having an aggregate Fair Market Value equal to the Withholding Taxes.
(b) If an Optionee makes a disposition, within
the meaning of Section 424(c) of the Code and regulations promulgated
thereunder, of any Share or Shares issued to such Optionee pursuant to the
exercise of an Incentive Stock Option within the two-year period commencing on
the day after the date of the grant or within the one-year period commencing on
the day after the date of transfer of such Share or Shares to the Optionee
pursuant to such exercise, the Optionee shall, within ten (10) days of such
disposition, notify the Company thereof, by delivery of written notice to the
Company at its principal executive office.
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<PAGE> 1
PROMISSORY NOTE
U.S. $460,000 Dated: September 27, 1996
The undersigned, JOSEPH A. CANNON, an individual ("Borrower"),
promises to pay to GENEVA STEEL COMPANY, a Utah corporation (hereinafter,
together with any subsequent holder of this promissory note, referred to as
"Lender"), at 10 South Geneva Road, Vineyard, Utah 84058, or at such other
place as Lender may designate, in lawful money of the United States, the
principal sum of FOUR HUNDRED SIXTY THOUSAND DOLLARS ($460,000), together with
interest from the date hereof on the unpaid principal, payable as hereinafter
provided for in this promissory note (the "Note").
1. Borrower shall pay to Lender the principal amount of this Note
and all interest accrued thereon at the earliest to occur of (i) demand for
repayment by Lender and (ii) September 27, 1997. On such repayment date, the
entire then-remaining unpaid principal balance, plus accrued interest and all
other fees and amounts required by this Note, shall be due and payable in full.
2. Except as otherwise expressly provided in the following
paragraphs of this Note, the outstanding principal balance of this Note shall
bear interest for each day from and including the date hereof to but excluding
the date such principal and interest accrued thereon is repaid in full at a
rate per annum equal to Eight and 53/100 Percent (8.53%). Interest shall
accrue based upon a year of 360 days.
3. Any overdue principal hereof and, to the extent permitted by
law, overdue interest hereon shall bear interest payable on demand, for each
day from and including the date payment thereof was due to but excluding the
date of actual payment, at a rate equal to Eighteen Percent (18%) per annum.
4. This Note may be prepaid in full or in part at any time
without the consent of Lender and without penalty or premium. Each payment
under this Note shall be applied first, to the payment of Lender's costs, fees
and expenses as provided herein, second, to accrued but unpaid interest due
under this Note, and third, to the reduction of unpaid principal owing under
this Note.
5. If one or more of the following events (each, an "Event of
Default") shall have occurred and be continuing:
(a) Borrower shall fail to pay any principal of this Note
when due, or interest thereon or any fees or any other amounts payable
hereunder within ten (10) days after the due date thereof;
-1-
<PAGE> 2
(b) the occurrence of an Event of Default, as such term is
defined in Section 8 of that certain Security Agreement dated
September 27, 1996 executed by Borrower, Janeal B. Cannon and Lender
(the "Security Agreement");
(c) Borrower or Janeal B. Cannon shall breach or fail to
comply with any agreement respecting any "Obligation," as such term is
defined in a Deed of Trust dated as of September 27, 1996, executed by
Borrower and Janeal B. Cannon as trustor, to Associated Title Company,
as trustee, for the use and benefit of Lender, as beneficiary (the
"Cannon Trust Deed");
(d) Riverwood Limited Partnership, a Utah limited partnership
("Riverwood Partnership"), shall breach or fail to comply with any of
its agreements respecting any "Obligation," as such term is defined in
a Utah Deed of Trust, Security Agreement and Financing Statement dated
as of September 27, 1996, executed by Riverwood Partnership as
trustor, to Associated Title Company, as trustee, for the use and
benefit of Lender, as beneficiary (the "Riverwood Trust Deed," and
collectively with the Cannon Trust Deed, the "Trust Deeds"); or
(e) Borrower shall use any of the proceeds of the loan
evidenced by this Note for any purpose other than for the payment of
principal, interest or related fees and expenses under a promissory
note dated October 29, 1993 made by Borrower in favor of Citibank,
N.A., a national banking association, as amended;
then, and in every such event, without notice to Borrower or any other act by
Lender, the entire unpaid principal balance hereunder, together with all
accrued but unpaid interest and all fees and charges required by this Note,
shall, at the option of the holder hereof, at once become due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by Borrower (time being the essence hereof). The failure of
Lender to exercise any right or remedy upon the occurrence or continuance of an
Event of Default shall not constitute or be construed to constitute a waiver of
any right or remedy of Lender.
6. Notwithstanding any other provision contained in this Note or
in any agreement, document or instrument related to the transaction of which
this Note is a part: (a) the rates of interest and charges and the payments
provided for herein and therein shall in no event exceed the rates and charges
and the payments which would result in interest being charged at a rate
equalling the maximum allowed by law; and (b) if, for any reason whatsoever,
the holder hereof ever receives as interest (or as a charge in the nature of
interest) in connection with the transaction of which this Note is a part an
amount which would result in interest being charged at a rate exceeding the
maximum allowed by law, such amount or portion thereof as would otherwise be
excessive interest shall automatically be applied toward reduction of the
unpaid principal balance then outstanding hereunder. Any such amount shall not
be applied toward payment of interest (or toward payment of a charge in the
nature of interest).
7. In the event that (a) any payment under this Note is not made
at the time and in the manner required hereunder, (b) the holder hereof incurs
any costs of collection or other costs
-2-
<PAGE> 3
reasonably necessary for the protection of the interest of Lender with respect
to this Note, or (c) the holder hereof exercises its right to accelerate the
maturity of the obligations hereunder, Borrower agrees to pay any and all costs
and expenses (regardless of the particular nature thereof and whether incurred
before or after the initiation of suit or before or after judgment) which may
be incurred by the holder hereof in connection with the enforcement of any of
its rights under this Note, including court costs and attorneys' fees.
8. The undersigned, sureties, guarantors, and endorsers hereof
severally waive presentment for payment, demand, protest and notice of dishonor
of this Note, and consent to any and all extensions of time, renewals, waivers
or modifications that may be granted by the holder hereof with respect to the
payment or other provisions of this Note, and to the release of any security,
or any part thereof, with or without substitution.
9. This Note is secured by, and entitled to the benefits of, the
Security Agreement and the Trust Deeds.
"BORROWER"
/s/ JOSEPH A. CANNON
______________________________________
Joseph A. Cannon
-3-
<PAGE> 4
PROMISSORY NOTE
U.S. $40,000 Dated: December 23, 1996
The undersigned, JOSEPH A. CANNON, an individual ("Borrower"),
promises to pay to GENEVA STEEL COMPANY, a Utah corporation (hereinafter,
together with any subsequent holder of this promissory note, referred to as
"Lender"), at 10 South Geneva Road, Vineyard, Utah 84058, or at such other
place as Lender may designate, in lawful money of the United States, the
principal sum of FORTY THOUSAND DOLLARS ($40,000), together with interest from
the date hereof on the unpaid principal, payable as hereinafter provided for in
this promissory note (the "Note").
1. Borrower shall pay to Lender the principal amount of this Note
and all interest accrued thereon at the earliest to occur of (i) demand for
repayment by Lender and (ii) September 27, 1997. On such repayment date, the
entire then-remaining unpaid principal balance, plus accrued interest and all
other fees and amounts required by this Note, shall be due and payable in full.
2. Except as otherwise expressly provided in the following
paragraphs of this Note, the outstanding principal balance of this Note shall
bear interest for each day from and including the date hereof to but excluding
the date such principal and interest accrued thereon is repaid in full at a
rate per annum equal to Eight and 53/100 Percent (8.53%). Interest shall
accrue based upon a year of 360 days.
3. Any overdue principal hereof and, to the extent permitted by
law, overdue interest hereon shall bear interest payable on demand, for each
day from and including the date payment thereof was due to but excluding the
date of actual payment, at a rate equal to Eighteen Percent (18%) per annum.
4. This Note may be prepaid in full or in part at any time
without the consent of Lender and without penalty or premium. Each payment
under this Note shall be applied first, to the payment of Lender's costs, fees
and expenses as provided herein, second, to accrued but unpaid interest due
under this Note, and third, to the reduction of unpaid principal owing under
this Note.
5. If one or more of the following events (each, an "Event of
Default") shall have occurred and be continuing:
(a) Borrower shall fail to pay any principal of this Note
when due, or interest thereon or any fees or any other amounts payable
hereunder within ten (10) days after the due date thereof;
-1-
<PAGE> 5
(b) the occurrence of an Event of Default, as such term is
defined in Section 8 of that certain Security Agreement dated
September 27, 1996 executed by Borrower, Janeal B. Cannon and Lender
(the "Security Agreement");
(c) Borrower or Janeal B. Cannon shall breach or fail to
comply with any agreement respecting any "Obligation," as such term is
defined in a Deed of Trust dated as of September 27, 1996, executed by
Borrower and Janeal B. Cannon as trustor, to Associated Title Company,
as trustee, for the use and benefit of Lender, as beneficiary, as
amended by a First Amendment to Deed of Trust dated as of December 23,
1996 (as amended, the "Cannon Trust Deed");
(d) Riverwood Limited Partnership, a Utah limited partnership
("Riverwood Partnership"), shall breach or fail to comply with any of
its agreements respecting any "Obligation," as such term is defined in
a Utah Deed of Trust, Security Agreement and Financing Statement dated
as of September 27, 1996, executed by Riverwood Partnership as
trustor, to Associated Title Company, as trustee, for the use and
benefit of Lender, as beneficiary, as amended by a First Amendment to
Utah Deed of Trust, Security Agreement and Financing Statement dated
as of December 23, 1996 (as amended, the "Riverwood Trust Deed," and
collectively with the Cannon Trust Deed, the "Trust Deeds"); or
(e) Borrower shall use any of the proceeds of the loan
evidenced by this Note for any purpose other than for the payment of
principal, interest or related fees and expenses under a promissory
note dated October 29, 1993 made by Borrower in favor of Citibank,
N.A., a national banking association, as amended;
then, and in every such event, without notice to Borrower or any other act by
Lender, the entire unpaid principal balance hereunder, together with all
accrued but unpaid interest and all fees and charges required by this Note,
shall, at the option of the holder hereof, at once become due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by Borrower (time being the essence hereof). The failure of
Lender to exercise any right or remedy upon the occurrence or continuance of an
Event of Default shall not constitute or be construed to constitute a waiver of
any right or remedy of Lender.
6. Notwithstanding any other provision contained in this Note or
in any agreement, document or instrument related to the transaction of which
this Note is a part: (a) the rates of interest and charges and the payments
provided for herein and therein shall in no event exceed the rates and charges
and the payments which would result in interest being charged at a rate
equalling the maximum allowed by law; and (b) if, for any reason whatsoever,
the holder hereof ever receives as interest (or as a charge in the nature of
interest) in connection with the transaction of which this Note is a part an
amount which would result in interest being charged at a rate exceeding the
maximum allowed by law, such amount or portion thereof as would otherwise be
excessive interest shall automatically be applied toward reduction of the
unpaid principal balance then outstanding hereunder. Any such amount shall not
be applied toward payment of interest (or toward payment of a charge in the
nature of interest).
-2-
<PAGE> 6
7. In the event that (a) any payment under this Note is not made
at the time and in the manner required hereunder, (b) the holder hereof incurs
any costs of collection or other costs reasonably necessary for the protection
of the interest of Lender with respect to this Note, or (c) the holder hereof
exercises its right to accelerate the maturity of the obligations hereunder,
Borrower agrees to pay any and all costs and expenses (regardless of the
particular nature thereof and whether incurred before or after the initiation
of suit or before or after judgment) which may be incurred by the holder hereof
in connection with the enforcement of any of its rights under this Note,
including court costs and attorneys' fees.
8. The undersigned, sureties, guarantors, and endorsers hereof
severally waive presentment for payment, demand, protest and notice of dishonor
of this Note, and consent to any and all extensions of time, renewals, waivers
or modifications that may be granted by the holder hereof with respect to the
payment or other provisions of this Note, and to the release of any security,
or any part thereof, with or without substitution.
9. This Note is secured by, and entitled to the benefits of, the
Security Agreement and the Trust Deeds.
"BORROWER"
/s/ JOSEPH A. CANNON
------------------------------------
Joseph A. Cannon
-3-
<PAGE> 7
PROMISSORY NOTE
U.S. $200,000 Dated: February 13, 1997
The undersigned, JOSEPH A. CANNON, an individual ("Borrower"),
promises to pay to GENEVA STEEL COMPANY, a Utah corporation (hereinafter,
together with any subsequent holder of this promissory note, referred to as
"Lender"), at 10 South Geneva Road, Vineyard, Utah 84058, or at such other
place as Lender may designate, in lawful money of the United States, the
principal sum of TWO HUNDRED THOUSAND DOLLARS ($200,000), together with
interest from the date hereof on the unpaid principal, payable as hereinafter
provided for in this promissory note (the "Note").
1. Borrower shall pay to Lender the principal amount of this Note
and all interest accrued thereon at the earliest to occur of (i) demand for
repayment by Lender and (ii) September 27, 1997. On such repayment date, the
entire then-remaining unpaid principal balance, plus accrued interest and all
other fees and amounts required by this Note, shall be due and payable in full.
2. Except as otherwise expressly provided in the following
paragraphs of this Note, the outstanding principal balance of this Note shall
bear interest for each day from and including the date hereof to but excluding
the date such principal and interest accrued thereon is repaid in full at a
rate per annum equal to Eight and 53/100 Percent (8.53%). Interest shall
accrue based upon a year of 360 days.
3. Any overdue principal hereof and, to the extent permitted by
law, overdue interest hereon shall bear interest payable on demand, for each
day from and including the date payment thereof was due to but excluding the
date of actual payment, at a rate equal to Eighteen Percent (18%) per annum.
4. This Note may be prepaid in full or in part at any time
without the consent of Lender and without penalty or premium. Each payment
under this Note shall be applied first, to the payment of Lender's costs, fees
and expenses as provided herein, second, to accrued but unpaid interest due
under this Note, and third, to the reduction of unpaid principal owing under
this Note.
5. If one or more of the following events (each, an "Event of
Default") shall have occurred and be continuing:
(a) Borrower shall fail to pay any principal of this Note
when due, or interest thereon or any fees or any other amounts payable
hereunder within ten (10) days after the due date thereof;
-1-
<PAGE> 8
(b) the occurrence of an Event of Default, as such term is
defined in Section 8 of that certain Security Agreement dated
September 27, 1996 executed by Borrower, Janeal B. Cannon and Lender
(the "Security Agreement");
(c) Borrower or Janeal B. Cannon shall breach or fail to
comply with any agreement respecting any "Obligation," as such term is
defined in a Deed of Trust dated as of September 27, 1996, executed by
Borrower and Janeal B. Cannon as trustor, to Associated Title Company,
as trustee, for the use and benefit of Lender, as beneficiary, as
amended by a First Amendment to Deed of Trust dated as of December 23,
1996 (as amended, the "Cannon Trust Deed");
(d) Riverwood Limited Partnership, a Utah limited partnership
("Riverwood Partnership"), shall breach or fail to comply with any of
its agreements respecting any "Obligation," as such term is defined in
a Utah Deed of Trust, Security Agreement and Financing Statement dated
as of September 27, 1996, executed by Riverwood Partnership as
trustor, to Associated Title Company, as trustee, for the use and
benefit of Lender, as beneficiary, as amended by a First Amendment to
Utah Deed of Trust, Security Agreement and Financing Statement dated
as of December 23, 1996 (as amended, the "Riverwood Trust Deed," and
collectively with the Cannon Trust Deed, the "Trust Deeds"); or
(e) Borrower shall use any of the proceeds of the loan
evidenced by this Note for any purpose other than for the payment of
principal, interest or related fees and expenses under a promissory
note dated October 29, 1993 made by Borrower in favor of Citibank,
N.A., a national banking association, as amended;
then, and in every such event, without notice to Borrower or any other act by
Lender, the entire unpaid principal balance hereunder, together with all
accrued but unpaid interest and all fees and charges required by this Note,
shall, at the option of the holder hereof, at once become due and payable
without presentment, demand, protest or notice of any kind, all of which are
hereby waived by Borrower (time being the essence hereof). The failure of
Lender to exercise any right or remedy upon the occurrence or continuance of an
Event of Default shall not constitute or be construed to constitute a waiver of
any right or remedy of Lender.
6. Notwithstanding any other provision contained in this Note or
in any agreement, document or instrument related to the transaction of which
this Note is a part: (a) the rates of interest and charges and the payments
provided for herein and therein shall in no event exceed the rates and charges
and the payments which would result in interest being charged at a rate
equalling the maximum allowed by law; and (b) if, for any reason whatsoever,
the holder hereof ever receives as interest (or as a charge in the nature of
interest) in connection with the transaction of which this Note is a part an
amount which would result in interest being charged at a rate exceeding the
maximum allowed by law, such amount or portion thereof as would otherwise be
excessive interest shall automatically be applied toward reduction of the
unpaid principal balance then outstanding hereunder. Any such amount shall not
be applied toward payment of interest (or toward payment of a charge in the
nature of interest).
-2-
<PAGE> 9
7. In the event that (a) any payment under this Note is not made
at the time and in the manner required hereunder, (b) the holder hereof incurs
any costs of collection or other costs reasonably necessary for the protection
of the interest of Lender with respect to this Note, or (c) the holder hereof
exercises its right to accelerate the maturity of the obligations hereunder,
Borrower agrees to pay any and all costs and expenses (regardless of the
particular nature thereof and whether incurred before or after the initiation
of suit or before or after judgment) which may be incurred by the holder hereof
in connection with the enforcement of any of its rights under this Note,
including court costs and attorneys' fees.
8. The undersigned, sureties, guarantors, and endorsers hereof
severally waive presentment for payment, demand, protest and notice of dishonor
of this Note, and consent to any and all extensions of time, renewals, waivers
or modifications that may be granted by the holder hereof with respect to the
payment or other provisions of this Note, and to the release of any security,
or any part thereof, with or without substitution.
9. This Note is secured by, and entitled to the benefits of, the
Security Agreement, the Trust Deeds and an Assignment of Interest, dated as of
the date hereof, made by Borrower in favor of Lender.
"BORROWER"
/s/ JOSEPH A. CANNON
------------------------------------
Joseph A. Cannon
-3-
<PAGE> 10
AFTER RECORDING, RETURN TO:
Brian G. Lloyd, Esq.
KIMBALL, PARR, WADDOUPS, BROWN & GEE
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
UTAH DEED OF TRUST, SECURITY AGREEMENT
AND FINANCING STATEMENT
(WITH ASSIGNMENT OF RENTS AND LEASES)
THIS DEED OF TRUST, SECURITY AGREEMENT AND FINANCING STATEMENT
(hereinafter the "Trust Deed") is executed as of the 27th day of September,
1996, by RIVERWOOD LIMITED PARTNERSHIP, a Utah limited partnership whose
address for purposes hereof is 3919 North Riverwood Drive, Provo, Utah 84604,
(hereinafter, "Trustor"), to ASSOCIATED TITLE COMPANY, a Utah corporation whose
address for the purposes hereof is 560 South 300 East, Salt Lake City, Utah
84111 ("Trustee"), for the use and benefit of GENEVA STEEL COMPANY, a Utah
corporation, and its successors and assigns (hereinafter "Beneficiary"), whose
address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058.
RECITALS:
A. Trustor is the record owner of fee title to a certain tract of
real property lying in the County of Wayne, State of Utah, which said property
is more particularly described as follows (hereinafter the "Tract"):
See Exhibit A attached hereto and incorporated herein by this
reference.
B. Joseph A. Cannon, a general partner of Trustor ("Borrower"), has
obtained a loan (the "Loan") from Beneficiary in the original principal amount
of FOUR HUNDRED SIXTY THOUSAND and no/100 DOLLARS ($460,000.00), as evidenced
by a Promissory Note of even date herewith, made by Borrower payable to the
order of Beneficiary, which note also provides for interest on the unpaid
principal balance at the rate or rates therein set forth, described, or
provided for, and payable at the times and in the manner therein set forth
(hereinafter the "Note").
NOW, THEREFORE, in order to secure (A) The payment and performance of
each and every obligation of Borrower under the Note; (B) Any extensions,
renewals, modifications or replacements of the Note or of the obligations
evidenced thereby, regardless of the extent of or the subject matter of any
such extension, renewal, modification or replacement; (C) The payment and
performance of each and every agreement and obligation of Trustor under this
Trust Deed and under any other instrument given to evidence or further secure
the payment and
<PAGE> 11
performance of any obligation secured hereby; (D) The payment of such
additional loans or advances as may hereafter be made by Beneficiary to
Borrower or Trustor, or their respective successors or assigns, when evidenced
by a promissory note or notes reciting that they are secured by this Trust
Deed; and (E) The payment of all sums expended or advanced by Beneficiary or
Trustee pursuant to the terms of this Trust Deed, the Note, or any instrument
further evidencing or securing any obligation secured hereby, together with
interest thereon as herein and therein provided (the foregoing items (A)
through (E) and the matters referred to therein being hereinafter collectively
referred to as the "Obligations"), Trustor hereby CONVEYS, WARRANTS, and
TRANSFERS to Trustee, IN TRUST, WITH POWER OF SALE, the following property,
rights, privileges, interests, and franchises, to-wit:
I.
The Tract (which is described in Paragraph A appearing at the outset
hereof).
Together with all minerals, oil, gas and other hydrocarbon substances,
air rights, water rights, water stock, rights-of-way, easements, tenements,
hereditaments, and appurtenances belonging to or in any way appertaining to the
Tract and of any improvements now or hereafter situated on the Tract.
Together with all right, title, and interest of Trustor, now owned or
hereafter acquired, in and to any land lying in the bed of any street, road, or
avenue, open or proposed, in front of or adjoining the Tract.
Together with all right, title, and interest of Trustor, now owned or
hereafter acquired, in and to any and all sidewalks and alleys, and all strips
and gores of land, adjacent to or used in connection with the Tract.
II.
All buildings, structures, and improvements now or at any time
hereafter erected, constructed, or situated upon the Tract or any part thereof,
and all apparatus, fixtures, and articles of property now or hereafter attached
to or necessary for use in connection with the operation or maintenance of any
such building, structure, or other improvement, including, but without limiting
the generality of the foregoing, all carpeting, draperies, appliances, engines,
furnaces, boilers, pumps, heaters, tanks, motors, generators, electrical
equipment, heating, plumbing, lifting, and ventilating apparatus, air-cooling
and air-conditioning apparatus, gas and electric fixtures, elevators, fittings,
and machinery, and all other fixtures, property, and equipment of every kind
and description, attached to or necessary for use in connection with the
operation or maintenance of any building standing on the Tract (all of which
apparatus, fixtures, property, and equipment shall be deemed to be fixtures and
a part of the realty), together with any and all replacements and renewals of
any of the foregoing and any and all additions thereto.
2
<PAGE> 12
III.
All awards made for the taking by eminent domain or by any proceeding
or purchase in lieu thereof of the whole or any part of the Tract or of any
improvements now or hereafter situated thereon or any estate or easement
therein (including any awards for change of grade of streets), and all proceeds
of insurance paid on account of any partial or total destruction of
improvements on the Tract, all of which awards and proceeds are hereby assigned
to Beneficiary, which is hereby authorized to collect and receive such awards
and proceeds and to give proper receipts and acquittances therefor and (subject
to the terms of Paragraph 4 of this Trust Deed) to apply the same against the
Obligations, whether or not then due.
IV.
All right, title, and interest of Trustor in and to all unearned
premiums accrued, accruing, or to accrue under any and all insurance policies
now or hereafter obtained by Trustor pursuant to the provisions hereof.
V.
All fixtures, carpeting, floor coverings, draperies, equipment, sun
screens, awnings, implements, goods, fittings, machinery, appliances,
furniture, and other personal property of every kind or nature whatsoever which
are presently, or which are at any time hereafter, installed, placed, located,
contained, or used in, about, or in connection with, or procured for purposes
of installation, placing, location, being contained, or used in, about, or in
connection with, and which are necessary for the existence, construction,
creation, operation, or maintenance of any building or other structure now or
at any time hereafter erected or situated on, any part of the Tract, together
with all construction materials and all plans and specifications of every kind
or nature whatsoever which are intended to be used, which are used, or which
are procured for use in constructing and completing any of the improvements
located or to be located on the Tract (including all replacements, renewals,
additions, products, and proceeds of all of the foregoing).
Together with all inventory, equipment, trademarks, trade names, logos
and designs for the operations located on the Tract, contract rights, deposit,
escrow and cash accounts, chattel paper, instruments, documents, general
intangibles, certificates, agreements, insurance policies, business records,
plans and specifications, drawings, maps, surveys, studies, permits, licenses,
zoning, subdivision development and other applications, filings and approvals
and other intangible personal property now owned or hereafter acquired by
Trustor and used in connection with the ownership or operation of the Tract,
and any substitutions and replacements thereof, and any proceeds or products
therefrom.
Together with all water stock relating to the Tract, and deposits and
other security given to utility companies or governmental or quasi-governmental
agencies in connection with the Tract.
3
<PAGE> 13
All of the property, rights, privileges, interests, and franchises
described in the foregoing items I through V and hereby conveyed, warranted,
and transferred are hereinafter collectively referred to as the "Property."
All of the property described in the foregoing items III, IV and V is
hereinafter collectively referred to as the "Personal Property."
IN CONNECTION WITH THIS TRUST DEED, IT IS AGREED AS FOLLOWS:
1. Warranties of Title and Authority. Trustor hereby represents and
warrants that it is lawfully seized of indefeasible fee title to the Property,
that it has the authority and right to execute and deliver this Trust Deed,
that it shall defend the title to the Property against all claims and demands
whatsoever, that the Property is free and clear of any and all liens,
encumbrances, and interests of third parties (other than such liens,
encumbrances, and interests as may be set forth in the policy of mortgage title
insurance to be provided to Beneficiary pursuant to Paragraph 7 of this Trust
Deed), that no hazardous substances, hazardous wastes, pollutants or
contaminants are, have been or will be used, deposited, stored, disposed of,
placed or otherwise located in or on the Property or at any facility operated
on the Property at any time, and that any and all obligations it may have
incurred in connection with the Property are current and without default.
Trustor hereby releases, waives, and relinquishes all exemptions and homestead
rights which may exist with respect to the Property.
2. Obligations Mandatory. Trustor shall promptly pay or cause to be
paid to Beneficiary, or order, and shall promptly perform or cause to be
performed, each and every payment and obligation on the part of Trustor
provided to be paid or performed in connection with any of the Obligations.
All of such payments and obligations are mandatory, and Trustor's failure to
accomplish any of the same shall constitute a default under this Trust Deed.
3. Payments Protecting Against Liens. Trustor shall pay, when due,
all taxes, assessments, and governmental, municipal, or other charges or
impositions levied against or affecting the Property, or which might become a
lien thereon, and shall promptly deliver all receipts for such payments to
Beneficiary upon request. Trustor shall also pay, when due, any and all sums
constituting an encumbrance, charge, or lien upon the Property, or any part
thereof, which may at any time appear to Beneficiary to be prior or superior to
the interest of Beneficiary or Trustee hereunder.
4. Insurance Coverage. Trustor shall secure and at all times maintain
an insurance policy or policies in a form reasonably satisfactory to
Beneficiary, naming Beneficiary as additional insured thereunder, providing:
(i) hazard insurance with "all risk" coverage upon the buildings, fixtures,
improvements and Personal Property now existing or hereafter erected or placed
upon the Tract, insuring, inter alia, against the perils of fire, extended
coverage, vandalism, and malicious mischief, having a full replacement cost
endorsement, and in an amount based upon a minimum insurable value and upon
co-insurance rates which value and rates are acceptable to Beneficiary; and
(iii) if the Tract is or comes to be located in a flood prone or flood risk
area
4
<PAGE> 14
as identified pursuant to the Flood Disaster Protection Act of l973, as amended
or supplemented, hazard insurance covering the risk of damage to improvements
caused by flooding, in such amounts as Beneficiary may require. Trustor shall
deliver to Beneficiary (at the option of Beneficiary) either the originals of
the policies evidencing such insurance coverage or certificates duly executed
by the insurer(s) evidencing such insurance coverage. Concurrently with the
delivery to Beneficiary of each such policy or certificate (and of each renewal
policy or other evidence that the insurance coverage required hereby has been
renewed, which said renewal policy or other evidence of renewal shall be
delivered to Beneficiary at least fifteen (l5) days prior to the expiration of
the coverage then in force), Trustor shall also furnish to Beneficiary paid
premium receipts evidencing payment in full of the required insurance premiums
for at least the first full year (and for each renewal policy, the applicable
full renewal year) of coverage. Each insurer concerned shall agree that the
coverage will not be cancelled or modified unless at least thirty (30) days
advance written notice of the proposed cancellation or modification has been
given to Beneficiary. In the event Trustor fails to secure and maintain any of
the insurance coverage as provided in this Paragraph, Beneficiary may procure
such insurance on Trustor's behalf, including insurance in favor of Beneficiary
alone. In the event of loss, Trustor shall give immediate notice to
Beneficiary which may, but without any obligation to do so, make proof of loss,
and each insurance company concerned is hereby authorized and directed to make
payment for such loss directly to Beneficiary, instead of to Trustor and
Beneficiary jointly. Insurance proceeds of any of the hazard insurance
maintained pursuant to this Paragraph may be applied by Beneficiary, at its
option, to reduce the Obligations (whether or not then due) and/or to restore
or repair the Property damaged. If Beneficiary gives its consent to use of
such proceeds for restoration and repair, the proceeds shall be made available
by Beneficiary for use in restoring or reconstructing the Property damaged in
accordance with plans and specifications and construction arrangements approved
by Beneficiary. Beneficiary or its nominee shall hold such hazard insurance
proceeds in escrow and from time to time shall, upon compliance with such
reasonable conditions or requirements as may be imposed by Beneficiary,
disburse portions of such proceeds to Trustor and/or to those entitled thereto
as progress is made on necessary restoration and reconstruction. If any of
such proceeds remain after the cost of such restoration and reconstruction has
been paid, Beneficiary may, at its option, apply such remaining proceeds to
reduce the Obligations (whether or not then due) and/or remit the same to
Trustor.
5. Proof of Payment for Taxes and Insurance. Trustor shall, prior to
the due date of each required payment of taxes, assessments, and insurance
premiums relating to the Property, make the required payment and furnish to
Beneficiary a receipt evidencing that such payment has been timely made.
6. Maintenance and Use of Property. Trustor agrees: to maintain the
Property at all times in good condition and repair; to keep and maintain all
buildings and improvements which may be or become part of the Property in good
and neat order and repair and to allow no nuisances to exist or be maintained;
to keep all buildings and improvements which may be or become part of the
Property free from dry rot, fungus, termites and all other infestations; to
keep and maintain abutting grounds, sidewalks, roads, and parking and
landscaped areas in good and neat order and repair; to comply with all federal,
state, county, municipal, and other govern-
5
<PAGE> 15
mental statutes, ordinances, laws, and regulations and all covenants,
conditions and restrictions affecting the Property or any condition or activity
respecting the Property; not to commit or permit waste upon the Property and
not to remove, materially alter, damage, or demolish any improvement on the
Tract; to restore promptly and in a good and workmanlike manner any improvement
on the Tract which may for any reason be damaged or destroyed; to allow
Beneficiary or its designated representative to inspect the Property at all
reasonable times during the term hereof and to conduct soil and other tests
thereon; to comply with all requirements and conditions necessary to preserve
and extend any and all rights, licenses, permits (including but not limited to
zoning variances, conditional uses, special exceptions, special permits, and
non- conforming uses), privileges, franchises and concessions which are
applicable to the Tract or which have been granted to or contracted for by
Trustor in connection with any existing or presently contemplated use of the
Tract; not to drill or permit the drilling for or extraction of oil, gas or
other hydrocarbon substances, or any mineral of any kind upon the Tract without
the prior written consent of Beneficiary; and to comply with all provisions of
law concerning maintenance, use, or improvement of the Property. Trustor
agrees to do any act which, from the character or use of the Property, is
reasonably necessary to protect and preserve the fair market value of the
Property, any specific enumerations herein not limiting the general. Trustor
shall not, without the prior written consent of Trustor subdivide the Tract or
any portion thereof. Beneficiary shall have the right to review and approve or
disapprove the layout, configuration, terms and conditions of any subdivision
or development of the Tract, including but not limited to, the number and
configuration of lots, roads, utilities, or other improvements on the Tract.
At any time and from time to time upon written request of Beneficiary, payment
of its fees and presentation of this Trust Deed and the note for endorsement
(in case of full reconveyance, for cancellation and retention), without
affecting the liability of any person for the payment of the indebtedness
secured hereby, Trustee may (a) consent to the making of any map or plat of
said property; (b) join in granting any easement or creating any restriction
thereon; (c) join in any subordination or other agreement affecting this Trust
Deed or the lien or charge thereof; (d) reconvey, without warranty, all or any
part of the Tract. The grantee in any reconveyance may be described as "the
person or persons entitled thereto," and the recitals therein of any matters or
facts shall be conclusive proof of truthfulness thereof. Trustor agrees to pay
reasonable Trustee's fees for any of the services mentioned in this Paragraph.
7. Title Insurance. Trustor shall obtain and provide Beneficiary
with a policy of title insurance insuring the lien of this Trust Deed. Such
policy shall be in such form and issued by such company as are acceptable to
Beneficiary and shall be in an amount not less than the face amount of the
Note.
8. Sale and Assignment of Leases. Trustor shall not, without the
prior written consent of Beneficiary (which consent may be given or withheld in
the absolute and unqualified discretion of Beneficiary), sell, assign,
transfer, mortgage, pledge, or otherwise dispose of or encumber, whether by
operation of law or otherwise, any lease of the Tract or of any portion thereof
or of space in any building now or hereafter constituting a portion of the
Property, or any rents, issues, or profits issuing from the Property. Any
transaction done in contravention
6
<PAGE> 16
of the foregoing limitation shall be null and void as regards the interest of
Beneficiary in the Property and under this Trust Deed and shall constitute a
default hereunder.
9. Appearance in Proceedings Affecting Security. Trustor shall
appear in and defend any action or proceeding which purports to or which might
in any way affect the title to the Property or the security hereof (the phrase
"the security hereof" when used in this Trust Deed shall mean the interest of
Trustor, Beneficiary, and Trustee in the Property, the rights, powers, duties,
covenants, representations, warranties, and authority of Trustor, Beneficiary,
and Trustee hereunder and under any instrument further evidencing or securing
the Obligations, and the validity, enforceability, and binding effect hereof
and of any instrument further evidencing or securing the Obligations). Should
Beneficiary or Trustee elect to appear in or defend any such action or
proceeding, Trustor shall pay all costs and expenses incurred by Beneficiary or
Trustee in connection therewith, including costs of evidence of title, court
costs, and reasonable attorneys' fees.
10. Beneficiary's Performance in Trustor's Stead. Should Trustor
fail to make any payment, to do any act or thing, or to perform any obligation
herein or in any lease of any part of the Property provided to be paid, done,
or performed, at the time and in the manner so provided, Beneficiary may, but
without any obligation to do so, and without notice to or demand upon Trustor,
and without releasing Trustor from any obligation hereunder or thereunder: (a)
make, do, pay, or perform the same in such manner and to such extent as
Beneficiary may deem reasonably necessary or desirable to protect the security
hereof or to protect any other interest of Beneficiary or Trustee, Beneficiary
for such purposes being authorized to enter upon the Property at all reasonable
times and to commence, appear in, or defend any action or proceeding purporting
to affect the security hereof; or (b) pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in the sole judgment of Beneficiary
appears to be prior or superior to the interest of Beneficiary or Trustee in
the Property.
11. Repayment of Advances. Trustor shall immediately repay to
Beneficiary all sums, with interest thereon as hereafter provided, which at any
time may be paid or advanced by Beneficiary for the payment of insurance,
taxes, assessments, governmental, municipal, or other charges or impositions,
title searches, title reports or abstracts, any obligation secured by a prior
lien upon or prior interest in the Property, and any other advances made by
Beneficiary which are or appear to be necessary or desirable, in Beneficiary's
sole discretion, to maintain this Trust Deed as a prior, valid, and subsisting
lien upon the Property, to preserve and protect Beneficiary's, Trustee's, or
Trustor's interest therein or hereunder, or to preserve, repair or maintain the
Property. All such advances shall be wholly optional on the part of
Beneficiary, and Trustor's obligation to repay the same, with interest, to
Beneficiary shall be secured by the lien of this Trust Deed. The amount of
each such advance shall, for the period during which it remains unpaid and both
before and after judgment, bear interest at the rate of eighteen percent (l8%)
per annum.
12. Application of Awards and Proceeds. Should the Property or any
part thereof be taken or damaged by reason of any public improvement or
condemnation proceeding, or be
7
<PAGE> 17
damaged by fire, flood, or earthquake or in any other manner, Beneficiary shall
be entitled to all compensation, awards, insurance proceeds, and other payments
or relief therefor, and shall be entitled at its option to commence, appear in,
and prosecute in its own name any action or proceeding, and to make any
compromise or settlement, in connection with such taking or damage. All such
compensation, awards, damages, rights of action, proceeds, or other payments
are hereby assigned to Beneficiary which may, after deducting therefrom all
costs and expenses (regardless of the particular nature thereof and whether
incurred with or without suit), including attorneys' fees, incurred by it in
connection with such compensation, awards, damages, rights of action, proceeds,
or other payments, release any and all moneys so received by it or apply the
same, or any portion thereof, to reduce the Obligations (whether or not then
due); Beneficiary's rights hereunder regarding use of hazard insurance proceeds
being subject, however, to the provisions of Paragraph 4 of this Trust Deed.
Trustor agrees to execute and deliver to Beneficiary such further assignments
of such compensation, awards, damages, rights of action, proceeds, or other
payments as Beneficiary may from time to time require.
13. Assignment of Leases and Rents; Leasing Requirements. Trustor
hereby absolutely, irrevocably and unconditionally conveys, transfers and
assigns to Beneficiary all present and future leases, subleases and rental
agreements covering the Property (collectively the "Leases"), and all rents,
issues, profits, royalties, income (including security deposits) and profits
arising from the Property (collectively, the "Rents"), together with the right,
power and authority to enforce the Leases, collect the Rents and apply the
Rents to any of the Obligations. Notwithstanding anything contained in this
Trust Deed to the contrary, the assignment set forth in the preceding sentence
is an absolute, irrevocable and unconditional present assignment from Trustor
to Beneficiary and not merely the passing of a security interest. Trustor may,
on behalf of Beneficiary, enforce the Leases and collect the Rents (but not
more than one (1) month in advance) at any time a default does not exist
hereunder and an event or condition does not exist which with the giving of
notice or lapse of time or both would result in a default hereunder. Trustor
shall hold the Rents so collected in trust for Beneficiary and shall use so
much of the Rents as is required for the satisfaction of the Obligations. Upon
the occurrence of a default hereunder or an event or condition which with the
giving of notice or lapse of time or both would result in a default hereunder,
the right of Trustor to enforce the Leases and collect the Rents shall
automatically terminate, and Trustor shall immediately pay to Beneficiary all
of the Rents then held by Trustor. All tenants, lessees and other persons
having any obligation to make any payment in connection with the Property are
hereby authorized and directed to make such payment directly to Beneficiary
upon the demand of Beneficiary. The receipt by Beneficiary of such payment
shall be a good and sufficient discharge of the obligation of the tenant,
lessee or other person concerned to make the payment connected with the amount
so received by Beneficiary. Nothing contained in this Paragraph shall be
construed to make Beneficiary a mortgagee in possession or make Beneficiary
responsible for any matters relating to the Property or the Leases.
Without the prior written consent of Beneficiary, Trustor shall not
enter into, modify, terminate or accept a surrender of any Leases, permit the
assignment of any Leases or accept payment of more than one (1) installment of
rent due thereunder prior to its due date. Trustor
8
<PAGE> 18
shall timely comply with all of the terms, covenants and conditions as landlord
under the Leases. Trustor shall promptly notify Beneficiary of (a) the default
by a lessee under any of the Leases; (b) the commencement of any action by any
lessee against Trustor, or by Trustor against any lessee; or (c) the receipt of
a written notice by Trustor from any lessee claiming that Trustor is in default
under a Lease. Trustor shall promptly deliver to Beneficiary a copy of any
process, pleading or notice given or received by Trustor in reference to any
such action or claim. Prior to entering into any Lease, Trustor shall furnish
a copy of the proposed Lease to Beneficiary for its approval. If Beneficiary
conditions its approval of a Lease upon certain changes being made thereto,
Trustor shall make all of such changes prior to the execution of such Lease.
Immediately upon the execution thereof, an executed copy of each Lease shall be
furnished to Beneficiary.
14. No Waiver of Rights by Collection of Proceeds. The entering upon
and taking possession of the Property or the collection of Rents or the
application or release thereof as aforesaid shall not cure or waive any default
or notice of default hereunder, shall not invalidate any act done pursuant to
such notice of default, and shall not operate to postpone or suspend any of the
Obligations.
15. Application of Payments. If at any time during the term
hereof Beneficiary receives or obtains a payment, installment, or sum which is
less than the entire amount then due in connection with the Obligations and in
connection with all other instruments and transactions to which Trustor and
Beneficiary are parties, Beneficiary shall, notwithstanding any instructions
which may be given by Trustor, have the right to apply such payment,
installment, or sum, or any part thereof, to such of the items or obligations
then due as Beneficiary may in its sole discretion determine.
16. Tax on Trust Deed or Debt. Trustor shall pay to Beneficiary
the amount of all taxes, assessments, or charges which may be levied by any
governmental authority upon this Trust Deed, upon the Obligations, or upon
Beneficiary by reason of its interests under this Trust Deed or the
Obligations. In the event any of said taxes, assessments, or charges cannot
legally be paid by Trustor, all of the Obligations shall, at the option of
Beneficiary, become immediately due and payable.
17. Records. Throughout the term of this Trust Deed, Trustor
shall furnish to Beneficiary annually, within sixty (60) days after the close
of each fiscal year of Trustor, all of the following materials: (i) Statements
relating to the Property, showing in detail all items of income and expense
relative to the Property for the preceding year and a detailed current rent
roll for the Property; (ii) Summarized statements of gross sales made by
Trustor or lessees on or from the Property during the preceding year, where and
to the extent that the leases under which such lessees are in occupancy provide
for information respecting gross sales to be provided to the lessor or
landlord; and (iii) Complete financial statements concerning Trustor, including
information respecting the assets and liabilities of Trustor and a profit and
loss statement for Trustor. Each of such materials shall be in form
satisfactory to Beneficiary and shall be certified by a person satisfactory to
Beneficiary. Trustor shall, upon the request of
9
<PAGE> 19
Beneficiary, advise Beneficiary in writing as to the commencement date of
Trustor's fiscal year. Any and all of the records, lists and statements
described in this Paragraph 17 shall be supplied to Beneficiary without expense
to Beneficiary.
18. Acceleration. Time is the essence hereof. All of the
Obligations, at the option of Beneficiary and without notice or demand, shall
become immediately due and payable upon the discovery that any representation
or warranty contained herein or in any instrument relating to the Loan or
evidencing or securing the Obligations is untrue or was untrue as of the
effective date(s) of such representation or warranty, upon Trustor's breach of
or failure to comply with any of its agreements respecting any of the
Obligations, upon the occurrence of any other default hereunder or otherwise in
connection with the Obligations (including, but not limited to, Borrower's
default in the timely payment of any installment of principal or interest under
the Note), or upon the occurrence of any default in the payment or performance
of any obligation owed by Borrower or Trustor to Beneficiary other than those
created by the Note or any instrument evidencing or securing the same or
comprising the term Obligations as herein defined, or if Borrower or Trustor
makes an assignment for the benefit of creditors, or if a receiver is appointed
for Borrower or Trustor or any part of the Property, or if Borrower or Trustor
files a petition in bankruptcy, or if Borrower or Trustor is adjudicated a
bankrupt. Thereupon, Beneficiary may either: (i) Cause Trustee to accomplish
any necessary prerequisites and to sell the Property at public auction to the
highest bidder; or (ii) Proceed to foreclose this Trust Deed in the manner
provided by law for the foreclosure of mortgages covering real property.
19. Law Governing Exercise of Power of Sale. All procedural matters
relating to exercise of the Power of Sale available under this Trust Deed (such
as the manner of giving notice of default and notice of sale, the forms
employed for such purpose, the persons to receive notice, the time which must
elapse between various stages of the proceeding, and the manner in which the
sale is conducted) shall be governed by the statutory law which is in effect at
the time said power is exercised. In the event some or all of such procedural
matters are not covered by then-effective legislation, the matters not covered
shall be governed by the law which is in effect at the time this Trust Deed is
executed.
20. Trustee's Sale. At Trustee's sale the Property may be sold in
its entirety or in separate parts in such order as Trustee may determine,
subject to Trustor's statutory right to direct the order of sale of real
property consisting of several known parcels or lots. Any person, including
Borrower, Trustor, Trustee and Beneficiary, may bid and purchase at the sale.
Upon receipt of payment Trustee shall execute and deliver its deed (the
"Trustee's Deed") to the purchaser. The Trustee's Deed may contain recitals of
compliance with any requirements of applicable law relating to exercise of the
Power of Sale or to the sale. Such recitals shall constitute conclusive
evidence of such compliance in favor of bona fide purchasers and encumbrances
for value and prima facie evidence thereof in favor of all other persons. The
Trustee's Deed shall operate to convey to the grantee, not subject to any right
of redemption, the Trustee's title and all right, title, interest, and claim of
Trustor, of its successors in interest, and of all persons claiming by,
through, or under them, in and to that part of the Property sold,
10
<PAGE> 20
including any and all right, title, interest, or claim in and to such part
which may have been acquired by Trustor or its successors in interest
subsequent to the execution of this Trust Deed, but without any covenant or
warranty, express or implied. Trustee shall apply the proceeds of sale toward
payment of the following, and in the order indicated: (a) All costs and
expenses incurred in connection with exercise of the Power of Sale or with the
sale, including Trustee's and attorneys' fees and the cost of any evidence of
title procured in connection with the sale; (b) Each sum the payment of which
is secured by this Trust Deed, together with accrued interest thereon at the
applicable rate; and (c) The balance, if any, to those entitled thereto or, at
Trustee's discretion, such remainder may be deposited with the County Clerk of
the County in which the sale took place. If a deficiency remains after proper
application of the proceeds of sale of the Property, Trustor shall, immediately
after determination of the amount thereof, pay the same to Beneficiary. Such
deficiency shall, both before and after judgment therefor is entered, bear
interest at the rate of eighteen percent (l8%) per annum. At any time within
three (3) months after Trustee's sale of the Property, Beneficiary may commence
an action to recover such deficiency and interest thereon. In said action
Beneficiary shall also be entitled to recover all costs and expenses, including
reasonable attorneys' fees, incurred by it in connection therewith. Trustor
hereby authorizes Trustee, upon its being presented with an Affidavit signed by
Beneficiary setting forth facts showing a default under this Trust Deed, to
accept as true and conclusive all facts and statements contained therein and to
rely and act thereon.
21. Foreclosure as Mortgage. In any proceeding brought to foreclose
this Trust Deed as a mortgage, Beneficiary shall be entitled to recover all
costs and expenses incident to the realization of its rights hereunder,
including court costs and attorneys' fees. Beneficiary shall be entitled to
possession of the Property during any period of redemption. Trustor hereby
waives any right it or its successors in interest may have in the event of
acceleration or entry of a decree of foreclosure: to obtain a partial release
of the Property from the lien of this Trust Deed by paying less than the entire
amount then secured hereby; or to partially redeem the Property by paying less
than the amount necessary to effect redemption in full. If a deficiency
remains after proper application of the proceeds from the foreclosure sale,
Trustor shall pay the same to Beneficiary immediately after determination of
the amount thereof. Such deficiency shall, both before and after judgment
therefor is entered, bear interest at the rate of eighteen percent (l8%) per
annum.
22. Trustee's and Attorneys' Fees. The Obligations shall include all
costs, expenses, and fees whatsoever which are in any way related to, or which
are in any way incurred by Beneficiary or Trustee in connection with the
enforcement or protection of Beneficiary's or Trustee's rights and interests
hereunder or otherwise in connection with the Obligations, including Trustee's
and attorneys' fees as follows: (a) In the event Beneficiary's rights are
enforced or in any way protected through the services of an attorney, but not
in conjunction with acceleration of the maturity of the Obligations, a
reasonable attorney's fee; (b) In the event Beneficiary accelerates the
maturity of the Obligations and thereafter reinstatement thereof occurs,
Trustee's and attorneys' fees actually incurred not exceeding such amount as is
permissible under the statutory law which is in effect at the time said
reinstatement occurs; (c) In the event a sale of the Property is effected by
Trustee pursuant to the Power of Sale available
11
<PAGE> 21
hereunder, a reasonable Trustee's fee and a reasonable attorney's fee; (d) In
the event an action is commenced to obtain judgment for a deficiency remaining
after exercise of the Power of Sale, a reasonable attorney's fee; and (e) In
the event a decree of foreclosure is entered in proceedings to foreclose this
Trust Deed as a mortgage, a reasonable attorney's fee.
23. Mailing Address for Notice of Default. Trustor hereby requests
that a copy of any notice of default required by law and a copy of any notice
of sale required by law be mailed to Trustor at the address for Trustor set
forth at the outset of this instrument.
24. Substitution of Trustee. At any time during the term of this
Trust Deed Beneficiary may appoint a successor Trustee to act hereunder. All
matters relating to the method of effecting a substitution of Trustees shall be
governed by the statutory law which is in effect at the time substitution takes
place. In the event then-effective legislation does not cover some or all of
the matters relating to the method of accomplishing a substitution of Trustees,
the matters not covered shall be governed by the law which is in effect at the
time this Trust Deed is executed. From the time a substitution of Trustees is
accomplished the new Trustee shall succeed to all the power, duties, authority,
and title of the Trustee named herein and of any successor Trustee.
25. Reconveyances. Beneficiary may, through its delivery to Trustee
of written request therefor, require Trustee to reconvey, release, and
discharge from the operation of this Trust Deed all or any part of the
Property. Such written request shall contain a description of that portion of
the Property to be reconveyed, a statement of the consideration, if any,
received by Beneficiary for such reconveyance, a declaration that Beneficiary
is the owner and holder of the Note, and a statement that the Note has not been
assigned or transferred. Any reconveyance executed by Trustee shall identify
this Trust Deed and shall describe that portion of the Property being released
from the lien hereof. The grantee in any such reconveyance may be described as
"the person or persons entitled thereto." Any partial reconveyance shall not
diminish Trustor's liability for the Obligations and shall not affect or impair
the lien of this Trust Deed with respect to the remaining portion of the
Property. This Trust Deed need not accompany a request for partial
reconveyance but, upon Trustee's demand, Beneficiary shall exhibit to it the
Note.
26. Security Agreement. With respect to the Personal Property,
this Trust Deed shall constitute a Security Agreement between Trustor, as
Debtor, and Beneficiary, as Secured Party, and, cumulative of all other rights
of Beneficiary under this Trust Deed, Beneficiary shall have all of the rights
and remedies available to a Secured Party under Article 9 of the Utah Uniform
Commercial Code. Upon the occurrence of a default in connection with the
Obligations, Beneficiary may at its discretion require Trustor to assemble the
Personal Property and make it available to Beneficiary at a place, reasonably
convenient to both parties, to be designated by Beneficiary. Beneficiary shall
give Trustor notice, by certified or registered mail, postage prepaid, of the
time and place of any public sale of any of the Personal Property or of the
time after which any private sale or other intended disposition thereof is to
be made by sending notice to Trustor at least five (5) days before the time of
the sale or other disposition, which provisions
12
<PAGE> 22
for notice Trustor and Beneficiary agree are reasonable. Provided, however,
that nothing herein shall preclude Beneficiary from proceeding as to both real
and personal property (including the Personal Property) in accordance with
Beneficiary's rights and remedies in respect of the real property, as provided
in Section 70A-9-501(4), Utah Code Annotated (1953). A carbon, photographic,
or other reproduction or copy of this Trust Deed or of a Financing Statement
related to or executed pursuant to this Trust Deed shall be sufficient as and
may be filed as an original Financing Statement in connection with the security
interest granted to Beneficiary herein. Until this Trust Deed is discharged
and satisfied of record, Trustor shall, from time to time as and if requested
by Beneficiary so to do, execute one or more Financing Statements, Continuation
Statements, and other documents in the manner and form required by law and to
the reasonable satisfaction of Beneficiary, to perfect, preserve, and maintain
the encumbrance of this Trust Deed and the priority hereof relative to such
classes or items of collateral (including, without limitation, the Personal
Property) covered by this Trust Deed as Beneficiary may from time to time
specify. Trustor shall pay to Beneficiary upon demand all expenses incurred by
Beneficiary in connection with the preparation, execution, or filing of any
such documents.
27. Fixture Filing. With respect to any fixtures included within the
definition of Property hereunder, and with respect to any item of Personal
Property (including any goods) that are or may become such fixtures, this Trust
Deed shall constitute a Financing Statement under the Utah Uniform Commercial
Code. It is intended that as to such fixtures and any items of Personal
Property (including any goods) that are or may become such fixtures, as well as
the proceeds and products thereof, this Trust Deed shall be effective as a
Financing Statement filed as a fixture filing in the Real Estate Records of the
County in which the Property is located. The Property affected by this Trust
Deed is, in part, defined and described by reference to the "Tract" described
on Exhibit A hereto. The Record Owner of such "Tract" is the Trustor.
Information concerning the interest of Beneficiary in such fixtures may be
obtained from Beneficiary at its address as shown at the outset of this Trust
Deed. Beneficiary is a seller and purchase money lender of the Property.
28. Termination of Leases upon Foreclosure. Upon foreclosure of
this Trust Deed (whether pursuant to the Power of Sale which is available under
this Trust Deed or pursuant to foreclosure of this Trust Deed as a mortgage),
no lease then affecting the Property shall be terminated by application of the
doctrine of merger, or as a matter of law, or as a result of such foreclosure,
unless Beneficiary or the purchaser at the foreclosure sale shall so elect in
writing. No act by or on behalf of Beneficiary, Trustee, or any such purchaser
shall constitute or result in termination of any such lease unless Beneficiary
or such purchaser shall give written notice of such termination to the tenant
or lessee thereunder.
29. Rights Cumulative and Not Waived; Written Consent Required. The
rights and remedies accorded by this Trust Deed shall be in addition to, and
not in substitution of, any rights or remedies available under now existing or
hereafter arising applicable law. All rights and remedies provided for in this
Trust Deed or afforded by law or equity are distinct and cumulative and may be
exercised concurrently, independently, or successively. The failure on
13
<PAGE> 23
the part of Beneficiary or Trustee to promptly enforce any right hereunder
shall not operate as a waiver of such right and the waiver of any default shall
not constitute a waiver of any subsequent or other default. The mere giving of
notice to Beneficiary of any proposed or contemplated action requiring
Beneficiary's consent shall not constitute consent thereto by Beneficiary. Any
consent required to be given by Beneficiary under this Trust Deed shall be
deemed given only upon the receipt by Trustor of a writing signed by
Beneficiary expressing such consent.
30. Binding on Successors. This Trust Deed shall be binding upon and
shall inure to the benefit of the respective grantees, transferees, heirs,
devisees, personal representatives, successors, and assigns of the parties
hereto. The term "Beneficiary" as used herein shall mean the owner and holder,
including any pledgee, of the Obligations.
31. Late Charge. Trustor agrees to pay Beneficiary a "late charge"
equal to five percent (5%) of each and any payment due hereunder or pursuant to
the Note which is more than fifteen (l5) days in arrears. Such late charge
shall be made to cover the extra expense involved in handling delinquent
payments.
32. Acceptance of Trust. Trustee accepts this Trust when this Deed
of Trust, duly executed and acknowledged, is made a public record as provided
by law. Trustee is not obligated to notify any party hereto of pending sale
under any other Deed of Trust or of any action or proceeding in which Trustor,
Beneficiary, or Trustee shall be a party, unless brought by Trustee.
33. Transfers or Further Encumbrances. In the event any of the
transactions or occurrences mentioned in the following items (a) through (c)
takes place without the prior review and written consent of Beneficiary (which
consent may be given or withheld in the absolute and unqualified discretion of
Beneficiary), Beneficiary may, at its option, declare all of the Obligations to
be immediately due and payable: (a) The Property or any portion thereof or any
interest therein is sold, contracted to be sold, conveyed, assigned, or
transferred, whether voluntarily, involuntarily, or by operation of law; or (b)
The Property or any portion thereof or any interest therein is subjected to any
mortgage, deed of trust, or other security device junior or inferior to this
Trust Deed; or (c) There occurs any material change in the composition,
ownership, and/or control of any party Trustor or of any successor in interest
of any party Trustor.
34. Interpretation. The captions which precede the Paragraphs of
this Trust Deed are for convenience only and shall in no way affect the manner
in which any provision hereof is construed. Whenever the context so requires,
the singular shall include the plural, the plural shall include the singular,
the whole shall include any part thereof, and any gender shall include both
other genders. The invalidity or unenforceability of any portion or provision
of this Trust Deed shall in no way affect the validity or enforceability of the
remainder hereof. This Trust Deed is executed pursuant to Sections 57-l-l9
through 57-l-36, Utah Code Annotated (l953). To the extent the provisions of
that legislation are consistent with this Trust Deed, such provisions
14
<PAGE> 24
shall supplement the terms hereof and are incorporated herein. This instrument
is delivered in the State of Utah and shall be governed by and construed in
accordance with Federal law and the laws of said State.
EXECUTED on or as of the day and year first above written.
"Trustor":
RIVERWOOD LIMITED PARTNERSHIP,
a Utah limited partnership
By: /s/ JOSEPH A. CANNON
----------------------------------
Joseph A. Cannon, General Partner
15
<PAGE> 25
STATE OF UTAH )
: ss.
County of Utah )
The foregoing instrument was acknowledged before me this 27th day of
September, 1996, by Joseph A. Cannon, a general partner of Riverwood Limited
Partnership, a Utah limited partnership.
/s/ Lori G. Loumis
-------------------------------------
(Seal) Notary Public
My commission expires: Residing at:
February 6, 1998 Salt Lake City, Utah
- ----------------------- -------------------------------------
16
<PAGE> 26
EXHIBIT A
to
Utah Deed of Trust, Security Agreement and Financing Statement
Executed by Riverwood Limited Partnership in favor of Geneva
Steel Company.
The real property referred to in said instrument consists of the
following-described realty situated in the County of Wayne, State of Utah:
Parcel No. 1
Southeast quarter of Southeast quarter of
Section 31, Township 29 South, Range 5 East, Salt Lake
Base and Meridian, LESS: Beginning at the Southeast
corner of the Southwest quarter of the Southeast
quarter of the Southeast quarter of Section 31,
Township 29 South, Range 5 East, Salt Lake Base and
Meridian; thence North 89 degrees 22'43" West 660.70
feet, along the Section line to the Southwest corner
of the Southeast quarter of the Southeast quarter of
said Section 31; thence North 30 feet; thence North 89
degrees 19'10" East 277.52 feet; thence North 78
degrees 23'45" East 177.88 feet; thence North 86
degrees 47'10" East 176.34 feet; thence South 86
degrees 07'10" East 32.95 feet; thence South 93.90
feet to the point of beginning.
SUBJECT TO AND TOGETHER WITH a 20 foot wide
right-of-way of ingress and egress through property.
ALSO SUBJECT TO current taxes and assessments
and all liens, encumbrances, rights- of-way,
easements, restrictions, reservations and other
matters of record or enforceable at law or in equity.
Parcel No. 2
Beginning at the Southwest corner of Section
32, Township 29 South, Range 5 East, Salt Lake Base
and Meridian, and running thence North 0 degrees
28'52" East along the Section line 1000 feet;
17
<PAGE> 27
thence East 435 feet; thence South 1000 feet to the
South line of said Section 32; thence North 89 degrees
44'48" West along Section line 435 feet, more or less,
to the point of beginning.
TOGETHER with a non-exclusive easement and
right-of-way for rights of ingress, egress, and
utilities, over and across the existing roadway
running from Highway 117 to the Property, running
through the remaining property owned by Bill Jones on
June 21, 1991.
SUBJECT TO current taxes and assessments and
all liens, encumbrances, rights-of-way, easements,
restrictions, reservations and other matters of
records, or enforceable in law and equity.
18
<PAGE> 28
AFTER RECORDING, RETURN TO:
Brian G. Lloyd, Esq.
KIMBALL, PARR, WADDOUPS, BROWN & GEE
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
DEED OF TRUST
(WITH ASSIGNMENT OF RENTS)
THIS DEED OF TRUST, (hereinafter the "Trust Deed") is executed as of
the 27th day of September, 1996, by JOSEPH A. CANNON and JANEAL B. CANNON,
Husband and Wife as Joint Tenants, whose address for purposes hereof is 3919
North Riverwood Drive, Provo, Utah 84604 (hereinafter, collectively,
"Trustor"), to ASSOCIATED TITLE COMPANY, a Utah corporation whose address for
the purposes hereof is 560 South 300 East, Salt Lake City, Utah 84111
("Trustee"), for the use and benefit of GENEVA STEEL COMPANY, a Utah
corporation, and its successors and assigns (hereinafter "Beneficiary"), whose
address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058.
RECITALS:
A. Trustor is the record owner of fee title to a certain tract of
real property lying in the County of Utah, State of Utah, which said property
is more particularly described below as the "Trust Property."
B. Joseph A. Cannon ("Borrower") has obtained a loan (the "Loan")
from Beneficiary in the original principal amount of FOUR HUNDRED SIXTY
THOUSAND and no/100 DOLLARS ($460,000.00), as evidenced by a Promissory Note of
even date herewith, made by Borrower payable to the order of Beneficiary, which
note also provides for interest on the unpaid principal balance at the rate or
rates therein set forth, described, or provided for, and payable at the times
and in the manner therein set forth (hereinafter the "Note").
NOW, THEREFORE, in order to secure (A) The payment and performance of
each and every obligation of Borrower under the Note; (B) Any extensions,
renewals, modifications or replacements of the Note or of the obligations
evidenced thereby, regardless of the extent of or the subject matter of any
such extension, renewal, modification or replacement; (C) The payment and
performance of each and every agreement and obligation of Trustor under this
Trust Deed and under any other instrument given to evidence or further secure
the payment and performance of any obligation secured hereby; (D) The payment
of such additional loans or advances as may hereafter be made by Beneficiary to
Borrower or Trustor or their respective successors or assigns, when evidenced
by a promissory note or notes reciting that they are secured by this Trust
Deed; and (E) The payment of all sums expended or advanced by Beneficiary or
Trustee pursuant to the terms of this Trust Deed, the Note, or any instrument
further evidencing or securing any obligation secured hereby, together with
interest thereon as herein and therein provided (the foregoing items (A)
through (E) and the matters referred to therein being hereinafter collectively
referred to as the "Obligations"), Trustor hereby CONVEYS, WARRANTS, and
TRANSFERS to Trustee, IN TRUST, WITH POWER OF SALE, the following described
property situated in Utah County, State of Utah (the "Trust Property"):
1
<PAGE> 29
See Exhibit A attached hereto and incorporated herein by this
reference.
Together with all buildings, fixtures and improvements thereon and all
water rights, rights of way, easements, rents, issues, profits, income,
tenements, hereditaments, privileges and appurtenances thereunto belonging, now
or hereafter used or enjoyed with the Trust Property, or any part thereof,
SUBJECT, HOWEVER, to the right, power and authority hereinafter given to and
conferred upon Beneficiary to collect and apply such rents, issues, and
profits;
TO PROTECT THE SECURITY OF THIS TRUST DEED, TRUSTOR AGREES:
1. To maintain the Trust Property and every part thereof in good
order, condition and repair, and in a clean and sanitary condition, including
both structural and nonstructural portions, including, without limitation, all
plumbing, heating, air conditioning, ventilating, electrical, lighting
facilities and equipment, fixtures, walls (interior and exterior), foundations,
ceilings, roofs (interior and exterior), columns, beams, floors, windows,
window sashes and frames, doors and door frames, glass, landscaping, driveway
and fences located on the Trust Property. To remove or demolish any building
thereon, to complete or restore promptly and in good and workmanlike manner any
building which may be constructed, damaged or destroyed thereon; to not do or
permit anything to be done on the Trust Property which may (a) increase the
existing rate or violate the provisions of any insurance carried with respect
to the Trust Property; (b) create a public or private nuisance, commit waste,
spoil or destruction on the Trust Property; (c) overload the floors or
otherwise damage the structure of the building; (d) constitute an improper,
immoral or objectionable purpose; (e) subject Beneficiary to any liability to
any third party; or (f) lower the value of the Trust Property. Trustor shall,
at its sole cost, (v) use the Trust Property in a careful, safe and proper
manner; (w) comply with all present and future governmental or
quasi-governmental laws, ordinances, regulations and requirements and any
covenants, conditions and restrictions existing with respect to the Trust
Property; (x) keep the Trust Property free of objectionable noises and odors;
(y) not store, use or dispose of any hazardous substances, hazardous wastes,
pollutants or contaminants on the Trust Property; and (z) do all other acts
which from the character or use of the Trust Property may be reasonably
necessary, the specific enumerations herein not excluding the general.
Trustee, upon presentation to it of an affidavit signed by
Beneficiary, setting forth facts showing a default by Trustor under this
numbered paragraph, is authorized to accept as true and conclusive all facts
and statements therein, and to act thereon hereunder.
2. To provide and maintain insurance, of such type or types and
amounts as Beneficiary may require, on the improvements now existing or
hereafter erected or placed on the Trust Property. Such insurance shall be
carried in companies approved by Beneficiary with loss payable clauses in favor
of and in form acceptable to Beneficiary. In event of loss, Trustor shall give
immediate notice to Beneficiary, who may make proof of loss, and each insurance
company concerned is hereby authorized and directed to make payment for such
loss directly to Beneficiary instead of to Trustor and Beneficiary jointly, and
the insurance proceeds, or any part thereof, may be applied by Beneficiary, at
its option, to reduction of the indebtedness hereby secured or to the
restoration of repair of the Trust Property damaged.
3. To deliver to, pay for and maintain with Beneficiary until the
indebtedness secured hereby is paid in full, such evidence of title as
Beneficiary may require, including policies of title insurance and any
extensions or renewals thereof or supplements thereto.
4. To appear in and defend any action or proceeding purporting to
affect the security hereof, the title to the Trust Property, or the rights or
powers of Beneficiary or Trustee; and should Beneficiary or Trustee elect to
also appear in or defend any such action or proceeding, to pay all costs and
expenses,
2
<PAGE> 30
including cost of evidence of title and attorney's fees in a reasonable sum
incurred by Beneficiary or Trustee.
5. To pay at least ten (10) days before delinquency all taxes and
assessments affecting the Trust Property, including all assessments upon water
company stock and all rents, assessments and charges for water, appurtenant to
or used in connection with the Trust Property; to pay, when due, all
encumbrances, charges, and liens with interest, on the Trust Property or any
part thereof, which at any time appear to be prior or superior hereto; to pay
all costs, fees, and expenses of this trust and to timely pay when due all
costs, expenses, charges and amounts, of whatever kind or character, for all
water, gas, heat, light, power, air conditioning, telephone, sewer service,
trash disposal and other utilities and services supplied to the Trust Property,
together with any taxes thereon.
6. Should Trustor fail to make any payment or to do any act as
herein provided, then Beneficiary or Trustee, but without obligation so to do
and without notice to or demand upon Trustor and without releasing Trustor from
any obligation hereof, may: make or do the same in such manner and to such
extent as either may deem necessary to protect the security hereof, Beneficiary
or Trustee being authorized to enter upon the Trust Property for such purposes;
commence, appear in and defend any action or proceeding purporting to affect
the security hereof or the rights of powers of Beneficiary or Trustee; pay,
purchase, contest, or compromise any encumbrance, charge or lien which in the
judgment of either appears to be prior or superior hereto; and in exercising
any such powers, incur any liability, expend whatever amounts reasonably
necessary therefor, including the reasonable costs of evidence of title and the
employment of legal counsel.
7. To perform and do all obligations, responsibilities and duties
of Beneficiary pursuant to that certain Trust Deed Note dated June 10, 1996
executed by Beneficiary in favor of First Security Bank of Utah, N.A. and that
certain Trust Deed of even date therewith, with Joseph A. Cannon and Janeal B.
Cannon, Husband and Wife as Joint Tenants, as trustor, Affiliated Title Company
as trustee, and First Security Bank of Utah, N.A., as beneficiary, recorded in
the official records of the Utah County Recorder's office, (the "First Trust
Deed"), and to indemnify, defend and hold harmless Beneficiary with respect
thereto. Trustor agrees that all and all notices of default, late payment, or
nonperformance by Trustor of any type pursuant to the First Trust Deed received
by Trustor shall be immediately delivered to Beneficiary and such event of
default, non-payment or non-performance immediately cured to the satisfaction
of the holder of the First Trust Deed and Beneficiary. Any default by Trustor
of its obligations under the First Trust Deed shall be a default pursuant to
this Trust Deed.
8. To promptly pay or cause to be paid to Beneficiary, or order,
and shall promptly perform or cause to be performed, each and every payment and
obligation on the part of Trustor provided to be paid or performed in
connection with any of the Obligations, including, without limitation, to pay
immediately and without demand all sums expended hereunder by Beneficiary or
Trustee, and the repayment thereof shall be secured hereby. All of such
payments and obligations are mandatory, and Trustor's failure to accomplish any
of the same shall constitute a default under this Trust Deed.
IT IS MUTUALLY AGREED THAT:
9. Should the Trust Property or any part thereof be taken or
damaged by reason of any public improvement or condemnation proceeding, or
damaged by fire, or earthquake, or in any other manner, Beneficiary shall be
entitled to all compensation, awards, and other payments or relief therefor,
and shall be entitled at its option to commence, appear in and prosecute in its
own name, any action or proceedings, or to make any compromise or settlement,
in connection with such taking or damage. All such compensation, awards,
damages, rights of action and proceeds, including the proceeds of any
3
<PAGE> 31
policies of fire and other insurance affecting the Trust Property, are hereby
assigned to Beneficiary in trust for the restoration of the Trust Property as
necessary as a result of such damage or condemnation, after deducting therefrom
all its expenses, including attorney's fees. Beneficiary may apply any such
proceeds which are not necessary to restore the Trust Property toward the
indebtedness secured hereby. Trustor agrees to execute such further
assignments of any compensation, award, damages, and rights of action and
proceeds as Beneficiary or Trustee may require.
10. At any time and from time to time upon written request of
Beneficiary, payment of its fees and presentation of this Trust Deed and the
Note secured hereby for endorsement (in case of full reconveyance, for
cancellation and retention), without affecting the liability of any person for
the payment of the indebtedness secured hereby, Trustee may (a) consent to the
making of any map or plat of said property; (b) join in granting any easement
or creating any restriction thereon; (c) join in any subordination or other
agreement affecting this Trust Deed or the lien or charge thereof; (d)
reconvey, without warranty, all or any part of said property. The grantee in
any reconveyance may be described as "the person or persons entitled thereto,"
and the recitals therein of any matters or facts shall be conclusive proof of
truthfulness thereof. Trustor agrees to pay reasonable Trustee's fees for any
of the services mentioned in this Paragraph 10.
11. During the existence of this Trust, Trustor may make changes,
additions and improvements to the Trust Property, provided, however, that each
such change, addition or improvement: (a) equals or exceeds the then-current
standard for the building and utilizes only new and first-grade materials; (b)
is in conformity with all applicable governmental and quasi-governmental laws,
ordinances, regulations and requirements, and is made after obtaining any
required permits and licenses; (c) is made with the prior written consent of
Beneficiary; (d) is made pursuant to plans and specifications approved in
writing in advance by Beneficiary; and (e) is carried out by persons approved
in writing by Beneficiary, who, if required by Beneficiary, deliver to
Beneficiary before commencement of their work proof of such insurance coverage
as Beneficiary may require, with Beneficiary named as an additional insured.
Trustor shall promptly pay the entire cost thereof. Trustor shall indemnify,
defend and hold harmless Beneficiary from and against all liens, claims,
damages, losses, liabilities and expenses, including attorneys' fees, which may
arise out of or be connected in any way with any such change, addition or
improvement.
12. In the event Trustor shall default in the payment of any
taxes, assessments, insurance premiums or other expenses of the Trust Property,
Beneficiary may, at Beneficiary's option, pay said taxes, assessments,
insurance premiums or other expenses, and if Beneficiary elects so to do,
Trustor agrees to immediately repay Beneficiary upon demand all such sums so
advanced and paid by Beneficiary together with interest thereon from date of
payment of said sums at the rate of one and one-half percent (1 1/2%) per month
until paid. In the event on the date the monetary obligations secured hereby
are fully paid, Trustor fails to also repay Beneficiary such advances, with the
interest provided for herein, Beneficiary may refuse to release this Trust Deed
until such repayment is made.
13. As additional security, Trustor hereby assigns Beneficiary,
during the continuance of this trust, all rents, issues, royalties and profits
of the Trust Property and of any personal property of Trustor located thereon.
Until Trustor shall default in the payment of any indebtedness secured hereby
or in the performance of any agreement hereunder, Trustor shall have the right
to collect all such rents, issues, royalties, and profits earned prior to
default as they become due and payable. If Trustor shall default as aforesaid,
Trustor's right to collect any of such moneys shall cease and Beneficiary shall
have the right, with or without taking possession of the property affected
hereby, to collect all rents, royalties, issues, and profits. Failure or
discontinuance of Beneficiary at any time or from time to time to collect any
such moneys shall not in any manner affect the subsequent enforcement by
Beneficiary of the right, power,
4
<PAGE> 32
and authority to collect the same. Nothing contained herein, nor the exercise
of the right by Beneficiary to collect, shall be, or be construed to be, an
affirmation by Beneficiary of any tenancy, lease or option, an assumption of
liability under, or a subordination of the lien or charge of this Trust Deed to
any such tenancy, lease or option.
14. Upon any default by Trustor hereunder or pursuant to the First
Trust Deed, Beneficiary may at any time without notice, either in person, by
agent, or by a receiver to be appointed by a court (Trustor hereby consenting
to the appointment of Beneficiary as such receiver), and without regard to the
adequacy of any security for the indebtedness hereby secured, enter upon and
take possession of the Trust Property or any part thereof, in its own name sue
for or otherwise collect said rents, issues, and profits, including those past
due and unpaid, and apply the same, less costs and expenses of operation and
collection, including reasonable attorney's fees, upon any indebtedness secured
hereby, and in such order as Beneficiary may determine.
15. The entering upon and taking possession of said property, the
collection of such rents, issues, and profits, or the proceeds of fire and
other insurance policies, or compensation or awards for any taking or damage of
said property, and the application or release thereof as aforesaid, shall not
cure or waive any default or notice of default hereunder or invalidate any act
done pursuant to such notice.
16. The failure on the part of Beneficiary to promptly enforce any
right hereunder shall not operate as a waiver of such right and the waiver by
Beneficiary of any default shall not constitute a waiver of any other or
subsequent default.
17. Time is of the essence hereof. Upon default by Trustor in the
payment of any indebtedness secured hereby or in the performance of any
agreement hereunder, including, but not limited to the First Trust Deed, all
sums secured hereby shall immediately become due and payable at the option of
Beneficiary. In the event of such default, Beneficiary may execute or cause
Trustee to execute a written notice of default and of election to cause the
Trust Property to be sold to satisfy the obligations hereof, and Trustee shall
file such notice for record in each county wherein the Trust Property or some
part or parcel thereof is situated. Beneficiary also shall deposit with
Trustee, the Note and all documents evidencing expenditures secured hereby.
18. After the lapse of such time as may then be required by law
following the recordation of said notice of default, and notice of default and
notice of sale having been given as then required by law, Trustee, without
demand on Trustor, shall sell the Trust Property on the date and at the time
and place designated in said notice of sale, either as a whole or in separate
parcels, and in such order as it may determine (but subject to any statutory
right of Trustor to direct the order in which the Trust Property, if consisting
of several known lots or parcels, shall be sold), at public auction to the
highest bidder, the purchase price payable in lawful money of the United States
at the time of sale. The person conducting the sale may, for any cause he
deems expedient, postpone the sale from time to time until it shall be
completed and, in every case, notice of postponement shall be given by public
declaration thereof by such person at the time and place last appointed for the
sale; provided, if the sale is postponed for longer than one day beyond the day
designated in the notice of sale, notice thereof shall be given in the same
manner as the original notice of sale. Trustee shall execute and deliver to
the purchaser its deed conveying the Trust Property so sold, but without any
covenant or warranty, express or implied. The recitals in the deed of any
matters or facts shall be conclusive proof of the truthfulness thereof. Any
person, including Beneficiary, may bid at the sale. Trustee shall apply the
proceeds of the sale to payment of (1) the costs and expenses of exercising the
power of sale and the sale, including the payment of Trustee's and attorney's
fees; (2) costs of any evidence of title procured in connection with such sale
and revenue stamps on the Trustee's deed; (3) all sums expended pursuant the
terms hereof, not then
5
<PAGE> 33
repaid; (4) all other sums then secured hereby; and (5) the remainder, if any,
to the person or persons legally entitled thereto, or the Trustee, in its
discretion, may deposit the balance of such proceeds with the County Clerk of
the county in which the sale took place.
19. Upon the occurrence of any default hereunder, Beneficiary
shall have the option to declare all sums secured hereby immediately due and
payable and foreclose this Trust Deed in the manner provided by law for the
foreclosure of mortgages on real property and Beneficiary shall be entitled to
recovery in such proceeding of all costs and expenses incident thereto,
including a reasonable attorney's fee.
20. Beneficiary may appoint a successor trustee at any time by
filing for record in the office of the County Recorder of each county in which
the Trust Property or some part thereof is situated, a substitution of trustee.
From the time the substitution is filed for record, the new trustee shall
succeed to all the powers, duties, authority and title of the trustee named
herein or of any successor trustee. Each such substitution shall be executed
and acknowledged, and notice thereof shall be given and proof thereof made, in
the manner provided by law.
21. This Trust Deed shall apply to, inure to the benefit of, and
bind all parties hereto, their heirs, legatees, devisees, administrators,
executors, successors and assigns. The term "Beneficiary" shall mean the owner
and holder, including any pledgee, of the note secured hereby. In this Trust
Deed, whenever the context requires, the masculine gender includes the feminine
and/or neuter, and the singular number includes the plural.
22. Trustee accepts this trust when this Trust Deed, duly executed
and acknowledged, is made a public record as provided by law. Trustee is not
obligated to notify any party hereto of pending sale under any other Trust Deed
or of any action or proceeding in which Trustor, Beneficiary, or Trustee shall
be a party, unless brought by Trustee.
23. This Trust Deed shall be construed according to the laws of
the State of Utah.
24. The undersigned Trustor requests that a copy of any notice of
default and of any notice of sale hereunder be mailed to them at the address
hereinbefore set forth.
25. The obligations secured by this Trust Deed shall become
immediately due and payable at the option of Beneficiary if, without the prior
written consent of Beneficiary, any part of the Trust Property or any interest
therein is in any manner directly or indirectly further mortgaged, encumbered,
sold, transferred, conveyed, assigned, or subjected to a lien (not removed in
thirty (30) days), or if the Trust Property is not kept in good condition and
repair or if any portion of the Trust Property is taken by any governmental or
quasi-governmental body through eminent domain or otherwise. Trustor shall pay
all costs and expenses incurred by Beneficiary and/or Trustee in evaluating and
investigating any consent requested by Trustor.
26. Notwithstanding any provision contained in this Trust Deed to
the contrary, the covenants, warranties, agreements and representations
evidenced by this Trust Deed shall be joint and several between Joseph A.
Cannon and Janeal B. Cannon. The use of the neuter singular pronoun to refer
to Trustor shall be deemed a proper reference even though Trustor may be an
individual, partnership, association, corporation or a group of two or more
individuals, partnerships, associations or corporations. The necessary
grammatical changes required to make the provisions of this Deed of Trust apply
in the plural sense where more than one Trustor exists and to individuals,
partnerships, associations, corporations, males or females, shall in all cases
be assumed as though in each case fully expressed.
6
<PAGE> 34
EXECUTED on or as of the day and year first above written.
"Trustor":
/s/ JOSEPH A. CANNON
------------------------------------
Joseph A. Cannon, an individual
/s/ JANEAL B. CANNON
------------------------------------
Janeal B. Cannon, an individual
7
<PAGE> 35
STATE OF UTAH )
: ss.
County of Utah )
The foregoing instrument was acknowledged before me this 27th day of
September, 1996, by Joseph A. Cannon.
/s/ Lori G. Loumis
------------------------------------
(Seal) Notary Public
My commission expires: Residing at:
February 6, 1998 Salt Lake City, Utah
- ----------------------- ------------------------------------
STATE OF UTAH )
: ss.
County of Utah )
The foregoing instrument was acknowledged before me this 27th day of
September, 1996, by Janeal B. Cannon.
/s/ Lori G. Loumis
------------------------------------
(Seal) Notary Public
My commission expires: Residing at:
February 6, 1998 Salt Lake City, Utah
- ----------------------- ------------------------------------
8
<PAGE> 36
EXHIBIT A
TO
TRUST DEED
_________________________________________________________
THE "TRUST PROPERTY"
The Trust Property described in the foregoing Trust Deed is situated
in Utah County, State of Utah, and is more particularly described as follows:
LOT 11, PLAT "A", RIVERWOOD ESTATES, PROVO, UTAH ACCORDING TO
THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE UTAH
COUNTY RECORDER'S OFFICE.
<PAGE> 37
AFTER RECORDING, PLEASE RETURN TO:
Brian G. Lloyd, Esq.
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
FIRST AMENDMENT TO DEED OF TRUST
THIS FIRST AMENDMENT TO DEED OF TRUST (the "Amendment") is executed as
of the 23rd day of December, 1996, by JOSEPH A. CANNON and JANEAL B. CANNON,
Husband and Wife as Joint Tenants, whose address for purposes hereof is 3919
North Riverwood Drive, Provo, Utah 84604 (hereinafter, collectively,
"Trustor"), and GENEVA STEEL COMPANY, a Utah corporation ("Beneficiary"), whose
address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058.
RECITALS
A. Trustor is the record owner of fee title to a certain tract of
real property lying in the County of Utah, State of Utah, the legal description
of which is attached hereto as Exhibit "A" (the "Trust Property").
B. Joseph A. Cannon ("Borrower"), has obtained a loan (the
"Loan") from Beneficiary in the original principal amount of FOUR HUNDRED SIXTY
THOUSAND and no/100 DOLLARS ($460,000.00), which loan is evidenced by a
promissory note in the same principal amount, dated as of September 27, 1996,
made by Borrower payable to the order of Beneficiary (the "Original Note") and
secured by certain liens and security interests with respect to the Trust
Property created by certain instruments, including, without limitation, a Deed
of Trust (the "Trust Deed"), dated as of September 27, 1996, executed by
Trustor, as trustor, to Associated Title Company, as trustee, for the benefit
of Beneficiary, as beneficiary.
C. As of the date hereof, Borrower has obtained from Beneficiary
an increase in the amount of the Loan in the additional principal amount of
FORTY THOUSAND and no/100 DOLLARS ($40,000.00), which increase is evidenced by
a Promissory Note (the "Additional Note") of even date herewith made by
Borrower payable to the order of Beneficiary in the aggregate principal amount
of FORTY THOUSAND and no/100 DOLLARS ($40,000.00).
<PAGE> 38
D. The Original Note, the Additional Note, the Trust Deed, and
all other agreements, instruments, certificates and documents executed by
Trustor or Borrower in connection with the Loan are referred to collectively as
the "Loan Documents."
E. Trustor has requested, and Beneficiary has consented to,
certain modifications of the Trust Deed as of the date set forth above.
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth in this Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Amendment to Trust Deed. The Trust Deed is hereby amended in
the following respects:
(a) Recital B. Recital B of the Trust Deed and the
paragraph following immediately thereafter are hereby deleted in their entirety
and replaced with the following provisions:
B. Joseph A. Cannon ("Borrower") has obtained a
loan (the "Loan") from Beneficiary in the aggregate principal amount
of FIVE HUNDRED THOUSAND and no/100 DOLLARS ($500,000.00), as
evidenced by a promissory note, dated as of September 27, 1996, made
by Borrower payable to the order of Beneficiary (the "Original Note")
and a promissory note, dated as of December 23, 1996, made by Borrower
payable to the order of Beneficiary (the "Additional Note"), which
promissory notes also provide for interest on the unpaid principal
balance of the Loan at the rate or rates therein set forth, described,
or provided for, and payable at the times and in the manner therein
set forth (the Original Note and the Additional Note are referred to
collectively hereinafter as the "Notes").
NOW, THEREFORE, in order to secure (A) The payment
and performance of each and every obligation of Borrower under the
Notes; (B) Any extensions, renewals, modifications or replacements of
the Notes or of the obligations evidenced thereby, regardless of the
extent of or the subject matter of any such extension, renewal,
modification or replacement; (C) The payment and performance of each
and every agreement and obligation of Trustor under this Trust Deed
and under any other instrument given to evidence or further secure the
payment and performance of any obligation secured hereby; (D) The
payment of such additional loans or advances as may hereafter be made
by Beneficiary to Borrower or Trustor or their respective successors
or assigns, when evidenced by a promissory note or notes reciting that
they are secured by this Trust Deed; and (E) The payment of all sums
expended or advanced by Beneficiary or Trustee pursuant to the terms
of this Trust Deed, the Notes, or any instrument further
-2-
<PAGE> 39
evidencing or securing any obligation secured hereby, together with
interest thereon as herein and therein provided (the foregoing items
(A) through (E) and the matters referred to therein being hereinafter
collectively referred to as the "Obligations"), Trustor hereby
CONVEYS, WARRANTS, and TRANSFERS to Trustee, IN TRUST, WITH POWER OF
SALE, the following property situated in Utah County, State of Utah
(the "Trust Property"):
(b) Reference to Notes. All references in the Trust Deed
to the "Note" shall be amended and modified to refer to the "Notes" and such
references shall refer collectively to the Original Note and the Additional
Note.
2. General Provisions. Except as modified by this Amendment, the
Trust Deed and the other Loan Documents and each provision thereof are hereby
ratified and affirmed in their entirety. This Amendment modifies and amends
the Trust Deed, but does not in any manner cancel, repeal, extinguish, replace,
satisfy, or release the obligations evidenced and secured by the Trust Deed or
the other Loan Documents. This Amendment shall in no manner impair, limit,
restrict, or otherwise affect the liens, security interests, assignments, or
other rights, benefits, remedies, or prerogatives created and evidenced by the
Loan Documents; and such liens, security interests, assignments, and other
rights, benefits, remedies, and prerogatives are valid and subsisting and shall
continue with their original priority until all of the obligations under the
Loan Documents, as modified and amended hereby, are paid and performed in full.
The captions in this Amendment shall be solely for convenience of reference.
This Amendment may be executed in any number of counterparts, each of which
shall, when so executed and delivered, constitute in the aggregate but one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
"TRUSTOR"
/s/ JOSEPH A. CANNON
------------------------------------
Joseph A. Cannon, an individual
/s/ JANEAL B. CANNON
------------------------------------
Janeal B. Cannon, an individual
-3-
<PAGE> 40
"BENEFICIARY"
GENEVA STEEL COMPANY,
a Utah corporation
By /s/ KEN C. JOHNSON
---------------------------------
Title Vice President
------------------------------
"TRUSTOR"
STATE OF UTAH )
:
COUNTY OF UTAH )
The foregoing instrument was acknowledged before me this 23rd day of
December, 1996, by Joseph A. Cannon, an individual.
/s/ LORI G. LOUMIS
------------------------------------
NOTARY PUBLIC
My Commission Expires: Residing at: Salt Lake City, Utah
February 6, 1998
- ---------------------------
STATE OF UTAH )
:
COUNTY OF UTAH )
The foregoing instrument was acknowledged before me this 23rd day of
December, 1996, by Janeal B. Cannon, an individual.
/s/ LORI G. LOUMIS
------------------------------------
NOTARY PUBLIC
My Commission Expires: Residing at: Salt Lake City, Utah
February 6, 1998
- ---------------------------
-4-
<PAGE> 41
"BENEFICIARY"
STATE OF UTAH )
:
COUNTY OF UTAH )
The foregoing instrument was acknowledged before me this 23rd day of
December, 1996, by Ken C. Johnson, the V.P. of Geneva Steel Company, a Utah
corporation.
/s/ LORI G. LOUMIS
------------------------------------
NOTARY PUBLIC
My Commission Expires: Residing at: Salt Lake City, Utah
February 6, 1998
- ---------------------------
-5-
<PAGE> 42
EXHIBIT "A"
to
FIRST AMENDMENT TO DEED OF TRUST
LEGAL DESCRIPTION
The Property referred to in the foregoing instrument is located in Utah County,
State of Utah, and is more particularly described as follows:
LOT 11, PLAT "A," RIVERWOOD ESTATES, PROVO, UTAH, ACCORDING TO
THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE UTAH
COUNTY RECORDER'S OFFICE.
<PAGE> 43
AFTER RECORDING, PLEASE RETURN TO:
Brian G. Lloyd, Esq.
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
FIRST AMENDMENT TO UTAH DEED OF TRUST,
SECURITY AGREEMENT AND FINANCING STATEMENT
THIS FIRST AMENDMENT TO UTAH DEED OF TRUST, SECURITY AGREEMENT AND
FINANCING STATEMENT (the "Amendment") is executed as of the 23rd day of
December, 1996, by RIVERWOOD LIMITED PARTNERSHIP, a Utah limited partnership
("Trustor"), whose address for purposes hereof is 3919 North Riverwood Drive,
Provo, Utah 84604, and GENEVA STEEL COMPANY, a Utah corporation
("Beneficiary"), whose address for purposes hereof is 10 South Geneva Road,
Vineyard, Utah 84058.
RECITALS
A. Trustor is the record owner of fee title to a certain tract of
real property lying in the County of Wayne, State of Utah, the legal
description of which is attached hereto as Exhibit "A" (the "Property").
B. Joseph A. Cannon, a general partner of Trustor ("Borrower"),
has obtained a loan (the "Loan") from Beneficiary in the original principal
amount of FOUR HUNDRED SIXTY THOUSAND and no/100 DOLLARS ($460,000.00), which
loan is evidenced by a promissory note in the same principal amount, dated
September 27, 1996, made by Borrower payable to the order of Beneficiary (the
"Original Note") and secured by certain liens and security interests with
respect to the Property created by certain instruments, including, without
limitation, a Utah Deed of Trust, Security Agreement and Financing Statement
(the "Trust Deed") dated as of September 27, 1996 and executed by Trustor, as
trustor, to Associated Title Company, as trustee, for the benefit of
Beneficiary, as beneficiary.
C. As of the date hereof, Borrower has obtained from Beneficiary
an increase in the amount of the Loan in the additional principal amount of
FORTY THOUSAND and no/100 DOLLARS ($40,000.00), which increase is evidenced by
a Promissory Note (the "Additional Note") of even date herewith made by
Borrower payable to the order of Beneficiary in the aggregate principal amount
of FORTY THOUSAND and no/100 DOLLARS ($40,000.00).
<PAGE> 44
D. The Original Note, the Additional Note, the Trust Deed, and
all other agreements, instruments, certificates and documents executed by
Trustor or Borrower in connection with the Loan are referred to collectively as
the "Loan Documents."
E. Trustor has requested, and Beneficiary has consented to,
certain modifications of the Trust Deed as of the date set forth above.
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth in this Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Amendment to Trust Deed. The Trust Deed is hereby amended in
the following respects:
(a) Recital B. Recital B of the Trust Deed and the
paragraph following immediately thereafter are hereby deleted in their entirety
and replaced with the following provisions:
B. Joseph A. Cannon, a general partner of
Trustor ("Borrower"), has obtained a loan (the "Loan") from
Beneficiary in the aggregate principal amount of FIVE HUNDRED THOUSAND
and no/100 DOLLARS ($500,000.00), as evidenced by a promissory note,
dated as of September 27, 1996, made by Borrower payable to the order
of Beneficiary (the "Original Note") and a promissory note, dated as
of December 23, 1996, made by Borrower payable to the order of
Beneficiary (the "Additional Note"), which promissory notes also
provide for interest on the unpaid principal balance of the Loan at
the rate or rates therein set forth, described, or provided for, and
payable at the times and in the manner therein set forth (the Original
Note and the Additional Note are referred to collectively hereinafter
as the "Notes").
NOW, THEREFORE, in order to secure (A) The payment
and performance of each and every obligation of Borrower under the
Notes; (B) Any extensions, renewals, modifications or replacements of
the Notes or of the obligations evidenced thereby, regardless of the
extent of or the subject matter of any such extension, renewal,
modification or replacement; (C) The payment and performance of each
and every agreement and obligation of Trustor under this Trust Deed
and under any other instrument given to evidence or further secure the
payment and performance of any obligation secured hereby; (D) The
payment of such additional loans or advances as may hereafter be made
by Beneficiary to Borrower or Trustor, or their respective successors
or assigns, when evidenced by a promissory note or notes reciting that
they are secured by this Trust Deed; and (E) The payment of all sums
expended or advanced by Beneficiary or Trustee pursuant to the terms
of this Trust Deed, the Notes, or any instrument further
-2-
<PAGE> 45
evidencing or securing any obligation secured hereby, together with
interest thereon as herein and therein provided (the foregoing items
(A) through (E) and the matters referred to therein being hereinafter
collectively referred to as the "Obligations"), Trustor hereby
CONVEYS, WARRANTS, and TRANSFERS to Trustee, IN TRUST, WITH POWER OF
SALE, the following property, rights, privileges, interests, and
franchises, to-wit:
(b) Reference to Notes. All references in the Trust Deed
to the "Note" shall be amended and modified to refer to the "Notes" and such
references shall refer collectively to the Original Note and the Additional
Note.
2. General Provisions. Except as modified by this Amendment, the
Trust Deed and the other Loan Documents and each provision thereof are hereby
ratified and affirmed in their entirety. This Amendment modifies and amends
the Trust Deed, but does not in any manner cancel, repeal, extinguish, replace,
satisfy, or release the obligations evidenced and secured by the Trust Deed or
the other Loan Documents. This Amendment shall in no manner impair, limit,
restrict, or otherwise affect the liens, security interests, assignments, or
other rights, benefits, remedies, or prerogatives created and evidenced by the
Loan Documents; and such liens, security interests, assignments, and other
rights, benefits, remedies, and prerogatives are valid and subsisting and shall
continue with their original priority until all of the obligations under the
Loan Documents, as modified and amended hereby, are paid and performed in full.
The captions in this Amendment shall be solely for convenience of reference.
This Amendment may be executed in any number of counterparts, each of which
shall, when so executed and delivered, constitute in the aggregate but one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
"TRUSTOR"
RIVERWOOD LIMITED PARTNERSHIP,
a Utah limited partnership
By /s/ JOSEPH A. CANNON
---------------------------------
Joseph A. Cannon, General Partner
-3-
<PAGE> 46
"BENEFICIARY"
GENEVA STEEL COMPANY,
a Utah corporation
By /s/ Ken C. Johnson
------------------------------
Title Vice President
------------------------------
"TRUSTOR"
STATE OF UTAH )
:
COUNTY OF UTAH )
The foregoing instrument was acknowledged before me this 23rd day of
December, 1996, by Joseph A. Cannon, a general partner of Riverwood Limited
Partnership, a Utah limited partnership.
/s/ LORI G. LOUMIS
------------------------------------
NOTARY PUBLIC
My Commission Expires: Residing at: Salt Lake City, Utah
February 6, 1998
- ---------------------------
"BENEFICIARY"
STATE OF UTAH )
:
COUNTY OF UTAH )
The foregoing instrument was acknowledged before me this 23rd day of
December, 1996, by Ken C. Johnson, the V.P. of Geneva Steel Company, a Utah
corporation.
/s/ LORI G. LOUMIS
------------------------------------
NOTARY PUBLIC
My Commission Expires: Residing at: Salt Lake City, Utah
February 6, 1998
- ---------------------------
-4-
<PAGE> 47
EXHIBIT "A"
to
FIRST AMENDMENT TO UTAH DEED OF TRUST,
SECURITY AGREEMENT AND FINANCING STATEMENT
LEGAL DESCRIPTION
The Property referred to in the foregoing instrument is located in Wayne
County, State of Utah, and is more particularly described as follows:
Parcel No. 1
Southeast quarter of Southeast quarter of
Section 31, Township 29 South, Range 5 East, Salt Lake
Base and Meridian, LESS: Beginning at the Southeast
corner of the Southwest quarter of the Southeast
quarter of the Southeast quarter of Section 31,
Township 29 South, Range 5 East, Salt Lake Base and
Meridian; thence North 89 degrees 22'43" West 660.70
feet, along the Section line to the Southwest corner
of the Southeast quarter of the Southeast quarter of
said Section 31; thence North 30 feet; thence North 89
degrees 19'10" East 277.52 feet; thence North 78
degrees 23'45" East 177.88 feet; thence North 86
degrees 47'10" East 176.34 feet; thence South 86
degrees 07'10" East 32.95 feet; thence South 93.90
feet to the point of beginning.
SUBJECT TO AND TOGETHER WITH a 20 foot wide
right-of-way of ingress and egress through property.
ALSO SUBJECT TO current taxes and assessments
and all liens, encumbrances, rights-of-way,
easements, restrictions, reservations and other
matters of record or enforceable at law or in equity.
<PAGE> 48
Parcel No. 2
Beginning at the Southwest corner of Section
32, Township 29 South, Range 5 East, Salt Lake Base
and Meridian, and running thence North 0 degrees
28'52" East along the Section line 1000 feet; thence
East 435 feet; thence South 1000 feet to the South
line of said Section 32; thence North 89 degrees
44'48" West along Section line 435 feet, more or less,
to the point of beginning.
TOGETHER with a non-exclusive easement and
right-of-way for rights of ingress, egress, and
utilities, over and across the existing roadway
running from Highway 117 to the Property, running
through the remaining property owned by Bill Jones on
June 21, 1991.
SUBJECT TO current taxes and assessments and
all liens, encumbrances, rights-of-way, easements,
restrictions, reservations and other matters of
records, or enforceable in law and equity.
<PAGE> 49
AFTER RECORDING, PLEASE RETURN TO:
Brian G. Lloyd, Esq.
Kimball, Parr, Waddoups, Brown & Gee
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
FIRST AMENDMENT TO DEED OF TRUST
THIS FIRST AMENDMENT TO DEED OF TRUST (the "Amendment") is executed as
of the 23rd day of December, 1996, by JOSEPH A. CANNON and JANEAL B. CANNON,
Husband and Wife as Joint Tenants, whose address for purposes hereof is 3919
North Riverwood Drive, Provo, Utah 84604 (hereinafter, collectively,
"Trustor"), and GENEVA STEEL COMPANY, a Utah corporation ("Beneficiary"), whose
address for purposes hereof is 10 South Geneva Road, Vineyard, Utah 84058.
RECITALS
A. Trustor is the record owner of fee title to a certain tract of
real property lying in the County of Utah, State of Utah, the legal description
of which is attached hereto as Exhibit "A" (the "Trust Property").
B. Joseph A. Cannon ("Borrower"), has obtained a loan (the
"Loan") from Beneficiary in the original principal amount of FOUR HUNDRED SIXTY
THOUSAND and no/100 DOLLARS ($460,000.00), which loan is evidenced by a
promissory note in the same principal amount, dated as of September 27, 1996,
made by Borrower payable to the order of Beneficiary (the "Original Note") and
secured by certain liens and security interests with respect to the Trust
Property created by certain instruments, including, without limitation, a Deed
of Trust (the "Trust Deed"), dated as of September 27, 1996, executed by
Trustor, as trustor, to Associated Title Company, as trustee, for the benefit
of Beneficiary, as beneficiary.
C. As of the date hereof, Borrower has obtained from Beneficiary
an increase in the amount of the Loan in the additional principal amount of
FORTY THOUSAND and no/100 DOLLARS ($40,000.00), which increase is evidenced by
a Promissory Note (the "Additional Note") of even date herewith made by
Borrower payable to the order of Beneficiary in the aggregate principal amount
of FORTY THOUSAND and no/100 DOLLARS ($40,000.00).
<PAGE> 50
D. The Original Note, the Additional Note, the Trust Deed, and
all other agreements, instruments, certificates and documents executed by
Trustor or Borrower in connection with the Loan are referred to collectively as
the "Loan Documents."
E. Trustor has requested, and Beneficiary has consented to,
certain modifications of the Trust Deed as of the date set forth above.
NOW THEREFORE, in consideration of the mutual promises and covenants
set forth in this Amendment, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. Amendment to Trust Deed. The Trust Deed is hereby amended in
the following respects:
(a) Recital B. Recital B of the Trust Deed and the
paragraph following immediately thereafter are hereby deleted in their entirety
and replaced with the following provisions:
B. Joseph A. Cannon ("Borrower") has obtained a
loan (the "Loan") from Beneficiary in the aggregate principal amount
of FIVE HUNDRED THOUSAND and no/100 DOLLARS ($500,000.00), as
evidenced by a promissory note, dated as of September 27, 1996, made
by Borrower payable to the order of Beneficiary (the "Original Note")
and a promissory note, dated as of December 23, 1996, made by Borrower
payable to the order of Beneficiary (the "Additional Note"), which
promissory notes also provide for interest on the unpaid principal
balance of the Loan at the rate or rates therein set forth, described,
or provided for, and payable at the times and in the manner therein
set forth (the Original Note and the Additional Note are referred to
collectively hereinafter as the "Notes").
NOW, THEREFORE, in order to secure (A) The payment
and performance of each and every obligation of Borrower under the
Notes; (B) Any extensions, renewals, modifications or replacements of
the Notes or of the obligations evidenced thereby, regardless of the
extent of or the subject matter of any such extension, renewal,
modification or replacement; (C) The payment and performance of each
and every agreement and obligation of Trustor under this Trust Deed
and under any other instrument given to evidence or further secure the
payment and performance of any obligation secured hereby; (D) The
payment of such additional loans or advances as may hereafter be made
by Beneficiary to Borrower or Trustor or their respective successors
or assigns, when evidenced by a promissory note or notes reciting that
they are secured by this Trust Deed; and (E) The payment of all sums
expended or advanced by Beneficiary or Trustee pursuant to the terms
of this Trust Deed, the Notes, or any instrument further
-2-
<PAGE> 51
evidencing or securing any obligation secured hereby, together with
interest thereon as herein and therein provided (the foregoing items
(A) through (E) and the matters referred to therein being hereinafter
collectively referred to as the "Obligations"), Trustor hereby
CONVEYS, WARRANTS, and TRANSFERS to Trustee, IN TRUST, WITH POWER OF
SALE, the following property situated in Utah County, State of Utah
(the "Trust Property"):
(b) Reference to Notes. All references in the Trust Deed
to the "Note" shall be amended and modified to refer to the "Notes" and such
references shall refer collectively to the Original Note and the Additional
Note.
2. General Provisions. Except as modified by this Amendment, the
Trust Deed and the other Loan Documents and each provision thereof are hereby
ratified and affirmed in their entirety. This Amendment modifies and amends
the Trust Deed, but does not in any manner cancel, repeal, extinguish, replace,
satisfy, or release the obligations evidenced and secured by the Trust Deed or
the other Loan Documents. This Amendment shall in no manner impair, limit,
restrict, or otherwise affect the liens, security interests, assignments, or
other rights, benefits, remedies, or prerogatives created and evidenced by the
Loan Documents; and such liens, security interests, assignments, and other
rights, benefits, remedies, and prerogatives are valid and subsisting and shall
continue with their original priority until all of the obligations under the
Loan Documents, as modified and amended hereby, are paid and performed in full.
The captions in this Amendment shall be solely for convenience of reference.
This Amendment may be executed in any number of counterparts, each of which
shall, when so executed and delivered, constitute in the aggregate but one and
the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
"TRUSTOR"
/s/ JOSEPH A. CANNON
------------------------------------
Joseph A. Cannon, an individual
/s/ JANEAL B. CANNON
------------------------------------
Janeal B. Cannon, an individual
-3-
<PAGE> 52
"BENEFICIARY"
GENEVA STEEL COMPANY,
a Utah corporation
By /s/ Ken C. Johnson
------------------------------
Title Vice President
------------------------------
"TRUSTOR"
STATE OF UTAH )
:
COUNTY OF UTAH )
The foregoing instrument was acknowledged before me this 23rd day of
December, 1996, by Joseph A. Cannon, an individual.
/s/ LORI G. LOUMIS
------------------------------------
NOTARY PUBLIC
My Commission Expires: Residing at: Salt Lake City, Utah
February 6, 1998
- ---------------------------
STATE OF UTAH )
:
COUNTY OF UTAH )
The foregoing instrument was acknowledged before me this 23rd day of
December, 1996, by Janeal B. Cannon, an individual.
/s/ LORI G. LOUMIS
------------------------------------
NOTARY PUBLIC
My Commission Expires: Residing at: Salt Lake City, Utah
February 6, 1998
- ---------------------------
-4-
<PAGE> 53
"BENEFICIARY"
STATE OF UTAH )
:
COUNTY OF UTAH )
The foregoing instrument was acknowledged before me this 23rd day of
December, 1996, by Ken C. Johnson, the V.P. of Geneva Steel Company, a Utah
corporation.
/s/ LORI G. LOUMIS
------------------------------------
NOTARY PUBLIC
My Commission Expires: Residing at: Salt Lake City, Utah
February 6, 1998
- ---------------------------
-5-
<PAGE> 54
EXHIBIT "A"
to
FIRST AMENDMENT TO DEED OF TRUST
LEGAL DESCRIPTION
The Property referred to in the foregoing instrument is located in Utah County,
State of Utah, and is more particularly described as follows:
LOT 11, PLAT "A," RIVERWOOD ESTATES, PROVO, UTAH, ACCORDING TO
THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE UTAH
COUNTY RECORDER'S OFFICE.
<PAGE> 55
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement"), dated as of February 13,
1997, made by JOSEPH A. CANNON, an individual, and JANEAL B. CANNON, an
individual (collectively, the "Grantor"), in favor of GENEVA STEEL COMPANY, a
Utah corporation ("Lender"),
WITNESSETH:
WHEREAS, Lender has advanced funds to Grantor pursuant to certain
promissory notes dated September 27, 1996 ($460,000), December 23, 1996
($40,000) and February 13, 1997 ($200,000) (the "Promissory Notes") in the
total original principal amount of Seven Hundred Thousand Dollars (the "Loan")
and Grantor has executed and delivered to Lender the Promissory Notes
evidencing Grantor's obligation to repay the Loan; and
WHEREAS, as a condition of Lender making the Loan, Grantor is required
to enter into this Agreement for the purpose of securing their full and
complete performance under the Promissory Notes; and
WHEREAS, Grantor is willing to give and grant to Lender a security
interest in the Collateral (as defined below) as herein provided.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing premises and in
order to induce Lender make the Loan, Grantor hereby agrees with Lender, as
follows:
1. Defined Terms. As used in this Agreement, the following terms
have the meanings specified below (such meanings being equally applicable to
both the singular and plural forms of the terms defined):
"Collateral" has the meaning assigned to such term in Section
2 of this Agreement.
"Consumer Goods" means any "consumer goods," as such term is
defined in Section 9-109(1) of the UCC, now owned or hereafter
acquired by Grantor.
"Event of Default" has the meaning set forth in Section 7 of
this Agreement.
"General Intangible" means any "general intangible," as such
term is defined in Section 9-106 of the UCC now owned or hereafter
acquired by Grantor, and includes, without limitation, all licenses,
permits, rights of indemnification and all right, title and interest
which Grantor may now or hereafter have in or under any contract or
agreement now owned or hereafter acquired by Grantor.
"Instrument" means any "instrument" as that term is defined in
Section 9-105(i) of the UCC, now owned or hereafter acquired by
Grantor.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), security interest or preference, priority or
other security agreement, preferential arrangement or charge of any
kind or nature whatsoever, whether voluntary, involuntary or by
operation of law.
"Proceeds" means "proceeds," as such term is defined in
Section 9-306(1) of the UCC.
<PAGE> 56
"Secured Obligations" means all of (a) Grantor's obligations
under the Promissory Notes, (b) Grantor's obligations under this
Agreement in accordance with the terms hereof and (c) Grantor's
obligations under two Deeds of Trust executed by Grantor, as trustor,
to Associated Title Company, as trustee, for the use and benefit of
Lender (the "Trust Deeds"), as the Promissory Notes, this Agreement
and the Trust Deeds have been or may in the future be amended,
modified or supplemented, including, but not limited to, the
obligations to perform and observe all covenants and conditions
contained in the Promissory Notes, this Agreement and the Trust Deeds,
to indemnify Lender for certain liabilities herein provided and to pay
all amounts advanced in connection with the Loan.
"Tax Returns" means a United States federal income tax return
and Utah State income tax return filed by Grantor for the tax year
ended December 31, 1996.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Utah; provided, however, in
the event that, by reason of mandatory provisions of law, any or all
of the attachment, perfection or priority of Lender's security
interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of Utah, the term
"UCC" shall means the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of
definitions related to such provisions.
2. Grant of Security Interest. As collateral security for the
full and prompt payment when due (whether at stated maturity, by acceleration
or otherwise) of, and the performance of, all the Secured Obligations, Grantor
hereby assigns, conveys, mortgages, pledges, hypothecates and transfers to
Lender, and hereby grants to Lender a security interest in, all of Grantor's
right, title and interest in, to the following (hereinafter referred to as the
"Collateral":
(a) Grantor's Utah Art Collection as more particularly
described on Schedule I hereto;
(b) Grantor's European Art Collection as more
particularly described on Schedule I hereto;
(c) Any and all amounts payable to or for the benefit of
Grantor by the United States of America or any agency thereof,
including, without limitation, the United States Internal Revenue
Service and the United States Treasury Department, in connection with
Grantor's preparation and filing of the federal portion of the Tax
Return, representing taxes paid by Grantor in excess of Grantor's
actual federal income tax obligation for the 1996 tax year.
(d) Any and all amounts payable to or for the benefit of
Grantor by the State of Utah or any agency thereof, including, without
limitation, the Utah State Tax Commission and the Utah State
Treasurer's Office, in connection with Grantor's preparation and
filing of the state portion of the Tax Returns, representing taxes
paid by Grantor in excess of Grantor's actual state income tax
obligation for the 1996 tax year.
(e) to the extent not otherwise included, all Proceeds,
both cash and noncash, of the foregoing items of Collateral.
2
<PAGE> 57
3. Representation and Warranties. Grantor hereby represents and
warrants to Lender as follows:
(a) Each of the representations and warranties made by Grantor in
this Agreement is true and correct in all material respects.
(b) Grantor is the sole owner of each item of the Collateral in
which a security interest is granted hereunder, having good title thereto, free
and clear of any and all Liens except for the security interest granted to
Lender pursuant to this Agreement.
(c) No effective security agreement, financing statement,
equivalent security or Lien instrument or continuation statement covering all
or any part of the Collateral is on file or of record in any public office,
except (i) such as may have been filed by Grantor in favor of Lender pursuant
to this Agreement or the Trust Deeds, and (ii) those for which a valid release
has been executed and filed with the appropriate public office.
(d) Appropriate financing statements having been filed in the
jurisdictions listed on Schedule II hereto, this Agreement is effective to
create a valid and continuing security interest in the Collateral prior to all
other Liens. All actions necessary or desirable to protect and perfect such
security interest in each item of the Collateral has been duly taken. If,
after the date hereof, additional filings are required to create a valid and
continuing security interest in the Collateral prior to all other Liens,
Grantor shall promptly notify Lender, submit an appropriate amendment to
Schedule II hereto and file all such financing statements.
(f) The Collateral is in Grantor's control or possession and is
located at the location(s) set forth on Schedule III hereto.
4. Covenants. Grantor covenants and agrees with Lender that from
and after the date of this Agreement and until the Secured Obligations are
fully satisfied:
(a) Further Documentation: Pledge of Instruments. At any time and
from time to time, upon the written request of Lender, and at the sole expense
of Grantor, Grantor will promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Lender may
reasonably deem desirable to obtain the full benefits of this Agreement and of
the rights and powers herein granted, including, without limitation, the filing
of any financing or continuation statements under the UCC with respect to the
security interest granted hereby and transferring Proceeds to Lender's
possession (if a security interest in such Proceeds must be perfected by
possession). Grantor also hereby authorizes Lender to file any such financing
or continuation statement without the signature of Grantor to the extent
permitted by applicable law. If any of the Collateral shall be or become
evidenced by any Instrument, Grantor agrees to pledge such Instrument to Lender
and shall duly endorse such Instrument in a manner reasonably satisfactory to
Lender and deliver the same to Lender. Grantor hereby authorizes and directs
each obligor under any such Instrument, on and after the date of an Event of
Default, and upon demand of Lender, to remit directly to Lender all proceeds
arising out of the Instrument. Grantor hereby relieves each obligor under such
Instruments from any liability to Grantor by reason of the remittal of such
proceeds directly to Lender. Grantor agrees that within two (2) business days
of the receipt of such demand, they will remit to Lender all such proceeds
coming into their possession. Lender may apply all proceeds received to the
payment of the Secured Obligations, whether or not then due, in such order and
manner as Lender, in its sole discretion, may determine.
(b) Maintenance of Records. Grantor will keep and maintain at
their own cost and expense satisfactory and complete records of the Collateral,
including, without limitation, a record of all payments received and all
credits granted with respect to the Collateral and all other dealings with the
Collateral.
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<PAGE> 58
For Lender's further security, Grantor agrees that Lender shall have a special
property interest in all of Grantor's books and records pertaining to the
Collateral and, if an Event of Default shall have occurred and be continuing,
Grantor shall deliver and turn over any such books and records to Lender or to
its representatives at any time on demand of Lender.
(c) Indemnification. In any suit, proceeding or action brought by
Lender relating to any Instrument or General Intangible for any sum owing
thereunder, or to enforce any provision of any Instrument or General
Intangible, Grantor will save, indemnify and keep Lender harmless from and
against all expense, loss or damage suffered by reason of any defense, set-off,
counterclaim, recoupment or reduction of liability whatsoever of the obligor
thereunder, arising out of a breach by Grantor of any obligation thereunder or
arising out of any such other agreement, indebtedness or liability at any time
owing to, or in favor of, such obligor or its successors from Grantor, and all
such obligations of Grantor shall be and remain enforceable against and only
against Grantor and shall not be enforceable against Lender.
(d) Compliance with Laws, Etc. Grantor will comply, in all
material respects, with all federal, state and local laws, regulations and
statutes applicable to the Collateral or any part thereof or to the operation
of Grantor's business.
(e) Payment of Obligations. Grantor shall pay all liabilities and
obligations of Grantor promptly when due in accordance with their terms, and
pay and discharge promptly when due all taxes, assessments, and governmental
charges or levies imposed upon them or upon their income or profits or in
respect of their properties before the same shall become delinquent or in
default; provided, however, that Grantor shall not be required to pay and
discharge or to cause to be paid and discharged any such tax, assessment,
charge, levy, or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and so long as such
proceedings do not result in a risk of loss to Lender of any Collateral.
(f) Limitation on Liens on Collateral. Grantor will not create,
permit or suffer to exist, and will defend the Collateral against and take such
other action as is necessary to remove, any Lien on the Collateral), and will
defend the right, title and interest of Lender in and to any of Grantor's
rights to or under the Collateral and to the Proceeds thereof against the
claims and demands of all persons whomsoever.
(g) Maintenance of Insurance. Grantor will maintain, with
financially sound and reputable companies, insurance policies insuring the
Collateral to the full insurable value thereof against loss by fire, explosion,
theft and such other casualties as Lender may require. Proceeds of such
insurance shall be payable to Lender as its interest may appear and all
policies shall provide for ten (10) days minimum written cancellation notice to
Lender. Insurance proceeds may be applied by Lender toward payment of the
Promissory Notes, or any other obligations of Grantor to Lender, whether due or
not due, in such order of application as Lender shall determine. Grantor shall
deposit with Lender policies or certificates of insurance evidencing the
insurance coverage required by this section.
(h) Limitations on Disposition. Grantor will not sell, lease,
transfer or otherwise dispose of any of the Collateral, or attempt or contract
to do so, except as expressly permitted under this Agreement.
(i) Further Identification of Collateral. Grantor will, if so
requested by Lender, furnish to Lender, as often as Lender reasonably requests,
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Lender may reasonably
request, all in reasonable detail.
4
<PAGE> 59
(j) Notices. Grantor will advise Lender promptly, in reasonable
detail, (i) of any Lien or claim made or asserted against any of the
Collateral, and (ii) of the occurrence of any other event which would have a
material adverse effect on the aggregate value of the Collateral or in the
security interests created hereunder.
(k) Right of Inspection. Lender shall, at any reasonable time and
from time to time upon reasonable prior notice to Grantor (it being agreed that
Lender will use its best efforts to give at least five (5) business days' prior
notice unless an Event of Default shall have occurred and be continuing, in
which case no prior notice is necessary), have full and free access to all the
books and records and correspondence of Grantor, and Lender or its
representatives may examine the same, take extracts therefrom and make
photocopies thereof, and Grantor agrees to render to Lender, at Grantor's cost
and expense, such clerical and other assistance as may be reasonably requested
with regard thereto. Lender and its representatives shall at all times also
have the right to enter into and upon any premises belonging to, or under the
control of, Grantor where any of the Collateral is located for the purpose of
inspecting the same, observing its use or otherwise protecting its interests
therein, after giving any appropriate notice as required above.
(l) Continuous Perfection. Grantor will not change the location
of the Collateral as set forth on Schedule III hereto, except for the temporary
removal of certain items of Collateral in connection with their ordinary use,
unless they give Lender at least thirty (30) days' prior written notice thereof
and has taken such action as is necessary to cause the security interest of
Lender in the Collateral to continue to be perfected.
(m) Personal Property. The Collateral is now and shall be and
remain personal property, notwithstanding the manner in which the Collateral or
any part thereof shall be now or hereafter affixed, attached or annexed to real
estate. Grantor will obtain and deliver to Lender such instruments as may be
requested by Lender pursuant to which any person with an interest in any real
estate upon which any part or all of the tangible Collateral is now or may
hereafter be located, consents to the security interests granted herein,
disclaims any interest in the tangible Collateral as fixtures, waives in favor
of Lender all right to levy upon the Collateral for rent due or to become due
from Grantor, and authorizes Lender to enter upon any premises where the
Collateral is located at any time and to remove the Collateral.
(n) Tax Returns. Within seven (7) days after Grantor's filing of
the Tax Returns with the Internal Revenue Service and the Utah State Tax
Commission, as applicable, Grantor shall deliver to Lender a copy of the Tax
Returns, with all accompanying schedules. Upon Grantor's receipt of any amount
payable to or for the benefit of Grantor in connection with the Tax Returns,
Grantor shall immediately deliver and negotiate to Lender any such amount.
5. Lender's Appointment as Attorney-in-Fact.
(a) Grantor hereby irrevocably constitutes and appoints Lender and
any officer or agent thereof, with full power of substitution, as their true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of Grantor and in the name of Grantor or in its own name, from
time to time in Lender's discretion, for the purpose of protecting Lender's
rights and interests as established by this Agreement and for the purpose of
performing any of Lender's rights upon the occurrence of an Event of Default,
to take any and all appropriate action and to execute and deliver any and all
documents and instruments which Lender may deem necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby gives Lender the power and right, on behalf of
Grantor, without notice to or assent by Grantor to do the following:
(i) to ask, demand, collect, receive and give acquittance
and receipts for any and all moneys due and to become due under any
Collateral and, in the name of Grantor or in its own
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<PAGE> 60
name or otherwise, to take possession of and endorse (without
representation, warranty or recourse whatsoever) and collect any
checks, drafts, notes, acceptances or other Instruments for the
payment of moneys due under any Collateral and to file any claim or to
take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by Lender for the purpose of collecting
any and all such moneys due under any Collateral whenever payable; and
(ii) to pay or discharge taxes, Liens, security interests
or other encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Agreement and to pay all or any part of the premiums
therefor and the costs thereof; and
(iii) (A) to direct any party liable for any payment under
any of the Collateral to make payment of any and all moneys due, and
to become due thereunder, directly to Lender or as Lender shall
direct; (B) to receive payment of and receipt for any and all moneys,
claims and other amounts due, and to become due at any time, in
respect of, or arising out of, any Collateral; (C) to commence and
prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any Collateral;
(D) to defend any suit, action or proceeding brought against Grantor
with respect to any Collateral; (E) to settle, compromise or adjust
any suit, action or proceeding described above and, in connection
therewith, to give such discharges or releases as Lender may deem
appropriate; and (F) generally to sell, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though Lender were the absolute owner
thereof for all purposes, and to do, at Lender's option and Grantor's
expense, at any time, or from time to time, all acts and things which
Lender reasonably deems necessary to protect, preserve or realize upon
the Collateral and Lender's Lien therein, in order to effect the
intent of this Agreement, all as fully and effectively as Grantor
might do.
(b) Grantor hereby ratifies, to the extent permitted by law, all
that any said attorney shall lawfully do or cause to be done by virtue hereof.
The power of attorney granted pursuant to this Section 5, being coupled with an
interest, shall be irrevocable until the Secured Obligations are indefeasibly
paid and satisfied in full.
(c) The powers conferred on Lender hereunder are solely to protect
Lender's interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. Lender shall be required to give an accounting only
for amounts that it actually receives as a result of the exercise of such
powers and neither it nor any of its officers, directors, employees or agents
shall be responsible to Grantor for any act or failure to act, except for its
own gross negligence or willful misconduct.
(d) Grantor also authorizes Lender, at any time and from time to
time after the occurrence and during the continuance of an Event of Default, to
execute without recourse and without representation or warranty of any kind
(except as to ability to convey title), in connection with the sale provided
for in Section 8 hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
6. Performance by Lender of Grantor's Obligations. If Grantor
fails to perform or comply with any of their agreements contained herein and
Lender, as provided for by the terms of this Agreement, shall itself perform or
comply, or otherwise cause performance or compliance, with such agreement, the
reasonable expenses of Lender incurred in connection with such performance or
compliance shall be added to the outstanding principal amount pursuant to the
Promissory Notes.
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<PAGE> 61
7. Events of Default. The occurrence of any one or more of the
following events or existence of any one or more of the following conditions
shall constitute an event of default ("Event of Default") under this Agreement.
(a) Grantor shall fail to pay, when due, the principal of
or interest on the Promissory Notes, or any fees or charges associated
therewith (whether due on the date provided for herein or by acceleration or
otherwise);
(b) Grantor shall fail to observe or perform any other
term, condition or covenant of this Agreement not cured within ten (10)
business days after written notice from Lender;
(c) Any warranty or representation made or furnished to
Lender by or on behalf of Grantor in connection with this Agreement, the
Promissory Notes, the Trust Deeds or the Loan proves to have been false in any
material respect when made or furnished;
(d) There shall occur a material default or a defined
Event of Default under the Promissory Notes or the Trust Deeds; or
(e) Grantor shall fail to perform any Obligation, as such
term is defined in the Trust Deeds.
8. Remedies, Rights After Event of Default.
(a) After the occurrence and during the continuance of an Event of
Default, Lender may exercise in addition to all other rights and remedies
granted to it in this Agreement, all rights and remedies of a secured party
under the UCC. Without limiting the generality of the foregoing, Grantor
expressly agrees that in any such event, Lender, without demand of performance
or other demand, advertisement or notice of any kind (except the notice
specified below of time and place of public or private sale) to or upon Grantor
or any other person (all and each of which demands, advertisements and/or
notices are hereby expressly waived to the maximum extent permitted by the UCC
and other applicable law), may forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give an option or options to purchase, or sell or otherwise
dispose of and deliver said Collateral (or contract to do so), or any part
thereof, in one or more parcels at a public or private sale or sales, at any
exchange or Lender's offices or elsewhere at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. Lender shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of said Collateral so sold to the extent allowed by law,
free of any right or equity of redemption, which right or equity of redemption
Grantor hereby releases. Grantor further agrees, at Lender's request, to
assemble the Collateral and make it available to Lender at Grantor's premises
or such other location near Grantor's premises to which Lender has full access
or otherwise at places which Lender shall reasonably select, whether at
Grantor's premises or elsewhere. Lender shall apply the net proceeds of any
such collection, recovery, receipt, appropriation, realization or sale, as
provided in Section 8(d) hereof, Grantor remaining liable for any deficiency
remaining unpaid after such application. Lender shall be required to account
for any surplus, if any, to Grantor only after applying such net proceeds as
set forth in Section 8(d) and after the payment by Lender of any other amount
required by any provision of law, including Section 9-504(1)(c) of the UCC. To
the maximum extent permitted by applicable law, Grantor waives all claims,
damages, and demands against Lender arising out of the repossession, retention
or sale of the Collateral. Grantor agrees that Lender need not give more than
ten (10) days' notice of the time and place of any public sale or of the time
after which a private sale may take place and that such notice is reasonable
notification of such matters. Grantor shall remain liable for any deficiency
if the proceeds of any sale or disposition
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<PAGE> 62
of the Collateral are insufficient to pay all amounts to which Lender is
entitled, Grantor also being liable for the fees and expenses of any attorneys
employed by Lender to collect such deficiency.
(b) Grantor also agrees to pay all costs of Lender, including,
without limitation, attorneys' fees and expenses, incurred in connection with
the enforcement of any of its rights and remedies hereunder.
(c) Grantor hereby waives presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Agreement or any Collateral.
(d) The Proceeds of any sale, disposition or other realization
upon all or any part of the Collateral shall be distributed by Lender in the
following order of priorities:
First, to the payment of the reasonable costs and expenses of
such sale, including, without limitation, all reasonable expenses of
Lender and its agents including the fees and expenses of its counsel,
and all expenses, liabilities and advances made or incurred by Lender
in connection therewith or pursuant to Section 6 hereof;
Next, to Lender, for the payment in full of the Secured
Obligations in accordance with the terms of the Promissory Notes; and
Finally, after payment in full of all the Secured Obligations,
to Grantor, or their successors or assigns, or to whomsoever may be
lawfully entitled to receive the same, or as a court of competent
jurisdiction may direct.
9. Limitation on Lender's Duty in Respect of Collateral. Lender
shall not have any duty as to any Collateral in its possession or control or in
the possession or control of any agent or nominee of Lender or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto, except that Lender shall use reasonable care with
respect to the Collateral in its possession or under its control. Upon request
of Grantor, Lender shall account for any moneys received by it in respect of
any foreclosure on or disposition of the Collateral.
10. Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex, telecopy, or cable
communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered by hand, if to Grantor, addressed to them at 3919 North Riverwood
Drive, Provo, Utah 84607, and if to Lender, addressed to it at 10 South Geneva
Road, Vineyard, Utah 84058, attention Ken C. Johnsen, or, as to each party, at
such other address as shall be designated by such party in a written notice to
each other party complying as to delivery with the terms of this section. All
such notices and other communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective when deposited in the mails,
delivered to the telegraph company, confirmed by telex answerback, telecopied
with confirmation or receipt, delivered to the cable company, or delivered by
hand to the addressee or its agent, respectively. If the notice period
required by this Agreement is two days or less, notice shall be given to the
other party by telecopy, telephone or hand delivery in addition to any other
method chosen by the party giving notice.
11. Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Grantor therefrom shall in any
event be effective unless the same shall be in writing and signed by Lender,
and then any such waiver or consent shall only be effective in the specific
instance and for the specific purpose for which given.
12. No Waiver; Remedies. (a) No failure on the part of Lender to
exercise, and no delay in exercising any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise
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<PAGE> 63
of any right hereunder preclude any other or future exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative, may
be exercised singly or concurrently, and are not exclusive of any remedies
provided by law, or any other agreement or instrument executed by Grantor or
Lender.
(b) Failure by Lender at any time or times hereafter to require
strict performance by Grantor of any of the provisions, warranties, terms or
conditions contained in this Agreement or any other agreement or instrument now
or at any time or times hereafter executed by Grantor or any such other person
and delivered to Lender shall not waive, affect or diminish any right of Lender
at any time or times hereafter to demand strict performance thereof, and such
right shall not be deemed to have been modified or waived by any course of
conduct or knowledge of Lender, or any agent, officer or employee thereof.
13. Successors and Assigns. This Agreement and all obligations of
Grantor hereunder shall be binding upon the heirs, successors and assigns of
Grantor, and shall, together with the rights and remedies of Lender hereunder,
inure to the benefit of Lender and its respective successors and assigns.
14. Governing Law. This Agreement shall be governed by, and be
construed and interpreted in accordance with, the law of the State of Utah.
Wherever possible, each provision of this Agreement shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity and without invalidating the remaining provisions of this
Agreement.
15. Further Indemnification. Grantor agrees to pay, and to save
Lender harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all excise, sales or other similar taxes
which may be payable or determined to be payable with respect to any of the
Collateral or in connection with any of the transactions contemplated by this
Agreement.
16. Section Titles. The section titles and headings contained in
this Agreement are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of this Agreement.
17. Entire Agreement. This Agreement, together with the
Promissory Notes and the Trust Deeds, constitutes, on and as of the date
hereof, the entire agreement of Grantor and Lender with respect to the subject
matter hereof, and all prior or contemporaneous understandings or agreements,
whether written or oral, between Lender and Grantor with respect to such
subject matter are hereby superseded in their entireties.
18. Termination of Security Interest. This Agreement and the
security interests created or granted hereby shall terminate when the Secured
Obligations shall have been fully and indefeasibly paid and satisfied at which
time Lender (without recourse upon, or any warranty whatsoever by, Lender)
shall promptly execute and deliver to Grantor, for filing in each office in
which this Agreement or any related notice or filing, or any part thereof,
shall have been filed, an instrument releasing Lender's security interest
granted hereby as Grantor may reasonably request, all without recourse upon, or
any warranty whatsoever by, Lender and at the cost and expense of Grantor.
19. References to Grantor. Notwithstanding any provision
contained in this Agreement to the contrary, the covenants, warranties,
agreements and representations evidenced by this Agreement shall be joint and
several between Joseph A. Cannon and Janeal B. Cannon. The use of the neuter
singular pronoun to refer to Grantor shall be deemed a proper reference even
though Grantor may be a group of two or more individuals. The necessary
grammatical changes required to make the provisions of this
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<PAGE> 64
Agreement apply in the plural sense where more than one Grantor exists and to
males or females, shall in all cases be assumed as though in each case fully
expressed.
IN WITNESS WHEREOF, Grantor has executed and delivered this Agreement
as of the date first above written.
/s/ JOSEPH A. CANNON
------------------------------------
Joseph A. Cannon, an individual
/s/ JANEAL B. CANNON
------------------------------------
Janeal B. Cannon, an individual
Accepted and acknowledged by:
GENEVA STEEL COMPANY,
a Utah corporation
By: /s/ KEN C. JOHNSON
-------------------------------
Name: Ken C. Johnson
------------------------
Title: Vice President
-----------------------
10
<PAGE> 65
Schedule I
to
Security Agreement
(Description of Collateral)
See Attachments
11
<PAGE> 66
JOSEPH AND JANEAL CANNON
COLLECTION OF UTAH ART
Steel Plant, Utah Valley #2 by Steven L. Adams
Andrew Finds His Brother Peter by Robert T. Barrett
Savior by Dee Jay Bawden
Joseph and Hyrum by Dee Jay Bawden
Brigham Young by Dee Jay Bawden
First Vision by Dee Jay Bawden
Laguna Beach by Ken B. Baxter
Abraham Lincoln Bust by George E. Bissell
Springville Museum of Art Garden by Marilee B. Campbell
Tetons by Bruce S. Cheever
Angel in Pursuit of Fish by Knowledge by James Christensen
Solo by James C. Christensen
Floral by Jenni J. Christensen
Floral by Jenni J. Christensen
Floral by Jenni J. Christensen
Country Garden, Pleasant Grove by Marriam G. Christensen
Zion's Alter by Arthur B. Clarke
Indian Encampment by Michael Coleman
Box Canyon by Linda W. Curley
Golden Park, Dimple Dale by Linda W. Curley
Southern Utah Scene by Linda W. Curley
Near Stovepipe Wells, Death Valley by Leland Curtis
Portraits of George G. Cannon by Cyrus E. Dallin
Red by George N. Daniels
Earth Knower by L. Maynard Dixon
Grand Canyon Colorado by Christian Eiselle
Wash Day by Cinthia Fehr
Mountainous Landscape by John Fery
Takin a Break by Calvin Fletcher
Pioneers by Calvin Fletcher
Geneva Resort, Utah Lake by John Hafen
Deseret Landscape by Carol P. Harding
Sunflower Still Life by Carol P. Harding
Royal Palm by David Harrison-Smith
Geneva Open Hearth by Donald V. Hague
Sunset by John B. Jarvis
LaSalle, Peaks from Arches by John B. Jarvis
Road Through the Woods by Samuel Hans Jepperson
Geneva by Earl M. Jones
Pilgram by Brian T. Kershisnik
Southern Utah Scene by Linda Adams Kesler
Raising the Flag by Liz M. Lemon
Grande Canyon by Deana McDonald
Josh on the Wall by David M. Merrill
<PAGE> 67
Fishing on the River/Brigham and Abby by David M. Merrill
Sky Study by Anne Marie Oborn
Pioneer Wagon Train by George Martin Ottinger
Querling Temple Marble by Kathleen B. Peterson
Salt Lake Temple, East Face by Kathleen B. Peterson
Against the Light Kathleen B. Peterson
Holiness to the Lord by Kathleen B. Peterson
Carving Instruments by Kathleen B. Peterson
Sealing Room, Moroni Delivering Plates to Joseph by Kathleen B. Peterson
I am Alpha Omega by Kathleen B. Peterson
Big Dipper by Kathleen B. Peterson
San Rafael Series #15 by Denis R. Phillips
Deer Park Valley, Colorado by David Howell Rosenbaum
State Street at Eagle Gate by Al G. Rounds
Mt. Olympus, Afternoon Autumn by Jack S. Sears
Landscape by Nina N. Schumann
Girl on Bike by Dennis V. Smith
The Pyramid by Dennis V. Smith
Wild Apple at Kristina's by Dennis V. Smith
Watermaster by Dennis V. Smith
The Constitution by Dennis V. Smith
Backyard Icarus by Dennis V. Smith
The Boy Jesus by Gary Ernest Smith
Portrait of Jesus by Gary Ernest Smith
The Man of the Earth by Gary Ernest Smith
Christ Healing the Blind Man by Gary Ernest Smith
Woman in a Garden by Gary Ernest Smith
Potato Field by Gary Ernest Smith
Jerusalem Inside the Walls by Moishe Smith
Pieta by Trevor J. Southey
New Bloom by Trevor J. Southey
Hope by Trevor J. Southey
Farm Buildings In Winter by Leconte Stewart
Winterscape by Karl R. Thomas
Brigham Young by N. Kraig Varner
Broke Down Again by Lary C. Wade
Landscape by Alma Jay Young
The Farm Worker by Mahonri M. Young
The Steel Worker by Mahonri M. Young
Hauling Granite by Mahonri M. Young
Rembrandt by Mahonri M. Young
Nautilus by Christopher Young
<PAGE> 68
JOSEPH AND JANEAL CANNON
COLLECTION OF EUROPEAN ART
Paintings:
The Adulteress (17th C. European), artist unknown
The Annunciation by Lee Bennion
Man of the Earth by Gary Smith
The Bible I and II by Chagall
Etchings by Rembrandt:
Presentation in the Temple
Presentation in the Temple
Jews in Synagogue
David at Prayer
The Adoration of the Shepherds
Christ Preaching
The Circumcision in the Stable
Saints Peter and John
Christ Seated Disputing with Doctors
The Agony in the Garden
Joseph Telling His Dreams
David and Goliath
Christ and the Woman of Samaria
Raising of Lazarus
Abraham and Isaac
The Hundred Guilder Print (Christ Healing the Sick)
Bronzes:
Scout by Cyrus Dallin
James Madison by Avard Fairbanks
Restoration of the Melchizedek Priesthood by Avard Fairbanks
Signing of the Constitution by Dennis Smith
Mohonri Young Pair (farmer and laborer)
George Q. Cannon by Cyrus Dallin
Other:
Sacred Family, 16th C. Italian marble sculpture, artist unknown
Ivory chess set (large)
Ivory chess set (small)
The Last Supper by Durer (a fine Meder b impression)
<PAGE> 69
Schedule II
to
Security Agreement
(Jurisdictions Where UCC-1 Financing Statements Have Been Filed)
Utah
12
<PAGE> 70
Schedule III
(Location of Collateral)
Grantor's residence:
3919 North Riverwood Drive
Provo, Utah 84607
13
<PAGE> 71
EXHIBIT "A"
to
SECURITY AGREEMENT
LEGAL DESCRIPTION
The Property referred to in the foregoing instrument is located in Utah County,
State of Utah, and is more particularly described as follows:
LOT 11, PLAT "A," RIVERWOOD ESTATES, PROVO, UTAH, ACCORDING TO
THE OFFICIAL PLAT THEREOF ON FILE AND OF RECORD IN THE UTAH
COUNTY RECORDER'S OFFICE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
AS OF AND FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING
THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 80,711
<ALLOWANCES> 4,143
<INVENTORY> 97,478
<CURRENT-ASSETS> 203,022
<PP&E> 653,295
<DEPRECIATION> 192,744
<TOTAL-ASSETS> 671,924
<CURRENT-LIABILITIES> 123,405
<BONDS> 402,407
55,801
0
<COMMON> 85,371
<OTHER-SE> (3,776)
<TOTAL-LIABILITY-AND-EQUITY> 671,924
<SALES> 352,702
<TOTAL-REVENUES> 352,702
<CGS> 331,851
<TOTAL-COSTS> 331,851
<OTHER-EXPENSES> 11,041
<LOSS-PROVISION> 4,051
<INTEREST-EXPENSE> 19,774
<INCOME-PRETAX> (9,735)
<INCOME-TAX> (2,822)
<INCOME-CONTINUING> (6,913)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,913)
<EPS-PRIMARY> (.77)
<EPS-DILUTED> (.77)
</TABLE>
