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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended September 30, 1998, or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ________ to _________.
COMMISSION FILE NO. 1-10459
GENEVA STEEL COMPANY
(Exact name of Registrant as specified in charter)
UTAH 93-0942346
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
10 SOUTH GENEVA ROAD
VINEYARD, UTAH 84058
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (801) 227-9000
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
Title of each class Name of each exchange on
------------------- ------------------------
which registered
----------------
<S> <C>
CLASS A COMMON STOCK, NEW YORK STOCK EXCHANGE
NO PAR VALUE PACIFIC STOCK EXCHANGE
WARRANTS TO PURCHASE
CLASS A COMMON STOCK PACIFIC STOCK EXCHANGE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Class A Common Stock held by
non-affiliates of the Registrant, based upon the closing sale price of the Class
A Common Stock on the New York Stock Exchange on November 30, 1998, was
approximately $10,955,942. Shares of Class A Common Stock held by each officer
and director and by each person who may be deemed to be an affiliate have been
excluded. As of November 30, 1998, the Registrant had 14,700,478 and 19,151,348
shares of Class A and Class B Common Stock, respectively, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
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Parts of the following documents are incorporated by reference in
Parts II, III and IV of this Report: (1) Registrant's Annual Report to
Shareholders for the fiscal year ended September 30, 1998 (Parts II and IV), and
(2) Registrant's Proxy Statement for the Annual Meeting of Shareholders to be
held in March, 1999 (Part III).
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PART I
ITEM 1. BUSINESS.
BACKGROUND
Geneva Steel Company (the "Company" or "Geneva") owns and operates
the only integrated steel mill in the western United States. The Company's mill
manufactures coiled and flat plate, sheet, pipe and slabs for sale primarily in
the western and central United States.
The steel mill is located 45 miles south of Salt Lake City, Utah on
approximately 1,400 acres. The steel mill's facilities include four coke oven
batteries, three blast furnaces, a plasma-fired cupola ironmaking facility, two
basic oxygen process ("Q-BOP") furnaces, a continuous casting facility, a
combination continuous rolling mill and various finishing facilities. The
Company's coke ovens produce coke from a blend of various grades of
metallurgical coal. Coke is used as the principal fuel for the Company's blast
furnaces, which convert iron ore into liquid iron. The plasma-fired cupola is
also capable of producing liquid iron, but utilizes coke, oxygen and electricity
to melt iron or scrap into liquid iron. Liquid iron, scrap metal and metallic
alloys are combined and further refined in the Q-BOP furnaces to produce liquid
steel. The liquid steel is then processed through the continuous casting
facility into steel slabs. Steel slabs are either hot-charged into furnaces and
then rolled, or they are allowed to cool and then reheated prior to rolling.
Slabs are rolled into hot-rolled steel products (coiled and flat plate,
hot-rolled sheet and pipe) in the Company's rolling and finishing mills. The
Company also sells a portion of its slabs to other steel processors.
The Company acquired the steel mill and related facilities from USX
Corporation ("USX") on August 31, 1987. USX operated the mill and related
facilities from 1944 until 1986, when it placed the mill on hot-idle status.
Pursuant to the acquisition agreement between USX and the Company, USX retained
liability for retiree life insurance, health care and pension benefits relating
to employee service prior to the acquisition. USX also indemnified the Company
for costs due to any environmental condition existing on the Company's real
property as of the acquisition date that is determined to be in violation of
environmental laws or otherwise results in the imposition of environmental
liability, subject to the Company's sharing the first $20 million of certain
cleanup costs on an equal basis. See "Environmental Matters." Since acquiring
the mill from USX, the Company has modernized most of its facilities. The mill
includes the widest combination continuous rolling mill and one of the widest
in-line casters in the world. Both the rolling mill and the caster are unique in
the industry and enable the Company to offer an expanded range of products;
shift its product mix according to market demand; and produce wide, light-gauge
plate products more efficiently than many of its competitors.
RECENT DEVELOPMENTS
During the fourth quarter of 1998, order entry, shipments and pricing
for all of the Company's products were adversely affected by, among other
things, increased imports. As a result of the increased supply of imports and
other market conditions, the Company's overall price realization and shipments
will continue to decrease significantly in the first quarter of fiscal year 1999
and are expected to remain at low levels at least through the second quarter of
fiscal year 1999 and negatively impact the financial performance of the Company
during such periods. As of November 30, 1998, the Company had estimated total
orders on hand of approximately 74,000 tons compared to approximately 309,000
tons as of November 30, 1997.
As a result of the Company's recent financial performance, the
Company recently sought and received an amendment to its revolving credit
facility (the "Revolving Credit Facility") with respect to both the tangible net
worth and interest coverage covenants, among other things. The Company will
require additional modifications, waivers or forbearances to those and other
terms of the Revolving Credit Facility prior to January 7, 1999. The Company has
held several meetings with the banking group for the Revolving Credit Facility.
The Company anticipates that the banking group will grant short-term covenant
relief either by way of a waiver or a forbearance with respect to certain
potential or actual defaults. The Company believes that such waiver or
forebearance would be not granted under the existing terms of the agreement if
the Company intended to make the interest payment due January 15, 1999
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on the 9 1/2% senior notes, as discussed below. The banking group will, however,
continue to closely monitor the Company's liquidity and may withdraw its waiver
or forbearance or take other action with respect to, among other things, the
terms upon which the Company may borrow or the Company's continued access to
borrowings. There can be no assurance that the Company will receive the waiver
or forbearance, that the banking group will not require other changes to the
terms upon which borrowings under the Revolving Credit Facility are made, or
that the banking group will continue to permit the Company to incur borrowings
thereunder, in which event the Company's operations would be substantially
curtailed and its financial condition materially adversely affected.
As a result of reduced shipments and price realization caused
primarily by the recent surge in imports of the Company's products, the
Company's liquidity has declined significantly. On December 18, 1998, the
Company had approximately $21.3 million in borrowing availability under its
Revolving Credit Facility. In light of the uncertainties surrounding both
near-term market conditions and continued access to borrowings under the
Revolving Credit Facility, the Company has elected to preserve liquidity by not
making the interest payment of approximately $9.0 million due January 15, 1999
on the Company's 9-1/2 % senior notes, which will result in a default under the
terms of the 9-1/2 % senior notes. Such a default, if not timely cured, gives
right to the legal remedies available under the relevant bond indenture,
including the possibility of acceleration. Similarly, under the terms of the
9-1/2 % Senior Notes, non-payment of interest will result in a cross default
with respect to the Company's 11-1/8 % senior notes and may violate other terms
thereof. The Revolving Credit Facility also contains a similar cross default
provision. The Company anticipates that, as a part of the waiver or forbearance
described above, the banking group for the Revolving Credit Facility will
temporarily waive or forbear from acting upon such a cross-default. The Company
has retained financial and legal advisors, who are reviewing the financial
alternatives available to the Company, including without limitation a possible
debt restructuring.
Because of the Company's current financial condition, the covenant
compliance issues relating to its Revolving Credit Facility and its decision not
to pay the January 15, 1999 interest payment under the 9 1/2% senior notes, the
Company's financial flexibility is limited. During the months ahead, the Company
will be forced to make difficult decisions regarding, among other things, the
future direction and capital structure of the Company. Many of the foregoing
factors, over which the Company does not have complete control, may materially
affect the performance and financial condition of the Company.
CAPITAL PROJECTS
Overview
The Company has spent approximately $26 million, $48 million and $11
million on capital projects during the fiscal years ended September 30, 1996,
1997 and 1998, respectively. These expenditures were made primarily in
connection with the Company's ongoing modernization efforts. Since fiscal year
1989, Geneva has spent approximately $637 million on plant and equipment to
modernize and renovate its production facilities, as well as for ongoing capital
maintenance. Geneva believes its modernization efforts have significantly
strengthened the Company's capabilities by reducing costs, increasing operating
flexibility, broadening its product line, improving product quality and
increasing throughput rates.
The Company's modernization program was designed to take advantage of
the unique features of the Company's rolling mill. Geneva's wide six stand
rolling mill is differentiated from competitors' mills by its ability to roll
both narrow and wide one inch entry bars into finished product in a single pass.
In contrast, other producers utilize either a single- stand reversing mill or a
single-stand steckel mill to roll entry bars, requiring multiple passes.
Reducing the number of passes increases throughput, operating efficiencies and
yields, particularly on thinner gauge product.
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Geneva's in-line caster further enhances the Company's production
process by directly casting slabs to the required final width, up to 126 inches
wide, before the slabs are directly rolled. Wide casting and direct rolling
reduces heating and handling requirements and eliminates cross rolling to obtain
final product width. The Company further capitalized on its ability to cast and
roll wide plate products by completing a wide plate project which enables Geneva
to produce coiled plate up to 122 inches and subsequently cut the coiled plate
into flat plate. The combination of the caster, rolling mill and wide plate
project has created an efficient production process for wide products that most
of Geneva's competitors do not possess. As a result, the Company believes its
plate production costs are lower than many of its competitors.
Capital Projects
The key elements of the modernization are: (i) the replacement of
Geneva's open hearth furnaces with two state- of-the-art basic oxygen process
("Q-BOP") steelmaking furnaces, improving product quality and throughput and
reducing costs; (ii) the construction of one of the widest in-line casters in
the world, enabling the Company to cast slabs at the desired width without
cross-rolling; (iii) the completion of a wide-plate project, positioning Geneva
as the only North American producer currently offering coiled plate in widths
greater than 96 inches and improving plate production efficiencies; and (iv) the
recent modernization of Geneva's rolling mill, enhancing throughput rates,
quality and cost.
The Company has identified several large-scale capital improvement
projects that it believes would further increase the Company's production
capacity, expand product offerings, improve operating efficiencies and reduce
costs. These projects, however, are not currently included in the Company's
future capital budgets.
The Company has identified several other projects costing lesser
amounts that would also significantly improve operations. Several of the
projects are in the advanced-planning stage and could likely be completed as a
part of future capital maintenance budgets. These include a new plate leveler,
solid state electrical drives for the rolling mill and upgrades to the Company's
small diameter pipe mill.
The Company's capital projects are under continuous review, and
depending on market, operational, liquidity and other factors, the Company may
elect to adjust the design, timing and budgeted expenditures of its capital
plan. There can be no assurance that the projected benefits of the capital
projects will be fully achieved, sufficient product demand will exist for the
Company's additional throughput capacity, or that the planned capital projects
can be completed in a timely manner or for the amounts budgeted. Notwithstanding
the completion of many capital projects, management believes that additional
capital projects will be critical to the Company's long-term ability to compete.
PRODUCTS
The Company's principal products are coiled and flat plate,
hot-rolled sheet, pipe and slabs. The Company also sells non-steel materials
that are by-products of its steelmaking operations.
The Company's 132-inch combination continuous rolling mill has the
flexibility to roll either sheet or plate in response to customer demands and
changing market conditions. This flexibility has maximized utilization of its
facilities. Generally, the Company manufactures products in response to specific
customer orders. Consistent with the Company's strategic objectives, plate
shipments have increased as the modernization program has been completed and
various upgrades to plate processing and finishing equipment have been
integrated into the production process. The Company sells slabs to maximize
production from the continuous caster. The Company expects that slab shipments
will continue to gradually decrease as rolling mill throughput improves. Product
mix shifts are also determined by Geneva's product mix optimization efforts. The
Company's product sales mix as a percent of net sales for fiscal years 1994
through 1998 is shown below:
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1994 1995 1996 1997 1998
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Plate .............. 24% 35% 45% 45% 62%
Sheet .............. 65 41 30 30 18
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<S> <C> <C> <C> <C> <C>
Pipe ............... 7 6 6 10 11
Slab ............... 1 15 16 12 7
Non-steel .......... 3 3 3 3 2
------ ------ ------ ------ ------
Total ... 100% 100% 100% 100% 100%
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Coiled and Flat Plate. The Company produces plate products which
consist of hot rolled carbon and high-strength low alloy steel plate in coil
form, cut-to-length from coil and flat rolled in widths varying from 48 to 122
inches and in thicknesses varying from .1875 of an inch to 3 inches. Coiled and
flat plate can be used for heavy steel structures such as storage tanks,
railroad cars, ships and bridges.
Sheet. The Company produces hot-rolled sheet steel which is sold in
sheet or coil form in thicknesses of .061 to .230 of an inch and widths of 40 to
74 inches. Maximum widths vary according to thickness. Included in the sheet
products made by the Company are cut-to-length sheet, hot-rolled bands and
tempered coil. Sheet is used in a variety of applications such as storage tanks,
light structural components and supports and welded tubing.
Pipe. The Company produces electric resistance welded pipe ("ERW
pipe") ranging from approximately 6 5/8 to 16 inches in diameter. ERW pipe is
manufactured by heating and fusing the edges of the steel coil to form the pipe.
The Company's ERW pipe is used primarily in pipelines, including water, natural
gas and oil transmission and distribution systems, and in standard and
structural pipe applications.
Slab and Non-Steel. The Company has sold steel slabs when market
conditions were favorable and as a means of maximizing production through the
continuous caster. Consistent with the Company's efforts to shift product mix to
higher margin finished products and subject to market dynamics, slab sales
should continue to decline. The Company also sells various by-products resulting
from its steelmaking activities.
MARKETING; PRINCIPAL CUSTOMERS
The Company sells its plate and sheet products through a sales agency
arrangement primarily to steel service centers and distributors, which in recent
years have become one of the largest customer groups in the domestic steel
industry. Service centers and distributors accounted for approximately 65% of
the Company's finished product sales (excluding slabs) during fiscal year 1998.
The Company also sells its products to steel processors and various end-users,
including manufacturers of welded tubing, highway guardrail, storage tanks,
railcars, ships and agricultural and industrial equipment. The Company believes
that sales of its products, either directly or through service centers or
distributors, to automotive or appliance manufacturers have been immaterial. The
Company has developed a broad customer base of approximately 250 customers in 39
states, and abroad through exporters to five customers in Canada and Mexico,
with no concentration in any particular industry.
The Company sells its ERW pipe to end-users and distributors
primarily in the western and central United States, where demand for pipe
fluctuates in partial response to oil and gas industry cycles, import levels and
other factors. Export sales, which generally have lower margins than domestic
sales, accounted for approximately .7%, 1.4% and 2.6% of the Company's net sales
during fiscal years 1996, 1997 and 1998, respectively.
The Company's principal direct marketing efforts are in the western
and central United States. The Company believes that it holds a significant
market share of the plate, hot-rolled sheet and pipe sales in the eleven western
states. The Company is focused on expanding its share of the market in other
areas of the United States, where management believes there are significant
opportunities for revenue growth. On November 2, 1998, the Company signed a new,
three-year agreement with Mannesmann Pipe and Steel ("Mannesmann"). Under the
agreement, Mannesmann will extend the marketing of the Company's steel products
to throughout the continental United States. Mannesmann previously marketed the
Company's products in 15 midwestern states and to certain customers in the
eastern United States. The Company's existing sales force will remain Geneva
employees, but will be directed by Mannesmann. The Company also simultaneously
announced several other organization changes designed to improve product
distribution and on-time delivery.
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The Company's strategy is to maintain its core market in the western
United States, where its market position is the strongest, and to increase
growth in the midwest, southeast and eastern regions. The Company believes that
service centers and distributors account for a substantially larger proportion
of its sales than of sales for the industry as a whole. Demand from this
customer group historically has fluctuated widely due to substantial swings in
the group's inventory levels. In view of these factors, the Company intends to
target selected steel processors and various end-users, while retaining strong
relationships with service center and distributor customers. The Company
believes its modernization program enables the Company to produce higher quality
products and to gain access to a wider range of customers.
The Company's rolling mill can currently produce more wide, coiled
plate than the Company's processing facilities can cut and level into higher
margin flat plate. In addition, the Company's western location creates
logistical challenges in providing on-time delivery to its midwestern and
southeastern customers. Consequently, the Company has created a plate
distribution and processing system intended to increase plate processing
capacity and improve customer service. The facilities allow the Company to
further maximize its sales of flat plate made from coils. The system utilizes a
hub-and-spoke concept in which products are shipped in bulk primarily by rail
from the Company to transloading centers or plate processors and thereafter
delivered in smaller quantities primarily by truck to customers.
The Company has established transloading centers in Chicago, West
Memphis (AK), Mobile (AL), and Manchac (LA), to which plate is shipped in common
sizes and volumes. These inventories are located in relative close proximity to
the Company's customer base to maximize availability and on-time delivery. In
addition, the Company has contracted with several processors strategically
located throughout the west, midwest and southeast to which coiled plate is
shipped for processing into flat plate for specific customers. Through these
arrangements, the Company has significantly increased its capacity to produce
and sell plate made from coils at costs comparable to processing plate on its
own internal facilities.
The Company is in the process of installing an enterprise-wide
business system that is designed to increase on-time deliveries through a
sophisticated system that tracks inventory and determines the most
cost-efficient mode of transportation to the customer.
The Company generally produces steel in response to specific orders.
As of November 30, 1998, the Company had estimated total orders on hand for
approximately 74,000 tons compared to approximately 309,000 tons as of November
30, 1997. See "Competition and Other Market Factors."
EMPLOYEES; LABOR AGREEMENT
As of November 25, 1998, the Company's workforce included
approximately 1,625 full-time employees, of whom approximately 310 are salaried
and approximately 1,315 are union-eligible. The Company's operating management
personnel generally have considerable experience in the steel industry. Almost
half have more than 20 years of industry experience, with most of the remaining
managers ranging in experience from 8 to 20 years. The Company's senior
operating managers have an average of approximately 20 years of industry
experience.
Substantially all of the Company's union-eligible employees are
represented by the United Steelworkers of America under a collective bargaining
agreement. In April 1998, the Company reached a new, three-year labor agreement
with the United Steelworkers of America. The negotiations were completed without
any work interruptions or labor disruption. The Company believes that its labor
agreement is an important competitive advantage. Although the Company's wage
rates under the agreement are high by local standards and comparable to regional
competitors, its total hourly labor costs are substantially below recent
industry averages compiled by the American Iron and Steel Institute. Unlike
labor agreements negotiated by many other domestic integrated steel producers,
the Company's labor agreement does not contain traditional work rules,
significantly limits the Company's pension obligations and entitles the Company
to reduce its profit sharing obligations by an amount equal to a portion of its
capital expenditures. The Company did not assume any pension obligations or
retiree medical obligations related to employment service while the plant was
owned by USX.
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As part of the new agreement, the Company and the Union reached
several new understandings intended to create a cooperative partnership. The
objectives of the partnership include, among others, (i) improving productivity,
quality and customer service, (ii) expanding employee involvement in decision
making, and (iii) creating a better work environment.
A significant portion of the labor negotiations focused upon the
mutually-recognized need to improve the Company's operating results through
further workforce reductions. The Company granted the union-eligible employees
employment security, subject to several exceptions. These exceptions included
the right to lay off (i) up to 200 workers prior to September 1, 1998; (ii) any
workers with fewer than three years of service; (iii) employees displaced by
several identified potential capital improvements; and (iv) employees associated
with certain key facilities in the event that production at those facilities
falls below a specified level. The Company also agreed to expanded protections
against outsourcing Union work, subject to several exceptions. In return, the
Union agreed actively to assist the Company in capturing attrition through
several means, including workplace restructuring. This joint effort will be
conducted by representatives of both labor and management, with oversight by a
steering committee composed of senior executives and Union leaders. The Union
has also appointed a full-time facilitator to help organize the effort and solve
problems as they arise.
The Company has made significant progress in implementing its
strategy to reduce its employment costs through process redesign, workplace
restructuring, modernization and severance incentives. Since September 1997, the
Company's administrative and executive staff has been reduced from 328 to 219.
Operations management has been reduced from 155 to 92. During the same period,
the Company has also reduced its union-eligible workforce by 332. In addition,
the Company currently has 460 union-eligible employees on layoff status because
of market conditions. When the market improves and production increases, the
labor agreement requires that the Company rehire those employees on layoff that
desire to return. The Company and the Union are working on several initiatives
intended to capture the attrition created by those employees which elect not to
return from layoff status. There can be no assurance, however, that such
attrition will be captured or that other labor-management initiatives will be
successful.
The Company's labor agreement also contains a performance dividend
plan designed to reward employees for increased shipments of steel products.
Compensation under the plan includes a monthly guarantee of $.33 per hour for
all union represented workers. The guaranteed payment is based on an annualized
shipment rate of up to 1.5 million tons. As shipments increase above this level,
compensation under the plan also increases.
The Company also has a performance dividend plan for all non-union
employees that provides additional compensation as shipment levels increase.
Unlike the union plan, however, there are no guaranteed payments.
The Company's profit sharing obligations under the labor agreement
are based on earnings before taxes, extraordinary items and profit sharing.
Unlike the profit sharing arrangements of many major domestic integrated steel
producers, the Company's profit sharing obligations are reduced by an amount
equal to a portion of its capital expenditures. The Company is required to
contribute each year to the profit sharing pool 10% of earnings before taxes,
extraordinary items and profit sharing after deducting 25% of the first $50
million of capital expenditures and 30% of all additional capital expenditures
in such year (including, in each case, capital maintenance). All payments made
to workers under the union performance dividend plan are deducted from any
profit sharing obligations otherwise required.
Effective March 1, 1995, the Company established a voluntary employee
beneficiary association trust ("VEBA Trust") to fund post retirement medical
benefits for future retirees covered by the collective bargaining agreement.
Company contributions to the VEBA Trust are $.15 for each hour of work performed
by employees covered by the collective bargaining agreement. No benefits were
payable from the VEBA Trust until March 31, 1998. The Company and the Union are
currently developing eligibility requirements, benefit levels and other related
terms with respect to the VEBA trust.
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RAW MATERIALS AND RELATED SERVICES
The Company is located near major deposits of several of the
principal raw materials used to make steel, including iron ore, high volatile
coal, limestone and natural gas. The Company believes that, in certain
instances, this proximity, together with the Company's importance as a customer
to suppliers of these materials, enhances its ability to obtain competitive
terms for these raw materials. As the Company evaluates emerging technologies
for the production of iron and steel, it focuses on those technologies that
allow increased utilization of resources available in the western United States.
Iron Ore. The Company's steelmaking process can use both iron ore and
iron ore pellets. In recent years, the Company has used iron ore pellets in an
effort to maximize the operating efficiencies of its blast furnaces in response
to increased production needs. Iron ore pellets are generally purchased from
USX, as discussed below, as well as on the spot market. The Company has iron ore
deposits at mines in Utah. When used, the ore is mined by an independent
contractor under claims owned by the Company and transported by railroad to the
steel mill. The Company expects future costs of recovery of this ore to increase
gradually as the open reserves are depleted.
The Company has historically purchased iron ore pellets from USX.
Pursuant to a five year agreement entered into as of September 1, 1994, which
was amended on July 25, 1997 and September 30, 1998, the Company has a
commitment to purchase a minimum of 2,700,000 net tons in the fifth year of the
agreement, which is defined as a five- quarter period ending December 31, 1999.
The agreement also limits the maximum quantity of pellets USX is obligated
to supply. Given the current market conditions, the Company may not have a need
for the minimum volume requirements under the USX agreement. The Company may in
the future elect to purchase additional amounts of pellets on a longer-term
basis.
Coal and Coke. The coke batteries operated by the Company require a
blend of various grades of metallurgical coal. The Company currently obtains
high volatile coal from a mine in western Colorado operated by Oxbow Carbon and
Minerals, Inc. ("Oxbow") under a contract that expires in March 2004. The
Company and Oxbow have discussed shortening the payment terms thereof in return
for a discount, but have not yet agreed to any change. The Company also
purchases various grades of coal under short-term contracts from sources in the
eastern United States. Although the Company believes that such coal is available
from several alternative eastern suppliers, the Company is subject to price
volatility resulting from fluctuations in the spot market. There can be no
assurance that the Company's blend of coal will not change or that its overall
cost of coal will not increase.
At times of full production, the Company purchases imported coke as a
result of its decreasing capacity to produce its own coke as the Company's coke
ovens deteriorate. The ability of other domestic integrated steel mills to
produce coke is also generally decreasing, thereby increasing the demand for
purchased coke in the United States at times of strong steel demand. The Company
purchases coke from sources originating in Japan and China. As the Company's
consumption of purchased coke increases, the Company's average cost of coke used
in the manufacturing process will be higher.
Energy. The Company's steel operations consume large amounts of
oxygen, electricity and natural gas. The Company purchases oxygen, nitrogen and
argon from three facilities located on the Company's premises. Two of the
facilities were constructed by Air Liquide America Corporation ("Air Liquide")
and the third by Praxair, Inc. ("Praxair"). These facilities are capable of
providing approximately 275, 800 and 550 tons of oxygen per day under contracts
which expire in 2002, 2012 and 2006, respectively.
The Company generates a portion of its electrical requirements using
a 50 megawatt rated generator located at the steel mill and currently purchases
its remaining electrical requirements from Pacificorp under a 110 - 150 megawatt
interruptible power contract expiring in February 2002. The contract provides
for price increases tied to changes in the utilities energy and fixed costs.
Natural gas is purchased at the wellhead in the Rocky Mountain region
and is transported to the steel mill by pipeline utilizing firm and
interruptible transportation contracts. The Rocky Mountain region has
substantial natural gas reserves.
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Other. The Company's mill can be physically served by both the
Burlington Northern Santa Fe Railroad ("BNSF") and the Union Pacific Railroad
Company ("UP"). The Company believes that it is one of the largest western
customers of the UP railroad. The Company's location in the western United
States facilitates backhauling, which reduces freight costs. In connection with
the merger of the UP and Southern Pacific Transportation Company, the Company
negotiated a long-term transportation contract with the UP covering a large
portion of the Company's rail transportation needs and intended to provide a
competitive rate structure. The Company also owns mining claims in a limestone
quarry located approximately 30 miles from the Company's plant. The limestone is
mined by the Company and transported by railroad to the mill.
The Company uses scrap metal obtained from its own operations and
external sources in its steelmaking process. As the Company increases its
production volume or improves yields, management anticipates that increased
amounts of scrap will be purchased.
The cost of the Company's raw materials, including energy, has been
susceptible in the past to fluctuations in price and availability and is
expected to increase over time. Worldwide competition in the steel industry has
frequently limited the ability of steel producers to raise finished product
prices to recover higher raw material costs. The Company's future profitability
will be adversely affected to the extent it is unable to pass on higher raw
material costs to its customers.
COMPETITION AND OTHER MARKET FACTORS
The Company competes with domestic and foreign steel producers on the
basis of price, quality and service. Many of the Company's competitors are
larger companies and have greater capital resources. Intense worldwide sales
competition exists for all the Company's products. Both the industry and the
Company face increasing competition from producers of certain materials such as
aluminum, composites, plastics and concrete.
The Company believes that certain of its raw material arrangements,
particularly with respect to energy, and its current labor contract are
favorable in relation to those of the domestic steel industry as a whole.
However, the Company currently purchases iron ore pellets and a significant
portion of its coal requirements from locations in the midwest and eastern
United States, for which it has a transportation cost disadvantage. The Company
believes that its geographic location enhances its ability to compete in the
western United States, although it has a transportation disadvantage in
midwestern and eastern markets.
Product quality has improved significantly as a result of the
Company's modernization efforts. The Company believes that its modernization
efforts have enhanced the competitiveness of its products, particularly with
respect to plate products. Standards of quality in the steel industry are,
nevertheless, rising as buyers continually expect higher quality products.
Foreign and domestic producers continue to invest heavily to achieve increased
production efficiencies and product quality.
The steel industry is cyclical in nature and highly competitive.
Moreover, overall throughput capacity and competition are increasing due
primarily to construction of mini-mills and improvements in production
efficiencies at existing mills. The Company, like other steel producers, is
highly sensitive to price and production volume changes. Consequently, downward
movements have had and will continue to have an adverse effect on the Company's
results of operations.
Integrated steel producers are facing increasing competitive
pressures from mini-mills. Mini-mills use ferrous scrap metal as their basic raw
material and serve regional markets. These operations traditionally produced
lower margin, commodity type steel goods such as bars, rods and structural
products. A number of mini-mills, however, produce plate, coil and pipe products
that compete directly with the Company's products. Several domestic mini-mills
have been completed that produce wide plate in coil form, thereby competing with
products produced by the Company. In addition, other mini-mills are planned.
Thin slab/direct rolling techniques have also allowed mini-mills to produce some
of the types of sheet products that have traditionally been supplied by
integrated producers.
Foreign competition is a significant factor in the steel industry and
has adversely affected product prices in the United States and tonnage sold by
domestic producers. The intensity of foreign competition is substantially driven
8
<PAGE> 11
by fluctuations in the value of the United States dollar against several other
currencies as well as the strength of the United States economy relative to
foreign economies. In addition, many foreign steel producers are controlled or
subsidized by foreign governments whose decisions concerning production and
exports may be influenced in part by political and social policy considerations
as well as by prevailing market conditions and profit opportunities.
Historically, coiled and flat plate imports have represented
approximately 20% of total U.S. consumption. In the summer of 1998, the steel
industry began experiencing an unprecedented surge in imports. Approximately 40%
of recent domestic plate and hot rolled sheet consumption has been supplied by
imports. Imports have similarly increased in each of the Company's other product
lines. The surge in imports from various countries in part is the result of
depressed economies in various regions, which have greatly reduced steel
consumption, causing steel producers to dramatically increase exports to the
United States, one of the few strong markets for steel consumption. The Company,
as well as other domestic steel producers, believes that foreign producers are
selling product into the U.S. market at dumped prices and that domestic
shipments and pricing have been adversely affected by unfairly traded imports.
While a previous import surge in 1996 primarily involved only flat
plate, the current surge includes all of the Company's products. As a result,
from May 1998 to November 1998, the Company's plate and sheet prices fell by
12.2% and 12.7%, respectively. Concurrently, the Company has been forced to
reduce production by approximately 50 percent, resulting in higher costs per ton
and production inefficiencies, as well as a significant decline in operating
results and cash flow. During September 1998 through November 1998, the
Company's total shipments were approximately 302,000 tons as compared to 493,000
tons for the same period in 1997.
On September 30, 1998, the Company and eleven other domestic steel
producers filed anti-dumping actions against hot-rolled coiled steel imports
form Russia, Japan and Brazil (the "Coiled Products Cases"). The group also
filed a subsidy (countervailing duty) case against Brazil. In mid November 1998,
the International Trade Commission (the "ITC") made a unanimous affirmative
preliminary determination. Preliminary dumping margins will be announced by the
Department of Commerce ("DOC") in February 1999, with final margins announced
between May-July 1999. The ITC is expected to make its final injury
determination between July-September 1999. If affirmative, the final
determinations by the ITC and DOC will result in duties against imported
hot-rolled coil products from the offending countries. Under applicable law, the
U.S. Administration may settle some or all of the cases if the settlement has
the effect of removing the injury or threat of injury caused by the imports.
Settlements, called suspension agreements, typically involve import volume
and/or price limitations
Imports of hot-rolled coil products from the subject countries that
arrive in the U.S. after mid-November 1998 are at risk that duties eventually
imposed in the Coiled Products Cases could be applied retroactively to that
date. Consequently, the Company expects that such imports will likely decline.
As a result, the Company expects that its production levels, shipments and
pricing of those products will increase as imports decline and excess inventory
levels are reduced. There is, however, no assurance that the trade cases will be
successful, that duties will be imposed, that imports from countries not named
in the Coiled Products Cases will not increase or that domestic shipments or
prices will rise.
The Company continues to monitor imports of all its products and will
very likely file additional trade cases or take other trade action in the
future. Existing trade laws and regulations may be inadequate to the adverse
impact of such an unprecedented world financial crisis practices; consequently,
imports could pose continuing or increasing problems for the domestic steel
industry and the Company.
A five year sunset review of anti-dumping countervailing duty orders
against the countries on plate will begin November 1999 and should be concluded
by the end of 2000. The Company and other U.S. producers will participate in
these reviews in support of a five year extension of these orders. The outcome
of these reviews cannot currently be predicted.
ENVIRONMENTAL MATTERS
Compliance with environmental laws and regulations is a significant
factor in the Company's business. The Company is subject to federal, state and
local environmental laws and regulations concerning, among other things, air
emissions, wastewater discharge, and solid and hazardous waste disposal.
The Company has incurred substantial capital expenditures for
environmental control facilities, including the Q-BOP furnaces, the wastewater
treatment facility, the benzene mitigation equipment, the coke oven gas
desulfurization facility and other projects. The Company has budgeted a total of
approximately $2.0 million for environmental capital improvements in fiscal
years 1999 and 2000. Environmental legislation and regulations have
9
<PAGE> 12
changed rapidly in recent years and it is likely that the Company will be
subject to increasingly stringent environmental standards in the future.
Although the Company has budgeted capital expenditures for environmental
matters, it is not possible at this time to predict the amount of capital
expenditures that may ultimately be required to comply with all environmental
laws and regulations.
Under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), the U.S. Environmental Protection
Agency and the states have authority to impose liability on waste generators,
site owners and operators and others regardless of fault or the legality of the
original disposal activity. Other environmental laws and regulations may also
impose liability on the Company for conditions existing prior to the Company's
acquisition of the steel mill.
At the time of the Company's acquisition of the steel mill, the
Company and USX identified certain hazardous and solid waste sites and other
environmental conditions which existed prior to the acquisition. USX has agreed
to indemnify the Company (subject to the sharing arrangements described below)
for any fines, penalties, costs (including costs of clean-up, required studies,
and reasonable attorneys' fees), or other liabilities for which the Company
becomes liable due to any environmental condition existing on the Company's real
property as of the acquisition date that is determined to be in violation of any
environmental law, is otherwise required by applicable judicial or
administrative action, or is determined to trigger civil liability (the
"Pre-existing Environmental Liabilities"). The Company has provided a similar
indemnity (but without any similar sharing arrangement) to USX for conditions
that may arise after the acquisition. Although the Company has not completed a
comprehensive analysis of the extent of the Pre-existing Environmental
Liabilities, such liabilities could be material.
Under the acquisition agreement between the two parties, the Company
and USX agreed to share on an equal basis the first $20 million of costs
incurred by either party to satisfy any government demand for studies, closure,
monitoring, or remediation at specified waste sites or facilities or for other
claims under CERCLA or the Resource Conservation and Recovery Act. The Company
is not obligated to contribute more than $10 million for the clean-up of wastes
generated prior to the acquisition. The Company believes that it has paid the
full $10 million necessary to satisfy its obligations under the cost-sharing
arrangement. USX has advised the Company, however, of its position that a
portion of the amount paid by the Company may not be properly credited against
Geneva's obligations. Although the Company believes that USX's position is
without merit, there can be no assurance that this matter will be resolved
without litigation. The Company and USX have similarly had several disagreements
regarding the scope and actual application of USX's indemnification obligations.
The Company's ability to obtain indemnification from USX in the future will
depend on factors which may be beyond the Company's control and may be subject
to litigation.
ITEM 2. PROPERTIES.
The Company's principal properties consist of the approximately
1,400-acre site on which the steel mill and related facilities are located, the
Company's iron ore mines in southern Utah and the limestone quarry near the
steel mill. The Company also leases from the State of Utah, under a lease
expiring in 2016, a site which includes a retention pond. The retention pond is
a significant part of the Company's water pollution control facilities. Although
the Company's facilities are generally suitable to its needs, the Company
believes that such facilities will continue to require future improvements and
additional modernization projects in order to remain competitive. See Item 1.
"Business--Capital Projects" and "--Competition and Other Market Factors."
10
<PAGE> 13
ITEM 3. LEGAL PROCEEDINGS.
On February 25, 1997, the Company filed a state court complaint
against Commerce & Industry Insurance Co. ("C&I"), a New York Corporation,
alleging that C&I had breached its insurance contract with Geneva by failing to
pay Geneva's claim for the losses it incurred on January 25 and 26, 1996 and
subsequent thereto when it lost its internal generator. C&I removed the case to
the United States District Court for the District of Utah. The case continued
during 1997 and 1998 with the parties conducting further investigation and
discovery of the claims.
On August 11, 1998, the Company and C&I reached a settlement of the
litigation. Under the terms of the settlement, C&I agreed to pay the Company
$24.5 million to resolve all outstanding issues. The Company's insurance carrier
under the primary layer of insurance paid the Company $5 million in the fall of
1996. Including the Company's $1 million deductible, the settlement reflects an
overall-resolution of the claim in the amount of $30.5 million. The settlement
was achieved through third party mediation.
In addition to the matters described under Item 1.
"Business--Environmental Matters", the Company is a party to routine legal
proceedings incidental to its business. In the opinion of management, after
consultation with its legal counsel, none of the proceedings to which the
Company is currently a party to are expected to have a material adverse effect
on the Company's financial condition or results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Report.
11
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Class A Common Stock is listed and traded on the New
York Stock Exchange ("NYSE") and the Pacific Stock Exchange under the symbol
"GNV." The following table sets forth, for the periods indicated, the high and
low sales prices for the Class A Common Stock as reported on the NYSE Composite
Tape.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1997 HIGH LOW
-------- --------
<S> <C> <C>
First Quarter ended December 31 $4 1/2 $2 3/4
Second Quarter ended March 31 3 5/8 2
Third Quarter ended June 30 3 1/2 2 1/4
Fourth Quarter ended September 30 4 1/4 2 5/8
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1998 HIGH LOW
-------- --------
<S> <C> <C>
First Quarter ended December 31 $3 7/8 $1 15/16
Second Quarter ended March 31 3 11/16 1 15/16
Third Quarter ended June 30 4 1/4 2 1/4
Fourth Quarter ended September 30 2 5/8 1 3/16
</TABLE>
As of November 30, 1998, the Company had 14,700,478 shares of Class A
Common Stock outstanding, held by 654 stockholders of record, and 19,151,348
shares of Class B Common Stock outstanding, held by five stockholders of record.
Shares of Class B Common Stock are convertible into shares of Class A Common
Stock at the rate of ten shares of Class B Common Stock for one share of Class A
Common Stock. There is no public market for the Class B Common Stock.
The Company currently anticipates that it will retain all available
funds to finance its capital expenditures and other business activities, and it
does not anticipate paying any cash dividends on the Common Stock in the
foreseeable future. In addition, the Company's revolving credit facility and
senior notes restrict the amount of dividends that the Company may pay. See Item
7. "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and Note 3 of Notes to
Consolidated Financial Statements included in this Report.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is incorporated by reference to
pages 4 through 5 of the Company's Annual Report to Shareholders for the fiscal
year ended September 30, 1998.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this Item is incorporated by reference to
pages 6 through 15 of the Company's Annual Report to Shareholders for the fiscal
year ended September 30, 1998.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is incorporated by reference to
pages 16 through 36 of the Company's Annual Report to Shareholders for the
fiscal year ended September 30, 1998.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
12
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is incorporated by reference to
the sections entitled "Election of Directors -- Nominees for Election as
Directors" and "Executive Officers" in the Company's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held in March 1999. The definitive
Proxy Statement will be filed with the Securities and Exchange Commission not
later than 120 days after September 30, 1998, pursuant to Regulation 14A of the
Securities Exchange Act of 1934, as amended.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference to
the sections entitled "Election of Directors -- Director Compensation" and
"Executive Compensation" in the Company's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held in March 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated by reference to
the section entitled "Principal Holders of Voting Securities" in the Company's
definitive Proxy Statement for the Annual Meeting of Shareholders to be held in
March 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by reference to
the section entitled, "Certain Relationships and Related Transactions" in the
Company's definitive Proxy Statement for the Annual Meeting of Shareholders to
be held in March 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
(a) Documents Filed:
1. Consolidated Financial Statements. The following
Consolidated Financial Statements of the Company
and Report of Independent Public Accountants
included in the Company's Annual Report to
Shareholders for the fiscal year ended September
30, 1998 are incorporated by reference in Item 8
of this Report:
- Report of Independent Public Accountants
- Consolidated Balance Sheets at September 30,
1998 and 1997
- Consolidated Statements of Operations for the
years ended September 30, 1998, 1997 and 1996
- Consolidated Statements of Stockholders'
Equity for the years ended September 30,
1998, 1997 and 1996
- Consolidated Statements of Cash Flows for the
years ended September 30, 1998, 1997 and 1996
- Notes to Consolidated Financial Statements
13
<PAGE> 16
2. Financial Statement Schedule. The following
Financial Statement Schedule of the Company for
the years ended September 30, 1998, 1997 and 1996
is filed as part of this Report and should be
read in conjunction with the Company's
Consolidated Financial Statements and Notes
thereto:
<TABLE>
<CAPTION>
Schedule Page
-------- ----
<S> <C>
II - Valuation and Qualifying Accounts 18
</TABLE>
Financial statements and schedules other than
those listed are omitted for the reason that they
are not required or are not applicable, or the
required information is shown in the Consolidated
Financial Statements or Notes thereto, or
contained in this Report.
(b) Reports on Form 8-K
None.
(c) Exhibits
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED FILED
NO. EXHIBIT BY REFERENCE HEREWITH
- ----------- --------------------------------------------------------------------- -------------------- --------------
<S> <C> <C> <C>
3.1 Revised Articles of Incorporation of the Registrant (1)
3.2 Articles of Amendment dated February 17, 1993 to the Registrant's (2)
Revised Articles of Incorporation
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED FILED
NO. EXHIBIT BY REFERENCE HEREWITH
- ----------- --------------------------------------------------------------------- -------------------- --------------
<S> <C> <C> <C>
3.3 Articles of Amendment dated March 12, 1993 to the Registrant's (3)
Revised Articles of Incorporation
3.4 Restated Bylaws of the Registrant X
4.1 Specimen Certificate of the Registrant's Class A Common Stock, no (1)
par value
4.2 Specimen Certificate of the Registrant's Series B Preferred Stock, (4)
no par value
4.3 Rights Agreement dated as of May 19, 1997, between Registrant and (5)
Rights Agent
10.1 Asset Sales Agreement between USX and the Registrant dated as of (1)
June 26, 1987, as Amended and Restated August 31, 1987
10.2 Registration Rights Agreement among the signatories listed on the (1)
signature pages thereof and the Registrant dated November 6, 1989
10.3 License Agreement between ENSR Corporation and the Registrant (1)
dated December 8, 1988
10.4 Second Amended and Restated Revolving Credit Agreement among (6)
the Registrant, the Lender Parties named therein, Citicorp U.S.A.,
Inc. and Heller Financial Inc., dated May 14, 1996
10.5 Amendment to Second Amended and restated Revolving Credit X
Agreement dated May 1, 1998
10.6 Amendment No. 2 to Second Amended and Restated Revolving X
Credit Agreement dated September 30, 1998
10.7 Second Amended and Restated Security Agreement dated May 14, (6)
1996
10.8 Amended and Restated Sales Representation Agreement between X
Mannesmann Pipe & Steel Corporation and the Registrant dated
October 30, 1998
10.9 Geneva Steel Key Employee Plan (7)
10.10 Amendment to Geneva Steel Key Employee Plan dated May 12, (8)
1991
10.11 Form of Non-Statutory Stock Option Agreement (1)
10.12 Management Employee Savings and Pension Plan, as Amended and (9)
Restated generally effective January 1, 1994, dated as of July 3,
1995
10.13 Amendment No. 1 to the Geneva Steel Management Employee (10)
Savings and Pension Plan, effective as of January 1, 1997, dated
June 25, 1997
10.14 Form of revised Executive Split Dollar Insurance Agreement (11)
10.15 Form of revised Executive Supplemental Retirement Agreement (11)
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED FILED
NO. EXHIBIT BY REFERENCE HEREWITH
- ----------- --------------------------------------------------------------------- -------------------- --------------
<S> <C> <C> <C>
10.16 Union Employee Savings and Pension Plan, as Amended and (12)
Restated effective January 1, 1995, dated as of August 13, 1997
10.17 Collective Bargaining Agreement between United Steelworkers of X
America and the Registrant ("Collective Bargaining Agreement")
dated May 1, 1998
10.18 Agreement between Union Carbide Industrial Gases, Inc. and the (7)
Registrant dated July 12, 1990, as amended August 3, 1990 (the
"Union Carbide Agreement")
10.19 Amendment to the Union Carbide Agreement dated December 1, (11)
1992
10.20 Oxygen Supply Agreement between Air Liquide America (12)
Corporation and the Registrant dated June 10, 1997
10.21 Coilbox License Agreement between Stelco Technical Services (1)
Limited and the Registrant dated August 23, 1989
10.22 License Agreement for the K-OBM Process between (1)
Klockner Contracting and Technologies GmbH and the Registrant
dated November 25, 1989
10.23 Special Use Lease Agreement No. 897 between the State of Utah (11)
and the Registrant dated January 13, 1992 and Amendment thereto
dated June 19, 1992
10.24 Indenture dated as of January 15, 1994 between the Registrant and (13)
Bankers Trust Company, as Trustee, including a form of 9 1/2%
Senior Note due 2004
10.25 Indenture dated as of March 15, 1993 between the Registrant and (3)
The Bank of New York, as Trustee, including a form of 11 1/8%
Senior Note due 2001
10.26 License Agreement relating to the desulfurization process between (1)
BS&B Engineering Company, Inc. and the Registrant dated March
1, 1990
10.27 Lo-Cat(R)Licensing Agreement between ARI Technologies, Inc. and (7)
the Registrant dated April 16, 1990
10.28 Agreement relating to the closure of hazardous waste surface (7)
impoundments between USX Corporation, the Registrant and
Duncan Lagnese Associates, Incorporated dated October 22, 1990
10.29 Agreement for Sale and Purchase of Coke between the Registrant (14)
and Pacific Basin Resources (a division of Oxbow Carbon and
Minerals, Inc.) dated April 29, 1994 (the "Oxbow Coke
Agreement")
10.30 First Amendment to the Oxbow Coke Agreement dated April 11, (15)
1996
10.31 Agreement for the Sale and Purchase of Coal between the Registrant (16)
and Oxbow Carbon and Minerals, Inc. dated February 19, 1996,
effective as of April 1, 1994
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT INCORPORATED FILED
NO. EXHIBIT BY REFERENCE HEREWITH
- ----------- --------------------------------------------------------------------- -------------------- --------------
<S> <C> <C> <C>
10.32 Warrant Agreement dated as of March 16, 1993 between the (2)
Registrant and The Bank of New York, as Warrant Agent
10.33 Form of Indenture between the Registrant and the Trustee thereunder (3)
related to the Exchange Debentures, including a form of Exchange
Debenture
10.34 Taconite Pellet Sales Agreement between USX Corporation and (17)
Geneva Steel dated May 31, 1995
10.35 First Amendment to Taconite Pellet Sales Agreement between USX (12)
Corporation and the Registrant dated July 25,1997
10.36 Second Amendment to Taconite Pellet Sales Agreement between X
USX Corporation and Geneva Steel dated September 30, 1998
10.37 Industrial Gas Supply Agreement between Air Liquide America (17)
Corporation and Geneva Steel dated June 8, 1995
10.38 Geneva Steel Company 1996 Incentive Plan (18)
10.39 Form of Employment Agreement between Registrant and Certain (12)
Executive Officers
13 Selected portions of the Registrant's Annual Report to Shareholders X
for the year ended September 30, 1998 which are incorporated by
reference in Parts II and IV of this Report
23 Consent of Arthur Andersen LLP, independent public accountants X
27 Financial Data Schedule X
</TABLE>
----------
(1) Incorporated by reference to the Registration Statement on Form S-1
dated March 27, 1990, File No. 33-33319.
(2) Incorporated by reference to the Registration Statement on Form S-3
dated June 16, 1993, File No. 33-64548.
(3) Incorporated by reference to the Registration Statement on Form S-4
dated April 15, 1993, File No. 33-61072.
(4) Incorporated by reference to the Registration Statement on Form S-4
dated August 9, 1993, File No. 33-61072.
(5) Incorporated by reference to Exhibit 99.1 of the Registration
Statement on Form 8-A filed on November 21, 1997.
(6) Incorporated by reference to the Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1996.
(7) Incorporated by reference to the Registration Statement on Form S-1
dated November 5, 1990, File No. 33-37238.
(8) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended September 30, 1991.
17
<PAGE> 20
(9) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended September 30, 1995.
(10) Incorporated by reference to the Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1997.
(11) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended September 30, 1992.
(12) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended September 30, 1997.
(13) Incorporated by reference to the Quarterly Report on Form 10-Q for
the fiscal quarter ended December 31, 1993.
(14) Incorporated by reference to the Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1994.
(15) Incorporated by reference to the Annual Report on Form 10-K for the
fiscal year ended September 30, 1996.
(16) Incorporated by reference to the Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1996.
(17) Incorporated by reference to the Quarterly Report on Form 10-Q for
the fiscal quarter ended June 30, 1995.
(18) Incorporated by reference to the Quarterly Report on Form 10-Q for
the fiscal quarter ended March 31, 1997.
(d) Financial Statement Schedule
See page 18 herein.
18
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Geneva Steel Company:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements incorporated by reference in
Item 8 of this Form 10-K, and have issued our report thereon dated December 4,
1998. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedule listed in Item 14(a)2 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
December 4, 1998
<PAGE> 22
GENEVA STEEL COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1998, 1997 AND 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Deductions, Balance
Beginning Costs and Net of at End
Description of Year Expenses Recoveries of Year
- ----------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Year Ended September 30, 1998
Allowance for doubtful accounts $4,564 $6,923 $(5,076) $6,411
====== ====== ======= ======
Year Ended September 30, 1997
Allowance for doubtful accounts $4,031 $6,558 $(6,025) $4,564
====== ====== ======= ======
Year Ended September 30, 1996
Allowance for doubtful accounts $2,012 $8,616 $(6,597) $4,031
====== ====== ======= ======
</TABLE>
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on December 28, 1998.
GENEVA STEEL Company
By: /s/ Joseph A. Cannon
------------------------------------
Joseph A. Cannon, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Joseph A. Cannon Chairman of the Board and Chief December 28, 1998
- ------------------------------------- Executive Officer (Principal executive officer)
Joseph A. Cannon
/s/ Robert J. Grow President and Director December 28, 1998
- -------------------------------------
Robert J. Grow
/s/ Ken C. Johnsen Executive Vice President, Secretary December 28, 1998
- ------------------------------------- and General Counsel
Ken C. Johnsen
/s/ Dennis L. Wanlass Vice President, Treasurer and Chief December 28, 1998
- ------------------------------------- Financial Officer
Dennis L. Wanlass (Principal financial and accounting officer)
/s/ Alan C. Ashton Director December 28, 1998
- -------------------------------------
Alan C. Ashton
/s/ K. Fred Skousen Director December 28, 1998
- -------------------------------------
K. Fred Skousen
/s/ R. J. Shopf Director December 28, 1998
- -------------------------------------
R. J. Shopf
/s/ Kevin S. Flannery Director December 28, 1998
- -------------------------------------
Kevin S. Flannery
/s/ Gregory T. Hradsky Director December 28, 1998
- -------------------------------------
Gregory T. Hradsky
</TABLE>
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
GENEVA STEEL COMPANY
ARTICLE I.
OFFICES
Section 1. Business Offices. The principal office of the corporation
shall be located at 10 South Geneva Road, Vineyard, Utah 84058. The corporation
may have such other offices, either within or outside Utah, as the board of
directors may designate or as the business of the corporation may require from
time to time.
Section 2. Registered Office. The registered office of the corporation
required by the Utah Business Corporation Act to be maintained in Utah may be,
but need not be, identical with the principal office if in Utah, and the address
of the registered office may be changed from time to time by the board of
directors.
ARTICLE II.
SHAREHOLDERS
Section 1. Annual Meeting. An annual meeting of the shareholders shall
be held on the fourth Tuesday of February of every year, or on such other date
as may be determined by the board of directors for the purpose of electing
directors and for the transaction of such other business as may come before the
meeting. If the day fixed for the annual meeting shall be a legal holiday, such
meeting shall be held on the next succeeding business day. If the election of
the directors shall not be held on the day designated herein for any annual
meeting of the shareholders, or at any adjournment thereof, the board of
directors shall cause the election to be held at a meeting of the shareholders
as soon thereafter as conveniently may be.
Section 2. Place of Meetings. Each annual or special meeting of the
shareholders shall be held at such place, either within or outside Utah, as may
be designated in the notice of meeting, or if no place is designated in the
notice, at the registered office of the corporation in Utah.
Section 3. Matters Relating to Notice of Meetings. If three successive
notices mailed to the last known address of any shareholder of record are
returned as undeliverable, no further notices to such shareholder shall be
necessary until another address for such shareholder is made known to the
corporation. If properly requested by a person or persons, other than the
corporation properly calling a meeting, the secretary shall give notice of such
meeting at corporate expense. The attendance of a shareholder at a meeting in
person or by proxy (or participation by a shareholder in a meeting by means of a
conference telephone or similar communications equipment) shall constitute a
waiver of notice of such meeting, except where a shareholder attends (or
participates in) a meeting for the express purpose of objecting the transaction
of any business because the meeting is not lawfully called or convened. Neither
the business to be transacted
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at, nor the purpose of, any meeting of the shareholders need be specified in the
notice or waiver of notice of such meeting unless required by statute.
Section 4. Matters Relating to Proxies. Any proxy to be voted at any
meeting of the shareholders shall be filed with the secretary of the corporation
before or at the time of the meeting.
Section 5. Failure of a Quorum. If less than a majority of the
outstanding shares of the corporation entitled to vote are represented in person
or by proxy at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time for a period not to exceed sixty days at any one
adjournment without further notice other than an announcement at the meeting. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 6. Voting of Fractional Shares. Each fractional share is
entitled to a corresponding fractional vote, on each matter submitted to a vote
of the shareholders either at a meeting thereof or pursuant to written action as
permitted by applicable law, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the Articles of
Incorporation (as the same may be amended, revised or restated from time to
time) as permitted by the Utah Business Corporation Act.
Section 7. Written Consents. Any written consent of shareholders may be
signed in counterparts.
Section 8. Notice of Shareholder Business and Nominations.
(a) Annual Meetings of Shareholders.
(1) Nominations of persons for election to the board
of directors of the corporation and the proposal of business to be considered by
the shareholders may be made at an annual meeting of shareholders (a) pursuant
to the corporation's notice of meeting, (b) by or at the direction of the board
of directors, or (c) by any shareholder of the corporation who was a shareholder
of record at the time of giving notice provided for in this bylaw, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this bylaw.
(2) For nominations or other business to be properly
brought before an annual meeting by a shareholder pursuant to clause (c) of
paragraph (a)(1) of this bylaw, the shareholder must have given timely notice
thereof in writing to the secretary of the corporation and such other business
must otherwise be a proper matter for shareholder action. To be timely, a
shareholder's notice shall be delivered to the secretary at the principal
executive offices of the corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice by the
shareholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made by the corporation. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the giving of a shareholder's notice as described above. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or
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reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the shareholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such shareholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the shareholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
shareholder, as they appear on the corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such shareholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence
of paragraph (a)(2) of this bylaw to the contrary, in the event that the number
of directors to be elected to the board of directors of the corporation is
increased and there is no public announcement by the corporation naming all of
the nominees for director or specifying the size of the increased board of
directors at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a shareholder's notice required by this bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the secretary at the
principal executive offices of the corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the corporation.
(b) Special Meetings of Shareholders. Only such business shall
be conducted at a special meeting of shareholders as shall have been brought
before the meeting pursuant to the corporation's notice of meeting. Nominations
of persons for election to the board of directors may be made at a special
meeting of shareholders at which directors are to be elected pursuant to the
corporation's notice of meeting (a) by or at the direction of the board of
directors or (b) provided that the board of directors has determined that
directors shall be elected at such meeting, by any shareholder of the
corporation who is a shareholder of record at the time of giving of notice
provided for in this bylaw, who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this bylaw. In the event the
corporation calls a special meeting of shareholders for the purpose of electing
one or more directors to the board of directors, any such shareholder may
nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
shareholder's notice required by paragraph (a)(2) of this bylaw shall be
delivered to the secretary at the principal executive offices of the corporation
not earlier than the close of business on the 90th day prior to such meeting and
not later than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the board of directors to be elected at such meeting. In no event shall the
public announcement of an adjournment of a special meeting commence a new time
period for the giving of a shareholder's notice as described above.
(c) General.
(1) Only such persons who are nominated in accordance
with the procedures set forth in this bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting of shareholders
as shall have been brought before the meeting in accordance with the procedures
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set forth in this bylaw. Except as otherwise provided by law, the Articles of
Incorporation or these bylaws, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this bylaw and, if any proposed
nomination or business is not in compliance with this bylaw, to declare that
such defective proposal or nomination shall be disregarded.
(2) For purposes of this bylaw, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
bylaw, a shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this bylaw. Nothing in this bylaw shall be deemed to affect
any rights (i) of shareholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
ARTICLE III.
BOARD OF DIRECTORS
Section 1. Number, Qualifications and Organization. The number of
directors constituting the entire board of directors shall be determined at any
time and from time to time by resolution of the board of directors then in
office, but shall not be less than three (3) and shall not be more than seven
(7); provided however, that if any of the events set forth in Article IV,
Paragraph A.6 (f) (iv) (A) of the Articles of Incorporation shall have occurred
and have not been terminated (as set forth in Article IV, Paragraph A.6 (f) (iv)
(B) of such Articles) (an "Unterminated Event"), (a) the number of directors
constituting the entire board of directors shall not be less than four (4) and
shall not be more than twelve (12), and (b) a number of additional directors
equal to at least 25% of the total number of members of the board of directors
immediately after an Unterminated Event shall be elected by the then current
board of directors (if so directed by the holders of the Preferred Stock
described in Article IV, Paragraph A.6(a) of such Articles) or, at the
discretion of the holders of such Preferred Stock, by the holders of such
Preferred Stock. Directors must be at least twenty-one years old. The directors
may elect from their number a director to serve as chairman of the board of
directors, for such term and with such authority as may be granted by the board
of directors.
Section 2. Resignation. Any director may resign at any time by giving
written notice to the chief executive officer or to the secretary of the
corporation or by agreeing to do so in and in accordance with the terms of a
written agreement. A director's resignation shall take effect upon receipt of
such notice unless otherwise specified therein or in accordance with the terms
of such agreement, the acceptance of such resignation shall not be necessary to
make it effective.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held immediately after and at the same place as the annual
meeting of the shareholders, or as soon as practical thereafter at the time and
place determined by the board, for the purpose of electing officers and for the
transaction of such other business as may come before the meeting. The board of
directors may provide by
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resolution the time and place, either within or outside Utah, for the holding of
additional regular meetings.
Section 4. Special Meeting. Special meetings of the board of directors
may be called by or at the request of the chief executive officer or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix the time and place for holding any special meeting of
the board called by them.
Section 5. Notice. No notice is required for the regular meeting to be
held immediately after and at the same place as the annual meeting of the
shareholders. Notice of each other meeting of the board of directors stating the
place, day and hour of the meeting shall be given to each director at least five
days prior thereto by the mailing of written notice by first class mail, or at
least two days prior thereto by personal delivery of written notice or by
telephonic or telegraphic notice, except that in the case of a meeting to be
held by means of a conference telephone or similar communications equipment
telephone notice may be given one day prior thereto. (The method of notice need
not be the same to each director.) Notice shall be deemed to be given, if
mailed, when deposited in the United States Mail, with postage thereon prepaid,
addressed to the director at his business or residence address; if personally
delivered, when delivered to the director; if telegraphed, when the telegram is
delivered to the telegraph company; if telephoned, when communicated to the
director. The participation by a director in a meeting by means of conference
telephone or similar communication equipment shall constitute a waiver of notice
of such meeting, except where a director so participates in a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 6. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
Section 7. Failure of Quorum and Voting. If less than a majority of the
number of directors fixed by Section 1 of this Article is present at a meeting
(in person or participating by telephone or other means allowed by law), a
majority of the directors present may adjourn the meeting from time to time
without further notice other than an announcement at the meeting, until a quorum
shall be present. No director may vote or act by proxy at any meeting of
directors.
Section 8. Compensation. By resolution of the board of directors, any
director may be paid any one or more of the following: his or her expenses, if
any, of attendance at meeting; a fixed sum for attendance at such meeting; or a
stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
Section 9. Executive and Other Committees. By one or more resolutions
adopted by the majority of the board of directors, the board of directors may
designate from among its members an executive committee and one or more other
committees, each of which, to the extent provided in the resolution establishing
such committee, shall have and may exercise all of the authority of the board of
directors, except as prohibited by statute. Rules governing procedures for
meeting of any committee of the board shall be established by the committee, or
in the absence thereof, by the board of directors.
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Section 10. Written Consents. Any written consent of directors may be
signed in counterparts.
ARTICLE IV.
OFFICERS AND AGENTS
Section 1. Additional Officers and Qualifications. In addition to the
officers prescribed by statute, the board of directors may elect to appoint such
other officers, assistant officers and agents, including a chief executive
officer, one or more vice presidents, assistant secretaries, and assistant
treasurers, as they may consider necessary. All officers must be at least
twenty-one years old.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected by the board of directors annually at the first meeting of the
board held after each annual meeting of the shareholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall hold office until his
successor shall have been duly elected and shall have qualified, or until his
earlier, death, resignation or removal.
Section 3. Salaries. The salaries of the officers shall be as fixed
from time to time by the board of directors and no officer shall be prevented
from receiving a salary by reason of the fact that he is also a director of the
corporation.
Section 4. Vacancies. Any officer may resign at any time, subject to
any rights or obligations under any existing contracts between the officer and
the corporation, by giving written notice to the chief executive officer or to
the board of directors. An officer's resignation shall take effect at the time
specified therein; the acceptance of such resignation shall not be necessary to
make it effective. A vacancy in any office, however occurring, may be filled by
the board of directors for the unexpired portion of the term.
Section 5. Authority and Duties of Officers. The officers of the
corporation shall have the authority and shall exercise the powers and perform
the duties specified below and as may be additionally specified by the chief
executive officer, the board of directors or these bylaws, except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law:
(a) Chief Executive Officer. The chief executive officer
shall, subject to the direction and supervision of the board of directors, (i)
have general and active control of its affairs and business and general
supervision of its officers, agents and employees; (ii) unless there is a
chairman of the board, preside at all meetings of shareholders; (iii) see that
all orders and resolutions of the board of directors are carried into effect;
and (iv) perform all other duties incident to the office of chief executive
officer as from time to time may be assigned to him by the board of directors.
(b) President. The president shall perform such duties
incident to the office of the president as from time to time may be assigned to
him by the board of directors or the chief executive officer.
(c) Vice Presidents. Vice presidents shall assist the chief
executive officer and the president and shall perform such duties as may be
assigned by the board of directors, the chief executive
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officer or the president.
(d) Secretary. The secretary shall: (i) keep the minutes of
the proceedings of the shareholders and the board of directors; (ii) see that
all notices are duly given in accordance with the provisions of these bylaws or
as required by law; (iii) be custodian of the corporate records and the seal of
the corporation; (iv) keep at the corporation's registered office or principal
place of business within or outside Utah a record containing the names and
addresses of all shareholders and the number and class of shares held by each,
unless such a record shall be kept at the office of the corporation's transfer
agent or registrar; (v) have general charge of the stock books of the
corporation, unless the corporation has a transfer agent; and (vi) in general,
perform all duties incident to the office of secretary and such other duties as
from time to time may be assigned to him by the board of directors, the chief
executive officer or the president. Assistant secretaries, if any, shall have
the same duties and powers, subject to the supervision by the secretary.
(e) Treasurer. The treasurer shall: (i) be the chief financial
officer of the corporation and have the care and custody of all its funds,
securities, evidences of indebtedness or other personal property and deposit the
same in accordance with the instructions of the board of directors; (ii) receive
and give receipts for monies paid into or on account of the corporation and pay
out of the funds on hand all bills, payrolls, and other just debts of the
corporation of whatever nature upon maturity; (iii) be the principal accounting
officer of the corporation and as such prescribe and maintain the methods and
systems of accounting to be followed, keep complete books and records of
account, prepare and file all local, state and federal tax returns, prescribe
and maintain an adequate system of internal audit, and prepare and furnish to
the board of directors, the chief executive officer and the president statements
of account showing the financial position of the corporation and the results of
its operations; (iv) upon request of the board of directors, make such reports
to it as may be required at any time; and (v) perform all other duties incident
to the office of treasurer and such other duties as from time to time may be
assigned by the board of directors, the chief executive officer or the
president. Assistant treasurers, if any, shall have the same powers and duties,
subject to supervision by the treasurer.
Section 6. Surety Bonds. The board of directors may require any officer
or agent of the corporation to execute to the corporation a bond in such sums
and with such sureties as shall be satisfactory to the board, conditioned upon
the faithful performance of his duties and for the restoration to the
corporation of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
ARTICLE V.
SHARES
Section 1. Issuance of Shares. The issuance or sale by the corporation
of any shares of its authorized capital stock of any class, including treasury
shares, shall be made only upon authorization by the board of directors, except
as otherwise may be provided by statute.
Section 2. Certificates. Certificates of stock shall be in such form
consistent with law as shall be prescribed by the board of directors. The
certificates representing shares of stock of the corporation shall be
consecutively numbered.
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Section 3. Lost Certificates. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as it may prescribe. The board of directors may, in its
discretion, require a bond in such form and amount and with such surety as it
may determine, before issuing a new certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock fully endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, and cancel the old certificate. Every such transfer
of stock shall be entered on the stock books of the corporation.
Section 5. Holders of Record. The corporation shall be entitled to
treat the holder of record of any share of stock as the holder-in-fact thereof,
and accordingly shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person whether or not it
shall have express or other notice thereof, except as may be required by the
laws of Utah.
Section 6. Transfer Agents, Registrars and Paying Agents. The board of
directors may, at its discretion, appoint one or more transfer agents,
registrars or agents for making payment upon any class of stock, bond, debenture
or other security of the corporation. Such agents and registrars may be located
either within or outside Utah. They shall have such rights and duties and shall
be entitled to such compensation as may be agreed.
ARTICLE VI.
INDEMNIFICATION
Section 1. Definitions. For purposes of this Article VI, the following
terms shall have the meanings set forth below:
(a) Action - Any threatened, pending or compelled action, suit
or proceeding, whether civil, criminal, administrative, arbitrative or
investigative; and
(b) Indemnified Party - Any person who is or was a party or is
threatened to be made a party to any Action by reason of the fact that he is or
was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including, without limitation, any employee benefit plan of the
corporation for which any such person is or was serving as trustee, plan
administrator or fiduciary.
Section 2. Determination. To the extent applicable law permits a
determination to be made as to the propriety of indemnification by someone other
than a court, the directors or the shareholders, such determination may be made
upon the request of a majority of the directors who are not or were not parties
to such Action, or if there be none, upon the request of a majority of a quorum
of the whole board of directors, by independent legal counsel (which counsel
shall not be the counsel generally employed by the corporation in connection
with its corporation affairs) in a written opinion.
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Section 3. Payment in Advance. Expenses (including attorneys' fees)
incurred by Indemnified Party in defending any Action, shall be paid by the
corporation in advance of the final disposition of such Action upon receipt of a
written undertaking by or on behalf of the Indemnified Party to repay such
amount if it is ultimately determined that he or she is not entitled to be
indemnified by the corporation as authorized under applicable law.
Section 4. Insurance. By action of the board of directors,
notwithstanding any interest of the directors in such action, the corporation
may purchase and maintain insurance, in such amounts as the board may deem
appropriate, on behalf of any Indemnified Party against any liability asserted
against him and incurred by him in his capacity of or arising out of his status
as an Indemnified Party, whether or not the corporation would have the power to
indemnify him against such liability under applicable provisions of law.
Section 5. Right to Impose Conditions to Indemnification. The
corporation shall have the right to impose, as conditions to any indemnification
or advance of expenses provided by the corporation, such reasonable requirements
and conditions as to the board of directors or shareholders may appear
appropriate in each specific case and circumstance, including but not limited to
any one or more of the following: (a) that any counsel representing the person
to be indemnified in connection with the defense or settlement of any Action
shall be counsel mutually agreeable to the person to be indemnified and to the
corporation; (b) that the corporation shall have the right, at its option, to
assume and control the defense or settlement of any claim or proceeding made,
initiated, or threatened against the person to be indemnified; and (c) that the
corporation shall be subrogated, to the extent of any payments made by way of
indemnification or advance, to all of the indemnified person's right of
recovery, and that the person to be indemnified shall execute all writings and
do everything necessary to assure such rights of subrogation to the corporation.
ARTICLE VII.
MISCELLANEOUS
Section 1. Voting of Securities by the Corporation. Unless otherwise
provided by resolution of the board of directors, on behalf of the corporation
the chief executive officer, the president or any vice president, shall attend
in person or by substitute appointed by him, or shall execute written
instruments appointing a proxy or proxies to represent the corporation at all
meetings of the shareholders of any other corporation, association, or other
entity in which the corporation holds any stock or other securities, and may
execute written waivers of notice with respect to any such meetings. At all such
meetings and otherwise, the chief executive officer, the president or any vice
president, in person or by substitute or proxy as aforesaid, may vote the stock
or other securities so held by the corporation and may execute written consents
or any other instruments with respect to such stock or securities and may
exercise any and all rights and powers incident to the ownership of said stock
or securities, subject, however, to the instructions, if any, of the board of
directors.
Section 2. Seal. The corporate seal of the corporation shall be
circular in form and shall contain the name of the corporation, the year of its
incorporation, and the words, "Seal, Utah."
Section 3. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the board of directors of this corporation.
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Exhibit 10.5
EXECUTION COPY
AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT
AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING AGREEMENT
dated as of May 1, 1998 (the "Amendment") among GENEVA STEEL COMPANY, a Utah
corporation (the "Borrower"), the financial institutions listed on the signature
pages to the Credit Agreement (as defined below) (each individually a "Lender"
and collectively the "Lenders"), the issuer party thereto (the "Issuer"),
CITICORP USA, INC., a Delaware corporation ("CUSA"), as agent under the Credit
Agreement for itself and the Lenders (in such capacity, the "Agent"), and HELLER
FINANCIAL, INC., as co-agent (the "Co-Agent"). All capitalized terms used but
not otherwise defined in this Amendment shall have the meanings assigned thereto
in the Credit Agreement referred to below.
WITNESSETH:
WHEREAS, the Borrower, the Lenders, the Issuer, the Agent and the
Co-Agent have entered into a Second Amended and Restated Revolving Credit
Agreement dated as of May 14, 1996 (the "Credit Agreement", and the terms
defined in the Credit Agreement being used herein as therein defined);
WHEREAS, the Borrower and the Majority Lenders pursuant to
Section 10.1 of the Credit Agreement desire to amend the Credit Agreement; and
WHEREAS, the Majority Lenders are willing to amend the Credit
Agreement in the manner and on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as follows:
SECTION 1. Amendments to the Credit Agreement.
(a) The definition of "Reportable Event" is amended by deleting
the words "Section 4043(b)" and substituting therefor the words "Section
4043(c)".
(b) Section 4.9(a) of the Credit Agreement is amended by deleting
the second sentence thereof and substituting therefor the following:
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There are no Multiemployer Plans,
and except as set forth on Schedule 4.9
hereto, no Title IV Plans.
(c) Section 4.9(b) of the Credit Agreement is amended by adding
the words "Except for the Title IV Plan described on Schedule 4.9, as to which a
timely application will be filed," at the beginning thereof.
(d) Section 7.9 of the Credit Agreement is amended by deleting
the parenthetical in the fourth line thereof and substituting therefor the
following:
(except for any such Plan listed on Schedule 4.9
on the Closing Date and except for the Title IV
Plan described on Schedule 4.9 so long as the
annual contributions with respect thereto do not
exceed $4,000,000 in each fiscal year).
(e) Schedule 4.9 of the Credit Agreement is deleted in its
entirety and Schedule 4.9 attached hereto is substituted therefor.
SECTION 2. Representations and Warranties.
Borrower hereby represents and warrants to the Majority Lenders
that (i) the execution, delivery and performance of this Amendment has been duly
authorized by all requisite corporate action on the part of Borrower and will
not violate the certificate of incorporation or by-laws of Borrower; (ii) this
Amendment is the legal, valid, binding and enforceable obligation of Borrower,
enforceable against it in accordance with its terms; (iii) the representations
and warranties contained in the Credit Agreement as amended by this Amendment
are true and correct in all material respects on and as of the date hereof as
though made on and as of such date, except to the extent that any such
representation or warranty expressly relates to an earlier date and for changes
therein permitted or contemplated by the Credit Agreement as amended by this
Amendment; and (iv) after giving effect to this Amendment, no Default or Event
of Default under the Credit Agreement has occurred and is continuing.
2
<PAGE> 3
SECTION 3. Conditions to Effectiveness.
This Amendment shall become effective (the "Effective Date")
when, and only when, (i) the Borrower and the Majority Lenders shall have signed
a copy hereof (whether the same or different copies), (ii) the Majority Lenders
shall have received certified resolutions of the Board of Directors of Borrower
authorizing the transactions contemplated hereunder and (iii) the Majority
Lenders shall have received a certificate from a Responsible Officer of Borrower
certifying that the representations and warranties set forth in Section 2 hereof
are true and correct on and as of the Effective Date.
SECTION 4. No Modification.
This Amendment is limited as specified herein and, except as
provided herein, shall not constitute a modification, acceptance or waiver of
any other provision of the Credit Agreement or any other Loan Document, all of
which shall continue to be in full force and effect and are hereby ratified and
confirmed in all respects.
SECTION 5. Counterparts.
This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
SECTION 6. References to Loan Documents.
From and after the Effective Date, all references in the Credit
Agreement and each of the Loan Documents to the Credit Agreement shall be deemed
to be references to the Credit Agreement as modified hereby.
SECTION 7. Governing Law.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
3
<PAGE> 4
SECTION 8. Release.
BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM ANY LENDER. BORROWER HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES EACH LENDER, ITS PREDECESSORS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS,
CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR
UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART
ON OR BEFORE THE DATE THIS AGREEMENT IS EXECUTED, WHICH BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST SUCH LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS
ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Amendment as of the date first above written.
GENEVA STEEL COMPANY
By: /s/ Dennis L. Wanlass
---------------------------------------
Name: Dennis L. Wanlass
Title: Vice President, Treasurer
and Chief Financial Officer
4
<PAGE> 5
CITICORP USA, INC.
as Agent
By: /s/ John Podkowsky
---------------------------------------
Name: John Podkowsky
Title: Attorney-in-Fact
Lenders
CITICORP USA, INC.
By: /s/ John Podkowsky
---------------------------------------
Name: John Podkowsky
Title: Attorney-in-Fact
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ J.K. Williams
---------------------------------------
Name: Janet K. Williams
Title: Duly Authorized Signatory
IBJ SCHRODER BANK & TRUST
COMPANY
By: /s/ John Butera
---------------------------------------
Name: John Butera
Title: V.P.
5
<PAGE> 6
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Michael Burns
---------------------------------------
Name: Michael S. Burns
Title: Senior Vice President
CORESTATES BANK, N.A.
By: /s/ Jennifer Avrigian
---------------------------------------
Name: Jennifer Avrigian
Title: AVP
HELLER FINANCIAL, INC.
By: /s/ T. Bukowski
---------------------------------------
Name: T. Bukowski
Title: Sr. Vice President
MELLON BANK, N.A.
By: /s/ Daniel K. Clancy
---------------------------------------
Name: Daniel K. Clancy
Title: Vice President
6
<PAGE> 7
LASALLE BUSINESS CREDIT, INC.
By: /s/ Mark E. Landsem
---------------------------------------
Name: Mark E. Landsem
Title: Vice President
PNC BUSINESS CREDIT
By: /s/ Michael D. Shover
---------------------------------------
Name: Michael D. Shover
Title: Bank Officer
NATIONSBANK, N.A.
By: /s/ Melba B. Quizon
---------------------------------------
Name: Melba B. Quizon
Title: Vice President
BNY FINANCIAL CORP. as Successor in interest to
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By: /s/ Stephen V. Mangiante
---------------------------------------
Name: Stephen V. Mangiante
Title: Vice President
7
<PAGE> 8
SANWA BUSINESS CREDIT
CORPORATION
By: /s/ Peter L. Skavla
---------------------------------------
Name: Peter L. Skavla
Title: Vice President
CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ William Shiro
---------------------------------------
Name: William Shiro
Title: Assistant Vice President
Issuer
CITIBANK, N.A.
By: /s/ John Podkowsky
---------------------------------------
Name: John Podkowsky
Title: Attorney-in-Fact
8
<PAGE> 1
Exhibit 10.6
AMENDMENT NO. 2 TO SECOND AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT
AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED REVOLVING
AGREEMENT, dated as of September 30, 1998 (the "Amendment No. 2"), by and among
GENEVA STEEL COMPANY, a Utah corporation (the "Borrower"), the financial
institutions listed on the signature pages to the Credit Agreement (as defined
below) (each individually a "Lender" and collectively the "Lenders"), the issuer
party thereto (the "Issuer"), CITICORP USA, INC., a Delaware corporation
("CUSA"), as agent under the Credit Agreement for itself and for the Lenders (in
such capacity, the "Agent"), and HELLER FINANCIAL, INC., as co-agent (the
"Co-Agent"). All capitalized terms used but not otherwise defined in this
Amendment shall have the meanings assigned to such terms in the Credit Agreement
referred to below.
W I T N E S S E T H:
WHEREAS, the Borrower, the Lenders, the Issuer, the Agent and the
Co-Agent have entered into a Second Amended and Restated Revolving Credit
Agreement dated as of May 14, 1996, as amended by an Amendment dated as of May
1, 1998 (the "Credit Agreement");
WHEREAS, the Borrower and the Majority Lenders pursuant to
Section 10.1 of the Credit Agreement desire to amend the Credit Agreement; and
WHEREAS, the Majority Lenders are willing to amend the Credit
Agreement in the manner and on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as follows:
SECTION 1. Amendments to the Credit Agreement. Subject to the
satisfaction of the conditions to effectiveness in Section 3 hereof, the Credit
Agreement shall be amended as follows:
(a) The following definitions in Section 1.1 shall be amended and
restated in their entirety to read as follows:
"Borrowing Base" means, at any time, the sum of (a) 85% of
Eligible Receivables at such time plus (b) the lesser of (i) such amount of the
Eligible Inventory at such time as determined in accordance with the advance
rate formulae set forth on Schedule I and (ii) the Inventory Availability
Sublimit, less, in each case,
<PAGE> 2
such reserves as the Agent, in its sole discretion, may deem appropriate, plus
(c) all cash on deposit at such time in the Cash Collateral Account and the L/C
Cash Collateral Account; provided, however, that the aforementioned advance
rates in respect of Eligible Inventory may be prospectively adjusted by the
Agent from time to time upon at least five Business Days' prior written notice
to the Borrower to conform to the Agent's regular business practices and
policies applicable to asset based loans with advance rates based on current
assets in effect from time to time, which practices and policies may be changed
by the Agent in its sole discretion; provided, however, that any increase in the
advance rates above those set forth on Schedule I shall require the written
consent of Lenders having two-thirds or more of the Revolving Credit
Commitments, and any changes with respect to reserves (as contemplated above) to
be evidenced by notice to the Borrower and applicable prospectively on the
Borrowing Base Certificate following such notice.
"EBITDA" means, for any Person and its Restricted Subsidiaries
for any period, the Net Income (Loss) of such Person and its Restricted
Subsidiaries for such period taken as a single accounting period, plus (a) the
sum of the following amounts of such Person and its Restricted Subsidiaries for
such period determined on a consolidated basis in accordance with GAAP to the
extent included in the determination of such Net Income (Loss): (i) depreciation
expense, (ii) amortization expense, (iii) other non-cash charges, (iv) Net
Interest Expense, (v) provision for income taxes and similar taxes, and (vi)
extraordinary losses, less (b) the sum of the following amounts of such Person
and its Restricted Subsidiaries determined on a consolidated basis in accordance
with GAAP to the extent included in the determination of such Net Income (Loss):
(i) extraordinary gains, (ii) the Net Income (Loss) (which, if it is a negative,
shall be added) of any other Person that is accounted for by the equity method
of accounting, after deducting the amount of dividends or distributions paid by
such other Person to such Person, (iii) the Net Income (Loss) (which, if it is a
negative, shall be added) of any other Person acquired by such Person or a
Restricted Subsidiary of such Person in a transaction accounted for as a pooling
of interests for any period prior to the date of such acquisition, and (iv)
other non-operating income.
"Net Worth" of any Person means, at any date, the difference
between Total Assets of such Person at such date and Total Liabilities
(excluding any such liabilities resulting from accrued but unpaid dividends on
the Borrower's Stock) of such Person at such date.
2
<PAGE> 3
"Tangible Net Worth" of any Person means, at any date, the Net
Worth of such Person at such date, excluding, however, from the determination of
the Total Assets of such Person at such date (to the extent the same are
included in the determination of Total Assets and without duplication), (i) all
goodwill, organizational expenses, research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other similar intangibles, (ii) all deferred charges
or unamortized debt discount and expense, (iii) all reserves carried and not
deducted from assets or carried as a liability, (iv) treasury stock and capital
stock of such Person and its Restricted Subsidiaries, and all obligations or
other securities of, or capital contributions to, or investments in or advances
or loans to, any Unrestricted Subsidiary of such Person or any of its
Subsidiaries, (v) securities which are not readily marketable, (vi) cash held in
a sinking or other analogous fund established for the purpose of redemption,
retirement, defeasance or prepayment of any Stock, (vii) any write-up in the
book value of any asset resulting from a revaluation thereof, and (viii) any
items not included in clauses (i) through (vii) above which are treated as
intangibles in conformity with GAAP.
(b) The following definition in Section 1.1 shall be amended as
follows:
Paragraph (q) of the definition of "Eligible Receivables"
is amended by inserting after the words "Accounts of such account
debtor" in the first line thereof the words "(other than Accounts
created under the Mannesman Agreement)".
(c) Section 5.1 shall be amended and restated in its entirety to
read as follows:
"5.1. Maintenance of Tangible Net Worth . The Borrower shall
maintain, during each of the periods set forth below, Tangible Net Worth no less
than the sum of (a) the amounts set forth below plus (b) an amount equal to 75%
of the net (after payment of fees, commissions, expenses and the like) cash
proceeds received by the Borrower from the sale of Additional Equity since the
date hereof:
3
<PAGE> 4
<TABLE>
<CAPTION>
Minimum
Period Amount
------ ------
<S> <C>
April 30, 1996 - July 30, 1996 $74,200,000
July 31, 1996 - October 30, 1996 $74,200,000
October 31, 1996 - January 30, 1997 $74,200,000
January 31, 1997 - April 29, 1997 $72,200,000
April 30, 1997 - July 30, 1997 $69,700,000
July 31, 1997 - October 30, 1997 $67,200,000
October 31, 1997 - January 30, 1998 $65,000,000
January 31, 1998 - April 29, 1998 $65,000,000
April 30, 1998 - July 30, 1998 $65,000,000
July 31, 1998 - September 30, 1998 $110,000,000
October 1, 1998 - October 31, 1998 $110,000,000
November 1, 1998 - November 30, 1998 $200,000,000
December 1, 1998 - December 31, 1998 $200,000,000
January 1, 1999 - January 30, 1999 $200,000,000
January 31, 1999 - April 29, 1999 $200,000,000
April 30, 1999 - July 30, 1999 $200,000,000
July 31, 1999 - October 30, 1999 $200,000,000
October 31, 1999 - January 30, 2000 $200,000,000
January 31, 2000 - April 29, 2000 $200,000,000
April 30, 2000 and thereafter $200,000,000"
</TABLE>
(d) Section 5.3 shall be amended and restated in its entirety to
read as follows:
"5.3. EBITDA to Cash Interest Expense Ratio . The Borrower shall
achieve as of the last day of each Fiscal Quarter commencing with the Fiscal
Quarter ending June 30, 1996, determined on the basis of the four Fiscal
Quarters ending on the date of determination, a ratio of (a) EBITDA for such
period to (b) Cash Interest Expense for such period, not less than the ratio set
forth below:
4
<PAGE> 5
<TABLE>
<CAPTION>
For the Fiscal Minimum
Quarter Ending Ratio Required
-------------- --------------
<S> <C>
June 30, 1996 1.40 : 1.0
September 30, 1996 1.40 : 1.0
December 31, 1996 1.40 : 1.0
March 31, 1997 1.40 : 1.0
June 30, 1997 1.50 : 1.0
September 30, 1997 1.50 : 1.0
December 31, 1997 1.50 : 1.0
March 31, 1998 1.60 : 1.0
June 30, 1998 1.75 : 1.0
September 30, 1998 1.82 : 1.0
December 31, 1998 2.15 : 1.0
March 31, 1999 2.30 : 1.0
June 30, 1999 2.40 : 1.0
September 30, 1999 2.60 : 1.0
December 31, 1999 2.75 : 1.0
March 31, 2000 and thereafter 3.00 : 1.0"
</TABLE>
(e) Notwithstanding the provisions of Section 6.11 of the Credit
Agreement, the financial statements of the Borrower due on December 31, 1998, in
respect of the month of November 1998, shall be furnished to the Lenders no
later than January 7, 1999.
SECTION 2. Representations and Warranties.
The Borrower hereby represents and warrants to the Lenders that
(i) the execution, delivery and performance of this Amendment has been duly
authorized by all requisite corporate action on the part of the Borrower and
will not violate the certificate of incorporation or by-laws of the Borrower;
(ii) this Amendment is the legal, valid, binding and enforceable obligation of
the Borrower, enforceable against it in accordance with its terms; (iii) the
representations and warranties contained in the Credit Agreement, as amended by
this Amendment No. 2, are true and correct in all material respects on and as of
the date hereof as though made on and as of such date, except to the extent that
any such representation or warranty expressly relates to an earlier date and for
changes therein permitted or contemplated by the Credit Agreement, as amended by
this Amendment No. 2; and (iv) after giving effect to this
5
<PAGE> 6
Amendment, no Default or Event of Default under the Credit Agreement has
occurred and is continuing.
SECTION 3. Conditions to Effectiveness.
This Amendment shall become effective (the "Effective Date")
when, and only when, (i) the Borrower and the Majority Lenders shall have signed
a copy hereof (whether the same or different copies), (ii) the Lenders shall
have received certified resolutions of the Board of Directors of the Borrower
authorizing the transactions contemplated hereunder and (iii) the Lenders shall
have received a certificate from a Responsible Officer of the Borrower
certifying that the representations and warranties set forth in Section 2 hereof
are true and correct on and as of the Effective Date.
SECTION 4. No Modification.
This Amendment is limited as specified herein and, except as
provided herein, shall not constitute a modification, acceptance or waiver of
any other provision of the Credit Agreement or any other Loan Document, all of
which shall continue to be in full force and effect and are hereby ratified and
confirmed in all respects.
SECTION 5. Counterparts.
This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
SECTION 6. References to Loan Documents.
From and after the Effective Date, all references in the Credit
Agreement and each of the Loan Documents to the Credit Agreement shall be deemed
to be references to the Credit Agreement as modified hereby.
6
<PAGE> 7
SECTION 7. Governing Law.
THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 8. Release.
THE BORROWER HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE,
COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE
WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS
LIABILITY TO REPAY THE "OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF
ANY KIND OR NATURE FROM ANY LENDER. THE BORROWER HEREBY VOLUNTARILY AND
KNOWINGLY RELEASES AND FOREVER DISCHARGES EACH LENDER, ITS PREDECESSORS, AGENTS,
EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS,
CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR
UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED,
CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART
ON OR BEFORE THE DATE THIS AGREEMENT IS EXECUTED, WHICH THE BORROWER MAY NOW OR
HEREAFTER HAVE AGAINST SUCH LENDER, ITS PREDECESSORS, AGENTS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS
ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE.
[signature pages follow]
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Amendment as of the date first above written.
GENEVA STEEL COMPANY
By: /s/ Joseph A. Cannon
------------------------------------
Name: Joseph A. Cannon
Title: Chief Executive Officer
CITICORP USA, INC.,
as Agent
By: /s/ John Podkowski
------------------------------------
Name: John Podkowski
Title: Attorney-in-Fact
Lenders
CITICORP USA, INC.
By: /s/ John Podkowski
------------------------------------
Name: John Podkowski
Title: Attorney-in-Fact
8
<PAGE> 9
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ J. K. Williams
------------------------------------
Name: Janet K. Williams
Title: Duly Authorized Signatory
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ John Butera
------------------------------------
Name: John Butera
Title: VP
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Michael Burns
------------------------------------
Name: Michael S. Burns
Title: Senior Vice President
CORESTATES BANK, N.A.
By: /s/ Jennifer Avrigian
------------------------------------
Name: Jennifer Avrigian
Title: AVP
9
<PAGE> 10
HELLER FINANCIAL, INC.
By: /s/ T. Bukowski
------------------------------------
Name: T. Bukowski
Title: Sr. Vice Pres.
MELLON BANK, N.A.
By: /s/ Daniel K. Clancy
------------------------------------
Name: Daniel K. Clancy
Title: Vice President
LASALLE BUSINESS CREDIT, INC.
By: /s/ Mark E. Landsem
------------------------------------
Name: Mark E. Landsem
Title: Vice President
PNC BUSINESS CREDIT
By: /s/ Michael D. Shover
------------------------------------
Name: Michael D. Shover
Title: Bank Officer
NATIONSBANK, N.A.
By: /s/ Melba B. Quizon
------------------------------------
Name: Melba B. Quizon
Title: Vice President
10
<PAGE> 11
BNY Financial Corp. as successor in
interest to
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
By: /s/ Stephen V. Mangiante
------------------------------------
Name: Stephen V. Mangiante
Title: Vice President
SANWA BUSINESS CREDIT
CORPORATION
By: /s/ Peter L. Skavla
------------------------------------
Name: Peter L. Skavla
Title: Vice President
CIT GROUP/BUSINESS CREDIT, INC.
By: /s/ William Shiro
------------------------------------
Name: William Shiro
Title: Assistant Vice President
Issuer
CITIBANK, N.A.
By: /s/ John Podkowski
------------------------------------
Name: John Podkowski
Title: Attorney-in-Fact
11
<PAGE> 1
Exhibit 10.8
AMENDED AND RESTATED
SALES REPRESENTATION AGREEMENT
This Sales Representation Agreement (this "Agreement") is the amendment
and restatement of an agreement entered into as of the 8th day of December, 1988
and amended April 18, 1991, April 17, 1992, April 1, 1996 and October 30, 1998
between Geneva Steel Company, a Utah corporation ("Geneva"), and Mannesmann Pipe
& Steel Corporation, a New York corporation ("Mannesmann").
Agreement
In consideration of the mutual promises contained herein, and other
valuable consideration, the receipt and sufficiency of which are acknowledged,
the parties hereto agree as follows:
1. Grant. Subject to the terms and conditions contained in this
Agreement, Geneva grants to Mannesmann the sole and exclusive right to purchase
from Geneva, sell and distribute to customers now or hereafter located in the
geographical area defined on Exhibit A, attached hereto (the "Territory"), those
steel products produced by Geneva that are more particularly described on
Exhibit B attached hereto ("Products"); provided, however, Geneva shall have the
option to exclude from time to time from the "Products" and from the terms of
this Agreement any pipe produced at the pipe mills located at the Geneva Steel
Works. For purposes of this Section 1, a customer will be deemed to be located
within the Territory only if that customer's purchasing and delivery locations
for the Products it orders are located within the Territory.
2. Reservation of Right. Notwithstanding Section 1 of this Agreement,
Geneva reserves the right, subject to Section 3.11 of this Agreement, to sell
Products and other materials produced by Geneva ("other materials") to any
customer in or outside of the Territory; provided, however, that subject to
Section 3.2 hereof, Geneva agrees, so long as Mannesmann is complying with its
obligations pursuant to Section 3.1 hereof, not to expand its marketing or sales
efforts within the Territory for the purpose of increasing the number of
customers within the Territory that purchase Products directly from Geneva. Any
contact relating to the marketing or sale of Products by Geneva with any
customer within the Territory, other than those customers identified on Exhibit
C attached hereto ("Geneva Direct Customers"), shall be coordinated with
Mannesmann, in advance when practicable. Geneva shall have the right to contact
any customer or potential customer in the Territory and Mannesmann shall provide
Geneva with the names and addresses of the appropriate contact persons with such
customers or potential customers for such purpose; provided, however, that no
sales of Products by Geneva to any customer of Mannesmann in the Territory
(other than to a Geneva Direct Customer) shall be concluded without notice of
such sale to Mannesmann.
<PAGE> 2
3. Sale of Product.
3.1 Sales Effort of Mannesmann. Mannesmann will use its best
efforts to engage in a consistent, deliberate sales effort that is, in good
faith, calculated to optimize the sale of Products in the Territory (including
with respect to product mix and overall margin optimization), the net mill
return to Geneva, and the integration of such effort with Geneva's sales efforts
and overall sales philosophy. For purposes of this Agreement, "net mill return
to Geneva" shall mean the total sales price actually received by Geneva for
Products or other materials, as the case may be, less transportation charges
incurred in delivering Products or other materials to customers.
3.2 Direct Sales. Geneva may, at Geneva's option and
notwithstanding any provision hereof to the contrary, sell Products and other
materials directly to any customer or potential customer within the Territory if
such customer or potential customer expresses its refusal to place an order
through Mannesmann or if Mannesmann refuses to take an order from such customer
or potential customer. Mannesmann agrees to provide Geneva with prompt notice of
any refusal by a customer or potential customer to place an order through
Mannesmann or Mannesmann's refusal to accept an order from any customer or
potential customer and to facilitate the placement of an order by such customer
or potential customer directly with Geneva. Geneva agrees to exercise such
option in a manner as not to unduly disrupt service by Mannesmann to customer or
potential customer.
3.3 Employees.
a. Geneva shall make available to Mannesmann the services
of certain of Geneva's employees (the "Employees"). The number and identity of
the Employees, and the terms and conditions of such employment, shall be
mutually acceptable to Geneva and Mannesmann, including the replacement or
removal of the Employees by Mannesmann during the term of this Agreement. The
Employees shall assist Mannesmann in its marketing, sales, servicing and
invoicing of Product to customers of Mannesmann in the Territory pursuant to
this Agreement; provided, that any such Employees that have historically been
involved in the sale of pipe products may be excluded by Geneva from the
provisions of this Agreement in the event Geneva exercises its right to exclude
pipe products from the definition of "Products" pursuant to Section 1 hereof.
Mannesmann shall reimburse Geneva on demand for the salary, payroll burden and
benefits (except as otherwise specified in Sections 3.3(b) and 3.3(c)) incurred
by Geneva in connection with the Employees. Mannesmann shall be solely
responsible for any expenses incurred by the Employees related to such
assistance and shall ensure that the
2
<PAGE> 3
Employees comply with Mannesmann's expense reimbursement guidelines with respect
thereto.
b. Geneva shall continue to maintain all insurance
coverage applicable to the Employees consistent with coverage provided with
respect to other employees of Geneva, including but not limited to workers'
compensation, health insurance, life insurance, short term disability and long
term disability. Geneva's workers' compensation insurance shall be endorsed to
name Mannesmann as an alternate employer using Endorsement Number WC-00-03-01.
Mannesmann shall obtain an endorsement to its existing commercial general
liability insurance extending coverage to the acts and omissions of the
Employees and naming Geneva as an additional insured and shall issue to Geneva a
waiver of subrogation claims.
c. Mannesmann shall indemnify, defend, and hold harmless
Geneva from and against any claims against Geneva: (i) by third parties for any
acts or omissions of the Employees while performing services for Mannesmann or
any of the customers of Mannesmann; and (ii) by any Employee for claims other
than personal injuries to the claimant, to the extent such claim arises out of
or relates to acts or omissions of other Employees or the acts or omissions of
employees of Mannesmann in the scope of such employee's employment. Geneva shall
indemnify, hold harmless and defend Mannesmann from and against any claims
against Mannesmann by any Employee (or beneficiaries of or persons claiming
through any Employee): (i) arising out of acts or omissions of other employees
of Geneva in the scope of such Employee's employment; and (ii) arising out of or
relating to claims or expenses for personal injuries, health benefits, life
insurance, short term disability or long term disability to the extent Geneva
would be otherwise liable for such claims pursuant to Geneva's plans, policies
or practices. Mannesmann hereby waives all claims against Geneva arising out of
or as a result of any claim being filed by an Employee against Mannesmann to the
extent such claim against Mannesmann is covered by the workers' compensation
insurance endorsement obtained with respect to the Employees by Geneva pursuant
to Section 3.3b.
d. During the term of this Agreement, and for one (1) year
after the termination or expiration of the term of this Agreement, Mannesmann
shall not attempt to hire, hire or otherwise cause, induce or suggest that any
such employee terminate employment with Geneva.
3.4 Acceptance of Orders. Geneva shall, in its sole discretion,
have the right to accept or reject any order for Products or other materials
that is submitted by Mannesmann; provided, however, that any such order shall be
deemed accepted by Geneva if notice of a rejection thereof is not given to
Mannesmann
3
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as soon as is reasonable under the circumstances, but in no event
later than (a) within five business days after Geneva received such order from
Mannesmann, if such order is wholly for Products or other materials that are
generally and regularly produced by Geneva and at Geneva's then current and
applicable published price for such Products or other materials, and (b) within
ten business days after Geneva receives such order from Mannesmann if any
portion of such order is for Products or other materials that are not generally
and regularly produced by Geneva, or at a price that is lower than Geneva's then
current and applicable published price for such Products or other materials.
3.5 Sales Forecast Reports.
a. On or before the first business day of the calendar
month preceding each calendar quarter Mannesmann shall submit to Geneva, in
writing, a forecast for such quarter that sets forth Mannesmann's anticipated
sales of Products.
b. On a best effort basis by Mannesmann, each such
forecast shall include a breakdown of anticipated sales for each calendar month
falling within the calendar quarter covered by such forecast and shall otherwise
include such details as are reasonably requested by Geneva upon reasonable
notice to Mannesmann.
3.6 Sales Representatives. Mannesmann shall, at all times,
maintain a sales force and support personnel that are adequate and qualified to
exploit and develop Mannesmann's marketing opportunities within the Territory.
Geneva reserves the right to approve or disapprove of any salesperson that
Mannesmann proposes to engage to sell Products within the Territory that was not
selling Products for Mannesmann in the Territory on October 31, 1998. Any such
salesperson that Geneva, in its reasonable judgment, disapproves shall not be
used by Mannesmann to sell Products within the Territory.
3.7 Efforts of Geneva to Hire Sales Personnel. Mannesmann agrees
that it will not interfere in any way with efforts by Geneva to hire any
Mannesmann salesperson to sell Products or other materials directly for Geneva.
Such efforts may include, without restriction, obtaining letters of intent from
Mannesmann salespersons to become employed by Geneva upon the termination of
this Agreement. Mannesmann agrees that it will take no action that is
detrimental to any salesperson of Mannesmann by reason of such salesperson's
signing such a letter of intent or agreeing to become employed by Geneva.
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3.8 Marketing.
a. Mannesmann agrees to incorporate into the marketing
effort it makes to sell Products within the Territory, on a good faith basis,
any reasonable directions or suggestions made by Geneva with respect to:
(i) marketing techniques and general policies
Mannesmann adopts with respect to the sale of Products within the Territory; and
(ii) information, including without restriction,
literature, brochures, and verbal instructions given by sales personnel to
customers and prospective customers within the Territory for the purpose of
soliciting sales of Products.
b. Without limiting the generality of Section 3.8a,
Mannesmann agrees that, without the specific prior consent of Geneva, it will
not, sell or distribute within the Territory, any plate, wide coil, or pipe
product of any manufacturer or distributor (other than Geneva) that competes
with any of the Products. As used in Sections 3.8a and 3.8b, a Product or other
materials shall not be deemed to be "produced" by Geneva until such time as such
Product is actually available for order by customers.
c. Mannesmann hereby grants to Geneva a right of first
refusal for the term of this Agreement to supply Mannesmann with all Narrow Coil
Products (as hereinafter defined) to be sold by, through or under Mannesmann
within the Territory. "Narrow Coil Products" shall mean unprocessed hot rolled
bands with (i) a width of seventy-six (76) inches or narrower and (ii) a
thickness in the range between, and including, nine one-hundredths of one
(0.090) inch and above. Prior to accepting from a customer any purchase order or
entering into any agreement to sell any Narrow Coil Product, Mannesmann shall
provide Geneva with a written notice of each inquiry received by it with respect
to the sale of Narrow Coil Product. Such notice shall contain all of the terms
and conditions applicable to such inquiry and a copy, if available, of such
inquiry (an "Inquiry Notice"). Geneva shall provide to Mannesmann written notice
of Geneva's exercise of such right of first refusal within two (2) business days
of Geneva's receipt of an Inquiry Notice. In the event that Geneva elects to
supply Mannesmann with the Narrow Coil Product identified in an Inquiry Notice,
Geneva shall proceed to supply such Narrow Coil Product to Mannesmann in
accordance with terms and conditions of the Inquiry Notice as supplemented by
this Agreement; provided, however, that in the event of any conflict between
such Inquiry Notice and this Agreement, the terms and conditions of this
Agreement shall control.
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3.9 Market Data Reports. Mannesmann will submit to Geneva on a
regular basis, but not less frequently than four times each month, a marketing
report that will include:
a. a brief description of the marketing efforts on behalf
of Geneva that have been made since the last marketing report submitted by
Mannesmann;
b. customer responses to Geneva's currently quoted prices
for Products;
c. price structures, to the extent available, of steel
products produced by competitors of Geneva;
d. any general market data that could reasonably be
expected to have an effect on Geneva's pricing structure of Products or sales
efforts in the Territory;
e. customers and prospective customers that have been
contacted in an effort to sell Products, including, but not limited to, Narrow
Coil Products, within the Territory;
f. a report for each customer that has, since the last
report, expressed to Mannesmann, its employees or agents, any dissatisfaction
with Mannesmann, Geneva, Products or other materials, with details regarding the
reason for any such dissatisfaction; and
g. a record of all competitive price reports made by
Mannesmann during the previous week or which had not been included in a
marketing report previously supplied to Geneva.
3.10 Pricing of Products. Geneva shall, on or before the 45th day
prior to the first business day of each calendar quarter, notify Mannesmann of
its pricing structure of Products for such quarter that apply in the Territory.
Geneva will make a good faith effort to maintain pricing structures throughout
each quarter at a competitive level and to immediately notify Mannesmann of any
price change applicable in the Territory. Mannesmann shall maintain records of
competitive price reports in such detail as Geneva shall request and shall
include such reports in the marketing report as provided in Section 3.9g.
3.11 Sales Allowance, Commission, and Discount.
a. Mannesmann shall be entitled to receive as a sales
allowance with respect to sales to Mannesmann of Products and other materials
shipped, or anticipated to be shipped, to Mannesmann customers located within
the Territory an amount (the "Sales Allowance") equal to the total of (x) the
Variable Allowance
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for such sale plus (y) 1.13% of the difference between the following (1) the
invoice amount with respect to such sale and (2) the Variable Allowance for such
sale. The allowance provided in this Section 3.11a shall be deducted by
Mannesmann, at the times hereafter indicated, from the funds remitted by
Mannesmann to Geneva.
b. The Variable Allowance for sales referred to in Section
3.11a is a percentage of the net invoice amount for each ton of Product and
other material shipped by Geneva (including direct sales by Geneva other than
sales excepted under Section 3.12) for which a Sales Allowance is provided
pursuant to this Agreement in each sales year equal to 1.5% on each ton so
shipped up to and including 1,000,000 tons in the aggregate and 1% on each ton
so shipped above 1,000,000 tons in the aggregate; provided, however, the
Variable Allowance for sales of electric resistance welded pipe shall be 1.75%;
provided, further, however, the tons of such pipe shipped shall not be included
in the tons of Product and other materials shipped by Geneva for purposes of
determining the percentage used in the calculation of the Variable Allowance.
c. Following each calendar quarter in any sales year
either party hereto may propose an adjustment to the portion of the Sales
Allowance described in Section 3.11a(y) above, to be effective for sales during
the then current calendar quarter, reflecting changes in (1) the Prime Rate, as
hereinafter defined, and (2) the average aging of receivables for accounts of
Mannesmann arising from sales by Mannesmann of Products and other materials
purchased by Mannesmann under this Agreement from those in effect on the date
hereof; provided, that Mannesmann shall use its best efforts to maintain the
average aging of receivables as low as possible with a target of not more than
forty-five calendar days. Such proposal shall be accompanied by detailed
justification for such adjustment. In the event the parties hereto fail to agree
to the adjustment proposed, such element of the Sales Allowance then in effect
shall continue until an adjustment is agreed.
d. Any commission payable by Geneva to Mannesmann in
connection with the direct sale of Product by Geneva shall be paid by Geneva to
Mannesmann upon receipt by Geneva of payment for such Product.
e. Mannesmann shall be entitled to receive as an
additional discount with respect to each Payment Invoice for Products sold to
Mannesmann an amount equal to the product of (x) the average number of days in
the period commencing on the date that payment for such Products is received by
Geneva in accordance with Section 5.2 of this Agreement and ending on the date
on which such Products are shipped (the "Storage Period"); multiplied by (y) (i)
the average of the prime rate published in the Money Rates
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section of the Wall Street Journal (the "Prime Rate") on each day during the
Storage Period divided by (ii) 365; and multiplied by (z) (i) the amount set
forth on the Payment Invoice with respect to such Product less (ii) the Sales
Allowance retained by Mannesmann or otherwise remitted to Mannesmann by Geneva
with respect to such Payment Invoice. The initial Storage Period and the average
Prime Rate shall be 21 days and 8.25%, respectively. The discount provided in
this Section 3.11e shall be deducted by Mannesmann, at the times hereafter
indicated, from the funds remitted by Mannesmann to Geneva.
f. Following each calendar quarter in any sales year
either party hereto may propose an adjustment to the discount described in
Section 3.11e above, to be effective for Payment Invoices during the then
current calendar quarter, reflecting changes in (1) the Prime Rate and (2) the
Storage Period. In the event the parties hereto fail to agree to the adjustment
proposed, such element of the discount then in effect shall continue until an
adjustment is agreed.
3.12 Exception. Notwithstanding Section 3.11 of this Agreement,
Geneva shall not be obligated to pay any sales allowance, discount or commission
to Mannesmann for any Product that is sold to any customer identified on Exhibit
C to this Agreement or to any customer or potential customer with whom
Mannesmann has refused to deal or to whom Mannesmann has elected not to sell or
for any other materials that are sold by Geneva to any customer located within
the Territory. Geneva will have the right to sell such Product or other
materials directly or through another sales representative.
3.13 Title to the Products.
a. Title to the Products shall pass to Mannesmann upon the
Products being Identified to the Agreement (as defined below). Promptly upon
assignment of Products to an order, all such Products shall be stamped, or the
lots consisting of such Products shall be marked, with a tracking number (a
"Tracking Number") that shall be entered into Geneva's inventory records.
b. Products shall be deemed "Identified to the Agreement"
on the earlier of:
(i) At the time at which the Tracking Number for
such Product or for the lot of which such Product is a part, is identified in
Geneva's inventory records as relating to a particular purchase order placed by
Mannesmann; provided, however, that any Product Identified to the Agreement that
is placed in any of the inventory stockpiles, other than a stockpile relating to
the Mannesmann purchase order to which such Product has been
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identified, herein the "Geneva Inventory Stockpiles," shall be deemed to be
"fungible" for purposes of Article 7 of the Utah Uniform Commercial Code (Any
fungible Product that is Identified to the Agreement and is located in the
"Geneva Inventory Stockpiles," may be replaced by or substituted for any other
Product of equal quantity, metallurgical quality and width, thickness and
length; provided, that such replacement or substitute Product is concurrently
Identified to the Agreement, as provided in the foregoing part of this Section
3.13b(i)); or
(ii) At the time at which an invoice is issued to
Mannesmann for designated Products, regardless of whether the requirements of
3.13b(i) have been met.
c. Mannesmann may elect to file a protective Form UCC-1
with the Utah Department of Commerce, Division of Corporations and Commercial
Code to give public notice of its interest in the Products with respect to which
title has passed to Mannesmann.
d. Mannesmann acknowledges and consents to the storage of
the Products on Geneva's premises whether such Products have or have not been
Identified to the Agreement.
3.14 Books and Records. Geneva shall have the right, exercisable
from time to time upon reasonable advance notice, to audit and copy those
portions of Mannesmann's books and records necessary to determine Mannesmann's
compliance with its obligations under this Section 3. Geneva shall have no right
to audit or copy any (a) confidential and proprietary information pertaining to
a customer or supplier (other than customers of Products), (b) Mannesmann's
books and records relating to salaries of Mannesmann employees, or (c)
Mannesmann's books and records unrelated to Mannesmann's obligations hereunder.
4. Warranty Provisions.
4.1 Warranty. The Products and other materials produced by Geneva
and sold under this Agreement are warranted to conform to contract
specifications. The obligations of Geneva under this warranty are limited to an
amount equal to the original invoice price of Products or other materials that
have been reported by Mannesmann not to conform to such specifications and that
have been so found by Geneva after inspection, such amount to be paid either by
delivery of replacement product or offset against future invoices as the parties
may in good faith mutually agree.
4.2 Claims. All claims under the warranty set forth at Section
4.1 shall be made in writing by Mannesmann within five working days after
receipt by Mannesmann from its customer of
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notice of defect. Geneva will not be responsible for any claim if notice thereof
is not received by Geneva promptly following delivery by Geneva to Mannesmann or
Mannesmann's customer, whichever is earlier, of the Products or other materials
produced by Geneva that are the subject of such claim. Notwithstanding the
foregoing, Geneva will not, in any event, be responsible for such a claim if
notice thereof is not received by Geneva within the same time limit Geneva
contractually prescribes from time to time for customers to whom Geneva sells
directly. Geneva agrees in good faith to settle any warranty claim in a timely
fashion.
4.3 Sole Remedy for Defects. Mannesmann agrees to accept the
warranty hereinabove contained in lieu of all other warranties, statutory or
otherwise, as the sole and exclusive remedy against Geneva for any defects of
any nature whatsoever. ANY STATUTORY OR IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE IS HEREBY WAIVED. EXCEPT FOR THE WARRANTY SET
FORTH IN SECTION 4.1 AND THE REMEDY PROVIDED IN SECTION 4.1, ALL WARRANTIES,
UNDERTAKINGS AND CONDITIONS, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, ARE
HEREBY EXCLUDED. IN NO EVENT SHALL GENEVA BE LIABLE FOR ANY DIRECT, INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES SUFFERED BY MANNESMANN OR ANY CUSTOMER OF
MANNESMANN.
4.4 Disputes Regarding Warranty. If Geneva and Mannesmann do not
agree regarding the merits of a warranty claim, the disagreement will be settled
by the good faith appointment by the parties of a qualified and neutral
inspection company that is agreed to by the parties to investigate and report to
the parties within a reasonable time regarding the merits of the warranty claim.
The results of such report shall be final and binding on the parties hereto.
5. Credit Risk and Payment.
5.1 Credit Risk. The credit risk on all Products and other
materials shipped by Geneva upon Mannesmann's order shall be borne by Geneva.
5.2 Payment for Products. Notwithstanding any provision in this
Agreement to the contrary, with respect to any purchase order received from
Mannesmann by Geneva under this Agreement, as soon as practicable after a
Product is Identified to the Agreement, Geneva shall forward, by U.S. Mail or,
at the discretion of Geneva, a faster medium such as overnight courier or
facsimile transmission, invoices relating to such Product, and the other
materials subject to such purchase order, (each a "Payment Invoice"). Each
Payment Invoice shall specify the purchase order to which it relates, the
estimated promise date with respect thereto and the status of production or
shipment of the order. With respect to the Products for which title has passed
to
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Mannesmann but that are stored in Geneva's inventory stockpiles, Geneva shall
include with the Payment Invoice for such Products a mill test report for such
Product and a warehouse receipt, acknowledging Mannesmann's title to the
Products, the form of which shall be reasonably acceptable to Geneva and
Mannesmann and be sufficient as a warehouse receipt pursuant to Article 7 of the
Utah Uniform Commercial Code. Mannesmann shall, every Monday and every Thursday
of each week, remit to Geneva by wire transfer in U.S. funds the full amount of
all Payment Invoices from Geneva with respect to which such payment has not
previously been made less the Sales Allowance owed Mannesmann for shipments to
be made pursuant to such orders and the discount identified in Section 3.11e of
this Agreement. In addition to the information required above, upon shipment of
the Products, Geneva shall provide to Mannesmann the mill test report and bills
of lading for such Products.
5.3 Billing for Products. Mannesmann shall promptly, after
receiving Geneva's bill of lading with respect to any Product or other
materials, bill its customer for the Product or other materials subject to such
invoice. Each of Mannesmann's billings shall be on a net 30 day term or such
other term as may be agreed to by Geneva in writing and in advance of Geneva's
shipment. Thereafter, Mannesmann will use its best efforts to collect full
payment of such invoice from its customer. Geneva and Mannesmann agree to meet
periodically to reconcile their records with respect to the transactions under
this Agreement to assure that Mannesmann is paid the applicable Sales Allowance
and, if necessary, to review and adjust the procedures for billing and payment
hereunder.
5.4 Assignment of Uncollected Accounts. Mannesmann shall keep an
accurate accounting of all customer accounts receivable for customers to which
Mannesmann sells Products or other materials. With respect to Products and other
materials shipped by Geneva pursuant to a purchase order given by Mannesmann to
Geneva pursuant hereto, Mannesmann may, at its option, notify Geneva of the
failure of a customer to pay any invoice from Mannesmann for such Products and
other materials within 90 days from shipment date, specifying the customer, the
amount unpaid, the invoice relating to the account and the reason, if any,
asserted for non-payment. Within five business days after receipt by Geneva of
such notice by Mannesmann, (which notice shall be timely given under the
circumstances) Geneva shall remit to Mannesmann by wire transfer in U.S. funds
the amount of the invoice from Mannesmann to its customer which has not been
paid less the Variable Allowance in the case of a sale as to which a Variable
Allowance was paid. Geneva shall use its best efforts to collect each account
receivable with respect to which Geneva has so remitted funds and will remit to
Mannesmann, within 30 days after collection, Mannesmann's portion of the
Variable Allowance on the amount so collected. As to any invoice so paid by
Geneva, Mannesmann hereby
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absolutely, irrevocably, presently and unconditionally without further act or
deed of any kind or nature whatsoever assigns to Geneva, without recourse to
Mannesmann, the accounts receivable represented thereby, all present and future
rights to collect from such customer any such unpaid amounts, interest thereon
and other amounts in accordance with the terms of the Agreement between
Mannesmann and such customer. Mannesmann shall further (a) give Geneva
reasonable access to its sales records to allow Geneva to verify accounts
receivable so assigned to Geneva, (b) upon request of Geneva, execute such other
documents and instruments as Geneva may reasonably determine to be necessary to
evidence such assignment and (c) cooperate with Geneva as Geneva reasonably
determines necessary to collect such accounts receivable.
6. Force Majeure. Geneva will not be liable for any failure or delay in
delivery caused by an act of God, labor strike, accident, governmental
restriction, raw material shortage, or any other cause beyond Geneva's control,
or because of equipment failure.
7. Special or Consequential Damage. Neither party hereto shall be liable
to the other party for any special or consequential damages arising from the
breach of any obligation under this Agreement.
8. Relationship of the Parties. The relationship between the parties
hereto shall be one of independent contractors. Neither party hereto is
authorized to bind the other contractually or otherwise, or to make any
representation not permitted herein on behalf of the other party without such
other party's consent.
9. Right to Set-Off. Geneva and Mannesmann agree that if Geneva
purchases materials from Mannesmann during the term of this Agreement
("Materials"), and fails to pay for such Materials upon the terms agreed to
between the parties, the parties will automatically set-off any such monies that
are past due and owing by Geneva to Mannesmann for the Materials against monies
due and owed by Mannesmann to Geneva for Products and other materials. For
purposes of this Agreement, Materials shall mean, without limitation, any goods
the parties may agree upon from time to time. Geneva and Mannesmann agree to use
their best efforts to promptly, diligently and in good faith, establish and
maintain appropriate accounting procedures necessary to implement any set-off
allowed for in this Section 9.
10. Term of Agreement. This Agreement shall expire at the close of
business on September 30, 2001, if notice of such termination is given by a
party hereto to the other party not less than six (6) months prior to such
termination date. If timely notice of such termination is not given, the term of
this Agreement
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shall be extended automatically for an additional three year term and for
additional three year terms thereafter until notice of termination is given by a
party hereto to the other party not less than six (6) months prior to the next
termination date. Notwithstanding the foregoing, Geneva shall have the option to
terminate this Agreement effective December 31, 1999 by giving written notice of
such termination to the other party hereto not less than six (6) months prior to
the effective date of such termination.
11. Termination. Notwithstanding Section 10, this Agreement may be
terminated:
11.1 by the non-defaulting party if the other party is
adjudicated bankrupt, makes a general assignment for the benefit of creditors,
admits in writing its inability to pay its debts as they become due, ceases to
conduct business in the ordinary course, has a receiver appointed, files a
petition under any bankruptcy, reorganization, debt arrangement, insolvency,
liquidation or distribution law or a petition under any bankruptcy,
reorganization, debt arrangement, insolvency, liquidation or distribution law is
filed against it and is not dismissed within sixty days;
11.2 by the non-defaulting party if the other party materially
breaches any of the terms of this Agreement, unless such breach is cured within
thirty days after written notice thereof;
11.3 by Geneva if Rudy Georg no longer is employed by Mannesmann
or his areas of responsibility in relation to Mannesmann's obligations under
this Agreement are materially decreased in any way. Mannesmann acknowledges that
Rudy Georg is and shall remain the employee of Mannesmann primarily responsible
for Geneva's account with Mannesmann and the performance by Mannesmann of its
obligations hereunder; or
11.4 by Geneva if Mannesmann violates the provisions of Section
21 hereof relating to the transfer or assignment of this Agreement by
Mannesmann. For the purposes of this Section 11.4, any consent required for an
assignment by Mannesmann under Section 21 of this Agreement may be withheld in
Geneva's sole and absolute discretion if the assignee is unacceptable to Geneva.
For the purposes of this Section 11.4, "transfer or assignment" shall include
any transfer or assignment by merger, consolidation, liquidation or transfer of
assets or a transfer of control of Mannesmann, without the prior written consent
of Geneva, which consent may be withheld in Geneva's sole and absolute
discretion. "Control" for the purposes of this Agreement shall mean the sale or
transfer of a controlling percentage of the capital stock of
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Mannesmann or the sale of at least twenty-five percent (25%) of the value of the
assets of Mannesmann.
Provided, however, that if, and only if, Mannesmann gives Geneva written notice
of a transfer or assignment (a "Transfer Notice") prior to termination of this
Agreement by Geneva pursuant to Section 11.4 of this Agreement, then within
fifteen (15) business days after Geneva's receipt of such Transfer Notice,
Geneva shall give Mannesmann written notice setting forth the effective date of
such termination, if any, which effective date shall not be less than thirty
(30) nor more than ninety (90) days from the date of Geneva's receipt of such
Transfer Notice.
11.5 With respect to Sections 11.3 and 11.4 only, termination of
this Agreement shall be Geneva's sole remedy.
12. Post-Termination Transition. Following a timely notice of
termination pursuant to Section 10 of this Agreement, or actual termination
effected pursuant to Section 11 of this Agreement, Mannesmann shall promptly
afford Geneva its full good faith cooperation in aiding Geneva to effect a
transition of Geneva's sales force to replace Mannesmann's sales force that
deals with purchasers of the Products and other materials. The cooperation
contemplated by this Section 12 includes all acts of Mannesmann reasonably
necessary in such transition including, but not limited to, the following:
12.1 Mannesmann will provide Geneva with a comprehensive list of
customers to whom Mannesmann has sold Products or other materials pursuant to
this Agreement.
12.2 For each customer on the list supplied pursuant to Section
12.1, Mannesmann will supply Geneva with the following to the extent that such
is in the possession of Mannesmann:
(a) all historical sales information kept by Mannesmann
relating to Products and other materials purchased by Mannesmann pursuant to
this Agreement;
(b) the names of the employees or other representatives of
such customer that are Mannesmann's primary sales contact for such customer;
(c) the names of key management personnel of such
customer;
(d) the names of all competitor steel product suppliers
from whom such customer purchases;
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(e) the address of the headquarters and of each branch
location of such customer;
(f) a list of all equipment owned by such customer that is
used or that can be used to process Products and/or other materials, including
any technical specifications relating to such equipment that Mannesmann may
possess; and
(g) a list of all steel products such customer is capable
of producing.
12.3 Mannesmann will facilitate an introduction of the employees
or other representatives of such customer responsible for making purchasing
decisions for Products and other materials to the person or persons designated
by Geneva at such time and under such circumstances that, in the best judgment
of Mannesmann, will afford Geneva's designated representative with the best
opportunity to effect a transition of such customer's purchasing Products and
other materials directly from Geneva.
13. Promotion of Geneva. Mannesmann will use its best efforts at all
times that this Agreement is in force to promote and maintain a positive
reputation for Geneva among Mannesmann's customers and potential customers with
a view to minimizing any inconvenience, concern or confusion on the part of any
such customer or potential customer caused by Geneva's taking over all sales
efforts in the Territory upon termination of this Agreement.
14. Insurance. Geneva shall cause Mannesmann to be named as an
additional insured on any product liability insurance obtained by Geneva that
covers Products and other materials. Geneva will direct the carrier of any such
insurance to forward to Mannesmann a certificate of insurance naming Mannesmann
as an additional insured on the policy obtained and to give Mannesmann 90 days
notice of the termination, for any reason, of such policy.
15. Notice. Any notice required or permitted hereunder shall be in
writing and sent by registered or certified mail, postage prepaid, as follows:
If to Geneva:
Geneva Steel Company
Attention: Ken C. Johnsen
P.O. Box 2500
Provo, Utah 84603
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with a copy to:
Parr Waddoups Brown Gee & Loveless
185 South State Street, Suite 1300
Salt Lake City, Utah 84111
Attention: Roger D. Henriksen
If to Mannesmann:
Mannesmann Pipe & Steel Corporation
1990 Post Oak Boulevard, 18th Floor
Houston, Texas 77056
or at such other address as either party to this Agreement may from time to time
designate by notice in writing to the other party. Notice shall be deemed given
two business days after being mailed in the manner set forth above.
16. Amendments. Any amendment to this Agreement must be in writing, and
signed by all parties to this Agreement.
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Utah.
18. Required Performance. The failure of either party to this Agreement
to require the performance of any term of this Agreement or the waiver by either
party of any breach under this Agreement shall not prevent the subsequent
enforcement of such term and shall not be deemed a waiver of any subsequent
breach.
19. Costs Upon Default. In the event of a default under the terms of
this Agreement, the non-defaulting party shall be entitled to recover from the
defaulting party, all costs of the non-defaulting party, including a reasonable
attorney's fee, in enforcing the rights of the non-defaulting party hereunder.
20. Severability. If any provision of this Agreement is held to be
invalid or void by any court of competent jurisdiction, such provision shall be
deemed severable from the remainder of this Agreement and shall not effect any
other provision hereof. If such provision shall be deemed invalid due to its
scope or breadth, such provision shall be deemed valid to the extent of the
scope or breadth permitted by law.
21. Assignability. Neither party to this Agreement shall assign any
rights or delegate any obligations of such party hereunder, without the prior
written consent of the other party hereto. Geneva may withhold any such consent
in its sole and absolute discretion. Consent to any assignment shall not operate
as a waiver of the necessity for consent to any subsequent
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assignment and the terms of such consent shall be binding on any person holding
by, through or under Mannesmann.
22. Merger. This Agreement (including all Exhibits hereto, which
Exhibits are hereby incorporated herein by this reference) contains the entire
understanding between the parties with respect to the subject matter hereof and
supercedes all prior understandings between the parties. In the event of any
conflict between the terms of this Agreement and any purchase order or any
document submitted by Mannesmann to Geneva, this Agreement shall govern.
23. Confidentiality. Each of Mannesmann and Geneva acknowledges that
information, data and documents disclosed or produced by the other party hereto
(the "Disclosing Party") pursuant to this Agreement, orally or in writing,
including but not limited to, the terms and conditions of this Agreement, unless
otherwise specifically designated, shall be deemed "confidential information"
within the meaning of this Agreement. Except with prior written consent of the
Disclosing Party, all confidential information is solely for use in connection
with the performance of the party to which such confidential information was
disclosed or produced (the "Recipient Party") of its obligations hereunder and
shall not be used by the Recipient Party or disclosed to any other person except
with the prior written consent of the Disclosing Party in each instance.
"Confidential information" shall not include any such information, data or
documents that (a) at the time of disclosure is or subsequently becomes, through
no fault of such party, part of the public domain, (b) was known to the party to
whom it was disclosed, or (c) was disclosed to the other party by a third party
legally entitled to do so.
24. Counterparts and Facsimile Signatures. This Agreement may be
executed in counterparts, each of which shall be deemed to be an original and
all of which together shall constitute but one and the same instrument.
Counterparts and signatures transmitted by facsimile shall be valid as
originals.
25. Business Days. For purposes of this Agreement "business day" shall
mean every Monday through Friday except state, federal and company holidays.
26. Inurement. This Agreement shall be binding upon and inure to the
benefit of Geneva and Mannesmann and their respective successors and assigns.
27. Effective Date. This Agreement shall be effective as of November 16,
1998 unless the parties mutually agree in writing on a different effective date.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of October 30, 1998.
GENEVA STEEL COMPANY
By: /s/ RICHARD D. CLAYTON
-------------------------------
Name: Richard D. Clayton
Its: Senior VP of Marketing and
Distribution
MANNESMANN PIPE & STEEL CORPORATION
By: /s/ RUDOLF GEORG
-------------------------------
Name: Rudolf Georg
------------------------------
Its: President
------------------------------
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EXHIBIT A
(Attached to and forming a part of the
Amended and Restated
Sales Representation Agreement)
The term "Territory" shall include all of the United States of America
excluding Alaska and Hawaii.
<PAGE> 20
EXHIBIT B
(Attached to and forming a part of the
Amended and Restated
Sales Representation Agreement)
The term "Products" shall mean all steel products manufactured within
the mill capabilities by Geneva on October 31, 1998 or thereafter, including hot
rolled bands and sheets in thickness of 12 gauge and above, black or temper
passed coils, hot rolled plate (including but not limited to strip mill plate),
floor plate, welded pipe, and slabs; provided, however, that such term shall not
include non-prime or secondary items, products for sale to Geneva or any of its
affiliates or ingots or at Geneva's option, pipe products produced by Geneva or
at the pipe mills located at the Geneva Steel Works.
<PAGE> 21
EXHIBIT C
(Attached to and forming a part of the
Amended and Restated
Sales Representation Agreement)
Geneva Direct Customers within the Territory
Huntco Steel Inc.
<PAGE> 1
Exhibit 10.17
AGREEMENT
AGREEMENT dated May 1, 1998 between GENEVA STEEL (the "Company") and
UNITED STEELWORKERS OF AMERICA, on behalf of Local Union 2701 hereinafter
referred to as the "Union", providing for industrial relations at the Company's
Geneva, Utah steel operations (the "Geneva Plant") and certain other matters as
set forth herein.
ARTICLE 1
APPLICATION OF AGREEMENT
SECTION 1 -- PURPOSE AND INTENT OF THE PARTIES.
A. Matters of Employment: It is the intent and purpose of the parties
hereto to set forth herein the agreement between them in respect to rates of
pay, hours of work, and other conditions of employment in the Geneva Plant and
certain other matters as set forth herein.
B. Basis of Claims: The provisions of this Agreement constitute the sole
procedure for the processing and settlement of any claim by an employee (as
defined below) or the Union of the violation by the Company of this Agreement.
As the representative of the employees, the Union may except as provided in
Article 16, Section 4.C. initiate and process grievances through the grievance
procedure, including arbitration, in accordance with this Agreement, or adjust
or settle the same.
C. Administration: The representatives of the Company and the Union
shall continue to provide each other with such advance notice as is reasonable
under the circumstances on all matters of importance in the administration of
the terms of the Agreement, including changes or innovations affecting relations
between the parties.
D. Nondiscrimination: It is and shall be the policy of the Company and
the Union that the provisions of this Agreement shall be applied to all
employees and applicants without regard to race, color, religious creed,
national origin, sex, age, disability, Veteran or special disable Veteran
status, or membership in the Union.
SECTION 2 -- UNIT COVERAGE.
A. Membership: The bargaining unit at the Geneva Plant, and the term
"employee(s)" as used herein, shall include all production, maintenance, pipe
mill, quarry and certain salaried clerical and technical employees of the
Company for whom the Union is currently certified by the National Labor
Relations Board as the exclusive collective-bargaining representative, and shall
exclude all executives, office employees, managers, division managers, area
managers, foremen, shift managers, supervisors, draftsmen, timekeepers, watchmen
and guards, full-time first-aid and safety employees, and all similar or other
jobs not currently included in the bargaining unit. The
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term "Geneva Plant" shall not include the 40" blooming mill, and the structural
mill which have been shut down.
B. Dispute of Coverage: Any difference which shall arise between the
Company and the Union as to whether or not an individual employee is or is not
included within the bargaining unit shall be handled as a grievance in
accordance with the procedures set forth in Article 16 hereof.
SECTION 3 -- CONTRACTING OUT
The parties recognize the seriousness of the problems associated with
contracting out of work both inside and outside the Plant and have accordingly
agreed as follows:
The Parties have existing rights and contractual understandings with
respect to contracting out. In addition, the following provisions shall be
applicable to all contracting out issues subject to, and arising on or after the
effective date of this Agreement.
A. Basic Prohibition: In determining whether work should be contracted out or
accomplished by the bargaining unit, the guiding principle is that work capable
of being performed by Bargaining Unit employees shall be performed by such
employees. Accordingly, the Company will not contract out any work for
performance inside or outside the Plant unless it demonstrates that such work
meets one of the following exceptions:
B. Exceptions:
1. Work in the Plant
a. Production, service, all maintenance and repair work, all
installation, replacement and reconstruction of equipment
and productive facilities, other than that listed in
Subparagraph B1.b. below, all within a Plant, may be
contracted out if (i) the consistent practice has been to
have such work performed by employees of contractors and
(ii) it is more reasonable (within the meaning of
paragraph C below) for the Company to contract out such
work than to use its own employees.
b. Major new construction including major installation, major
replacement and major reconstruction of equipment and
productive facilities, at the Plant may be contracted out.
A project shall be deemed major so as to fall within the
scope of this exception if it is shown by the Company that
the project is of a grander or larger scale when compared
to other projects bargaining unit forces at the Plant are
normally expected to do. Such comparison should be made in
light of all relevant factors. However, in making such
comparison, there shall be no bundling of historically
distinct
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projects into single projects of major new construction
(including major installation, major replacement and major
reconstruction of equipment and production facilities) nor
any compression of historically distinct projects into a
continuous time period.
As regards the term "new construction" above, except for
work done on equipment or systems pursuant to a
manufacturer's warranty, work that is of a peripheral
nature to major new construction, including major
installation, major replacement and major reconstruction
of equipment and production facilities and which does not
concern the main body of work shall be assigned to
employees within the bargaining unit unless it is more
reasonable to contract out such work taking into
consideration the factors set forth in Paragraph C or it
is otherwise mutually agreed. For purposes of this
provision, the term "work of a peripheral nature" may in
certain instances include, but not be limited to
demolition, site preparation, road building, utility
hook-ups, pipe lines and any work which is not integral to
the main body.
2. Work Outside the Plant
a. Should the Company contend that maintenance or repair work
to be performed outside the Plant or work associated with
the fabricating of goods, materials or equipment purchased
or leased from a vendor or supplier should be excepted
from the prohibitions of this Section, the Company must
demonstrate that it is more reasonable (within the meaning
of paragraph C below) for the Company to contract for such
work (including the purchase or lease of the item) than to
use its own employees to perform the work or to fabricate
the item.
Notwithstanding the above, the Company may purchase
standard components or parts or supply items, produced for
sale generally ("shelf items"). No items shall be deemed a
standard component or part or supply item if (i) its
fabrication requires the use of prints, sketches or
manufacturing instructions supplied by the Company or at
its behest or it is otherwise made according to Company
specifications or (ii) it involves the purchase of motors,
transmissions, convertors or other items under a core
exchange, replacement or trade-in transaction (whether or
not title to the unit passes to the vendor/purchaser as
part of the transaction).
b. Production work may be performed outside the Plant only
where the Company demonstrates that it is unable because
of lack of capital to invest in necessary equipment or
facilities, and that it has a continuing
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<PAGE> 4
commitment to the steelmaking business. In determining
whether there is capital to invest in particular equipment
or facilities, the Company is entitled to make reasonable
judgments about the allocation of scarce capital resources
among its Plants represented by the Union and their
supporting facilities.
3. Mutual Agreement
Work contracted out by mutual agreement of the parties pursuant
to Paragraph G below.
C. Reasonableness: In determining whether it is more reasonable for the Company
to contract out work, rather than use its own employees, the following factors
shall be considered:
1. Whether the bargaining unit will be adversely impacted.
2. The necessity for hiring new employees shall not be deemed a
negative factor except for work of a temporary nature.
3. Desirability of recalling employees on layoff.
4. Availability of qualified employees (whether active or on layoff)
for a duration long enough to complete the work.
5. Availability of adequate qualified supervision.
6. Availability of required equipment either on hand or by lease or
purchase, provided that either the capital outlay for the
purchase of such equipment, or the expense of leasing such
equipment, is not an unreasonable expenditure in all the
circumstances at the time the proposed decision is made.
7. The expected duration of the work and the time constraints
associated with the work.
8. Whether the decision to contract out the work is made to avoid
any obligation under the collective bargaining agreement or
benefits agreements associated therewith.
9. Whether the work is covered by a warranty necessary to protect
the Company's investment. For purposes of this subparagraph,
warranties are intended to include work performed for the limited
time necessary to make effective the following seller guarantees:
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<PAGE> 5
a. Manufacturer guarantees that new or rehabilitated
equipment or systems are free of errors in quality,
workmanship or design.
b. Manufacturer guarantees that new or rehabilitated
equipment or systems will perform at stated levels of
performance and or efficiency subsequent to installation.
Warranties are commitments associated with a particular
product or service in order to assure that seller
representations will be honored at no additional cost to
the Company. Long term service contracts are not
warranties for the purposes of this subparagraph.
10. In the case of work associated with leased equipment, whether
such equipment is available without a commitment to use the
employees of outside contractors or lessors for its operation and
maintenance.
11. Whether, in connection with the subject work or generally, the
Local Union is willing to waive or has waived restrictive working
conditions, practices or jurisdictional rules (all within the
meaning of "local working conditions" and the authority provided
by this Agreement).
D. Contracting Out Committee:
1. A regularly constituted committee consisting of not more
than four persons (except that the committee may be
enlarged to six persons by local agreement), half of whom
shall be members of the bargaining unit and designated by
the Union in writing to the Management, shall attempt to
resolve problems in connection with the operation,
application and administration of the foregoing
provisions.
2. In addition to the requirements of Paragraph E below, such
committee may discuss any other current problems with
respect to contracting out brought to the attention of the
committee.
3. Such committee shall meet at least one time each month.
E. Notice and Information: Before the Company finally decides to contract out an
item of work as to which it claims the right to contract out, the Union
committee members will be notified. Except as provided in Paragraph J below
(Shelf Item Procedure) such notice will be given in sufficient time to permit
the Union to invoke the Expedited Procedure described in Paragraph H below,
unless emergency situations prevent it. Such notice shall be in writing and
shall be sufficient to advise the Union members of the committee of the
location, type, scope, duration and timetable of the work to be performed so
that the Union members of the committee
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<PAGE> 6
can adequately form an opinion as to the reasons for such contracting out. Such
notice shall generally contain the information set forth below:
1. Location of work.
2. Type of work:
a. Service
b. Maintenance
c. Major Rebuilds
d. New Construction
3. Detailed description of the work.
4. Crafts or occupations involved.
5. Estimated duration of work.
6. Anticipated utilization of bargaining unit forces during the
period.
7. Effect on operations of work not completed in timely fashion.
Within ninety (90) days following the effective date of this agreement,
representatives of the parties shall develop a form notice for the submission of
the information described above. Either the Union members of the committee or
the Company members of the committee may convene a prompt meeting of the
committee. Should the Union committee members believe a meeting to be necessary,
they shall so request the Company members in writing within five (5) days
(excluding Saturdays, Sundays and holidays) after receipt of such notice and
such a meeting shall be held within three (3) days (excluding Saturdays, Sundays
and holidays) thereafter. The Union members of the committee may include in the
meeting the Union representative from the area in which the problem arises. At
such meeting, the parties should review in detail the plans for the work to be
performed and the reasons for contracting out such work. Upon their request, the
Union members of the committee will be provided any and all relevant information
in the Company's possession relating to the reasonableness factors set forth in
Paragraph C above. Included among the information to be made available to the
committee shall be the opportunity to review copies of any relevant proposed
contracts with the outside contractor. This information will be kept
confidential. The Company members of the committee shall give full consideration
to any comments or suggestions by the Union members of the committee and to any
alternative plans proposed by Union members for the performance of the work by
bargaining unit personnel. Except in emergency situations, such discussions, if
requested shall take place before any final decision is made as to whether or
not such work will be contracted out.
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<PAGE> 7
Should the Company committee members fail to give notice as provided
above, then not later than thirty (30) days from the date of the commencement of
the work a grievance relating to such matter may be filed under the complaint
and grievance procedure. Should it be found in the arbitration of a grievance
alleging a failure of the Company to provide the notice or information required
under this Paragraph E that such notice or information was not provided, that
the failure was not due to any emergency requirement, and that such failure
deprived the Union of a reasonable opportunity to suggest and discuss
practicable alternatives to contracting out, the Arbitrator shall have the
authority to fashion a remedy, at his discretion, that he deems appropriate to
the circumstances of the particular case. Such remedy, if afforded, may include
earnings and benefits to grievants who would have performed the work, if they
can be reasonably identified.
F. Remedy for Repeated Notice Violations: Notwithstanding any other provision of
this Agreement, where, at a particular Plant, it is found that the Company (i)
committed violations of Paragraph E that demonstrate willful conduct in
violation of the notice provision or constitutes a pattern of conduct of
repeated violations or (ii) violated a cease and desist order previously issued
by an Arbitrator in connection with a violation of paragraph E the Arbitrator
may, as circumstances warrant, fashion a suitable remedy or penalty.
G. Mutual Agreement and Disputes: The committee may resolve the matter by
mutually agreeing that the work in question either shall or shall not be
contracted out. Any such resolution shall be final and binding but only as to
the matter under consideration and shall not affect future determinations under
this Section.
If the matter is not resolved, or if no discussion is held, the dispute
may be processed further (i) by filing a grievance relating to such matter under
the complaint and grievance procedure described in the Labor Agreement; or (ii)
by submitting the matter to the Expedited Procedure set out in Paragraph H
below.
H. Expedited Procedure: In the event that either the Union or Company members of
the committee request an expedited resolution of any dispute arising under this
Section, except Paragraph J (Shelf Item Procedure), it shall be submitted to the
Expedited Procedure in accordance with the following:
1. In all cases except those involving day-to-day maintenance and
repair work and service, and emergency situations, the Expedited
Procedure shall be implemented prior to letting a binding
contract.
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<PAGE> 8
2. Within three (3) days (excluding Saturdays, Sundays and holidays)
after either the Union or Company members of the committee
determine that the committee cannot resolve the dispute, either
party (Chairman of the Grievance Committee in the case of the
Local Union and the Manager of Labor Relations in the case of the
Company) may advise the other in writing that it is invoking this
Expedited Procedure.
3. An expedited arbitration must be scheduled within three (3) days
(excluding Saturdays, Sundays and holidays) of such notice and
heard at a hearing commencing within five (5) days (excluding
Saturdays, Sundays and holidays) thereafter. The arbitrator
selected from the Arbitration Panel shall hear the dispute and,
if the arbitrator selected is not available to hear the dispute
within five (5) days, another arbitrator shall be selected from
the Arbitration Panel.
4. The arbitrator must render a decision within forty-eight (48)
hours (excluding Saturdays, Sundays and holidays) of the
conclusion of the hearing. Such decision may be cited as a
precedent by either party in any future contracting out disputes.
5. Notwithstanding any other provision of this Agreement, any case
heard in the Expedited Procedure before the work in dispute was
performed may be reopened by the Union in accordance with this
paragraph if such work, as actually performed, varied in any
substantial respect from the description presented in
arbitration, except where the difference involved a good faith
variance as to the magnitude of the project. The request to
reopen the case must be submitted within seven (7) days of the
date on which the Union knew or should have known of the
variance and shall contain a summary of the ways in which the
work as actually performed differed from the description
presented in arbitration. As soon as practicable after receipt
of a request to reopen, an arbitration hearing date shall be
scheduled. In a case reopened pursuant to this paragraph, the
Arbitrator shall determine whether the work in dispute, as it
actually was performed, violated the contracting out provisions
and, if so, the remedy. The prior decision regarding the subject
work shall be considered in the determination and given weight
in the subsequent dispute, except to the extent that it relied
on an erroneous description.
I. Contractors Testifying in Arbitration: No testimony offered by an outside
contractor may be considered in any proceeding alleging a violation of these
provisions unless the party calling the contractor provides the other party with
a copy of each contractor document to be offered at least forty-eight (48) hours
(excluding Saturdays, Sundays and holidays) before commencement of that hearing.
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J. Shelf Item Procedure:
1. No later than July 1, 1998, and, except as provided herein,
annually thereafter, the Company shall provide the Union members
of the committee with a list and description of anticipated
ongoing purchases of each item which the Company claims to be a
shelf item within the meaning of Paragraph B (2) a above. If the
Union members of the committee so request, the list shall not
include any item included on a previous list where the status of
the items, as of that time, has been expressly resolved. Within
sixty (60) days of the submission of the list, either the Union
members of the committee or the Company members may convene a
prompt meeting of the committee to discuss and review the list
of items and, if requested, the facts underlying the Company's
claim that such items are shelf items.
2. The committee may resolve the matter by mutually agreeing that
the item in question either is or is not a shelf item. With
respect to any item as to which the Union members of the
committee agree with the Company's claim that it is a shelf item,
the Company shall be relieved of any obligation to furnish a
contracting out notice until the June 1 next following such
agreement and thereafter, if the Union has requested that a
resolved item be deleted from the shelf item list in accordance
with Paragraph J (1).
3. If the matter is not resolved, any dispute may be processed
further by filing, within thirty (30) days of the date of the
last discussion, a grievance in Step Three (3) of the complaint
and grievance procedures as described in the labor agreement.
Except as provided in Paragraph J (5) such a grievance shall
include all items in dispute. However, where a number of items
raise the same or similar issues, those items may be grouped in a
single class or category.
4. An item which the Company claims to be a shelf item, but which
was not included on the list referred to above because no
purchase was anticipated, shall be listed and described on a
contracting out notice provided to the Union not later than the
regularly scheduled meeting of the contracting out committee next
following purchase of the item. Thereafter, the parties shall
follow the procedures set forth in paragraphs (2) and (3) above.
5. The Union may file a grievance in accordance with Paragraph G or
H of these provisions with respect to any unresolved item of
maintenance, repair work or work associated with the fabrication
of goods, material or equipment performed outside the Plant
notwithstanding the inclusion of such item on the shelf item list
previously furnished to the Union by the Company, provided such
grievance is filed within thirty (30) days of the date on which
the Union knew or should have known of the performance of the
work.
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K. Annual Review: Commencing on or before September 1, 1998 and on or before
September 1 of each year thereafter the Company committee members shall meet
with the Union committee members for the purpose of (i) reviewing all work
whether inside or outside the Plant which the Company anticipates may be
performed by outside contractors or vendors at some time during the following
Twelve (12) months, (ii) determining such work which should be performed by
Bargaining Unit employees and (iii) identifying situations where the elimination
of restrictive practices would promote the performance of any such work by
Bargaining Unit employees. The Union committee members shall be entitled in
conducting this study to review any current or proposed contracts concerning
items of work performed for the Company by outside contractors and vendors and
shall keep such information confidential. By no later than November 1, 1998 and
November 1 of each year thereafter the Local Union and Company committee members
shall jointly prepare a written report recording the results of this review.
Specifically, the report should list (a) all items of work which the parties
agree will be performed by Bargaining Unit employees during the following twelve
(12) calendar months, (b) all items of work which the parties agree should be
performed by outside contractors and vendors, and (c) those items on which the
parties disagree. If the parties disagree, the report will state the reason for
such disagreements.
L. District Director/Company Union Relations Representative:It is the intent of
the parties that the members of the joint plant contracting out committee shall
engage in discussions of the problem involved in this field in a good faith
effort to arrive at mutual understanding so that disputes and grievances can be
avoided. If either the Company or the Union members of the committee feel that
this is not being done, they may appeal to the District Director of the Union
who has jurisdiction of the Plant in question and the appropriate representative
of the Company Headquarters for review of the complaint about the failure of the
committee to properly function. Such appeal shall result in prompt investigation
by the District Director or his designated representative and the Company's
Union Relations Representative for such review. This provision should in no way
affect the rights of the parties in connection with the processing of any
grievance relating to the subject of contracting out.
M. The amount of overtime that has been worked by the employees or that may be
worked by the employees shall not be used as a justification for contracting
out.
SECTION 4 -- SUPERVISION.
Supervisors at the plant shall not perform work on a job normally
performed by an employee; provided, however, this provision shall not be
construed to prohibit supervisors from performing the following types of work:
1. Experimental work.
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2. Demonstration work performed for the purpose of
instructing and training employees.
3. Work required of the supervisors by emergency conditions
which if not performed might result in interference with
operations, bodily injury, or loss or damage to material
or equipment; and
4. Work which under the circumstances then existing, would be
unreasonable to assign to an employee.
Work which is incidental to supervisor duties on the job normally
performed by a supervisor, even though similar to duties found in jobs in the
bargaining unit, shall not be affected by this provision.
If a supervisor performs work in violation of this Section 4 and the
employee who otherwise would have performed this work can reasonably be
identified, or in the event that the employee who otherwise would have performed
the work cannot be identified, the employee who initiated the grievance, the
Company shall pay such employee the applicable Regular Hourly Wage for the time
involved or for four (4) hours, whichever is greater.
ARTICLE 2
RECOGNITION AND UNION MEMBERSHIP
SECTION 1 -- EXCLUSIVE BARGAINING AGENT.
Subject to the provisions of the National Labor Relations Act, the
Company recognizes the Union as the exclusive representative of all of the
Bargaining Unit employees for the purposes of collective bargaining with respect
to rates of pay, hours of employment, or other conditions of employment.
SECTION 2 -- UNION MEMBERSHIP AND CHECKOFF.
A. The Company will checkoff monthly dues, assessments and initiation
fees each as designated by the International Secretary-Treasurer of the Union,
as initiation or membership dues in the Union, on the basis of individually
signed voluntary checkoff authorization cards on forms agreed to by the Company
and the Union.
B. At the time of employment, new employees will be provided the
opportunity to voluntarily execute an authorization for the check off of Union
dues, as they may or may not elect, on the form agreed upon. A copy of such
authorization card for the checkoff of Union dues shall be forwarded to the
Financial Secretary of the Local Union along with the membership application of
such employee.
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C. New checkoff authorization cards other than those provided for by
Paragraph B above will be submitted to the Company on summary lists through the
Financial Secretary of the Local Union as executed by new employees.
D. Deductions on the basis of authorizations cards submitted to the
Company shall commence with respect to dues for the month in which the Company
receives such authorization card or in which such card becomes effective,
whichever is later. Dues for a given month shall be deducted from the first pay
closed and calculated in the succeeding month.
E. In cases of earnings insufficient to cover deduction of dues, the
dues shall be deducted from the next pay in which there are sufficient earnings,
or a double deduction may be made from the first pay of the following month,
provided, however, that the accumulation of dues shall be limited to two (2)
months. The International Secretary-Treasurer of the Union shall be provided
with a list of those employees for whom a double deduction has been made.
F. The Union will be notified of the reason for non-transmission of dues
in case of layoff, discharge, resignation, leave of absence, sick leave,
retirement, death, or insufficient earnings.
Unless the Company is otherwise notified, the only Union membership dues
to be deducted for payment to the Union from the pay of the employee who has
furnished an authorization shall be the monthly Union dues. The Company will
deduct initiation fees when notified by notation on the lists referred to in
Paragraph C of this Section, and assessments as designated by the International
Secretary-Treasurer.
G. The Company will implement the dues checkoff provisions of this
Collective Bargaining Agreement in accordance with the Constitution of the
International Union pursuant to reasonable instructions to be supplied by the
Union.
H. The Union shall indemnify and save the Company harmless against any
and all claims, demands, suits or other forms of liability that shall arise out
of or by reason of action taken or not taken by the Company for the purpose of
complying with any of the provisions of this Section, or in reliance on any
list, notice or assignment furnished under any of such provisions.
ARTICLE 3
RATES OF PAY
SECTION 1 -- STANDARD HOURLY WAGE SCALE.
A. Wage Rates: The standard hourly wage scale rate for each job shall be
as set forth in Appendix A of this Agreement and is recognized as the
established regular rate of pay for all
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hours of work. As used in this Agreement, the term "Regular Hourly Wage" shall
mean the regular hourly wage rates set forth in Appendix A, without adjustment
for overtime, premiums or shift differentials.
B. Apprentice Training: At such time as all trade and craft job
descriptions are agreed to and installed, a joint committee not to exceed four
(4) members, two (2) each from the Company and the Union, shall be formed to
develop an apprentice training program. The committee will be responsible for
such things as composing the course curriculum, defining training periods, and
coordinating with educational institutions. Apprentice vacancies will be posted
at the Step 3 level and awarded consistent with Article 8, Seniority.
C. Job Classifications: All jobs shall be described and classified by
Management. The job description and classification for each job in effect shall
continue in effect unless (1) Management changes the job content (requirements
of the job as to the training, skill, responsibility, effort and working
conditions) to the extent of one (1) full job class or more; (2) the job is
terminated or not occupied during a period of one (1) year; or (3) the
description and classification are changed by the mutual agreement of the
officially designated representative of the Company and the Union. The Local
Union Rate Committee will be involved in the development and implementation of
all new job classifications and job descriptions. The Plant Union Committee and
Management shall discuss and determine the accuracy of all job descriptions. The
Union shall be responsible for the filing of grievances in a timely fashion (30
days).
All jobs shall be described and classified by Management, taking into
account, without being bound by, the information set forth in the manual for job
classifications of production and maintenance jobs dated August 1, 1971.
SECTION 2 -- SHIFT DIFFERENTIALS
A. Wage Differential: For hours worked on the afternoon shift, there
shall be paid a premium rate of $.18 per hour. For hours worked on the night
shift, there shall be a paid premium rate of $.27 per hour.
B. Applicable Hours:
1. For the purpose of applying the aforementioned shift
differentials, an employee will be paid the shift
differential for all hours that are worked on the
afternoon shift at the afternoon shift rate of pay and/or
the night shift at the night shift differential rate (as
the case may be).
2. Shift differential shall be paid for allowed time or
reporting time when the hours for which payment is made
would have called for a shift differential if worked.
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C. Shifts:Shifts shall be identified in accordance with the
following:
1. Day Shift includes all hours worked between the hours of
8:00 a.m. and 4:00 p.m.
2. Afternoon Shift includes all hours worked between the
hours of 4:00 p.m. and 12:00 midnight.
3. Night Shift includes all hours worked between the hours of
12:00 midnight and 8:00 a.m.
SECTION 3 -- SUNDAY PREMIUM
An employee shall be paid a premium of 1-1/4 times his Regular Hourly
Wage as defined in Paragraph 1A above for all hours worked on Sunday which are
not paid for on an overtime basis. For the purpose of this provision, Sunday
shall be deemed to be the twenty-four (24) hours beginning with the
shift-changing hour nearest to 12:01 a.m. Sunday.
ARTICLE 4
HOURS OF WORK AND OVERTIME
SECTION 1 -- NORMAL HOURS OF WORK.
A. The normal workday shall be eight (8) hours of work in a twenty-four
(24) hour period. The hours of work shall be consecutive. The normal work
pattern shall be five (5) consecutive workdays beginning on the first of any
seven (7) consecutive-day period. The seven (7) consecutive-day period is a
period of 168 consecutive hours and may begin on any day of the calendar week
and extend into the next calendar week. On shift changes, the 168 consecutive
hours may become 152 consecutive hours depending upon the change in the shift. A
work pattern of less or more than five (5) workdays in the seven (7)
consecutive-day period shall not be considered as deviating from the normal work
pattern provided the workdays are consecutive. The Company and the Union may
agree to a regular work schedule which is not in accordance with this Paragraph
1A, however, any such schedule shall be deemed as normal hours of work.
B. Schedules: All employees shall be scheduled on the basis of the
normal work pattern except where; (a) such schedules regularly would require the
payment of overtime; (b) deviations from the normal work pattern are necessary
because of breakdowns or other matters beyond the control of Management; or (c)
schedules deviating from the normal work pattern are established by agreement
between plant management and the grievance committee. Schedules showing
employees' workdays shall be posted or otherwise made known to employees in
accordance with the prevailing practices but no later than Thursday of the week
preceding the calendar week in which the schedule becomes effective unless
otherwise provided by local
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<PAGE> 15
agreement. Management will establish a procedure, where such does not already
exist, affording any employee whose last scheduled turn ends prior to the
posting of his schedule for the following week, an opportunity to obtain
information relating to his next scheduled turn. This procedure will also be
applicable with respect to employees returning from vacation. Schedules may be
changed by Management at any time provided, however, that any changes made after
Thursday of the week preceding the calendar week in which the changes are to be
effective shall be explained at the earliest practicable time to the grievance
committeemen of the employee affected; and provided further that, with respect
to any such schedules, no changes shall be made after Thursday except for
breakdowns or other matters beyond the control of Management. Should changes be
made in schedules contrary to this paragraph so that an employee is laid off and
does not work on a day that he was scheduled to work, he shall be deemed to have
reported for work on such day and shall be eligible for reporting allowance in
accordance with the provisions of Section 5 of this Article 4. Should changes be
made in schedules contrary to the provisions in Paragraph B (Schedules) so that
an employee is laid off on any day within the five (5) scheduled days and is
required to work on what would otherwise have been the sixth or seventh workday
in the schedule on which he was scheduled to commence work, the employee shall
be paid for such sixth or seventh day worked at overtime rates in accordance
with Article 4, Section 3D.
C. Definition of Terms: The payroll week shall consist of seven (7)
consecutive days beginning at 12:01 a.m. Sunday or at the turn-changing hour
nearest to that time. The workday for the purposes of this Section is the
twenty-four (24) hour period beginning with the time the employee begins work,
except that a tardy employee's workday shall begin at the time it would have
begun had he not been tardy. The regular rate of pay shall mean the hourly rate
which the employee would have received for the work had it been performed during
non overtime hours.
D. Guarantee of Hours: The above provisions of this Section shall not be
construed as guaranteeing to any employee any number of hours of work per day or
per week. Employees shall not be guaranteed any number of hours of work except
to the extent provided in Section 5 of this Article 4.
SECTION 2 -- STARTING TIME.
The starting time of regular turns at the Geneva Plant shall be
determined from time-to-time by Management, and Management shall make a positive
effort to give notice of any change in any such starting time.
SECTION 3 -- CONDITIONS UNDER WHICH OVERTIME RATES SHALL APPLY.
Overtime at the rate of 1-1/2 times the regular rate of pay shall be
paid for in the following order:
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<PAGE> 16
A. Hours worked in excess of eight (8) hours in a workday except as
provided in "E" below.
B. Hours worked in excess of forty (40) hours in a payroll week.
C. Hours worked on the sixth or seventh workday in a payroll week during
which work was performed on five (5) other workdays.
D. Hours worked on the sixth or seventh workday of a seven (7)
consecutive-day period during which the first five (5) days were worked, whether
or not all of such days fall within the same payroll week, except when worked
pursuant to schedules mutually agreed to as provided for in Subsection A;
provided, however, that no overtime will be due under such circumstances unless
the employee notifies his foreman of a claim for overtime within a period of one
(1) week after such sixth or seventh day is worked and provided further that on
shift changes the seven (7) consecutive-day period of 168 consecutive hours may
become 152 consecutive hours depending upon the change in the shift. Payment of
overtime rates shall not be duplicated for the same hours worked, but the higher
of the applicable rates shall be used. Hours compensated for at overtime rates
shall not be counted further for any purpose in determining overtime liability.
E. Employees may be provided with an opportunity to work a
nontraditional schedule of four (4) twelve-hour days on and four (4) twelve-hour
days off or four (4) ten-hour days on and four (4) ten-hour days off (or such
other nontraditional schedule as the Company and Union may mutually agree to).
In such cases, employees who are to be covered by such a schedule may request a
vote to determine whether the schedule proposed by Management is to be
implemented. Should two-thirds of employees vote to approve the schedule, it
will be implemented, subject to thirty (30) days written notice of cancellation
by the Union. Nothing in this Section 3E shall be construed as restricting
Management's right at any time to replace these schedules with a schedule based
on the normal work pattern.
The following rules shall apply to the payment of overtime, holiday and premium
pay to employees:
1. Overtime compensation at the rate of one and one-half
times the regular rate of the job worked shall be paid for
hours worked in excess of the agreed to hours scheduled on
any wok day, but in any event overtime shall be paid for
hours worked over forty (40) in a payroll week.
2. Shift differential will be paid consistent with the
provisions of Article 3, Section 2 of this Agreement.
3. Funeral and jury/witness pay shall be paid according to
the hours of work scheduled on the eligible days.
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<PAGE> 17
4. An unworked Holiday that falls on one (1) of the
employee's regularly scheduled days shall generate the
equivalent number of hours of pay as was scheduled on the
Holiday. An unworked Holiday that falls on an unscheduled
day shall generate eight (8) hours of pay at the Regular
Hourly Wage Rate. All hours actually worked on a Holiday
shall be compensated in accordance with Article 5, Section
2B of the Agreement.
5. Employees working a non-traditional schedule will not be
required to work more that sixteen (16) hours in a
twenty-four (24) hour period. To aid in this commitment,
covered employees should make every effort to cover
vacancies created by sickness or absenteeism.
6. Covered employees will be permitted to schedule their
vacations from days off to days off rather than on a
calendar week basis.
Except as expressly provided for above, all other rules and procedures
relating to the payment of overtime, holiday and premium pay, as contained in
this Agreement shall apply regardless of whether an employee is working an eight
(8) hour shift or more than eight (8) hours.
F. Overtime
1. The parties recognize that schedules that regularly
require overtime over extended periods are undesirable and
should not be used solely for the purpose of preventing
the recall of laid-off or demoted employees.
2. When employees qualified to perform the work could be
recalled because it is reasonably foreseeable that there
will be work for such employees for a period of two (2)
or more weeks, and Management determines that such work
should nevertheless be done on an overtime basis instead
of recalling such employees, it will first notify the
Union and, upon the request of the appropriate grievance
committeeman, will discuss its reasons and review with
him any suggested alternative in an effort to reach a
mutually satisfactory solution. Such discussions and
review will constitute full compliance with the
requirements of this Section.
3. Nothing in Subsection 1 and 2 above shall prejudice any
other rights which may exist under any other provision of
the agreement, nor affect local agreements existing as of
the date of this Agreement
4. Where local agreements with respect to the distribution of
overtime do not presently exist, the local plant
management and the local union grievance committee should
conclude promptly an agreement providing for the most
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equitable overtime distribution consistent with the
efficiency of the operation.
SECTION 4 -- HOLIDAY LIABILITY.
Hours compensated at overtime rates shall not be counted further for any
purpose in determining overtime liability under the same or any other provision
of this Agreement; provided, however, that a holiday whether worked or not,
shall be counted for purposes of computing overtime liability under this
Article.
SECTION 5 -- REPORTING PAY.
If an employee shall be required by Management to report for
regularly-scheduled or call-out work on any day and he shall report at the time
and place he was required to report, he shall be paid a minimum of four (4)
hours pay at the Regular Hourly Wage which would have been applicable had he
worked such four (4) hours in the assignment for which he was required to
report. If there is no work available on the job for which the employee was
scheduled or called out, the employee shall be paid at such Regular Hourly Wage
for which the employee was scheduled or called out, provided such employee shall
accept other job assignments for which he is qualified or forfeit the reporting
pay provided herein.
SECTION 6 -- ABSENTEEISM.
Whenever an employee has just cause for reporting late or absenting
himself from work, he shall, whenever practicable, give notice as far in advance
as possible to his supervisor or through another person or system to be
designated by the Company to receive such notice.
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<PAGE> 19
ARTICLE 5
HOLIDAYS
SECTION 1 -- DAYS.
Whenever used in this Agreement the term "holiday" means one of the
following days:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C>
New Year's Day New Year's Day
Memorial Day Good Friday
July 4th Memorial Day
July 24th July 4th
Labor Day July 24th
Thanksgiving Labor Day
Christmas Eve Thanksgiving
Christmas Day Christmas Eve
Christmas Day
</TABLE>
<TABLE>
<CAPTION>
2000 2001
---- ----
<S> <C>
New Year's Day New Year's Day
Memorial Day
July 4th
July 24th
Labor Day
Thanksgiving
Christmas Eve
Christmas Day
(1) To Be Determined
</TABLE>
If any of such holidays shall fall on a Sunday, the following Monday
(and not such Sunday) shall be observed as such holiday. For purposes of this
Article, a holiday shall be deemed to be the twenty-four (24) hours beginning
with the shift-changing hour nearest to 12:01 a.m. on the day of the holiday.
SECTION 2 -- HOLIDAY PAY.
A. An eligible employee who does not work on a holiday shall be paid
eight (8) times the employee's Regular Hourly Wage, which shall mean the hourly
rate which the employee
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<PAGE> 20
would have received for the work had it been performed during regular,
non-overtime hours; provided, however, that if an eligible employee is scheduled
to work on any such holiday, but fails to report and perform his scheduled or
assigned work, he shall become ineligible to be paid for the unworked holiday,
unless he has failed to report or perform such work because of verified sickness
or because of a death in the immediate family (father, mother, father-in-law,
mother-in-law, son-in-law, daughter-in-law, children, brothers, sisters, spouse
or grandparents) or similar good cause approved in advance by the Company.
B. An employee who has worked thirty (30) shifts since his last hire and
who actually works on a holiday shall be paid for all time worked at an overtime
rate of 2-1/4 times the Regular Hourly Wage of the job worked.
C. As used in this Article, an eligible employee is one who:
1. Has worked thirty (30) shifts since his last hire;
2. Performs work or is on vacation in the pay period in
which the holiday is observed; and
3. Works both on his last scheduled work day prior to and on
his first scheduled work day following the day on which
the holiday is observed, unless excused.
SECTION 3 -- VACATION AND HOLIDAY PAY.
An eligible employee who would otherwise be entitled to pay for an
unworked holiday and who shall be scheduled pursuant to the provisions of
Article 6 to take a vacation during a period when the holiday occurs, shall be
paid for the unworked holiday in addition to his vacation pay.
ARTICLE 6
VACATIONS
SECTION 1 -- VACATION BENEFITS.
An eligible employee who has attained the years of continuous service
indicated in the following table in any subsequent calendar year during the
continuation of this Agreement shall receive a vacation corresponding to such
years of continuous service, as shown in the following table:
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<PAGE> 21
<TABLE>
<CAPTION>
Years of Service Weeks of Vacation
---------------- -----------------
<S> <C>
1 year but less than 3 1
3 years but less than 10 2
10 years but less than 17 3
17 years but less than 25 4
25 years or more 5
</TABLE>
SECTION 2 -- EMPLOYEE ELIGIBILITY.
To be eligible for a vacation in a calendar year during the term of this
Agreement, the employee must:
A. Have one (1) year or more of continuous service; and
B. Not have been absent from work for six (6) consecutive months or more
in the preceding calendar year; except that in the case of an employee who
completes one (1) year of continuous service in the vacation calendar year, he
shall not have been absent from work for six (6) consecutive months or more
during the twelve (12) months following the date of his original employment;
provided, that an employee with more than one (1) year of continuous service
who, in any year, shall be ineligible for a vacation by reason of the provisions
of this paragraph as a result of an absence on account of layoff or illness
shall receive one (1) week's vacation with pay in such year if he shall not have
been absent from work for six (6) consecutive months or more in the twelve (12)
consecutive calendar months next preceding such vacation. Any period of absence
of an employee while absent due to a compensable industrial disability or
military service in the year in which he incurred such disability, shall be
deducted in determining the length of period of absence from work for the
purpose of Article 6, Section 2. The period of a scheduled vacation taken by an
employee while he is on layoff shall be deducted in determining the length of
the period of absence from work during such layoff for the purposes of this
Paragraph B.
Any employee, even though otherwise eligible under this Article,
forfeits the right to receive vacation benefits under this Article if he quits,
retires, or is discharged prior to January 1 of the vacation year.
For purposes of calculating vacation benefits, continuous service shall
include credit for previous employment by United States Steel Corporation
("USS") at the Geneva Plant and shall date from the later of (1) the date of
first employment or (2) date of re-employment following a break in continuous
service.
Should an active employee die on or before June 30 in any calendar year,
his estate will be compensated for any unexpended vacation earned in that year
in addition to half of the succeeding year's vacation entitlement. Should the
death occur after June 30, his estate will
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<PAGE> 22
again be entitled to any unexpended vacation as well as full vacation
entitlement for the succeeding year.
SECTION 3 -- SCHEDULING OF VACATIONS.
Vacations will, so far as practicable, be granted at times most desired
by employees (longer service employees being given preference as to choice); but
the final right to allot vacation periods and to change such allotments is
exclusively reserved to the Company in order to insure the orderly operation of
the plant. As soon as possible after January 1st of each year, the Company shall
post a vacation schedule. In case the Company desires to schedule regular
vacations for employees eligible during a shutdown period instead of in
accordance with the previously established vacation schedule, the Company will
give affected employees not less than forty-five (45) days notice of such
intent; in the absence of such notice, an affected employee shall have the
option to take his regular vacation during the shutdown period, or to be laid
off during the shutdown and to take his regular vacation at the previously
scheduled time. Management agrees to keep the vacation groupings the same as
they were for the 1998 vacation year. In the event the conditions change which
may affect the vacation groupings (i.e. combining lines of progression, jobs,
etc.), the Union agrees to discuss changing the groupings to insure the
efficient operation of the plant.
SECTION 4 -- VACATION PAY COMPUTATION.
Each employee granted a vacation will be paid at his average rate of
earnings per hour for the prior calendar year. Average rate of earnings per hour
shall be computed by:
A. Totaling (1) pay received for all hours worked (total earnings
excluding premium of overtime, holiday, Sunday, and shift differential), (2)
vacation pay including pay in lieu of vacation, and (3) pay for unworked
holidays, and
B. Dividing such earnings by the total of (1) hours worked, (2) vacation
hours paid for, including hours for which pay in lieu of vacation was paid, and
(3) unworked holiday hours which were paid for.
Hours of vacation pay for each vacation week shall be the average hours
per week worked by the employee in the prior calendar year. Any weeks not having
thirty-two (32) hours of actual work shall be excluded from the calculation.
Average hours per week worked shall be computed by dividing such hours by the
number of such weeks in which thirty-two (32) or more hours were worked.
The minimum number of hours paid for each week of vacation shall be
forty (40) and the maximum number of hours paid for each week of vacation shall
be forty-eight (48).
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<PAGE> 23
The calendar week containing New Year's Day may be taken as a week of
vacation for either the year preceding New Year's Day or the year in which New
Year's Day falls, except when New Year's Day falls on Sunday, provided such
vacation week has been scheduled as vacation in accordance with this Section. If
the Comapny in its sole discretion schedules a shutdown of any operation during
the calendar week containing Christmas Day, any employee who is not scheduled to
work due to the shutdown in such week and who has completed his vacation
entitlement for that year may elect to reschedule a week of vacation for which
the employee has qualified and will be entitled in the following calendar year
into the shutdown week; provided, however, that vacation pay for such vacation
week, calculated as though the week were scheduled and taken in the next
following year will be paid on the regular payday for the pay period in which
the shutdown vacation falls; and provided further that no vacation pay for a
vacation rescheduled hereunder will be paid to an employee who quits, retires,
dies, or is discharged prior to January 1st of the year from which the shutdown
vacation was rescheduled. In the application of this paragraph when the basis
for calculation of an employee's vacation pay for the following calendar year is
not available, his vacation payment hereunder shall be made on the basis for
calculation of his vacation pay in the current calendar year with appropriate
adjustment to be made when the basis for the following calendar year becomes
available.
Where an employee transfers from one (1) seniority unit to another
subsequent to January 1st in any given year, he shall take his vacation in
accordance with the schedule established in his old seniority unit except as
orderly operations of his new seniority unit preclude it. He shall not be
entitled to have any vacation schedule previously established in his new
seniority unit changed because of his entry into that unit; should there be a
conflict between the transferred employee and an employee in the unit, the
employee in the unit shall retain his preference in competition with the
transferred employee regardless of continuous service.
ARTICLE 7
PRIOR USS SERVICE
Except as otherwise provided in this Agreement, in calculating
continuous service under any provision of this Agreement, prior United States
Steel Corporation ("USS") continuous service shall be counted.
23
<PAGE> 24
ARTICLE 8
SENIORITY
SECTION 1 -- UNITS.
Seniority shall be applied in the following departments:
COKE PLANT DEPARTMENT
Coke and Coal Chemicals Products
Coke and Coal Chemicals Maintenance
BLAST FURNACE DEPARTMENT
Iron and Sinter Production
Blast Furnace Maintenance
Q-BOP DEPARTMENT
Steel Producing
Steel Producing Maintenance
Foundry
ROLLING MILL DEPARTMENT
45" & 132" Rolling Mills, Pipe Mill and Finishing
Rolling Mill Maintenance
CENTRAL MAINTENANCE AND TRANSPORTATION
Central Maintenance
Transportation and Yards
UTILITIES DEPARTMENT
Utilities
Utilities Maintenance
CASTER DEPARTMENT
Caster Production
Caster Maintenance
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<PAGE> 25
KEIGLEY QUARRY
Keigley Quarry Products
Keigley Quarry Maintenance
CLERICAL AND TECHNICAL
Accounting
Business Planning
Quality Assurance
Geneva Maintenance
Each seniority unit shall have its own seniority listing. All lines of
progression, including identification of entry level positions, shall be
established by mutual agreement. Should the Company and the Union fail to agree
at the department level, the disputed line of progression will be referred to
the parties responsible for grievance resolution at the second step. Should they
be unable to agree, the Union may process the dispute to arbitration.
SECTION 2 -- SENIORITY COMPUTATION.
For the purposes of this Article 8, seniority shall be based upon Geneva
Plant continuous service, which shall include prior continuous service with USS,
and with the Company, at the Geneva Plant. In the event of a tie, the employee
with the lowest badge number will be given the highest seniority standing.
SECTION 3 -- FACTORS AFFECTING SENIORITY.
In the promotion of employees to non-supervisory positions, and for the
purpose of demotions or layoff in connection with decreasing the work force, and
for the purpose of recalling to work of employees so laid off, the following
factors shall be considered, and if factors B and C are relatively equal, length
of continuous service shall govern:
A. Length of continuous service;
B. Ability to perform the work;
C. Physical fitness.
Determination of these factors shall be subject to grievance.
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<PAGE> 26
SECTION 4 -- PROMOTION TO SUPERVISORY POSITIONS AND UNION LEAVE OF ABSENCE.
A. SUPERVISORY POSITION: An employee who removes himself from the
bargaining unit by accepting a permanent job outside the bargaining unit shall
lose all seniority status in the bargaining unit.
B. TEMPORARY ASSIGNMENT:
a. An employee who accepts a temporary job assignment or
temporary management position outside the bargaining
unit shall not lose any seniority status in the
bargaining unit provided such assignment does not exceed
a total of one (1) year and such additional days as may
be mutually agreed to by the Company and the Union.
After completing one (1) year on a job assignment
outside the bargaining unit, or such additional time
period as mutually agreed upon, a Bargaining Unit
employee must work at least four (4) consecutive weeks
(excluding vacation and sick leave) on a position
consistent with his seniority rights within the
bargaining unit before that individual may again be
assigned outside of the bargaining unit without loss of
seniority.
b. Employees assigned to temporary positions will be
identified as such on the weekly schedules in their home
department.
c. Should an employee accept a temporary job assignment or
temporary management position outside the bargaining unit,
he will become ineligible to compete inside the bidding
procedures for either permanent or temporary vacancies
which may become available within the bargaining unit
during the period such employee has accepted such
assignment or position.
Any temporary job assignment outside the bargaining unit
other than a temporary management position shall be
limited to a six (6) month time limit unless mutually
agreed to.
d. Such temporary foreman assignments shall be limited to:
(i) a foreman position resulting from increases in
operating requirements over and above normal levels (not
to exceed one (1) year unless mutually agreed to); (ii)
the short-term absence of a foreman for reasons such as
sickness, jury duty or vacation; and (iii) twenty-first
turn coverage on continuous operations.
e. Employees will be assigned as temporary foremen on a
weekly basis (except in the case of twenty first turn
coverage on continuous operations) and will not work in
the bargaining unit during the week in which they are
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<PAGE> 27
assigned as temporary foremen. Employees will not be
assigned as temporary foremen merely as a means of
retaining them in employment or of recalling them for
layoff at a time when the application of their bargaining
unit seniority would not otherwise result in their
retention in employment.
f. An employee assigned as a temporary foreman will not issue
discipline to employees, provided that this provision will
not prevent a temporary foreman from relieving an employee
from work for the balance of the turn for alleged
misconduct. An employee will not be called by either party
in the grievance procedure or arbitration to testify as a
witness regarding any events involving discipline which
occurred while the employee was assigned as a temporary
foreman.
C. UNION LEAVE: Leave of absence for a maximum of four (4) years will be
granted to members of the Union selected to work full time for the Union in an
official capacity, and the seniority of such employee shall be unbroken by such
leave of absence. Upon written request by the District Director, United
Steelworkers of America, and approval of the equivalent of the Company's Vice
President for Human Resources, or their respective designated representative,
leave of absence without loss of seniority will be granted.
SECTION 5 -- BREAK IN SERVICE.
An employee's continuous service shall be broken and prior employment
not counted when:
A. The employee voluntarily quits;
B. The employee is discharged with just cause;
C. The employee is terminated because he fails to promptly return when
recalled from layoff or to respond within three (3) working days of the date a
recall notice is delivered by (certified) mail to the employee's last address of
record. In the event the recall involved an anticipated continuous employment
period of two (2) weeks or less, the employee upon execution of a written waiver
with the Company may refuse recall and remain on layoff. The recall waiver shall
remain in effect until such time as either the employee revokes the waiver or he
is recalled by the Company for an anticipated continuous employment period
greater than two (2) weeks.
D. The employee is absence due to layoff or disability for more than
forty-eight (48) months; provided, however, absence due to a compensable
disability incurred during the course of employment shall not break continuous
service if such employee returned to work within
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<PAGE> 28
thirty (30) days after final payment of statutory compensation for such
disability or after the end of the period used in calculating a lump-sum
payment, as the case may be.
SECTION 6 -- SENIORITY OF UNION OFFICERS.
Each member of the Grievance Committee and each employee who at the time
shall be the President or Vice President of the Union shall, for their
respective terms of office, have top seniority rights within his seniority unit
for the purposes of layoffs in connection with decreasing the work force within
such unit; provided, however, that such person shall not be retained in the
employ of the Company unless work which such person can perform is available in
such unit. Retention at work in accordance with this Section shall not enable
such employee to claim relative seniority status in excess of that which he
otherwise would have had prior to such retention. The local President and
Chairman of the Grievance Committee shall have top seniority rights within the
Plant to work which they can perform.
SECTION 7 -- INCUMBENCY.
An employee who bids and has been assigned and regularly worked on a
permanent vacancy, and who has not voluntarily relinquished his rights to such
job, has incumbency rights on that job over other employees who have not held
and regularly worked that job on a permanent basis. When an employee is
displaced from his incumbent position due to a reduction in force and bids and
accepts another job within the plant, he does not waive his rights to the
incumbent position he held prior to being forced reduced. At the time the
incumbent position from which he has been forced reduced becomes available, he
must elect to return to that position when scheduled or give up all rights of
incumbency on that job. If the employee elects to return to his previous
incumbency, he waives all rights to the second position. The only time an
employee will be allowed to hold two incumbencies is when he is force reduced
from his original incumbency. At no time will an employee be allowed to hold
incumbency rights on more than two positions. For training purposes, Management
may reassign employees to their former incumbent positions for up to ninety (90)
days during which time the employee will be paid the higher rate of the job he
held when recalled or his former incumbent position.
SECTION 8 -- REDUCTION IN FORCE.
Demotions, layoffs and other reductions in force shall be made in
descending job sequence within his line of progression recognizing current and
former incumbency rights within each seniority unit, starting with the highest
affected job, and with the employee on such job having the least length of Plant
service. The Company shall not be obliged to provide training (other than
deminimus reorientation) to employees in a reduction of force in order to
continue retention rights. Sequence on recall of employees so laid off shall be
in the reverse order.
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<PAGE> 29
SECTION 9 -- PERMANENT VACANCY AND TRANSFER RIGHTS.
When a permanent vacancy exists, the following procedures shall apply:
A. Step 1: Permanent vacancies within a seniority unit shall be filled
from within the first step of competition in the line of progression below or
above the job being filled. Each succeeding vacancy in the line of progression
shall be filled in the same manner.
B. Step 2: Any vacancy not filled in accordance with the Step 1 bidding
procedure shall be posted in the department for a period of ten (10) days. The
employees of the department shall be eligible to bid for said vacancy with first
preference given to employees in the seniority unit of the vacancy. An employee
who transfers under this step shall have the right to return to the position
from which he transferred or the Company may return him to his former job
because he cannot meet the requirements of the job, within five (5) days from
the date of transfer. When an eligible employee accepts the position, he shall
be ineligible to bid again for a period of nine (9) months. The Company will
send a copy of the notice to the Union and will also provide the names of the
bidders and the person receiving the job. If an employee accepts the position,
he shall be ineligible to transfer again within nine (9) months. If an employee
rejects the position at the time he is notified that he is a successful bidder,
the nine (9) month ineligibility period will not apply. Should he initially
accept the position and subsequently reject the bid, exercises his five (5) day
return right or refuse transfer, the nine (9) month transfer restriction shall
apply from the date of return or rejection. Prior to notification, an employee
may at any time remove their name from the bid sheet. If after being awarded and
accepting a position, a vacancy is posted during the nine (9) month
ineligibility period and such position would represent a promotion of two job
classes or more over the employee's current incumbent position, the employee may
bid on such position consistent with the provisions of this paragraph.
C. Step 3: A Step 3 notice of an available job opening(s) will be posted
on a plant-wide basis simultaneously with the Step 2 posting. The Step 3 posting
will inform employees of the job(s) which may be available if not filled at the
Step 2 level. The job posting will provide employees with an opportunity to
place their names on the Step 3 bid sheet prior to the time the Step 3 bid is
closed. The Step 3 bid sheets located in the Human Resources Building will be
closed at the time the Step 2 bid expires. If the position(s) is not filled at
the Step 2 level, the resulting vacancy shall be filled on a plant-wide basis
from the Step 3 bid sheet. When a vacancy is to be filled from the Step 3 bid
sheet, the designated human resources representative will notify the appropriate
employee and inform him of their selection. An employee who transfers under this
Step shall have the right to return to the seniority unit from which he
transferred or the Company may return him to his former unit because he cannot
meet the requirements of the job, within fourteen (14) days from the date of
transfer. If an employee is selected and accepts the position he shall be
ineligible to transfer again within one (1) year. If an employee elects not to
transfer at the time he is notified that he is a successful bidder, the one (1)
year ineligibility period will not apply. Should he initially accept the
position and subsequently reject the bid, exercise his fourteen (14) day return
right or refuse transfer, the one (1) year transfer restriction
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shall apply from the date of return or rejection. The Company will send a copy
of the notice to the Union and will also provide the names of the bidders and
the person receiving the job.
D. An employee who is absent because of vacation, sickness, or Union
business for the bidding period shall be allowed to bid on a vacancy that was
posted during such period; however, such bid must be registered within seven (7)
days of the date the employee returns to work, and provided further than an
employee who is awarded such vacancy will be deemed to have permanently accepted
such bid.
E. Temporary Assignments: Permanent vacancies may be filled by temporary
assignment until such time as the prevailing bidder is selected and assigned.
During the Step 1 bidding procedure, the Company will make every effort to
assign the senior employee who most likely would be the successful bidder. Such
temporary assignment shall not result in the creation of any rights of
incumbency.
F. Temporary Increases: All vacancies resulting from anticipated
increases in operating levels for a period of sixty (60) days or more, or
vacancies created by promotion, death, discharge, voluntary termination,
retirement or transfer out of the seniority unit shall be treated as permanent;
provided, however, that in the event an increase in operating levels is not
expected to continue, and does not, in fact, continue for more than sixty (60)
days, any vacancies created shall be deemed temporary and not permanent for the
purposes of this Article. The period of sixty (60) days or more will not be
considered interrupted or abbreviated due to work interruptions caused by
equipment failures, breakdowns, lack of material for processing and product flow
problems adversely affecting the feed stock required to maintain a level of
operations.
G. Consent Decree. The Company agrees to be bound by Decree 1 filed in
the United States District Court for the Northern District of Alabama, Southern
Division, dated April 12, 1974, if, to the extent, and for so long as it is
applicable to the Company.
H. Seniority Lists. The Company shall supply each Union unit grievance
committeeman with a complete unit seniority list on a quarterly basis unless
otherwise mutually agreed to.
SECTION 10 -- TEMPORARY VACANCIES.
When it is necessary to fill a temporary vacancy known to be of more
than two (2) weeks duration, such vacancy shall, to the greatest degree
consistent with efficiency of the operation and the safety of employees, be
filled on the basis of the seniority unit and the seniority used for promotional
purposes, and shall be so filled no later than on the second weekly schedule
following the date when the duration of the vacancy, as aforesaid, becomes known
to Management. However, in case of a permanent vacancy on a job, the assignment
of a junior employee to a temporary vacancy on such job shall not be used as a
presumption of greater
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ability in favor of such junior employee if such temporary vacancy was not made
available to the senior employee.
When temporary vacancies of two (2) weeks or less are filled, they shall
be filled by promotion in the order as follows:
1. Promote the most senior of any displaced incumbents of the position to be
filled who is currently working on the turn and occupying a job below the level
of the vacancy in the line of progression.
2. Promote the most senior seniority-listed regular employee of the position
immediately below the vacancy who is currently working on the turn involved.
3. Promote the most senior seniority-listed regular employee of the unit who is
currently working on the position immediately below the vacancy on the turn
involved.
ARTICLE 9
PROBATIONARY PERIOD
A new employee and one who is reemployed after a break in his continuous
service, shall not acquire seniority until the expiration of 760 hours of actual
work following his employment, at which time he shall receive credit for
continuous service during such period. If said employee is terminated or
discharged during the first 760 hours of actual work, said termination or
discharge shall not be the subject of any claim, complaint, grievance or
arbitration against the Company; provided, however, that this will not be used
for purposes of discrimination because of race, color, religious creed, national
origin, sex, age, disability, Veteran or special disabled Veteran status or
because of membership in the Union.
If said employee is rehired within six (6) months from the date of his
first employment, any prior hours worked shall count toward the seven hundred
sixty (760) hours of probation.
ARTICLE 10
JURY AND WITNESS SERVICE
An employee who is called for jury service or subpoenaed as a witness,
except on his own behalf, shall be excused from work for the days on which he
testifies or serves, up to and including sixty (60) business days. Service shall
include reporting for jury duty. Such employee shall receive for each day of
service on which he otherwise would have worked, the difference between the
payment he receives for such service in excess of $5 and the amount calculated
by the Company in accordance with the following formula. Such pay shall be based
on the number of days such employee would have worked had he not been performing
such service (plus any
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Holiday in such period which he would not have worked) and the pay for each such
day shall be eight (8) times his average straight-time hourly rate of earnings
(excluding shift differentials and Sunday and overtime premiums) during the last
payroll period worked prior to such service. The employee will present proof
that he served as a juror or witness, or reported, and the amount of pay, if
any, received therefor. An employee shall not receive such juror or witness pay
when it duplicates pay received for time not worked for any other reason, and
such pay shall not be computed as hours worked for purposes of determining
overtime or premium pay liability.
ARTICLE 11
BEREAVEMENT PAY
When death occurs to an employee's legal spouse, mother, father,
mother-in-law, father-in-law, son-in-law, daughter-in-law, son, daughter,
brother, sister, grandparents or grandchildren (including stepfather,
stepmother, stepchildren, stepbrother or stepsister when they have lived with
the employee in an immediate family relationship), an employee, upon request,
will be excused and paid for up to a maximum of three (3) shifts, or five (5)
scheduled shifts up to a maximum of forty (40) hours in the case of the death of
an employee's legal spouse, son, or daughter, including stepchildren when they
have lived with the employee in an immediate family relationship (or for such
fewer shifts as the employee may be absent) which shall fall within a three (3)
consecutive calendar day period or five (5) consecutive calendar day period in
the case of the death of an employee's legal spouse, son, or daughter, including
stepchildren when they have lived with the employee in an immediate family
relationship; provided, however, that one such calendar day shall be the day of
the funeral and it is established that the employee attended the funeral.
Payment shall be eight times his average straight-time hourly earnings. An
employee will not receive funeral pay when it duplicates pay received for time
not worked for any other reason. Time thus paid will not be counted as hours
worked for purposes of determining overtime or premium pay liability.
"Funeral" is defined as a service recognized by any organized religion,
creed, or culture to which the employee or decedent belongs as the standard
ceremony to observe the interment, cremation or similar disposition of remains
of the family members set forth above.
An employee will not receive funeral pay when it duplicates pay received
for time not worked for any other reason, and such bereavement pay shall not be
computed as hours worked for purposes of determining overtime or premium pay
liability.
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ARTICLE 12
MILITARY SERVICE
The Company shall provide each employee who enters the Armed Services of
the United States from employment with the Company all rights required to be
given to said employee upon his return to the Company provided in the laws of
the United States and the laws of the State of Utah.
An employee with one (1) or more years of continuous service who is
required to attend an encampment of the Reserve of the Armed Forces or the
National Guard shall be paid, for a period not to exceed two weeks in any
calendar year, the difference between the amount paid by the government (not
including travel, subsistence or quarters allowance) and the amount calculated
by the Company in accordance with the following formula. Such pay shall be based
on the number of days such employee would have worked had he not been attending
such encampment during such two (2) weeks (plus any holiday in such two (2)
weeks which he would not have worked) and the pay for each such day shall be
eight (8) times the employee's Regular Hourly Wage (as defined in Section 2A of
Article 5 of this Agreement) during the last payroll period worked prior to the
encampment. If the period of such encampment exceeds two (2) weeks in any
calendar year, the period on which such pay shall be based shall be the first
two (2) weeks he would have worked during such period.
ARTICLE 13
SAFETY AND HEALTH
SECTION 1 -- OBJECTIVE AND OBLIGATIONS OF THE PARTIES.
A. Cooperation: The Company and the Union will cooperate in the
objective of eliminating accidents and health hazards. The Company shall make
reasonable provision for the safety and health of its employees at the Geneva
Plant during the hours of their employment. The Company, the Union and the
employees recognize their obligations and/or rights under existing Federal and
State laws with respect to safety and health matters.
B. Radiation: Where devices which emit ionizing radiation are used, the
Company will continue to maintain safety standards with respect to such devices
not less rigid than those adopted from time to time by the Nuclear Regulatory
Commission and will maintain procedures designed to safeguard employees and will
instruct them as to safe working procedures involving such devices.
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C. Toxic Materials: Where the Company uses toxic materials, it shall
inform the affected employees what hazards, if any, are involved and what
precautions shall be taken to insure the safety and health of the employees.
Upon the request of the Union Co-chairman of the joint safety and health
committee (the "Joint Committee"), the Company shall provide in writing
requested information from material safety data sheets or their equivalent on
toxic substances to which employees are exposed in the workplace; provided that
when the information is considered proprietary, the Company shall so advise the
Union Co-chairman and provide sufficient information for the Union to make
further inquiry.
D. Sampling and Testing: The Company will continue a program of periodic
in-plant air sampling and noise testing under the direction of qualified
personnel. Where the Union Co-chairman alleges a significant on-the-job health
hazard due to the in-plant air pollution, noise, or chemical or physical agents,
the Company will also make such additional tests and investigations as are
necessary and shall notify the Union Co-chairman when such a test is to take
place. A report based on such additional tests and investigations shall be
reviewed and discussed with the Joint Committee. For such surveys conducted at
the request of the Union Co-chairman, a written summary of the sampling and
testing results and conclusions of the investigation shall be provided to the
Joint Committee.
E. First Aid: The Company shall provide adequate first aid for all
employees during their working hours, and as required, provide for prompt
emergency transportation to an appropriate treatment facility for employees who
become seriously ill or are injured on the job. Where necessary, the Company
shall also provide or arrange for suitable transportation from such facility
back to the Geneva Plant or the employee's home, as appropriate. An employee
who, as a result of an industrial accident, is unable to return to his assigned
job for the balance of the shift on which he was injured will be paid for any
wages lost on that shift.
SECTION 2 -- PROTECTIVE DEVICES, WEARING APPAREL AND EQUIPMENT.
Protective devices, wearing apparel and other equipment necessary to
properly protect employees from injury shall be provided by the Company. The
Company shall provide at the Company's cost one (1) pair of prescription safety
glasses at the time of hire and will replace damaged prescription safety glasses
which create an unsafe condition for the employee. Damaged safety glasses will
not be replaced where the damage is due to employee negligence. Goggles, gas
masks, face shields, respirators, special purpose gloves, fireproof, waterproof
or acid proof protective clothing when necessary and required shall be provided
by the Company without cost, except that the Company may assess a fair charge to
cover loss or willful destruction thereof by the employee. Proper heating and
ventilating systems shall be installed where needed and maintained in good
working condition. The Company shall provide, at the Company's cost, two (2)
pairs of safety shoes to each employee. The first safety shoe allowance will be
after May 1, 1998 and the second allowance will be after May 1, 2000.
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SECTION 3 -- DISPUTES CONCERNING UNSAFE CONDITIONS.
An employee or group of employees who believe that they are being
required to work under conditions which are unsafe or unhealthy beyond the
normal hazard inherent in the operation in question shall have the right to: (1)
file a grievance in the second step of the complaint and grievance procedure for
preferred handling in such procedure and arbitration and/or (2) relief from the
job or jobs, without loss to their right to return to such job or jobs, and, at
Management's discretion, assignment to such other employment as may be available
in the Geneva Plant; provided, however, that no employee, other than
communicating the facts relating to the safety of the job shall take any steps
to prevent another employee from working on the job. If an employee has
exercised his right to relief from the job under this Section, and the existence
of such unsafe condition is in dispute, Management shall notify the Chairman of
the Grievance Committee and the Division Manager, or their designees, shall
investigate immediately. The Chairman of the Grievance Committee shall have the
right to have a Union member of the Joint Committee present as an advisor.
Should either Management or the Board conclude that an unsafe condition within
the meaning of this Section 3 existed and should the employee not have been
assigned to other available equal or higher-rated work, he shall be paid for the
earnings he otherwise would have received.
It is recognized that emergency circumstances may exist, and the local
parties are authorized to make mutually satisfactory arrangements for immediate
arbitration to handle such situations in an expeditious manner.
SECTION 4 -- JOINT SAFETY AND HEALTH COMMITTEE.
A. Committee: A safety and health committee consisting of a mutually
agreed to number of employees from each department designated by the Union and
an equal number of Management members, if Management so desires, shall be
established (the "Joint Committee"). The Union and the Company shall designate
their respective Co-chairmen and shall certify to each other in writing such
Co-chairman and committee members. The Joint Committee shall hold monthly
meetings at times determined by the Co-chairman who may also agree to hold
special meetings. Each Co-chairman shall submit a proposed agenda to the other
Co-chairman at least five (5) days prior to the monthly meeting. The Company
Co-chairman shall provide the Union Co-Chairman with minutes of the monthly
meeting. Prior to such monthly meetings, the Co-chairman or their designees may
engage in an inspection of mutually selected areas of the Geneva Plant. At the
conclusion of the inspection, a written report shall be prepared by the
Co-chairman. Time consumed on Joint Committee work by Joint Committee members
designated by the Union shall not be considered hours worked to be compensated
by the Company. The function of the Joint Committee shall be to advise with
plant management concerning safety and health and to discuss legitimate safety
and health matters but not to handle complaints or grievances. In the discharge
of its function, the Joint Committee shall: consider existing practices and
rules relating to safety and health, formulate suggested changes in existing
practices and rules, recommend adoption of new practices and rules, encourage
cooperation with safe job
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procedures and safety rules by all parties, review proposed new safety and
health programs developed by Management and review accident statistics, trends
and disabling injuries which have occurred in the Geneva Plant and make
appropriate recommendations. When the Company introduces significant changes in
technology or operations which may affect the safety or health of employees, the
matter will be discussed in advance by the Joint Committee with the objective of
reviewing necessary safety equipment, safe job procedures and safety training.
B. Time Off for Committee Business: The Union Co-chairman or his
designee will be afforded time off without pay as may be required to visit
departments at all reasonable times for the purpose of transacting the
legitimate business of the Joint Committee, after notice to and receiving the
permission of, the head of the department to be visited or his designated
representative and, if the Co-chairman or his designee is then at work,
permission (which shall not be unreasonably withheld) from his own department
head or his designated representative. If the Union Co-chairman or his designee
is not at work, he shall be granted access to the plant at all reasonable times
for the purpose of conducting the legitimate business of the Joint Committee
after notice to, and receiving the permission of, the head of the department to
be visited or his designated representative.
C. New Equipment: When the Company introduces new personal protective
apparel or extends the use of protective apparel to new areas or issues new
rules relating to the use of protective apparel, the matter will be discussed
with the members of the Joint Committee in advance with the objective of
increasing cooperation. Should differences result from such discussions, a
grievance may be filed in the Second Step by the Chairman of the Grievance
Committee within thirty (30) days thereafter. In the event that the grievance
progresses through the complaint and grievance procedure to arbitration, the
Board shall determine whether such rule or requirement is appropriate to achieve
the objective set forth in Section 1.
D. Advice: Advice of the Joint Committee, together with supporting
suggestions, recommendations and reasons shall be submitted to the Vice
President of Operations for his consideration and for such action as he may
consider consistent with the Company's responsibility to provide for the safety
and health of its employees during the hours of their employment and mutual
objective set forth in Section 1.
E. Testimony and Investigations: In the event the Company requires an
employee to testify at the formal investigation into the causes of a disabling
injury or death or accidents which could have resulted in disabling injury or
death, the Company shall notify the employee that he, the employee, may arrange
to have the Union Co-chairman or his designee present as an observer at the
proceedings for the period of time required to take the employee's testimony.
The Union Co-chairman will be furnished with a copy of such record as is made of
the employee's testimony. In addition, in the case of accidents which resulted
in disabling injury or death or accidents which could have resulted in disabling
injury or death and require a fact-finding investigation, the Company will
within four (4) hours after such accident, notify the Union Co-chairman or his
designee, who shall have the right to visit the scene of the accident promptly
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upon such notification, if he so desires, accompanied by the Company Co-chairman
or his designee and the Company will add the Union Co-chairman or his designee
to the notification list for such accidents. After making its investigation, the
Company will supply to the Union Co-chairman a statement of the nature of the
injury, a description of the accident, and any recommendations available at that
time, and will consider any recommendations he may wish to make regarding the
report. In such cases, when requested by the Union Co-chairman, the Company
Co-chairman or his designee will review the statement with the Union
Co-chairman. Also, in such cases, the Company Co-chairman or his designee, when
requested by the Union Co-chairman, will visit the scene of the accident with
the Union Co-chairman or his designee.
F. Reports to International Union: The Company will provide the
International Union Safety and Health Department notification of any accident
resulting in a fatality to a Union member within seventy-two (72) hours of the
fatality. This notification shall be either oral or written and include the date
of the fatality, the unit location of the fatality and, if known, the cause of
the fatality. The Company will provide the International Union Safety and Health
Department with a copy of the fatal accident report that is given to the local
Joint Committee when such report becomes available. Any necessary discussion or
other communication on this data between the Company and International Union
will be with the individual designated to provide such information.
Once each year the Company will, from the same source described in F
above, provide to the International Union Safety and Health Department the OSHA
Form 200 Summary of Occupational Injuries and Illnesses or its equivalent, the
lost workday accident incidence frequency rate and the fatality frequency rate.
SECTION 5 -- DISCIPLINARY RECORDS.
Written records of disciplinary action against an employee involved for
the violation of a safety rule but not involving a penalty of time off will not
be used by the Company in any arbitration proceeding where such action occurred
one (1) or more years prior to the date of the event which is the subject of
such arbitration.
When an employee has completed twenty-four (24) consecutive months of
work without discipline involving a penalty or time off for violation of a
safety rule, prior disciplinary penalties for such offenses not exceeding four
(4) days suspension shall not be used for further disciplinary action.
When a written safety observation report is made involving a violation
of a safety procedure or rule by an employee which does not involve discipline,
a copy of that report will be given to the employee.
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SECTION 6 -- ALCOHOLISM AND DRUG ABUSE.
Alcoholism and drug abuse are recognized by the parties to be treatable
conditions. Without detracting from the existing rights and obligations of the
parties recognized in the other provision of this Agreement, the Company and the
Union agree to cooperate in encouraging employees afflicted with alcoholism or
drug abuse to undergo a coordinated program directed to the objective of their
rehabilitation.
It is the policy of Geneva Steel and the Union to make every reasonable
effort to provide a safe work environment free of drugs and alcohol.
Employees using, consuming, selling, transferring, or possessing alcohol
or illegal drugs on the Company's premises shall be subject to immediate
discipline following appropriate investigation and review by the Company.
Use of alcohol or illegal drugs prior to reporting for work which
results in negative work performance or erratic conduct in the workplace is also
grounds for discipline. In order to implement this policy, the Company may test
all applicants for employment for drugs and alcohol and employees recalled from
layoff after absences from work in excess of ninety (90) days. In addition, the
Company may require current employees to undergo drug and alcohol testing, in
order to investigate accidents, safety incidents in the workplace and possible
individual employee impairment. Such testing shall be done promptly after the
incident utilizing a N.I.D.A. Lab under the supervision of qualified medical
personnel. The employee being tested may observe the sample being tested at the
Plant Medical Facility should he or she so desire. Should an employee test
positive as to any illegal drug and a confirming test supports the positive
result, he shall be offered rehabilitation in the first such case only. All
programs will be carried out with due regard to the employee's right to privacy.
The Company will not require employees to submit to random or blanket drug
screening.
SECTION 7 -- SAFETY AND HEALTH TRAINING.
A. General: The Company recognizes the special need to provide
appropriate safety and health training to all employees. The Company will
develop safety and health training that provides either the training described
below or the basis for such training as it relates to the needs of the Company
and the employee.
Training programs shall recognize that there are different needs for
safety and health training for newly hired employees, employees who are
transferred or assigned to a new job and employees who require periodic
retraining.
B. Training of New Employees: Newly hire employees shall receive
training in the general recognition of safety and health hazards, their
statutory and basic labor contract rights and obligations with respect to health
and safety and the purpose and function of the Company's
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Safety, Health and Medical Departments, the Joint Committee and the
International Union Safety and Health Department. In addition, upon initial
assignment to a job, such employees shall receive training on the nature of the
operation or process, the safety and health hazards of the job, the safe working
procedures, the purpose, use and limitations of personal protective equipment
required, and other controls or precautions associated with the job.
The Union Co-chairman and the International Union Safety and Health
Department or a designee shall, upon request, be afforded the opportunity to
review the training program for newly hired employees at the plant level.
C. Training of Other Employees: The training of employees other than
those newly hired by the Company shall be directed to the hazards of the job or
jobs on which they are required to work. Such training shall include hazard
recognition, safe working procedures, purpose, use and limitations of
appropriate specialized instruction. Once each calendar quarter, the
chairpersons of the joint Management Safety Committee will hold a meeting to
address any issues surrounding the training of employees as contemplated in this
Section 7C.
D. Retraining: As required by an employee's job and assignment area,
periodic retraining shall be given on safe working procedures, hazard
recognition, and other necessary procedures and precautions.
SECTION 8 -- MEDICAL RECORDS.
The Company shall comply with all applicable Federal (OSHA) and/or State
(UOSH) regulations concerning the confidentiality of and access to employee
medical records.
ARTICLE 14
PENSIONS AND PROFIT SHARING
A. The Company shall pay into the Defined Contribution Pension Plan a
sum equal to 5% beginning May 1, 1998. The payment to the Pension Plan will be
increased to 5-1/4% beginning May 1, 1999.
B. A Defined Benefit Pension Plan effective May 1, 1998 is contained in
the plan document, a copy of which will be provided to each employee. Such plan
document constitutes a part of this Section as though incorporated herein.
C. Employees shall be entitled to share ten percent (10%) of the
Company's net profits before taxes (subject to certain adjustments) from its
Geneva Plant steel operations as more fully described in Appendix D to this
Agreement.
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Notwithstanding any contrary provision in any Pension Plan description
or plan document, the Company will not reduce the level of benefit called for in
the plan provided under this contract during the term of this Agreement, unless
such change in the benefit is agreed to by the Union or is required by
applicable law.
ARTICLE 15
INSURANCE
The insurance benefits which shall become effective upon the effective
date of this Agreement are set forth in Appendix B to this Agreement which is
incorporated herein.
In the event legislation is enacted creating a system of national or
state health benefits coverage, either party shall have the right to reopen this
provision of this Agreement. If the parties are unable to reach agreement, the
matter should be submitted to binding arbitration for resolution.
Notwithstanding any contrary provision in any Summary Plan Description
and/or plan document, the Company will not reduce the level of benefits called
for in the various health and benefit plans provided under this contract during
the term of this Agreement, unless such reduction in the level of benefits is
agreed to by the Union or required by applicable law.
ARTICLE 16
ADJUSTMENTS OF GRIEVANCES
SECTION 1 -- PURPOSE.
A. Should any differences arise between the Company and the employees as
to the meaning and application of the provisions of this Agreement, there shall
not be any suspension of work on account of such differences, but an earnest
effort shall be made to settle them promptly and in accordance with provisions
of this Agreement in the manner hereinafter set forth.
B. Failure to Appeal: If any decision is not appealed within the time
limits to the next step, it shall be considered settled on the basis of the
prior step, and the employee or employees covered by such complaint or grievance
shall not have any further right or remedy with respect to any matter or claim
covered by such complaint or grievance.
SECTION 2 -- DEFINITIONS.
A. "Complaint" shall mean a request or complaint.
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B. "Grievance" shall mean a complaint of an employee which involves the
interpretation or application of, or compliance with, the provisions of this
Agreement.
C. "Day" shall mean calendar day, but shall not include any Saturday,
Sunday, or Holiday unless otherwise indicated herein.
SECTION 3 -- PROCEDURE.
A. Oral: An employee shall take any complaint to his foreman, with or
without his Union representative as he may decide, within five (5) working days
of the event or the time he reasonably should have known of the event. The
matter shall be answered by the foreman within two (2) working days from the day
it is presented.
B. Step 1: If the complaint is not settled at the Oral Step, the
Department Area Manager, Manager Labor Relations (if appropriate) and Union
Grievance Committeeman, with the employee and any other necessary witnesses
present, shall discuss the matter within seven (7) working days from the
foreman's answer in Paragraph A above, and attempt to resolve the matter. At
this level, the grievance form shall be filed by the Union Grievance
Committeeman and the disposition of the grievance shall be noted on the
grievance form. Disposition of the grievance at this level shall occur with five
(5) working days following the completion of the discussion. If the disposition
of the grievance is not satisfactory to the Union Grievance Committeeman, a
written statement shall be prepared by the Union Grievance Committeeman attached
to the grievance form which shall be submitted to the Labor Relations Department
within seven (7) working days of the disposition of the grievance at Step 1. The
Company will provide a written response to the Union within seven (7) working
days of receipt of the Union's written statement. Written statements shall be
brief and factual. They shall state what provisions of the Agreement are relied
upon, the Company's response to Union reliance on these provisions, as well as
the remedy sought.
C. Step 2: The Union Grievance Committeeman is not satisfied with the
disposition in Step 1 and the Union continues to maintain that the grievance is
meritorious, the Labor Relations Department shall, within ten (10) working days
of the receipt of the Union's written statement (or such other time as shall be
mutually agreed to by the Company and the Union), cause a discussion between the
Chairman of the Grievance Committee and the Union Grievance Committeeman and
himself, together with the employee and such other persons as either side may
reasonably wish to have in order to dispose of the matter. It shall be answered
within seven (7) working days of the date of such meeting. The Chairman of the
Grievance Committee shall have the authority to settle, withdraw, or continue
processing the grievance. The Company Representative shall have the authority to
settle the grievance.
D. Step 3: If the Chairman of the Grievance Committee is not satisfied
with the disposition in Step 2, the Union must appeal the grievance to Step 3 of
the procedure within thirty (30) days of receipt of the disposition of the
grievance from Step 2. The Union and the
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<PAGE> 42
Company will meet in an effort to resolve the grievance prior to an Arbitration
hearing date being set. The parties involved in this review shall include the
International Union Representative, the Local Union President, the Grievance
Committee Chairman, the Company's Vice President of Human Resources, and the
Manager of Labor Relations or his designated representative. The International
Union Representative and the local Union President shall have the authority to
settle, withdraw, or continue processing the grievance. The Vice President of
Human Resources shall have the authority to settle the grievance. The review
meeting shall be limited to the International Union Representative, the Local
Union President, the Grievance Committee Chairman, the Company's Vice President
of Human Resources, and the Manager of Labor Relations or his designated
representative. No other attendees will be permitted unless mutually agreed upon
in advance of the meeting. All settlements arrived at in this procedure will be
in written form and signed by the aforementioned individuals. Whenever either
party concludes that further discussions cannot contribute to the settlement of
the grievance, the grievance may be appealed to arbitration.
E. Arbitration: If the grievance is not resolved at the Step 3 level,
then within thirty (30) working days from the disposition of the grievance at
Step 3 the International Union may appeal the complaint to arbitration. The
Company and the Union shall agree to an arbitration panel. If the Company and
the Union cannot agree on an arbitrator from such list, the Union shall strike a
name from the list and the Company shall do likewise and the process shall be
repeated until one name remains which shall then be the arbitrator. The
arbitrator shall be furnished with the written statements from both parties
outlining the pertinent facts in Step 1. Thereafter, the arbitrator shall hear
the complaint within twenty-one (21) days from the date he was selected, or upon
a date jointly agreed to by the parties. The arbitrator will be asked to issue a
decision within twenty (20) days from the date of the hearing, or fifteen (15)
days from receipt of the transcript, whichever is later. The parties may
mutually agree to have the arbitrator issue a decision on the basis of the
written record submitted to him by the parties. The arbitrator shall assure
himself that all necessary facts and consideration have been placed before him
by both sides, and he shall have the authority to interpret and apply the
provisions of this Agreement, but he shall not have the authority to alter any
of its provisions. The parties shall share equally the compensation and expenses
of the arbitration. The decision of the arbitrator shall be final and binding on
the parties.
SECTION 4 -- MISCELLANEOUS.
A. Union Representation: Any employee who is summoned to meet in an
office with a supervisor other than his own immediate supervisor for the purpose
of discussing possible disciplinary action shall be entitled to be accompanied
by a Union representative if he requests such representation, provided such
representation is then available or if not then available, the employee's
required attendance at such meeting shall be deferred only for such time during
that shift as is necessary to provide opportunity for him to secure the
attendance of such representative. The Union shall be entitled to a maximum of
eleven (11) Grievance
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<PAGE> 43
Committeemen, and any officer who is also a Grievance Committeeman will be
counted toward that maximum number.
B. Group Grievances: All grievances shall be on an individual basis
unless mutually agreed upon by the parties, which agreement shall not be
unreasonably withheld.
C. The complaint and grievance procedure may be utilized by the Union in
processing complaints or grievances which allege a violation of the obligations
of the Company to the Union as such. In processing such complaints or
grievances, the Union shall observe the specified time limits in appealing and
the Company shall observe the specified time limits in answering. The Union may
not, pursuant to this provision, initiate a grievance absent a signed complaint
form from an affected employee which alleges a violation of any individuals
rights under this Agreement. In the event an employee dies, the Union may
process on behalf of his legal heirs any claim he would have had relating to any
monies due under any provision of this Agreement.
D. Acceleration: The Grievance Committee Chairman can sign and process a
grievance directly into Step 2 if the issue involves two (2) or more
departments. If the Company's discussion or answer to a complaint or a grievance
is not given within the prescribed time requirements in any Step, the Union,
after notifying the Company, may refer or appeal to the next Step.
E. Extensions: The time limits set forth in this Article may be extended
by the written mutual agreement of the parties, such agreement shall not be
unreasonably denied.
F. Employee Disciplinary Record: Disciplinary records shall not be used
after two (2) years from the date of the event which was the subject of the
discipline, if the employee has been subject to no intervening disciplinary
action.
G. Prior Grievances: Any grievance or complaint existing or arising out
of events which occurred prior to the date that the Company begins operation of
the Geneva Plant shall have nothing to do with the Company or this Agreement.
H. When possible, proceedings under this grievance procedure shall take
place during normal shift hours.
I. The Company's liability shall be limited to 120 days prior to filing
of any grievance. In any settlement involving retroactive payments, the
appropriate Union and Company representatives shall expeditiously determine the
identity of the payees and the specific amount owned each payee. Payment shall
be made promptly but, unless otherwise mutually agreed, if the payment is not
made within sixty (60) days after such determination, the affected payee(s) will
be paid interest from the date of such determination at the rate of seven
percent (7%) per annum, unless the delay in payment is due to the actions of the
Union or the payee(s).
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<PAGE> 44
J. When a grievance has been appealed to Step 3, a written summary
developed from the Step 2 meeting shall be prepared by the Company. The record
shall be jointly signed by the Company Representative and the Chairman of the
Grievance Committee. If the Chairman of the Grievance Committee shall disagree
with the written summary prepared by the Company, he shall set forth and sign
his reasons for such disagreement, and the written summary, except for such
disagreement, shall be regarded as agreed to.
K. In the event that the Union processes a complaint or grievance
concerning the discipline or discharge of an employee, the Company will not
discipline employees who have been revealed to have violated a Company rule or
policy as a result of the Union's investigation into such matters. The foregoing
shall only be granted in those instances wherein the Union, as a part of the
defense of the grievant, maintains that the discipline or discharge issued in
the incident under grievance was inconsistent with the treatment of other
employees under similar circumstances.
Notwithstanding the foregoing, nothing in this Section 4.K. shall
prejudice or preclude the Company's right to discipline or discharge any
employee (i) for acts of misconduct which occur subsequent to the incident(s)
identified by the Union in the Grievance Procedure, or (ii) for any acts at
anytime of misconduct involving drugs, a serious safety violation or violence as
defined in Article 17, Section 2 of this Agreement.
ARTICLE 17
DISCHARGE AND DISCIPLINE OF EMPLOYEES
SECTION 1 -- DISCHARGE.
The Company may at any time suspend or discharge any employee for just
cause. If such employee believes he was suspended or discharged without just
cause, that employee or the Union may submit such complaint or grievance to the
adjustment of grievances procedure contained in Article 16.
SECTION 2 -- JUSTICE AND DIGNITY ON THE JOB.
The following understandings have been reached for a Procedure for
Justice and Dignity on the job applicable to discharge and suspension cases
only.
A. Management, after discharging an employee, or imposing a suspension,
shall not remove the affected employee from active work on the job to which his
seniority entitles him upon such discharge or suspension prior to a final
determination of the merits of the discharge or suspension in accordance with
the applicable provisions of the Basic Labor Agreement should the employee elect
to file a complaint or grievance protesting Management's decision. For purposes
of the operation of the option not to be removed from the job pursuant to this
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<PAGE> 45
Procedure, a complaint or grievance protesting a discharge or suspension must be
filed within four (4) calendar days after notice of discharge or imposition of
the suspension, as the case may be. In the event no complaint or grievance is
filed within such time limit, the Company will not suspend or remove the
affected employee from active work on the job to which his seniority entitles
him prior to the day following the expiration of the time limit set forth in
this paragraph. For any purpose other than operation of the option set forth
above, the time limits for filing a complaint or grievance protesting a
discharge or suspension shall continue to be those set forth in the Basic Labor
Agreement.
B. The parties recognize that it is essential that a proper balance be
maintained between the right of an employee to be retained under this Procedure
and the right of Management to manage the plant. Accordingly, to insure that
balance, this Procedure will be inapplicable to discharges or suspensions
involving any offenses which endanger the safety of other employees or members
of supervision or the plant and its equipment. Such offenses shall include:
theft; use and/or distribution on Company property of drugs, narcotics, and/or
alcoholic beverages; possession of firearms on Company property; destruction of
Company property; threatening bodily harm to, and/or striking, a member of
supervision; fighting; such as insubordination as endangers the safety of other
employees or members of supervision or the Plant and its equipment; or other
acts of a similar nature. In addition, this Procedure will be inapplicable to a
discharge or suspension involving activity prohibited by the provisions of
Article 18 of this Agreement, and to any violation of the terms of a Last Chance
Agreement.
C. When an employee is retained pursuant to Paragraph A, and the
employee's discharge or suspension is finally determined in the grievance
procedure or in arbitration to be for just cause, the removal of the employee
from the active employment rolls shall be effective for all purposes the day
following the date of final resolution of the grievance.
D. While a discharged employee is retained at work pursuant to Paragraph
A and the employee is discharged again for a repeat of the same conduct, the
employee will no longer be eligible to be retained at work under these
provisions. Such removal from work will be effective on the day of the
subsequent discharge.
E. Nothing in this Procedure shall restrict or expand Management's right
to relieve an employee for the balance of such employee's shift under the terms
of the Basic Labor Agreement.
ARTICLE 18
PROHIBITION OF STRIKES AND LOCKOUTS
During the term of this Agreement, neither the Union nor any employee
shall: (a) engage in or in any way encourage or sanction any strike or other
action which shall interrupt or interfere with work or production at the Geneva
Plant; or (b) prevent or attempt to prevent the access of
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<PAGE> 46
employees to the Geneva Plant. During the term of this Agreement, the Company
shall not engage in any lockout of the employees of the Geneva Plant.
ARTICLE 19
MANAGEMENT RIGHTS
The Management of operations and the direction of the working forces and
operations of the Geneva Plant, including, without limitation, the hiring,
promoting and retiring of employees, the suspending, discharging or otherwise
disciplining of employees for just cause, the laying off and calling to work of
employees in connection with any reduction or increase in the working forces,
the scheduling of work, and the control and regulation of the use of all
equipment and other property of the Company, are the exclusive functions of the
Management; provided, however, that in the exercise of such functions the
Management shall observe the provisions of this Agreement. Neither Management
nor the Union shall discriminate against any employee or applicant for
employment because of his membership or lack of membership in, or lawful
activity on behalf of or in connection with, the Union.
ARTICLE 20
SCOPE OF AGREEMENT
The Parties expressly declare that they have bargained between them on
all phases of wages, hours and working conditions, and that the specific terms
of this Agreement and any addenda thereto represent their full and complete
understanding without reservation or unexpressed understanding. Any aspect of
wages, hours or working conditions not covered by this Agreement is declared to
have been expressly eliminated as a subject of grievance, bargaining or
arbitration, and may not be raised for further bargaining or arbitration without
the specific written consent of both parties.
In accepting the considerations and limitations herein agreed to by the
Company, the Union unqualifiedly waives all present and/or future rights during
the term of the Agreement to require the Company to bargain collectively on any
other aspect of wages, hours of work or working conditions affecting employment,
whether specifically contained herein or not, this giving the Company the right
to manage the business in all respects subject only to the express terms of this
Agreement.
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<PAGE> 47
ARTICLE 21
LOCAL WORKING CONDITIONS, PAST PRACTICES, WORK RULES AND PRIOR AGREEMENTS
SECTION 1 -- LOCAL WORKING CONDITIONS, PAST PRACTICES, WORK RULES.
The term "local working conditions" as used herein means specific
practices or customs which reflect detailed application of the subject matter
within the scope of wages, hours of work, or other conditions of employment and
includes local agreements, written or oral, on such matters. It is recognized
that it is impracticable to set forth in this Agreement all of these working
conditions, which are of a local nature only, or to state specifically in this
Agreement which of these matters should be changed or eliminated. The following
provisions provide general principles and procedures which explain the status of
these matters and furnish necessary guideposts for the parties hereto and the
Board.
A. It is recognized that an employee does not have the right to have a
local working condition established, in any given situation or where such
condition has not existed, during the term of this Agreement or to have an
existing local working condition changed or eliminated, except to the extent
necessary to require the application of a specific provision of this Agreement.
B. In no case shall local working conditions be effective to deprive any
employee of rights under this Agreement. Should any employee believe that a
local working condition is depriving him of the benefits of this Agreement, he
shall have recourse to the complaint and grievance procedure and arbitration, if
necessary, to require that the local working condition be changed or eliminated
to provide the benefits established by this Agreement.
C. Should there be any local working conditions in effect which provide
benefits that are in excess of or in addition to the benefits established by
this Agreement, they shall remain in effect for the term of this Agreement,
except as they are changed or eliminated by mutual agreement or in accordance
with Paragraph D below.
D. The Company shall have the right to change or eliminate any local
working condition if, as a result of action taken by Management under Article
19-Management Rights, the basis for the existence of the local working condition
is changed or eliminated, thereby making it unnecessary to continue such local
working condition; provided, however, that when such a change or elimination is
made by the Company any affected employees shall have recourse to the complaint
and grievance procedure and arbitration, if necessary, to have the Company
justify its action.
E. No local working condition shall hereafter be established or agreed
to which changes or modifies any of the provisions of this Agreement, except as
it is approved in writing by an International Officer of the Union and the
Personnel Services Executive of the Company.
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<PAGE> 48
F. The settlement of a grievance prior to arbitration under this Section
shall not constitute a precedent in the settlement of grievances in other
situations in this area.
G. Each party shall as a matter of policy encourage the prompt
settlement of problems in this area by mutual agreement at the local level.
ARTICLE 22
SHORT WORK WEEK FUND
The Company shall establish a fund into which it will contribute $.10
for each hour worked by employees, to be known as the "Short Work Week Fund".
The Fund shall be used to pay any employee for any week for which he is
scheduled to work an amount equal to the product of his Regular Wage Rate times
the difference between (1) 32 hours, and (2) the sum of the hours he actually
worked, plus the hours he did not work but for which he was paid by the Company
(excluding the first eight (8) hours for which he received pay for unworked
Holidays in any week), plus the hours he was scheduled to work but did not work
because of his failure to report for work as scheduled.
The Company's obligation shall be limited to the prompt payment of the
$.10 per hour into the Fund. Funds in excess of $600,000 may be used by the
Company to offset costs as associated with the Long Term Disability Plan and the
Continuance of medical insurance benefits to employees on layoff.
ARTICLE 23
MISCELLANEOUS
SECTION 1 - TERMINATION.
This Agreement shall terminate at the expiration of sixty (60) days
after either party shall give notice of termination to the other party, but in
no event shall it terminate prior to April 30, 2001.
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<PAGE> 49
SECTION 2 -- MAILING OF NOTICES.
Any notice to be given under this Agreement shall be given by registered
or certified mail; be completed by and at the time of mailing; and if by the
Company, be addressed to the Union at the following addresses:
United Steelworkers of America
District 12
360 West 5300 South, #350
Murray, Utah 84123
United Steelworkers of America
Local Union 2701
1847 Columbia Lane
Orem, Utah 84058
United Steelworkers of America
Terry Bonds
Director, District 12
12821 Industrial Road
Houston, Texas 77015
And if by the Union to the Company at:
Vice President, Human Resources
Geneva Steel
P.O. Box 2500
Provo, Utah 84603
Either party may, by like written notice, change the address to which
registered mail notice to it shall be given.
SECTION 3 -- RATIFICATION.
This Agreement shall be binding on the parties hereto only after
affirmative ratification by Local 2701 and approval of the Board of Directors of
the Company.
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<PAGE> 50
IN WITNESS WHEREOF, we have hereunto set our hands the day and year
first above written.
UNITED STEELWORKERS
GENEVA STEEL COMPANY OF AMERICA
/s/ Joseph A. Cannon /s/ George Becker
- ----------------------------- ------------------------------
Joseph A. Cannon George Becker
CEO and Chairman of the Board President
/s/ Ken C. Johnsen /s/ Leo W. Gerard
- ----------------------------- ------------------------------
Ken C. Johnsen Leo W. Gerard
Executive Vice President Secretary, Treasurer
/s/ Carl E. Ramnitz /s/ Richard H. Davis
- ----------------------------- ------------------------------
Carl E. Ramnitz Richard H. Davis
V.P. of Human Resources V.P. of Administration
/s/ Leon Lynch
------------------------------
Leon Lynch
V.P. Human Affairs
/s/ Terry Bonds
------------------------------
Terry Bonds
District Director
/s/ Dallas Alexander
-------------------------------
Dallas Alexander
Subdirector, District 38, Subdistrict 12
/s/ Dennis Kujala
-------------------------------
Dennis Kujala
President, Local 2701
/s/ Lionel Camara
-------------------------------
Lionel Camara
Chairman, Grievance Committee
/s/ Jim Christensen
-------------------------------
Jim Christensen
Secretary, Grievance Committee
/s/ Gary Ransom
-------------------------------
Gary Ransom
Grievanceman
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APPENDIX A
HOURLY WAGE RATES
<TABLE>
<CAPTION>
JOB CLASS EFFECTIVE DATES
---------------------------------------------------------------
APRIL 1, 1998 APRIL 1, 1999 APRIL 1, 2000
--------- ------------- ------------- -------------
<S> <C> <C> <C>
1 $10.10 $10.35 $10.66
2 $13.14 $13.47 $13.87
3 $13.30 $13.63 $14.04
4 $13.48 $13.82 $14.23
5 $13.64 $13.98 $14.40
6 $13.81 $14.16 $14.58
7 $13.98 $14.33 $14.76
8 $14.15 $14.50 $14.94
9 $14.32 $14.68 $15.12
10 $14.48 $14.84 $15.29
11 $14.65 $15.02 $15.47
12 $14.82 $15.19 $15.65
13 $14.99 $15.36 $15.82
14 $15.15 $15.53 $16.00
15 $15.32 $15.70 $16.17
16 $15.49 $15.88 $16.36
17 $15.66 $16.05 $16.53
18 $15.83 $16.23 $16.72
19 $15.99 $16.39 $16.88
20 $16.16 $16.56 $17.06
21 $16.33 $16.74 $17.24
22 $16.50 $16.91 $17.42
23 $16.67 $17.09 $17.60
24 $16.83 $17.25 $17.77
25 $17.00 $17.43 $17.95
26 $17.17 $17.60 $18.13
27 $17.34 $17.77 $18.30
28 $17.51 $17.95 $18.49
29 $17.67 $18.11 $18.65
30 $17.85 $18.30 $18.85
31 $18.01 $18.46 $19.01
32 $18.17 $18.62 $19.18
33 $18.35 $18.81 $19.37
34 $18.51 $18.97 $19.54
</TABLE>
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APPENDIX B
INSURANCE BENEFITS
MEDICAL INSURANCE
The medical insurance which shall become effective upon the effective
date of this Agreement is contained in a booklet entitled Geneva Steel Health
Plan, a copy of which will be provided to each employee. Such booklet
constitutes a part of this Appendix as though incorporated herein.
LIFE INSURANCE
Group life insurance in the amount of $25,000 per employee shall be
provided by the Company.
DEPENDENT LIFE INSURANCE
Life Insurance for eligible dependents shall be provided by the Company
in the amount of $5,000 for spouse and $2,000 for each child.
ELIGIBILITY
Full-time, permanent employees become eligible for the above benefits on
the first day of the month thirty (30) days after hire. Pre-existing conditions
will be excluded from coverage for a period of nine (9) months.
CONTINUANCE
In the event of reduction in force, the above-described benefits for
full-time, permanent employees will continue according to the following
schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE INSURANCE CONTINUANCE
---------------- ---------------------
<S> <C>
0 to 5 End of the month plus two (2) months
5 to 10 End of the month plus four (4) months
10 or more End of month plus six (6) months
</TABLE>
In all other cases, the benefits cease on the last day worked.
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<PAGE> 53
SICKNESS AND ACCIDENT
Employees who become totally disabled as a result of sickness or
accident, as certified by a licensed physician, will be eligible to receive
weekly sickness and accident benefits. Benefits will not be payable for any
period during which an employee is not under the care of a licensed physician.
The weekly sickness and accident benefits will commence on the eighth
day following an illness and on the first day following an accident and continue
in accordance with the following schedule:
<TABLE>
<CAPTION>
YEARS OF SERVICE WEEKS
---------------- -----
<S> <C>
1st (After Probation) 13
1-20 Years 26
Over 20 Years 52
</TABLE>
The amount of the weekly benefit during the term of this Agreement will
be $350.00 effective May 1, 1998.
In order for the Company to process claims in a timely fashion and to
determine eligibility for benefits, a claim must be received by the Company
within twenty-one (21) days of the commencement of the disability. If the
employee exceeds twenty-one (21) days, and the employee demonstrates a good
reason that he was unable to file the claim within twenty-one (21) days, an
employee's benefits shall commence on the date of filing if the Company is able
to establish the medical and other factual aspects of the claim and determines
that the employee is eligible for benefits. If the employee is physically unable
to comply with this procedure, he should have someone notify the Geneva Steel
Benefits Office in writing of his disability before the end of the twenty-one
(21) day period.
Sickness and accident benefits will be administered according to the
Company's processing procedures, and weekly benefits will be reduced under the
following circumstances where other benefits are payable.
Workers' Compensation: If an employee is otherwise entitled to
sickness and accident benefits and he is making claim for Temporary Total
Disability benefits pursuant to any Workers' Compensation or occupational
disease law, the sickness and accident benefits will be paid only after
satisfactory arrangements are made to assure that any payment of sickness and
accident benefits shall be reimbursed by the employee if the claim for Workers'
Compensation benefits is successful. Such arrangements shall include the
employee's execution of necessary documents authorizing the deduction of any
such overpayment from any payments becoming due as a result of such claim or
from any amount payable the employee by or on behalf of the Company, including
benefits, wages and pension payments.
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<PAGE> 54
Long-Term Disability: If an eligible employee becomes permanently
and totally disabled defined as the inability to perform a bargaining unit job
after one (1) full year of disability, he shall be eligible to receive a
long-term disability benefit in the amount of $400 per month for a maximum of
forty-eight (48) months. In order to be eligible for such benefit, an employee
must (a) have fifteen (15) years or more of continuous service at the
commencement of disability; and (b) be actively at work at the commencement of
disability.
54
<PAGE> 55
APPENDIX C
COVERED SALARIED CLERICAL AND TECHNICAL EMPLOYEES
1. It is understood that the Clerical and Technical employees represented
by USWA Local Union 2701, are covered by this Agreement between Geneva
Steel and the United Steelworkers of America.
2. The employees of this Clerical and Technical Unit will be paid on a wage
hourly pay scale as set forth in Appendix A.
3. The C & T positions will have a guarantee of forty (40) hours work per
week, which includes unworked hours which are paid on holidays. The
Company will pay the employees of the C & T unit forty (40) hours per
week except if the employee is absent without leave. If an employee is
ill, is involved in an accident which precludes him from working, or has
a personal family emergency during their scheduled week, and, if
otherwise qualified, he shall be paid for forty (40) hours that week. A
supervisor may require certification of an illness by a licensed
physician when they feel such verification is necessary. After an
employee is absent from work due to sickness, for a period of seven (7)
days, he becomes eligible to apply for S & A Benefits commencing on the
eighth day of illness (see Appendix B).
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<PAGE> 56
APPENDIX D
PROFIT SHARING PLAN FOR GENEVA STEEL BARGAINING UNIT EMPLOYEES
A Profit Sharing Plan for eligible Geneva Steel Bargaining Unit
employees (the "Profit Sharing Plan") will be in effect for the duration of the
contract commencing May 1, 1998. The Profit Sharing Plan will be calculated and
paid annually based on the Company's fiscal year accounting records. The
Company's fiscal year ends on the last day of September of each year.
A. The Profit Sharing Plan shall be based on the Company contributing to
a pool (the "Profit Sharing Pool") ten percent (10%) of Geneva Steel's adjusted
earnings before taxes and excluding extraordinary items ("A.E.B.T.") for the
fiscal year if A.E.B.T. is positive. A.E.B.T. shall mean earnings before taxes
excluding profit sharing, reduced by Allocated Capital Expenditures. Allocated
Capital Expenditures shall mean twenty-five percent (25%) of all Capital
Expenditures up to $50 million and thirty percent (30%) of all Capital
Expenditures in excess of $50 million. Capital Expenditures shall mean the
aggregate of all the Company's actual capital expenditures (in accordance with
generally accepted accounting principles) for the fiscal year, including capital
maintenance. If for any fiscal year the Company's Capital Expenditures exceed
$85 million or the Company does not have sufficient cash (before payment of
dividends) and/or the ability to borrow funds against its working capital line
to pay profit sharing and have sufficient funds available to cover any then
forecasted negative cash flow in the six months following the scheduled payment
of the profit sharing, the Company shall at its option have the right to pay its
Profit Sharing Pool obligation in the form of shares of the Company's common
stock at a value then agreed to by the Company and the Union, or if they can't
agree, at a value determined by an independent appraiser acceptable to the
Company and the Union, or to defer the obligation for up to two (2) years with
interest at eight percent (8%) per annum. If the parties are unable to agree on
an independent appraiser, they shall select an appraiser in the manner set forth
in Paragraph E below, substituting five (5) qualified appraisers for the five
(5) auditors.
B. All Bargaining Unit employees shall be eligible to participate in the
Profit Sharing Plan if they were actively at work at any time during the subject
fiscal year. Employees, other than employees who die or retire, whose employment
is terminated, voluntarily or involuntarily, during the fiscal year shall not be
eligible to participate in the Profit Sharing Plan for the subject year.
Probationary employees during their probationary employment period shall not be
eligible to participate in the Profit Sharing Plan under any circumstances nor
shall the first 760 hours of work be considered as eligible hours of work under
this Plan.
C. The Profit Sharing Pool for each fiscal year, if any, as calculated
pursuant to Paragraph A above shall be allocated to each eligible Bargaining
Unit employee on the basis of each employee's Profit Sharing Plan Hours as
compared to total Profit Sharing Plan Hours. An employee's Profit Sharing Plan
Hours shall mean the lesser of (a) the sum of the hours the employee actually
worked for which the employee is paid during the fiscal year plus the hours for
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<PAGE> 57
which the employee receives vacation pay, or (b) 2080 hours. Total Profit
Sharing Plan Hours shall mean the total of all the eligible Bargaining Unit
employees's Profit Sharing Plan Hours.
D. The fiscal year Profit Sharing Plan payments to employees, if any,
will be reduced by PDP payments made during the period for which the profit
share is calculated. PDP payments made to all bargaining unit employees during
the fiscal year will first be totaled in the aggregate. Once the Profit Sharing
pool has been determined, the total PDP payments will then be deducted from the
total amount in the Profit Sharing Pool. Profit Sharing Plan payments shall be
made to eligible employees in a separate check during December following the
fiscal year in which they were earned, unless payment is delayed pursuant to
Paragraph F below or deferred pursuant to Paragraph A above. On or before
October 31 of each year, the Company will issue to each eligible Bargaining Unit
employee a summary of the employee's Profit Sharing Plan Hours for the subject
fiscal year and the report to the Union referred to in Paragraph E below. On or
before November 10, following the fiscal year any employee who objects to the
number of hours set forth on his or her summary shall file a written statement
setting forth the basis for the objection. The Union and the Company shall
resolve any disputes promptly. If an individual written objection is not filed
on or before November 10 following the fiscal year, any such objection will be
barred from thereafter being filed. No employee may object on behalf of any
other employee, nor may any employee object to the amount of the Profit Sharing
Pool or the overall allocation thereof.
E. No later than fifteen (15) days before the anticipated payment date,
the Company will provide the Union with a report of the Company's independent
certified public accountants certifying to the A.E.B.T. and Allocated Capital
Expenditures as set forth above, all in accordance with generally accepted
accounting principles. In addition, reasonable information to support the report
will be furnished upon request.
The Union shall have the right to retain, at its own expense, an
independent certified public accountant for the purpose of verifying the report
described above. In the event that the Company's CPA and the Union's CPA cannot
resolve their differences, the Company and the Union shall select a third
independent certified public accountant to resolve the matter. If the Company
and the Union are unable to agree to an acceptable independent public
accountant, the parties agree to select an independent accounting firm from a
list of five major independent accounting firms, by a process of elimination
through alternate striking of the firms until only one remains. The list of
major independent accounting firms shall be agreed to in a separate letter of
agreement. The accounting data supplied to the independent accounting firm shall
be limited to data that are essential to verify the Profit Sharing Plan, which
shall include PDP payment deductions, Adjusted Earnings Before Taxes, Actual
Capital Expenditures, profit sharing hours, and, if applicable, cash flow
justification. All confidential or proprietary information supplied or otherwise
made available to the independent accounting firms any union representatives
pursuant to this Agreement shall be held in the strictest confidence and used
only for the purpose of verifying amounts to be distributed to employees under
this plan. The cost of any such audit shall be shared equally by the Company and
the Union. If the Union does not
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request an independent third audit within forty-five (45) days of its receipt of
the report from the Company's CPA described above, such report shall be deemed
accepted, and the Union shall thereafter have no right to challenge the report
to make a request for any audit for the subject fiscal year.
F. The Company shall not make any Profit Sharing Plan payments to any
person until all employee objections described in Paragraph D above have been
resolved.
G. Under no circumstances other than defined below shall the Company be
required to contribute to the Profit Sharing Plan Pool, for any fiscal year more
than the total amount calculated pursuant to Paragraph A above. To the extent
that the Company, for any reason, over-funds the Profit Sharing Plan Pool for
any fiscal year, the Company shall deduct the amount of such over-funding from
the Profit Sharing Plan Pool for the next fiscal year or years in which the
Profit Sharing Plan makes a payment until all the overpayment is recovered. If
for any reason the Company should under-fund the Profit Sharing Plan Pool, the
under-funding shall be repaid and distributed in accordance with this plan.
H. Payments under the Profit Sharing Plan shall be included as
compensation for income tax, F.I.C.A., union dues and pension purposes, but
shall not be a part of an employee's pay for any other purpose and shall not be
used in the calculation of any other Company payment, allowance or benefit.
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APPENDIX E
TURN COORDINATORS
The Union and the Company recognize a need for proper manning and
efficient utilization of turn coordinators. A turn coordinator is a true working
member of the crew, who has the responsibility to direct the activities of
others. In order to address and resolve differences concerning this position,
the parties have discussed and agreed to the following:
1. The Company will identify to the Union, turn coordinator
assignments and current personnel who are working as turn
coordinators. Future turn coordinator vacancies in those
positions will be filled on a seniority basis from within the
line of progression. Employees awarded those positions will be
paid three job classes above the highest job they supervise. If,
due to an increase in operations or to fill for temporary
vacancies, additional turn coordinators are needed, they will be
assigned in seniority order from a list of employees who have
expressed an interest in being trained as turn coordinators and
who have satisfactorily completed a voluntary leadership
training program established by the Company at the Company's
expense. Employees electing to train as a turn coordinator will
(1) have the requirements and responsibilities (i.e. personnel
and crew attendance, safety, work performance, etc.) reviewed
with them; (2) have their training period outlined; (3) have the
evaluation system explained and their performance reviewed with
them a minimum of once every two (2) weeks. If an employee is
removed from the turn coordinator position, either voluntarily
or at the discretion of Management, he will return to his former
incumbent position. Should the employee feel that his/her
removal from that position was unwarranted, they may initiate a
grievance consistent with Article 16 of the Agreement.
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APPENDIX F
SUCCESSORSHIP
The Company agrees that it will not directly or indirectly sell, convey,
assign, or otherwise transfer any plant or operation or significant part thereof
covered by a Labor Agreement with the United Steelworkers of America to any
other party ("Buyer") who intends to operate the business as the Company had,
unless the following conditions have been satisfied prior to the closing date of
the sale:
A. The Buyer shall have entered into an Agreement with the Union
recognizing it as the bargaining representative for the employees within the
existing bargaining units.
B. The Buyer shall have entered into an Agreement with the Union
establishing the terms and conditions of employment to be effective as of the
closing date.
This provision is not intended to apply to any transactions solely
between the Company and any of its subsidiaries or affiliates, or its parent
company including any of its subsidiaries or affiliates; nor is it intended to
apply to transactions involving the sale of stock, except if (i) a plant or
operation or significant part thereof, which is covered by such Labor
Agreement(s), is sold to a third party pursuant to a transaction involving the
sale of stock of a subsidiary of the Company or (ii) a transaction or series of
transactions results in a change of Control of the Company. For purposes of this
Appendix F, "Control" when used with respect to any business entity means the
power to direct, but not merely influence, the management and policies of such
business entity, directly or indirectly, whether through voting power or by
contract or otherwise. This Appendix F shall not apply to an offering of
registered securities that are sold to greater than twelve (12) investors.
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APPENDIX G
MEMORANDUM OF AGREEMENT
In order to better implement and apply the provisions of Article 13,
Section 6 Alcoholism and Drug Abuse, and to comply with existing state and
federal laws, the Company and the Union have discussed and agree to the
following terms and conditions as an addendum to Article 13, Section 6, and as
such it is not intended to change or alter any other provisions of the
Collective Bargaining Agreement.
1. The initial cutoff levels for the following six (6) drugs or
classes of drugs shall be used when screening specimens to
determine whether or not they are negative.
Marijuana Metabolites 50 ng/ml
Cocaine Metabolites 300 ng/ml
Opiate Metabolites 300 ng/ml
Phencyclidine 25 ng/ml
Amphetamines 1,000 ng/ml
Alcohol 80 mg/dl
Any results at or above the foregoing levels will be considered
a positive test result. In the event NIDA lowers the cutoff
level for any of the substances listed above, the parties agree
to lower the level accordingly.
2. When an employee is discharged following a positive drug or
alcohol test, a Step 1 meeting will be held with appropriate
Management and Union representatives within five (5) working
days of the date of discharge. If it is determined in the Step 1
meeting that the discharged employee is to be offered a "Last
Chance Agreement", the Company representative from Human
Resources will explain the differences in the two types of Last
Chance Agreements which may be offered, and the procedure the
employee is required to follow prior to reinstatement. The
Company representative and the Union Grievance Committeeman will
work together to impress upon the employee his/her requirements
to strictly comply with the terms of the Last Chance Agreement
which is offered.
3. The two Last Chance Agreements to be used are attached as
Exhibit I and II of this Agreement. The first Agreement (Exhibit
I) is to be offered in situations where the discharged employee
recognizes that he/she may have a drug and/or alcohol abuse
problem. Consequently, the employee will be required to go to
the Employee Assistance Program for an evaluation, such
evaluation shall take into consideration the employee's duration
of usage of drugs and/or alcohol, the addictiveness of such
substance and the standard treatment for such condition, and if
required, complete a rehabilitation program. The second type of
Agreement
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(Exhibit II) will be used when the employee maintains that
he/she does not have an abuse problem and that the drug and/or
alcohol problem can be corrected without the assistance of a
rehabilitation program. At a minimum, however, an employee who
is offered the second type of Agreement must attend a drug and
alcohol awareness class.
4. The Company and the Union agree to establish a "Company/Union
Drug and Alcohol Abuse Committee." The Committee will consist of
two (2) members from the Union (the President and the Grievance
Committee Chairman), and two members of management. In the event
an employee discharged for drugs or alcohol is from the
Grievance Committee Chairman's home department, the Secretary of
the Grievance Committee will replace the Grievance Committee
Chairman in that one (1) instance. The two Company members will
be from Human Resources or one member may be a Management
representative from a department other than the one in which the
discharged employee works. The Committee will function as
outlined in the provisions of this Agreement.
5. In addition to testing an employee for drugs and alcohol
consistent with the provisions of Article 13, Section 6, the
Company may also test an employee who has signed a Last Chance
Agreement at any time for a period of one (1) year following the
signing of either type of Last Chance Agreement. Further, the
Company may also test the employee who is working under the
terms of a Last Chance Agreement any time he/she returns from
any absence from work in excess of seven (7) days (excluding
vacations) for a period of up to five (5) years after the
signing of the Last Chance Agreement. An employee will not be
randomly drug or alcohol tested pursuant to this provision
during the period of time that his enrollment in a
rehabilitation program has been temporarily delayed through no
fault of the employee. The period may not exceed fourteen (14)
days unless mutually agreed to by the parties. The Last Chance
Agreement will expire after a period of five (5) years after the
signing of the Agreement, provided there are no further
infractions of this type in that period of time.
6. If an employee tests positive for drugs or alcohol after signing
a Last Chance Agreement, he/she will be immediately suspended
from work. The employee will remain on suspension until the
Company/Union Drug and Alcohol Abuse Committee have an
opportunity to meet with the suspended employee. The meeting
will be held within seven (7) working days of the date of the
employee's suspension. The intent of the meeting will be to hear
and discuss the employee's explanation for his/her second
positive drug and/or alcohol test. If the Committee determines
that the employee had extenuating circumstances which led to
legitimate and documented reasons for his/her actions (i.e.
recent divorce, death in the immediate family, etc.), the
employee may be reinstated with an extended suspension and a
reinstruction that any additional positive drug or alcohol tests
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will result in discharge. If the Committee determines that the
employee did not have a legitimate reason for a second positive
test (i.e. the deer hunt, poker game, etc.), the employee's
suspension will be converted to discharge.
7. The Company will supply the Union and the employee with a
release of information form which an employee may elect to sign.
The release will allow the appropriate Company Representative to
supply the employee with the drug and/or alcohol test results
(including the level at which the employee tested), and to
supply that information to the Union.
8. This Agreement will become effective on the date of the
Collective Bargaining Agreement, and it will have no bearing or
affect on any drug and/or alcohol related cases which occurred
prior to June 14, 1993.
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EXHIBIT I
MEMORANDUM OF AGREEMENT
The following Agreement provides John Doe #00000 with the opportunity to
resolve any and all issues related to his discharge (date) for reporting to the
plant and/or working under the influence of illegal drugs (or alcohol). Mr. Doe
has had the following conditions reviewed with him by the Company and the Union
and agrees that he must comply with the following:
1. Mr. Does must meet with a professional counselor from the Employee
Assistance Program in order to evaluate the extent of his condition and
a recommendation for treatment. If a treatment program is recommended,
or the employee selects a program which exceeds the E.A.P.
recommendations, he must successfully complete the drug (or alcohol)
rehabilitation program and supply management with proof of attendance to
and successful completion of said program. Mr. Doe will be returned to
employment provided he is medically certified as competent to do so by
both a qualified representative of the rehabilitation institution and a
physician.
2. If a treatment program is recommended and at any time Mr. Doe fails to
comply with the requirements of that rehabilitation program, such that
the intent of the rehabilitation effort cannot be met, the agreement to
return grievant to work will become null and void with his status as an
employee being converted to discharge. Further, if the rehabilitation
effort is complete and after having returned to work, he again returns
to an alcoholic or drug afflicted state or tests positive for illegal
drugs or is found working in a condition unfit for work, he understands
he will be suspended pending a review by the Company/Union Drug and
Alcohol Abuse Committee. If the Committee determines that Mr. Doe was
clearly responsible for his actions, the suspension will be converted to
a discharge. If Mr. Doe fails to comply with the terms of the agreement
and is subsequently discharged, he understands he will not be eligible
to be rehired as an employee of Geneva Steel.
3. The discharge issued to Mr. Doe will be converted to a suspension to
cover a period of time from (date) until the day he returns to work at
Geneva Steel.
4. Management has complied fully with Article 13, Section 6 -- Alcoholism
and Drug Abuse by allowing the employee to return to active employment
following his evaluation and, if required, involvement in a drug (or
alcohol) rehabilitation program. With the signing of this Agreement, Mr.
Doe acknowledged he is not entitled to any further consideration under
Section 6.
5. Mr. Doe understands that he must report off in a timely fashion and
properly substantiate any absences as required by Management consistent
with department report off and absenteeism policies.
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6. Mr. Doe agrees to submit to a drug or alcohol test at any time during
the next year from the signing of this Agreement, solely at Management's
discretion, as condition of his continued employment at Geneva Steel.
7. Mr. Doe agrees to submit to a drug or alcohol test any time he returns
from an absence from work in excess of seven (7) days (excluding
vacations) for a period of five (5) years from the signing of this
Agreement.
8. This Agreement is without prejudice or precedent and shall not be
referred to in the handling of similar issues should they arise.
- ----------------------------- ---------------------------------
Union Representative Management Representative
- ------------------- ---------------------
Date Date
I have read, understand, and agree with the terms of this Agreement.
- ----------------------------- ----------------------
Signature Date
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EXHIBIT II
MEMORANDUM OF AGREEMENT
The following Agreement provides John Doe #00000 with the opportunity to
resolve any and all issues related to his discharge of (date) for working under
the influence of illegal drugs (or alcohol). Mr. Doe has had the following
conditions reviewed with him by the Company and the Union and agrees that he
must comply with the following:
1. Management has complied fully with Article 13, Section 6 -- Alcoholism
and Drug Abuse by returning the employee to active employment following
his positive drug (or alcohol) test on (date). With the signing of this
Agreement, Mr. Doe acknowledges he is not entitled to any further
consideration under Section 6.
2. Mr. Doe has informed the Company and the Union that he is physically
able to perform the full scope of his job duties and does not require
any form of rehabilitation. Such being the case, if at any time in the
future, Mr. Doe is again found to be working in an unfit condition or
tests positive for illegal drugs (or alcohol), he understands he will be
suspended pending a review by the Company/Union Drug and Alcohol Abuse
Committee. If the Committee determines that Mr. Doe was clearly
responsible for his actions, the suspension will be converted to a
discharge. If Mr. Doe fails to comply with the terms of this Agreement
and is subsequently discharged, he understands he will not be eligible
to be rehired as an employee of Geneva Steel.
3. The discharge issued to Mr. Doe will be converted to a suspension to
cover the period of time from (date) until the day he returns to work at
Geneva Steel.
4. Mr. Doe understands that he must report off in a timely fashion and
properly substantiate any absences as required by Management consistent
with department report off and absenteeism policies.
5. Mr. Doe agrees to submit to a drug or alcohol test at anytime during the
next year from the signing of this Agreement, solely at Management's
discretion, as a condition of his continued employment at Geneva Steel.
6. Mr. Doe agrees to submit to a drug or alcohol test any time he returns
from an absence from work in excess of seven (7) days (excluding
vacations) for a period of five (5) years following the signing of this
Agreement.
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7. This Agreement is without prejudice or precedent and shall not be
referred to in the handling of similar issues should they arise.
- ----------------------------- ---------------------------------
Union Representative Management Representative
- ------------------- ---------------------
Date Date
I have read, understand, and agree with the terms of this Agreement.
- ----------------------------- ----------------------
Signature Date
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APPENDIX H
PERFORMANCE DIVIDEND PLAN FOR
GENEVA STEEL BARGAINING UNIT EMPLOYEES
INTRODUCTION
The Performance Dividend Plan (PDP) is designed to provide incentive
payments to Bargaining Unit employees which recognize their contribution to
increased productivity as compared to base levels. The PDP provides a dividend
for increased Prime Shipped Tons. The PDP will be calculated each month and a
performance dividend for the month will be included in the employee's pay in the
following month consistent with the calculations set forth below.
DEFINITIONS
Shipped Tons
Shipped Tons include every ton of steel which is produced at the Geneva
Plant, as defined in the Collective Bargaining Agreement, as hot rolled product
through the 132" Mill facility, slabs shipped and sold in slab form to
commercial customers and not further processed in any form at Geneva, and cast
foundry merchant products for merchant sales, and is actually shipped to any
customer during the month for which the calculation is being made.
Secondary Shipped Tons
Seconds include any steel product which when produced is defective in
relation to the order or specification for which it was made (such as defects in
chemistry, gauge, width, length, shape or surface) or which is damaged in the
course of production, handling or shipping, regardless of when or where that
defect or damage is discovered.
Prime Shipped Tons
Prime Shipped Tons are defined as Shipped Tons minus Secondary Shipped Tons.
Base Prime Shipped Tons
Because this program is designed to pay a dividend, for performance
above stated levels, a "base" has been defined for Prime Shipped Tons. The
actual base number for each month will vary, depending on the number of days in
the month. A table showing the Base Prime Shipped Tons for each month is set
forth in Determinants and Base Quantities below.
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Fixed Dividend Percent
A fixed dividend of 2.5% will be paid for the month when the Actual
Prime Shipped Tons exceeds the Base Prime Shipped Tons established for that
month.
Incremental Prime Shipped Tons
Incremental Prime Shipped Tons are the tons calculated by subtracting
the Base Prime Shipped Tons from the Actual Prime Shipped Tons.
Incremental Prime Shipped Tons Determinant
The PDP is designed to pay an increasing dividend for each Prime Shipped
Ton above the monthly base. To determine how much each Incremental Prime Shipped
Ton above the Base Prime Shipped Ton is worth, there is a "Determinant", which,
when applied to the incremental tons above the base, will produce a PDP%. The
PDP% when applied to the individual base rate, will determine the dollar per
hour for the PDP payment. The following table shows the incremental Prime
Shipped Tons Determinant.
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PERFORMANCE DIVIDEND PLAN
DETERMINANTS AND BASE QUANTITIES
Prime Shipped Tons
1. Fixed Dividend %:
Prime Shipped Tons over Base Prime Shipped Tons for the month = 2.5%
2. Incremental Prime Shipped Tons Determinants:
<TABLE>
<CAPTION>
Dividend % Per Incremental
Month Prime Shipped Ton
----- -----------------
<S> <C>
February .00016657%
February (Leap Year) .00016082%
April, June, September, .00015546%
November
January, March, May, July, .00015045%
August, October, December
</TABLE>
3. Base Prime Shipped Tons Quantities:
<TABLE>
<CAPTION>
Base Prime Shipped
Month Tons Per Month
----- --------------
<S> <C>
February 103,562
February (Leap Year) 107,260
April, June, September, 110,959
November
January, March, May, July, 114,657
August, October, December
</TABLE>
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PRIME SHIPPED TONS
RULES
1. The PDP will go into effect on the effective date of the Collective
Bargaining Agreement and will remain in effect for the duration of the
Agreement. Eligible employees will be those defined as participants
under the Profit Sharing Plan for Geneva Steel Bargaining Unit
employees, Appendix D, Paragraph B.
2. The PDP will be calculated each month and a performance dividend for the
month will be included in the employee's pay in the following month
consistent with the calculations set forth in the Determinants and Base
Quantities shown above.
3. PDP payments under this plan shall be included as compensation for
income tax, FICA, union dues, pension purposes, and as otherwise
required by law, but shall not be part of employee's pay for any other
purpose.
4. For purposes of calculating an individual's PDP payout, the Performance
Dividend will be applied to the lesser of the first 173.3 hours worked
or the number of hours the employee actually worked during the month.
5. The fiscal year Profit Sharing Plan payments to employees, if any, will
be reduced by PDP payments made during the period for which the profit
share is calculated.
6. If an employee's PDP payment is less than $.33/hour based on the
Company's plan, the Company pays the employee $.33/hour on the PDP hours
determined for the month.
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APPENDIX I
401(K) PLAN
Effective March 1, 1996, the Company will provided a twenty-five percent
(25%) match to employee contributions of up to four percent (4%) to the 401(K)
Plan. The matching contribution may be made in cash or in Company stock.
Example: If an employee contributes $100 of his or her gross pay, the Company
will add an additional $25 in cash or Company stock.
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APPENDIX J
VOLUNTARY EMPLOYEE BENEFICIARY ASSOCIATION (VEBA) TRUST
A tax-exempt trust under Section 501(c)(9) of the Internal Revenue Code
("VEBA Trust") to fund post-retirement benefits for future retirees from the
USWA Bargaining Unit was established as part of the 1995 negotiations. The
parties agree to the following modifications with respect to the VEBA trust:
1. Future Company contributions to the VEBA Trust shall consist of, and be
limited to: (i) the amount by which forfeitures have reduced or will
reduce the Company's pension contributions to the Geneva Steel Union
Employees Savings and Pension Plan from April 1, 1998 through March 31,
2001, (ii) $.15 for each hour of work performed by Union employees for
the Company from May 1, 1998 through March 31, 1999; (iii) $.20 for each
hour of work performed by Union employees for the Company from April 1,
1999 through March 31, 2000; and (iv) $.25 for each hour of work
performed by Union employees for the Company from April 1, 2000 through
March 31, 2001.
2. There will the three (3) VEBA Trustees appointed by the Company and
three (3) VEBA Trustees appointed by the Union, with majority of
appointees of each party required for decision making. In the event of a
deadlock, the dispute shall be submitted to impartial binding
arbitration under procedures to be established. The Trust will pay the
reasonable and necessary administrative costs related to the VEBA Trust,
excluding fiduciary insurance coverage for Trustees which will be paid
by the Company.
3. The VEBA Trustees shall develop a plan of retiree (including dependents
and surviving spouses) medical and life insurance benefits that has the
objective of approximating the coverage providing for active Union
employees. In order to preserve a reasonable portion of Trust assets for
Union employees retiring after the term of this Agreement, the Trustees
may require retiree premium contributions by retirees and surviving
spouses comparable to other Basic Steel companies. In addition, Trustees
may alter benefits and/or premium contributions to preserve Trust assets
based on the level of Company contributions, investment returns,
increases in the cost of providing benefits, and in the event of changes
in the Company's financial circumstances that would substantially affect
anticipated VEBA Trust funding.
4. The Company and Union will agree upon revised VEBA Trust language
incorporating the above principles.
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APPENDIX K
LETTER
February 18, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Re: Right to Make Offer on Sale of Assets
Dear Mr. Alexander:
In connection with the recently completed negotiations between the
United Steelworkers of America ("USWA") and Geneva Steel Company (the
"Company"), the parties have reached the following understanding:
1. a. Should the Company decide or be presented with an offer to
sell or otherwise transfer: (i) a controlling interest in the
corporate entity which owns all or a substantial portion of its
assets (a "Controlling Interest"), or (ii) all or a substantial
portion of its facilities ("Facilities") (either or both, the
"Assets"), it will so notify the USWA in writing and grant to
the USWA the right to organize a transaction to purchase the
Assets. In no case, however, shall the Company enter into any
agreement or understanding to sell the Assets without first
complying with the provisions of this letter unless compliance
with such prohibition would, based upon an opinion of counsel,
constitute a breach by an director of such director's
obligations to the Company or its shareholders. For purposes of
this provision, a Controlling Interest shall be defined as fifty
percent (50%) of the common equity stock of the Company or with
respect to a business entity, the power to direct, but not
merely influence, the management and policies of such business
entity, directly or indirectly, whether through voting power or
by contract or otherwise.
b. Subject to the USWA and the Company entering into a
Confidentiality Agreement, the Company will provide the USWA
with information and access to Company personnel and facilities
needed to determine whether it wishes to make an offer. Such
information and access shall be of the type customarily provided
to similarly situated prospective purchasers for such Assets.
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Mr. Dallas Alexander
February 18, 1998
Page 2
- -------------------------
c. During the first thirty (30) days from the date the Company
notifies the USWA pursuant to Paragraph 1.a above, the Company
will not enter into a contract for the sale of the Assets unless
compliance with such prohibition would, based upon an opinion of
counsel, constitute a breach by any director of such director's
obligations to the Company and its shareholders. The USWA shall
be entitled to submit a written offer to purchase the Assets at
any time during such thirty (30) day period.
d. During the next sixty (60) day period, the Company will be free
to accept offers from other entities for the Assets and the USWA
will be entitled to submit an offer during such period if
submitted prior to acceptance by the Company of such other
entity's offer. During such period, the Company shall provide
the USWA five (5) business days notice prior to accepting an
offer from an entity other than the USWA.
e. In the event the thirty (30) day period referred to in Paragraph
1.c has elapsed, the Company shall be entitled, subject to this
Paragraph 1.e and Paragraph 1.f, to enter into an agreement to
sell such Assets to any purchaser, including the USWA, provided
that such a transaction must close within one (1) year after the
end of such period. If the Assets have not been sold during such
one (1) year period, the Company must comply again with the
provisions of this letter agreement before selling such Assets.
f. In the event that the USWA submits an offer within the time
periods set forth in paragraphs 1.c or 1.d above and prior to
the Company's acceptance of an offer during the period set forth
in 1.d above, the terms of this paragraph shall apply. The
Company shall be entitled to enter into a binding purchase
agreement with regard to the Assets with an entity other than
the USWA provided that the transaction contemplated by such
purchase agreement is, in the reasonable business judgement of
the Board of Directors of the Company, more favorable to the
Company than the USWA offer. In evaluating such offers, the
Board of Directors of the Company may take into account any
relevant factors, such as, without limitation, the purchase
price, form of consideration, down payment, break up fees,
security, structure, timing, identity of the offeror, risk of
non- consummation, impact on business of the Company, other
obligations of the Company and other relevant legal,
contractual, financial and political considerations. Nothing
contained herein shall require the Company to accept any offer
by an entity, including the USWA, for the purchase of the
Assets. In the
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Mr. Dallas Alexander
February 18, 1998
Page 3
- ---------------------
event that the Company elects to accept an offer, the Company shall not
be under any obligation to accept an offer from the USWA if it is not
the most favorable offer or to negotiate with the USWA concerning such
offer.
2. The rights granted the USWA under this letter agreement may not be
transferred or assigned by the USWA except that its rights may be
assigned to and exercised by an acquisition entity established by or for
the USWA-represented employees covered by the above-referenced labor
agreement; and, further provided, that said employees shall own directly
or indirectly through an employee stock ownership (or similar) plan, a
material portion of the voting equity interests in such acquisition
entity.
3. Notwithstanding the foregoing, the Company's failure to abide by the
provisions of this Agreement shall not be the basis of preventing the
sale of assets; rather, the remedy of the USWA shall be limited to
actual damages which the Company and the USWA agree shall be limited to
not more than $10 million.
4. This Agreement shall remain in effect for the term of the Agreement
between the USWA and Geneva Steel Company, dated May 1, 1998 (the
"Collective Bargaining Agreement") and shall expire at the termination
date of said Collective Bargaining Agreement.
5. Notwithstanding any other term of this Agreement, the provisions of this
Agreement shall be of no legal effect to the extent such terms are
inconsistent with the duties and obligations of the Company under any
financing agreement previously entered into in good faith by the
Company. The foregoing right to bid shall not be deemed to cover an
offering of registered securities that are sold to greater than twelve
(12) investors.
6. "Confidentiality Agreement" as used herein shall mean a written
agreement which is reasonably acceptable to the Company and entered into
between the Company and a prospective purchaser (including, if
applicable, the USWA) governing the furnishing, confidential treatment
and use of any non-public, proprietary and/or confidential information,
whether written or oral, which the Company may provide to a prospective
purchaser regarding the Company and/or Assets the Company may offer for
sale. In the event the Company and the USWA are unable to agree upon,
and execute, such a Confidentiality Agreement, the Company shall not be
obligated to deliver to the USWA any of said non-public, proprietary
and/or confidential information.
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Mr. Dallas Alexander
February 18, 1998
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If the foregoing confirms our mutual understandings and agreements,
please sign and return to me the duplicate original copy of this letter
agreement at your earliest opportunity.
Sincerely,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
--------------------------------------
Carl E. Ramnitz
Vice President
Human Resources
ACKNOWLEDGED AND AGREED TO
this ____day of ______1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
-----------------------------
Dallas Alexander
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APPENDIX L
PARTIES TO THE AGREEMENT
The parties to this Agreement shall be the United Steelworkers of
America (the "Union" or the "USWA") and Geneva Steel Company ("Geneva" or the
"Company") and any future Parent Company. Geneva agrees that it will not
consummate a transaction, the result of which would cause the Company to come
under the Control of another company or business entity ("Parent Company")
without first ensuring that said Parent Company becomes a signatory to this
Agreement. The foregoing sentence shall not apply to an offering of registered
securities that are sold to greater than twelve (12) investors. For purposes of
this Appendix L, Control shall be defined as ownership of fifty percent (50%) of
the common equity of the Company.
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APPENDIX M
LETTER OF AGREEMENT ON NEUTRALITY
February 18, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Dear Mr. Alexander:
This will confirm our understanding reached during the 1998
Negotiations.
A. NEUTRALITY
The Company and the Union agree that the Company's continued success and
our employee's continued job security hinge upon a constructive and harmonious
relationship between the Company and the Union built on trust, integrity, and
mutual respect. We are committed to continuing efforts to foster and maintain
such a relationship.
We also know from experience that when both parties are involved in an
organizing campaign directed at unrepresented Company employees there is a risk
that election conduct and campaign activities may have a harmful effect on
parties' relationship. Therefore, it is incumbent on both parties to take
appropriate steps to insure that all facets of an organizing campaign will be
conducted in a constructive and positive manner which does not misrepresent to
employees the facts and circumstances surrounding their employment and in a
manner which neither demeans the Company or the Union as an organization nor
their respective representatives as individuals.
To underscore the Company's commitment in this matter, it agrees to
adopt a position of neutrality in the event that the Union seeks to represent
any non-represented employees of the Company.
Neutrality means that the Company shall not, in any way, hinder the
Union's conduct of an organizing campaign, nor shall it demean the Union as an
organization or its representatives
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Mr. Dallas Alexander
February 18, 1998
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as individuals. Also, the Company shall not provide any support or assistance of
any kind to any person or group opposing Union organization of the Company's
employees.
For its part, the Union agrees that all facets of its organizing
campaign will be conducted in a constructive and positive manner which does not
misrepresent to employees the facts and circumstances surrounding their
employment. The Union shall not hinder the Company's conduct of its business nor
shall it demean the Company as an organization or its representatives as
individuals.
The Company's commitment to remain neutral shall cease if during the
course of an organizing campaign, the Union or its agents intentionally or
repeatedly (after having the matter called to the Union's attention)
misrepresent to the employees the facts and circumstances surrounding their
employment or conduct a campaign demeaning the integrity or character of the
Company or its representatives.
B. HIRING
1. For all hiring in a Covered Workplace (as defined in Section F-4
herein) in any unit(s) appropriate for bargaining (prior to the existence of a
Collective Bargaining Agreement), the Company shall extend preferential
consideration in hiring over outside applicants to qualified interested
employees covered by this Labor Agreement with the USWA (including laid off
employees hereunder), all in accordance with the following.
2. The Company shall treat applicants who are employees covered by this
Labor Agreement as presumptively qualified for such hiring if they perform or
have performed the same or similar jobs as those to be filled. Nevertheless, it
is understood that the Company shall have the right to reject a particular
applicant covered by this Labor Agreement, provided that the Company can
demonstrate that such applicant lacks reasonable and necessary qualifications or
that other applicants are more relevantly qualified, and provided further that
this Company right shall not be used for the purpose of defeating the existence
of a Union majority among the representative complement of employees in such
bargaining unit(s). In addition, the Company reserves the right to reject
applicants to preclude an unreasonable dilution of skills at an existing
facility.
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Mr. Dallas Alexander
February 18, 1998
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3. In determining whether to hire any applicant at a Covered Workplace
(whether or not such applicant is an employee covered by this Labor Agreement),
the Company shall refrain from using any interview, test, or other selection
procedure designed and intended, among other things, to eliminate or otherwise
disadvantage applicants based on their attitudes or behavior toward unions or
collective bargaining.
4. In each case covered hereunder, the parties shall meet prior to any
hiring to discuss in good faith the detailed application of the above principles
and to develop procedures for the consideration and hiring of interested
employees covered by the Company's Labor Agreement with the USWA.
C. SCOPE OF THE UNIT
As soon as practicable after notification by the Union of its interest
in organizing unrepresented employees, the parties will meet to attempt to reach
an agreement on any issues relating to the scope, appropriateness and makeup of
the unit sought by the USWA. In the event that the Company and the Union are
unable to agree on any such issues, either party may refer the matter to the
Dispute Resolution Procedure contained in Section H of this Neutrality
Agreement.
D. ACCESS TO COMPANY FACILITIES
Upon written request, such request to be made no more frequently than
twice a year, the Company shall grant access to its facilities to the Union for
an elapsed period not to exceed sixty (60) days for the purpose of distributing
literature and meeting with unrepresented Company employees. Distribution of
Union literature shall not compromise safety or production or disrupt access or
egress. Distribution of Union literature inside Company facilities and meetings
with unrepresented Company employees inside Company facilities shall be limited
to non-work areas during non-work time. Union representatives shall notify
appropriate Company labor relations officials before engaging in the above
activities to schedule access to Company facilities and arrange for access,
including, if requested, tables in non-work areas and shall not disrupt the
normal business of the facility.
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Mr. Dallas Alexander
February 18, 1998
Page 4
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E. UNION RECOGNITION
In the event that the Union demands recognition on the basis of a card
majority, the parties will request that the American Arbitration Association, or
other mutually agreeable third-party neutral, conduct a card check within ten
(10) days of the making of the request. The American Arbitration Association or
third-party neutral shall compare the authorization cards submitted by the Union
against original handwriting exemplars of the entire bargaining unit furnished
by the Company and shall determine if a simple majority of the eligible
employees has signed cards. The list of eligible employees shall be jointly
prepared by the Union and the Company.
If the Union secures a simple majority of authorization cards, as
certified in the procedure described above, of the employees in an appropriate
bargaining unit, the Company, and any other entity required to do so under the
terms of this letter agreement, shall recognize the Union as the exclusive
representative of such employees without a secret ballot election conducted by
the National Labor Relations Board. The authorization cards must unambiguously
state that the signing employees desire to designate the Union as their
exclusive representative for collective bargaining purposes.
F. SCOPE OF THIS NEUTRALITY AND RECOGNITION AGREEMENT
1. Rules with Respect to Affiliates and Parent Corporation
For purposes of this letter agreement, the Company also includes (in
addition to the Company): (i) any business entity which owns a controlling
interest in the Company (a "Parent Company"), (ii) any Affiliate of a Parent
Company (any one or combination of (i) and (ii) a "Related Party") or (iii) any
Affiliate of the Company, and the obligations and commitments in this letter
applicable to the Company are applicable to a Related Party and/or any Affiliate
of the Company.
For purposes of this letter agreement, "Affiliate" means any business
entity, including but not limited to, a corporation, partnership or limited
liability company, in which the company now (i) owns, directly or indirectly,
more than fifty percent (50%) of the equity of such entity or (ii) exercises
Control.
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Mr. Dallas Alexander
February 18, 1998
Page 5
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For purposes of this letter agreement, "Control" or "Controlling
Interest" when used with respect to any business entity means the power to
direct, but not merely influence, the management and policies of such business
entity, directly or indirectly, whether through voting power or by contract or
otherwise.
2. Rules with Respect to Other Covered Entities
a. For purposes of this letter agreement, Other Covered Entity means any
business entity, including but not limited to, a corporation, partnership or
limited liability company, engaged in the Business, in which the Company
currently has an investment or makes an investment after the date hereof and in
which the Company directly or indirectly: (i) owns more than forty percent (40%)
of the entity of such entity or (ii) owns less than forty percent (40%) equity
interest, but (a) becomes a material investor (equal to at least twenty percent
(20%) of the equity ownership of the entity), (b) makes a material investment or
series of investments (which in the aggregate are equal to at least twenty-five
percent (25%) of the book equity of the Company at the time such investment(s)
is (are) made) or (c) exercises Control over the entity.
Other Covered Entity shall also include any business entity including,
but not limited to a corporation, partnership or limited liability company,
engaged in the Business, in which the Company holds less than a forty percent
(40%) equity interest and in which the Company and other companies which are
obligated to the Union under a "Neutrality" provision similar to the provisions
hereof hold interests which when combined with the Company's interest constitute
a Controlling Interest.
It is understood that the relationship between the Company and any
Affiliate or Other Covered Entity shall be a "Covered Relationship." For
purposes of this letter agreement, the "Business" means (i) the mining,
refining, processing, production, handling, or transportation of raw materials
used in the making of steel, (ii) steelmaking, steel-finishing, steel-processing
or steel-fabricating or (iii) other similar business.
b. The Company shall not hereafter enter into any agreement or
arrangements which would, by virtue of such agreement or arrangement, create an
"Other Covered Entity" without first ensuring that said Other Covered Entity
adopts this letter agreement, but solely with respect to the other Covered
Entity and any entity thereafter created, directly or indirectly, by said Other
Covered Entity.
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Mr. Dallas Alexander
February 18, 1998
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c. With respect to any entity with which the Company currently has a
Covered Relationship, the Company shall cause such Other Covered Entity to
become party to this Neutrality Agreement and achieve compliance with its
provisions.
3. Rules with Respect to a Parent Company
The Company agrees that it will not consummate a transaction, the result
of which would directly or indirectly cause the Company to come under the
Control of another Company (a "New Parent") without first ensuring that said New
Parent to the extent it is engaged in the Business, and any entity that is
engaged in the Business with which the New Parent thereafter establishes a
Covered Relationship, agrees to be bound by this Neutrality Agreement. This
paragraph shall not apply to an offering of registered securities that are sold
to greater than 12 investors.
4. Covered Workplace
For purposes of this Neutrality Agreement a "Covered Workplace" shall
mean any workplace which employs or intends to employ employees who are eligible
to become represented by a labor organization and which is required to adopt
this letter agreement pursuant to the terms hereof.
G. BARGAINING IN NEWLY-ORGANIZED UNITS
Where the Company recognizes the Union pursuant to the above procedures,
the parties shall meet within fourteen (14) days to begin negotiations for a
collective bargaining agreement covering the new bargaining unit. The Union
agrees that the new collective bargaining agreement shall reflect the spirit of
partnership between the Company and the Union and that the model for such new
agreement with regard to employment security, work systems and working
conditions shall be the current contract between the Union and the Company,
modified with respect to wages, benefits and practices to take into account the
industry and the geographic location of the newly organized entity.
If, after sixty (60) days from the commencement of such negotiations,
the parties are unable to successfully negotiate a labor agreement, the matter
shall be submitted to interest arbitration in accordance with procedures to be
developed by the parties.
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February 18, 1998
Page 7
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H. DISPUTE RESOLUTION
Any alleged violation or dispute involving the terms of the foregoing,
including unit determination, may be brought by either party to a Joint Board of
Arbitration made up of one (1) representative each of the Company and the Union.
If the alleged violation or dispute cannot be resolved by the Joint Board of
Arbitration such dispute shall be referred to an arbitrator selected from the
Arbitration Panel. A hearing shall be held fourteen (14) days from the referral
and the arbitrator shall issue a decision within five (5) days thereafter. Such
decision shall be in writing but need only succinctly explain the basis for the
findings. All decisions by the arbitrator pursuant to this letter shall be based
on the terms of this letter and the applicable provisions of the law.
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
----------------------------------
Carl E. Ramnitz
Vice President
Human Resources
ACKNOWLEDGED AND AGREED TO
this ____day of _____________1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
------------------------------
Dallas Alexander
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APPENDIX N
PARTNERSHIP AGREEMENT
MEMORANDUM OF UNDERSTANDING ON UNION AND EMPLOYEE INVOLVEMENT
SECTION 1 -- PURPOSE AND INTENT.
The Union and the Company agree that their goal is to attain the
objectives set forth in this Memorandum. They also agree that these goals can
best be accomplished when information and decision-making authority as well as
responsibility are shared at all levels of the business. Accordingly, the
parties have agreed to work toward the objective of establishing a strategic
partnership. This commitment to working together on an ongoing basis must extend
from the Board Room and the Executive Office to the Shop Floor and the Union
offices and be driven by a shared vision of the needs for continuous improvement
in joint decision-making processes, employee participation, the parties'
relationship, and all aspects of the business.
The purpose of this Memorandum is to provide a framework for Union and
employee participation in joint decision making; full and continuing access by
appropriate Union representatives to the books, records and information relevant
to the purposes and objectives of this Memorandum; encouraging the
implementation of new and innovative approaches to the way work is performed;
and the establishment of a comprehensive training and education program, all as
further described herein.
The parties recognize that the changes contemplated by this Memorandum
must evolve. Accordingly, the local parties must have the flexibility to design
participative structures that best meet their needs at any given time and that
can change as Company circumstances and experience warrant.
SECTION 2 -- OBJECTIVES.
In furtherance of their understanding on long-term employment security,
the parties have agreed to pursue the following objectives and commitments:
A. Improving the quality, service, productivity and competitiveness
of the business and its products and seeking profitability on a
sustained basis;
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B. Work environments that are safer, fairer, more equitable, less
authoritarian and less stressful;
C. The ability to respond rapidly to changes in the marketplace, in
products and in customer needs;
D. Increased worker responsibility and influence in workplace
decision-making;
E. Joint mechanisms by which technology will serve the interests of
both the business and the workers affected by the change;
F. Full and timely access by the Union and all employees to
information concerning Company decisions affecting the working
lives of employees;
G. Understanding the current state of competitiveness and its
relationship to "World Class" standards;
H. Reduction of all overhead costs, including managerial,
supervisory, and other non-bargaining costs;
I. Encouraging the use of problem solving approaches to issues;
J. Commitment to higher skill development, better jobs, education
and more productive utilization of a skilled work force;
K. Compliance with public policy and environmental laws and
regulations;
L. Acceptance and support by the Company of the Union and
acknowledgment of its role as an essential vehicle in attaining
these objectives;
M. Acceptance and support by the Union of the Company and
acknowledgment by the Union of its role as an essential vehicle
in attaining these objectives.
SECTION 3 -- FULL AND CONTINUING ACCESS TO INFORMATION.
At all times during the term of the Basic Labor Agreement, appropriate
Union representatives (including consultants and advisors) shall have access to
financial and operational information that is relevant to the development and
implementation of the Business Plan as well as reasonable access to Company
employees and advisors who are responsible for such information. As used in this
Memorandum, the term "Business Plan" shall refer to the Company's short-term
business plan and long-term strategic and operating plan, including such
elements as those involving products, pricing, markets, capital spending, short
and long-term cash flow forecasts, and the method and manner of funding or
financing the Business Plan.
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Without limiting the foregoing, the Company shall provide the appropriate Union
representatives with early practicable notification of any contemplated
significant transactions involving mergers, acquisitions, and continuing updates
regarding dispositions, joint ventures and new facilities to be constructed or
established by the Company, its subsidiaries, joint ventures, or other entities
in which the Company has a financial interest. Access to and the use of the
types of information described in this paragraph will be covered by a
confidentiality agreement in form and substance satisfactory to the parties.
The Union will provide the Company with information regarding Union
activities, organizational changes, bargaining and political objectives, other
plans or developments that might affect the Company and appropriate access to
the Union officers and its Executive Board.
SECTION 4 -- COMPREHENSIVE TRAINING AND EDUCATION PROGRAM FOR COMMITTEE MEMBERS,
BARGAINING UNIT EMPLOYEES, AND NON-BARGAINING UNIT EMPLOYEES.
The parties recognize that the goals of this Memorandum can be attained
only by a commitment to comprehensive and ongoing training and education.
Accordingly, the Joint Leadership Committee (described below) shall establish
training programs necessary to the purposes of this Memorandum. Without limiting
the comprehensiveness or continuity of the training and education required by
this Memorandum, such activities will, unless otherwise agreed to, include at
least the following minimum standards and guidelines:
A. Both Company and Union representatives shall receive training by
their respective organizations in how, consistent with their
organization's goals, they can accomplish the objectives of this
Memorandum through participation and involvement activities and
such training shall, unless otherwise agreed to, include up to
the following levels, it being understood that during the first
year of this Agreement the following are minimum levels:
1. All members of the Joint Leadership Committee and
Facilitators and Assistants: five (5) days per year.
2. All members of the Department Boards and any Joint
Problem Solving Teams: twelve days per year.
3. All other leadership figures of the local parties to
this Memorandum: five (5) days per year.
B. By mutual agreement, the Joint Leadership Committee shall
sponsor a program for at least annual orientation and
appropriate training of all members of joint committees created
under this Memorandum.
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C. The Joint Leadership Committee shall develop a training program
designed to increase the skills of Bargaining Unit and
Non-Bargaining Unit employees concerning the purposes of this
Memorandum. Such program shall commence with instruction on how
best to pursue organizational objectives through participation
activities, such instruction to satisfy the following minimum
levels: for Bargaining Unit employees, a one-day Union-taught
orientation session; for front line supervisors, managers, and
other excluded personnel a one-day management-taught orientation
session.
D. The Company shall fund all training programs referred to in this
Section. This shall include reasonable and necessary expenses
incurred by employees and employee time spent in such training
as though it were time worked and employees shall suffer no loss
of earnings as a result thereof. The Joint Leadership Committee
shall establish reasonable policies and procedures for the
application of this paragraph.
E. Training referred to in this Section, other than Union training,
shall be jointly developed and implemented.
SECTION 5 -- PARTNERSHIP MECHANISMS.
A. Joint Leadership Committee
1. Appointment and Composition
A Joint Leadership Committee ("J.L.C.") shall be
established. The Co-Chairmen of this Board will be Chief
Executive Officer of the Company and the District
Director. The other members shall include the Vice
President-Human Resources, plant manager of the plant,
the Union staff representative, the Local Union
President, and Local Union members appointed by the
Local Union President. If any one of the designated
Union representatives is serving on a similar committee
at another steel company (to which the Company objects)
or is otherwise unable to serve on the J.L.C., the
District Director shall appoint an alternate. The J.L.C.
total number of members shall not exceed ten and shall
have an equal number of management and Union
representatives.
2. Meetings
a. The J.L.C. shall hold its meetings at least quarterly
and, whenever possible, in conjunction with the
Company's business planning meetings. These meetings
will be for the purpose of reviewing and ensuring
progress in the development and implementation of
Partnership programs. A
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review of and discussion of the current business status
and future outlook for the Company will be a regular
agenda item at these meetings.
b. All members of the J.L.C. shall have the opportunity to
attend and participate on a monthly basis in a normal
staff meeting of top management officials. Such members
of the J.L.C. shall give reasonable advance notice of
their desire to attend any such meeting and shall
cooperate with the Company in the scheduling and
arranging of such attendance and participation, the
availability of which shall not be unreasonably withheld
by the Company. Nothing in this Memorandum shall permit
the Union members of the J.L.C. to participate in the
portion of any managerial meetings in which the subject
matter involves the Company's strategy for collective
bargaining negotiations, grievances and other labor
relations issues or legal claims, including, without
limitation, lawsuits or administrative proceedings
involving the Union or employees of the Company,
salaried compensation, management development
activities, and similar personnel matters.
3. Information
Subject to Section 3, the Joint Leadership Committee shall
receive detailed and in-depth reports regarding all significant
business and labor matters relating to: the Business Plan;
technological changes and plans; manpower planning; safety and
health measures; customer evaluation; major organizational
issues; facilities utilization; and other significant issues and
concerns raised by the members of the J.L.C.
4. Reports
Consistent with Section 2 above, the J.L.C. shall report to
Local Union and management personnel (which shall include all
members of Plant-wide and Department-level Boards as well as any
Problem Solving Committees they may establish) on matters such
as: activities of the J.L.C., major issues being considered by
the J.L.C. and information relevant thereto; other information
to keep the Local Union leadership and management informed and
capable of further discussion of issues related to the Plant and
the Union.
5. Role of the Joint Leadership Committee
a. The Union members of the Joint Leadership Committee
shall have joint decision-making authority with respect
to the Business Plan as defined in section 3 above as
well as significant technological changes as defined in
Section 5.A.(6)(b) of this Memorandum.
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b. The J.L.C. will be responsible for developing and
implementing programs to achieve the objectives of
Section 2 of this Memorandum.
c. The Joint Leadership Committee shall work toward
achieving improved productivity levels through the
Plant, bearing in mind the competition in the products
produced at the Plant. To this end, the J.L.C. shall
have the ongoing responsibility to ensure that they and
the Department-level Boards (described below):
(1) Understand and communicate the current state of
competitiveness and its relationship to "World
Class" standards.
(2) Identify areas and activities for special
emphasis on improvement, and work with the
appropriate Departmental Boards in implementing
plans for such improvements.
(3) Identify and address inter-departmental,
inter-unit or other barriers which are impeding
improvement.
(4) Monitor the management of employees available as
a result of productivity improvements and the
value received from their efforts.
(5) Establish budgets for partnership programs.
6. Scope of Responsibility
a. Workplace Redesign
(1) Authorization
At the request of the J.L.C. (which shall
include the assent of a majority of the union
members of the J.L.C.) The parties may agree to
establish an Approved Work Redesign Program. An
Approved Work Redesign Program within the
meaning of this Memorandum is a workplace
redesign program that includes: the
establishment of operating work groups or teams
of self-directed work teams or groups; or the
implementation of other new and improved ways of
performing work.
(2) Required Elements
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Any workplace redesign program in the bargaining
unit that involves the establishment of
operating work groups or teams or self-directed
work teams or groups must be: a joint endeavor;
cause the workplace to be more open, more safe,
more equitable, less authoritarian and less
stressful; eliminate unnecessary supervision;
change the role of supervisors from directing to
coaching; and give the workers greater
influence, responsibility and input into
day-to-day operations, including, if the J.L.C.
so determines, planning, scheduling and
administrative functions not traditionally
performed by bargaining unit members.
b. Technological Change
The J.L.C. shall establish a new technology development
and implementation program (Technological Change
Program) which shall include the following elements:
(1) Advance Notice
The Company shall provide the J.L.C. advance
notice of any proposed significant technological
change no later than the time the Company's
outline of various options with respect thereto
is first developed. Such notice shall be in
writing, shall contain to the extent possible
supporting information outlined below, and shall
include updates of new or revised information
necessary to full and current understanding of
the proposed change. In the case of emergency
technological changes, the Company shall give
the maximum notice and information possible
under the circumstances.
(2) Information
Within the time periods referred to above, the
Company shall give the J.L.C. the following
information:
(a) a description of the purpose and
function of the technological change,
and how it would fit into existing
operations and processes;
(b) the estimated cost of the technology, a
cost justification of it, and the
proposed timetable for it;
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(c) disclosure of any service or maintenance
warranties or contracts provided or
required by the vendor (if any);
(d) the number and type of jobs (both inside
and outside the bargaining unit) which
would be changed, added, or eliminated
by the technological change;
(e) the anticipated impact on the skill
requirements of the work force;
(f) details of any training programs
connected with the new technology
(including duration, content, and who
will perform the training);
(g) an outline of other options which were
considered by the Company before
formulating its proposed changes; and
(h) the expected impact of the change on job
content, pace of work, safety and health
training needs, and contracting out.
Union representatives on the J.L.C. may request
and receive reasonable access to Company
personnel knowledgeable about any proposed
technological change (including outside
consultants) to review, discuss, and receive
follow-up information concerning any
technological changes proposed by the Company or
Union or their effects on the bargaining unit.
The use of the information contemplated by this
subsection will be covered by a confidentiality
agreement in form and substance satisfactory to
the parties.
(3) Union Joint Decision-making Authority with
Respect to Technological Change
The Union members of the J.L.C. shall have joint
decision-making authority with their Company
counterparts over both the decision to make
technological change and the effects of such
change. With respect to the effects of such
change they shall consider the following: the
number and type of jobs required by the changed
technology; the skill and training requirements
for each such job; the details of any new or
changed training associated with the technology;
the inclusion of such job in the bargaining
unit; any new work rules or operating procedures
associated with the
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technology; and any health, safety, or
environmental programs required by the
technology.
(4) As used herein, the term "technology" shall mean
significant advances in machinery, equipment,
controls and materials, and changes in software
that significantly change the content of
bargaining unit jobs. The phrase "technological
change" shall mean introduction of new
technology, significant changes in existing
technology, or both.
B. Department-level Boards
1. The J.L.C. shall establish Department-level Board
Committees in specific departments or operational units
for purposes as outlined herein, and as agreed to by the
parties. The Department-level Board Union co-chair shall
be appointed by the Local Union President and the
Company co-chair shall be appointed by management.
Additional members of the Department Board Committee
shall be drawn equally from the Company and Union.
2. Department Boards shall study matters assigned to them
by the J.L.C. or as they may agree upon and report any
findings back to the J.L.C. Such matters may relate to,
among other things, continuous improvement in quality,
customer satisfaction, productivity, costs, job
enrichment/enhancement, safety and improved work life.
Upon direction of the J.L.C., Department Boards may: (i)
devise measurements and goals to meet plans adopted by
the J.L.C.; and (ii) be responsible for communicating
plans, results, business information, and overall
employee involvement updates to the employees in their
area and to the Joint Leadership Committee.
3. Department Boards shall receive the resources (including
problem solving training and information) necessary for
them to determine the best solution to specific
problems. They shall not have the authority to modify,
detract, or delete any portion of the Local Seniority
Agreement or the Basic Labor Agreement.
C. Problem Solving Teams
1. The J.L.C. may create one or more Problem Solving Teams
to study and report back on a specific problem or
project. They shall receive the
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resources (including problem solving training and
information) necessary for them to determine the best
solution to specific problems.
SECTION 6 -- EMPLOYEE COMMUNICATIONS.
A. Critical to the accomplishment of the objectives of this
Memorandum is timely, ongoing, and unimpeded communication
between and among the committees created by this Memorandum and
employees. Accordingly, the parties agree as follows:
1. The results of any meetings of Joint Committees created
by this Memorandum, including the information and
opinions exchanged, the conclusions reached, and the
level of participation achieved may be conveyed as the
parties shall decide to all employees through their
working groups by joint communication from Union
representatives and department supervision.
2. J.L.C. shall encourage behaviors, attitudes, forums, and
opportunities that enlist the know-how and ingenuity of
workers in achieving the goals of this Memorandum. The
J.L.C. may convene meetings of any combination of
employees, Department Boards, and Problem Solving
Committees to advance the purposes of this Memorandum.
3. As the activities fostered by this Memorandum proceed,
it is expected that joint committees will need to
consult with and observe the work of committees at other
Plants outside the Company. The J.L.C. may consider
appropriate means for disseminating reports of the
activities of the Department Boards or Problem Solving
Teams among each other.
SECTION 7 -- SAFEGUARDS AND RESOURCES.
A. No joint committee may amend or modify the Basic Labor
Agreement.
B. No committee authorized by this Memorandum may effect any action
with respect to contractual grievances.
C. Service on any Plant-wide, Departmental, or Problem Solving Team
created under this Memorandum shall be voluntary.
D. The Union will strive to be a full participant in the processes
and mechanisms established by this Memorandum and Bargaining
Unit employees will be encouraged and expected to perform their
duties within the parameters established
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hereunder. However, no employee may be disciplined or discharged
for lack of commitment to participation or involvement
processes.
E. Employee participation and training shall normally occur during
normal work hours and the employee shall be compensated and
reimbursed in the same manner as set forth in Section 4.D.
above.
F. No committee established under this Memorandum may recommend or
effect the hiring, discipline, or discharge of any employee.
G. At the invitation of the Co-Chairs of any committee created
hereunder, appropriate Union representatives, Company
representatives or outside experts may attend a Committee
meeting.
H. All meeting time and necessary and reasonable expenses of joint
committees shall be paid for by the Company and employees
attending such meetings shall be compensated and reimbursed in
the same manner as set forth in Section 4.D. above.
I. Union members on joint committees shall be entitled to: adequate
opportunity on Company time to caucus for purposes of study,
preparation, consultation, and review, and shall be compensated
and reimbursed in the same manner as set forth in Section 4.D.
above. Requests for caucus time shall be made to the appropriate
Company management representative in a timely manner, and such
requests shall not be unreasonably denied.
J. Joint committees may agree to employ experts from within or
outside the Company as consultants, advisors or instructors and
such experts shall be jointly selected and assigned.
K. Decisions on the selection or retention of facilitators shall be
made by the J.L.C. whose members shall give due regard for the
needs of their constituents.
SECTION 8 -- FINAL DECISION MAKING AUTHORITY.
A. The parties have entered into this Partnership Agreement for the
purpose of making the Union and the employees participants in
the joint decision making process of the Company. After sharing
information and fully discussing and exchanging ideas and fully
considering all views about issues of mutual interest and
concern to the parties, decisions should be reached that are
satisfactory to all. It shall be the goal of the Committee to
abide by a consensus decision-making
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model in rendering decisions, resolving issues and implementing
plans for the success and well-being of the enterprise and its
employees.
The Joint Leadership Committee shall bear responsibility for
making decisions and resolving issues relative to development
and implementation of policies and procedures (as well as the
nature of employee involvement) in matters which regard, but are
not limited to, the following:
1. Counseling with respect to work-related problems;
2. Monitoring compensation plans, if any, agreed upon by the
parties, such as bonus payment plans;
3. Interpersonal skill development for all members of the
enterprise through training in leadership, consensus
decision-making, issue resolution and team building; and
4. Establishment of mutually agreed upon work patterns and
schedules.
B. Finally, in the event joint decision-making is unable to produce
agreement over a matter as to which, absent this Memorandum,
management has the right to make a unilateral decision, the
management person responsible shall have the right to make a
final decision concerning such matter, and such decision shall
not be subject to the grievance procedure. With respect to any
matter in this Memorandum which deals, in part, with various
matters as to which Management has not heretofore had the
unilateral right to make decisions, this Memorandum gives
Management no greater right to make unilateral decisions
regarding such matters than it would have in the absence of this
Memorandum. In all events, the process of decision making under
this Memorandum (including the full participation of the Union
representatives and employees in the process as provided in this
Memorandum and the Company's commitments concerning information,
access, and training in this Memorandum) is subject to the
grievance procedure and arbitration. As to a particular
decision, the Company's failure to follow the procedural
requirements of this Memorandum shall not be the basis for
preventing the implementation of that decision. The dispute
shall be heard by an Arbitrator provided for under the grievance
and arbitration provisions of the Collective Bargaining
Agreement.
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April 14, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Dear Dallas:
As part of the 1998 labor agreement, the parties have entered into a
comprehensive partnership agreement that includes a joint effort to accomplish
gains in productivity and to take advantage of attrition by instituting modern
work practices.
In order to help assure the success of this extremely important program,
the company and union agree that the newly established Joint Leadership
Committee will immediately explore upon its establishment the assignment of a
Bargaining Unit employee as a full-time facilitator assigned to work under the
direction of the co-chairs of the partnership committee.
Sincerely yours,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
------------------------------------
Carl E. Ramnitz
Vice President Human Resources
ACKNOWLEDGED AND AGREED TO
this ____ day of _______________, 1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
-------------------------------------
Dallas Alexander
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APPENDIX O
MEMORANDUM OF UNDERSTANDING ON THE
REVITALIZATION OF TRADE AND CRAFT TRAINING
The parties are committed to the establishment and preservation of a highly
skilled, efficient maintenance workforce in sufficient number to carry out a
successful maintenance program. It is also their purpose to accomplish the
foregoing as much as possible with Bargaining Unit employees.
Therefore the following shall apply:
A. Trade and Craft Review Committee
Within three (3) months of the effective date of the 1998 Basic Labor
Agreement, the local parties will establish a Joint Trade and Craft Plan
Committee, made up of two (2) representatives designated by the Local
Union, and an equal number of representatives designated by the Company,
at least one (1) of whom shall be experienced in maintenance supervision
or maintenance management. The Committee will meet regularly and will
receive required technical assistance from appropriate Company or Union
resources.
B. Study of Trade and Craft Workforce
The Committee will be responsible for examining the present maintenance
workforce, considering such future changes in maintenance requirements
that can be identified, and developing the specific information
described below:
1. determine the number of maintenance employees in each trade or
craft;
2. develop an age profile for all craft employees;
3. assess the anticipated attrition rates for the maintenance
workforce over the next five (5) years;
4. assess the availability of employees in the plant's workforce
who are qualified to enter craft training programs;
5. identify potential avenues by which employees can receive basic
education training to qualify for craft training programs;
6. evaluate the appropriateness of existing and new craft training
programs, and the necessity of developing additional craft
training programs, giving due
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consideration to changing technology and future skill needs.
Recommend changes to standards, type, and length of training as
appropriate.
7. examine current craft overtime levels;
8. examine methods by which productivity can be improved through
additional training of craft employees;
9. examine the plant's projected new construction, replacement, and
rehabilitation programs during the next five years, recognizing
that such programs are susceptible to termination, modification,
and scheduling change, and assess potential craft involvement in
such work; and
10. assess the level of plant trade and craft forces necessary to
meet reasonably anticipated long-term future maintenance needs,
bearing in mind all the above items and given the anticipated
modernization and possible future workforce restructuring.
The Study will commence immediately upon the establishment of the
Committee.
C. Maintenance Training Plan
Within six (6) months from the date of its establishment, the Committee
will submit a report to the Union Sub-district director and the Company
Vice President of Human Resources, setting forth its findings with
respect to the matters set forth in Section B. In addition, the
Committee will develop a recommendation for implementation of a Trade
and Craft Training Plan designed to fill anticipated maintenance needs.
The recommended plan will include an implementation date, the minimum
number of employees to be trained or retrained in each trade or craft
within a defined period, the method of training, and provisions for
upgrading the skills of incumbent trade or craft employees. In
developing the plan, the following guidelines/goals shall apply:
1. provide sufficient number of trained trade and craft employees
to meet long-term future maintenance needs, without the use of
excessive overtime, and in accordance with the contracting out
provisions of the Basic Labor Agreement, bearing in mind
anticipated modernization and possible future workforce
restructuring;
2. make reasonable efforts to draw qualifiable trainees for trade
and craft occupations from the ranks of the current workforce;
and
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3. complete training as quickly as feasible, consistent with the
actual requirements of the trade or craft job, as determined by
the Committee, and giving due consideration to the cost of such
training.
The Committee report will include separate statements by the parties
with respect to any finding or recommendation to which they disagree.
D. Action by the Union and Company
(i.e. District Director & Vice President of Human Resources)
Within sixty (60) days of receipt of the report submitted by the
Committee, the Chairmen may: (1) approve an agreed-upon plan submitted
by the parties; (2) modify any plan as they may mutually agree; or (3)
disagree, in whole or in part, with respect to any recommendations
contained in a submitted plan. With respect to any plan components as to
which the Chairmen disagree, the dispute will be promptly referred to an
Arbitrator selected from the Arbitration Panel, the arbitration to be
conducted pursuant to procedures to be agreed upon by the Chairmen of
the Committee. The dispute will be resolved on the basis of a "final
offer" submission by the parties at a hearing. The Arbitrator will
determine which of the submissions best meets the guidelines and goals
spelled out in Section C of this Memorandum of Understanding. The
Arbitrator shall have the power to determine the procedures pursuant to
which the hearing is conducted.
E. Preservation of Plan
Except where the training or continued training of additional trade and
craft employees is no longer justified due to changed conditions such as
depressed economic periods and/or facility shutdowns, the agreed to plan
shall not be discontinued during the term of the Basic Labor Agreement.
Approved by:
GENEVA STEEL COMPANY UNITED STEELWORKERS OF AMERICA
By: /s/ Carl E. Ramnitz By: /s/ Dallas Alexander
----------------------------- --------------------------------
Carl E. Ramnitz Dallas Alexander
Date:___________________________ Date:_______________________________
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APPENDIX P
JOINT REVIEW OF OUTSIDE COMMERCIAL ENTITIES
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Dear Mr. Alexander:
During the 1998 negotiations, the Union expressed interest in improving
the quality of the Company's purchasing and supply relationships. This letter
will serve to confirm our understandings on this subject.
In our discussions, the Company confirmed that it already seeks to
promote a practice of using only vendors and suppliers meeting minimum standards
of corporate responsibility. In this connection, the Union has raised two
concerns: first, as a procedural matter, that the Union be given a voice in the
selection of bidders, suppliers, vendors, providers, consultants, and the like
(hereinafter "Outside Commercial Entitles") meeting the criteria for business
responsibility outlined in this letter of understanding; and second, that the
parties' joint definition of "responsible" Outside Commercial Entities be
clarified to include respect for and compliance with the public policies and
other standards enumerated below.
The parties agree that a joint committee consisting of three members
appointed by the Company and three members appointed by the Union will be
established (the "OCE Committee") within 60 days to review all arrangements (new
or existing) with Outside Commercial Entities which, prior to the establishment
of the OCE Committee, fell within the responsibility of Management. In
conducting their review and approval process, the OCE Committee shall consider
as its decision-making criteria the performance of the Outside Commercial
Entities with respect to the following:
* cost, service and competitive bidding;
* performance in achieving safe and healthful workplaces and
compliance with applicable occupational safety and health laws
and regulations;
* adherence to employment and workplace laws and regulations,
including Title VII of the Civil Rights Act, Executive Orders on
equal employment opportunity and the Americans with Disabilities
Act;
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* environmental record and performance under applicable
environmental law and regulation; and
* demonstrated commitment to the creation and retention of
high-skill, high paying jobs in America, particularly in those
communities in which the Company operates.
As soon as practicable after the effective date of this Agreement, the
OCE Committee shall adopt a plan for the systematic and regular review of the
Company's relationships with outside commercial entities.
In the event joint review is unable to produce agreement over a matter
as to which, absent this letter, management has the right to make a unilateral
decision, the management person responsible shall have the right to make a final
decision concerning such matter, and such decision shall not be subject to the
grievance procedure.
This letter of understanding shall not be construed to affect any rights
and obligations of the parties under the contracting out clause of the Basic
Labor Agreement.
Sincerely yours,
GENEVA STEEL COMPANY
BY: /s/ Carl E. Ramnitz
-------------------------------------
Carl E. Ramnitz
Vice President of Human Resources
ACKNOWLEDGED AND AGREED TO
this ____ day of ____________, 1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
---------------------------------
Its:____________________________
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APPENDIX Q
LEAVE OF ABSENCE POLICY FOR INTERNATIONAL UNION EMPLOYEES
March 17, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Dear Dallas:
The Subject of Company leaves of absence for employees who leave their
employment with the Company to become employees or elected officials of the
International Union (International Union employees or elected officials shall
not for definition purposes of this policy include any local Union employees or
elected officials) was discussed by the parties during the negotiations.
1. As a result of that discussion, the parties have reached the
following agreement with respect to any person who:
(a) First becomes an Officer or Director of the
International Union after April 1, 1998 or
(b) Becomes an employee of the International Union and whose
probationary period expires on or after April 1, 1998.
(c) Was an Officer or Director or employee of the
International Union prior to April 1, 1998, but was not
as of that date accruing service for Company pension
purposes (for time spent as an Officer, Director or
employee of the International Union) pursuant to a valid
agreement providing for such accrual.
2. An individual described in paragraph 1 shall be granted a leave
of absence from the Company concurrent with the period of his
permanent employment with the International Union.
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Mr. Dallas Alexander
Page 2
March 17, 1998
- -----------------------
3. Once an individual described in paragraph 1 is made a permanent
employee of the International Union (by completing his
probationary period) that person shall, from that point forward
and while he retains his leave of absence status with the
Company, not receive any service credit for Company pension
purposes.
4. Such person shall accumulate continuous service for purposes of
recall to employment and for all other purposes under the Labor
Agreement, except pensions, provided that he shall not be
entitled to receive any contractual benefits during the period
of his leave of absence or receive retiree health care benefits
from the Company if he is eligible for coverage in the
International Union health care plan for retirees.
Very truly yours,
Carl E. Ramnitz
Vice President
Human Resources
Confirmed:
/s/ Dallas Alexander
- -----------------------------
Dallas Alexander
Date:
- ------------------------------
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APPENDIX R
FAMILY AND MEDICAL LEAVE ACT
The Company and the Union affirm their compliance with and implementation of the
Family and Medical Leave Act of 1993 (FMLA) and further agree to the following
particulars regarding employee eligibility and entitlement.
1. GENERAL
A. The FMLA provides for up to twelve (12) weeks of unpaid leave
each year for eligible employees to take care of a serious
health condition of certain family members or of employees
themselves, and for the birth, adoption or foster placement of a
child. The law also requires the continuation of certain
benefits under certain conditions while on leave and includes
certain notice requirements in order to obtain the leave.
B. A copy of the summary of the law and employee rights thereunder
is available at the Employee Benefits Office and will be issued
upon request and at the time any FMLA leave is requested. The
required posting under FMLA will be maintained by the Company.
C. FMLA under this Appendix shall be available to any employee who
has six (6) months or more of continuous service as calculated
pursuant to the Seniority provisions of the Labor Agreement.
D. This Appendix shall become effective on April 1, 1998. Any
covered employee then on leave of absence which would otherwise
be covered under the FMLA will be designated on FMLA leave
beginning April 1, 1998. An employee already on designated FMLA
leave as of April 1, 1998 will not begin a new 12-week maximum
leave entitlement, but will be subject to all other terms and
conditions of this Appendix.
2. ELIGIBILITY AND ENTITLEMENT
A. There shall be no hours worked requirement for the twelve (12)
months preceding the start of the leave.
B. The twelve (12) weeks unpaid leave entitlement under the FMLA
shall be measured on a rolling twelve (12) month period measured
backward from the date any FMLA leave is used.
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C. A pregnant employee who continues at work until certified as
totally disabled shall, effective at the conclusion of the
period of disability, be entitled to a Parental Leave for a
period of up to twelve (12) weeks.
3. INTERMITTENT OR REDUCED LEAVE SCHEDULING
A. An employee seeking leave in other than continuous weeks must
certify to Management why such schedule is necessary, and must
schedule the time off in the manner least disruptive to the
Plant's operating needs.
B. Where leave is sought other than in full day increments, the
employee may be assigned by Management to any available position
consistent with the Collective Bargaining Agreement and paid an
equivalent rate for that position, for the portion of the shift
actually worked. The employee may not displace anyone who was
assigned to the employee's normal position for the period of
absence except at Management's discretion.
C. Where leave is sought in increments of less than a full work
week, if Management, consistent with the Collective Bargaining
Agreement, is able to accommodate the need for time off by
adjusting the employee's work schedule (including, but not
limited to, altering the shift assignment or the scheduled
workdays), no leave need be provided.
D. Where leave is requested in other than continuous weeks and
where Management considers it desirable to do so in order to
avoid disruption to the operation, absent mutual agreement
between the parties the employee may be assigned to an open
comparable position, without regard to the employee's own
seniority, for the period of time during which intermittent
leave may be required. The employee shall be paid an equivalent
rate for the assigned position.
4. NOTICE
A. In the case of unforeseeable leave sought for care of the
serious health condition of the employee or a family member, the
Department Head and Employee Benefits Office shall be notified
as soon as possible (within forty-eight hours) of learning of
the need for leave, and the need, expected duration, and
schedule of the leave explained.
1. In the case of such leave, following the initial notice
provided above, a written notice shall be provided as
soon as possible, but in no event more than fifteen (15)
calendar days from the time the need for the leave
arises. This notice shall be accompanied by a
certification signed by the attending physician or other
health care provider and shall include:
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(a) the date on which the condition commenced;
(b) the probable duration of the condition;
(c) appropriate medical information regarding
diagnosis, regimen of treatment and need for
hospitalization, sufficient to enable the
Company to reasonably review the request; and
(d) medical information for employee's serious
health condition that he is unable to perform
work, or for family member why it is necessary
for the employee to provide care to the family
member and an estimate of the amount of the
employee's time necessary for that care.
2. Where the leave is to be taken in other than a single
continuous period of time, the notice shall also
include:
(a) the date on which the medical treatment is
expected to be given;
(b) the duration of such treatment;
(c) the medical necessity for leave to be granted on
an intermittent basis; and
(d) the expected duration of the need for an
intermittent schedule.
3. Certification forms can be obtained from the Employee
Benefits Office.
5. PAY DURING FMLA LEAVE
A. Employees seeking FMLA leave under this Appendix may be required
by management to utilize up to one week of unused paid vacation
in either single days or a full week.
B. An employee may request to utilize additional paid vacation
during the FMLA leave time. Management reserves the right to
approve such a request where it involves a change in the
vacation schedule.
C. Except for the substitution of paid vacation and the utilization
of Sickness and Accident, or Workers' Compensation benefits, all
time off provided shall be unpaid. Time off without pay granted
pursuant to the FMLA shall be considered as time not worked
through choice of the employee and may not be utilized in
connection with a claim by the employee under any provision of
this Agreement for any wages, benefit or entitlement,
eligibility for which is related to hours worked unless the
employee otherwise meets the eligibility requirements for such
wage, benefit or entitlement. This exclusion includes, but is
not limited to, such matters as reporting pay, overtime,
profit-sharing, PDP, guaranteed hours, holiday pay, or short
week benefit.
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6. TERMINATION OF LEAVE
A. The anticipated duration of the leave sought shall be
established at the time the leave is granted. Upon termination
of a leave, the employee shall be reinstated to the same or an
equivalent position as that held at the time the leave
commenced, consistent with his seniority, unless there was an
intervening event including but not limited to a reorganization
or force reduction. In the latter event, the employee shall be
reinstated to the same position or status which would have been
held after the intervening event if leave had not been taken.
B. An employee who wishes to return from leave prior to the
scheduled return date must give the Department Head and Employee
Benefits Office twelve (12) days notice of his desire to return,
unless the Employee Benefits Office agrees to a shorter period
in a particular case.
C. An employee on FMLA will be eligible for sickness and accident
benefits in the event of an illness or injury arising during the
FMLA leave, if all other requirements for S & A eligibility are
met. At the end of eligibility for S & A benefits, the employee
may return to FMLA leave status, if eligible, until the date
FMLA leave was originally scheduled to end. The weeks for which
S & A benefits are paid will not be counted toward the 12-week
maximum.
7. CONTINUOUS SERVICE
Leave of absence under this program shall not constitute a break in the
employee's length of continuous service, and the period of such leave
shall be included in his length of continuous service under the Labor
and Benefits Agreements.
8. BENEFIT CONTINUATION
A. All employees will continue in benefit coverage during such
leave, provided the employee is otherwise eligible for such
coverage under provisions of the FMLA and the employee continues
making any normally required premium or other payments in a
manner acceptable to the Company.
B. In the event an employee fails to return to work or quits after
the employee's FMLA leave period has been concluded, the Company
will waive its right to seek to recover health insurance
premiums for health insurance coverage provided by the Company
during such leave, notwithstanding the provision of the FMLA
which permits recovery of health insurance premiums under
specified circumstances.
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9. GOOD FAITH EFFORTS
In the event problems develop in implementing this Appendix, whether as
a result of changes in the law or regulations or otherwise, the parties
agree to use their best efforts to resolve them in a manner designed to
assure minimal disruption to the operation, minimize absenteeism, and
provide an employee the time necessary to meet family and personal
emergencies and obligations.
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APPENDIX S
EMPLOYMENT SECURITY PLAN
A. EFFECTIVE DATE
1. This Employment Security Plan (ESP) shall become effective for
eligible employees, as defined in Paragraph C below, the first
full week following the effective date of this Agreement.
B. GUARANTEE
1. Employees eligible for this ESP may not be laid off during the
term of this Agreement except as provided below. If a disaster
occurs, the ESP will be terminated. For the purposes of this
agreement, disaster is defined as:
a. The permanent shutdown of the plant.
b. A petition in bankruptcy for reorganization or
liquidation is filed, and the Court finds that it is
necessary to reject this agreement and issues an order
under the bankruptcy laws authorizing such rejection.
c. Severe financial difficulties short of bankruptcy
filing. Such financial difficulties must represent a
clear and present danger to the Company's viability.
Disputes concerning this paragraph shall be subject to
immediate arbitration pursuant to a special emergency
procedure to be agreed upon by the parties, but in no
event longer than 30 calendar days from a request by
either for arbitration. Termination can occur under this
paragraph only by mutual agreement of the parties or
upon a finding by the arbitrator that the financial
difficulty asserted by the Company does in fact
represent a clear and present danger to the Company's
continued viability.
2. In addition, in the event of a strike, or work stoppage by
employees covered by the Basic Labor Agreement, the ESP will be
suspended for the duration of such strike or work stoppage.
3. In addition, in the event of a breakdown or outage which is
expected to last for two (2) weeks or more, the ESP may, by
mutual agreement, be suspended for affected employees only, for
the duration of the breakdown or outage.
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4. Should a strike or work stoppage by others, or a natural
disaster, result in a need to reduce planned work activity, the
ESP may, by mutual agreement, be suspended until normal
operations are restored.
5. In addition, in the event of a significant decrease in the level
of plant operations which is expected to last less than six
months, employees affected by the decrease in the level of plant
operations and eligible for this ESP pursuant to Paragraph C
below may, by mutual agreement, be temporarily scheduled on a
thirty-two (32) hours a week basis. Any implementation issues or
procedures that arise under this paragraph will be addressed by
the local plant implementation committee.
6. In the case of a permanent shutdown of a department or a
substantial portion of a department, layoffs will be permitted
but only in accordance with the following:
a. The appropriate local parties shall promptly meet and
consider alternatives designed to provide employment to
displaced employees, in accordance with agreed-upon
procedures. Absent agreement, subsection b. Shall apply.
b. Displaced employees in such departments or displaced
employees on occupations traditionally, routinely, and
regularly dedicated primarily to such departments, and
displaced maintenance employees who are displaced from
their line of progression as a result of a shutdown of
the department or a substantial portion of the
department shall be entitled to displace junior
employees in accordance with existing seniority rights
and labor pool rights. Displaced employees, including
those displaced as the result of the exercise of bumping
rights referred to in this subparagraph, may be laid off
and, if laid off, shall have no entitlement to the
protections of this ESP until they are subsequently
recalled and become eligible for such protection
pursuant to the provisions of this ESP.
c. "Substantial portion" of a department shall be
determined in a manner consistent with the way that term
is generally understood in the basic steel industry.
7. The guarantee provided to active eligible employees by this ESP,
except as provided in paragraph 5, is defined as the opportunity
to earn forty (40) hours of pay (including hours paid for but
not worked, work opportunities declined by the employee,
disciplinary time off, absenteeism, report-off for Union
business, but excluding overtime pay and premium pay) during any
payroll week. An eligible employee on approved leave of absence
or medically laid off during any payroll week shall be
considered as having been provided employment security during
that week, it being understood that the pay, if any, that such
an employee is
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entitled to receive while on approved leave of absence or
medical layoff is that provided by applicable law or the labor
agreement, not the earning opportunity set forth in the ESP.
Similarly, employees working agreed-upon non-normal schedules
(i.e., 12 hour, 10 hour, etc.) will be covered in weeks when
scheduled fewer than 40 hours but only to the extent of the
hours they are normally scheduled during such weeks.
C. ELIGIBILITY
1. All employees with at least three years of continuous service
and who are active as of April 1, 1998, are eligible for the
protections of this ESP. An active employee who does not have a
least three years of continuous service as of the effective date
of this Plan shall be eligible for this ESP upon attaining three
years of continuous service unless he is on layoff at that time,
in which case he shall become eligible when he returns to active
employment. An employee with three years of continuous service
and who is inactive as of the effective date of this Plan shall
become eligible for this ESP upon his return to active status.
Employees who are laid off in accordance with Paragraph B.6.
involving shutdowns that occur after the effective date of this
Agreement may become eligible for this ESP only when they return
to work.
2. Any full-time employee hired after the effective date of this
ESP shall be eligible for this ESP under its provisions upon
attaining three years of continuous service, unless he is on
layoff at that time, in which case he shall become eligible when
he returns to active employment.
3. Employees eligible for employment security must continue to
fully satisfy the terms and conditions of employment.
D. IMPLEMENTATION
The local parties will meet for the purpose of reaching agreement on the
implementation of this ESP, including the placement of employees who
would have been laid off but for this ESP. Those agreements shall become
part of this ESP, and may not be changed except as agreed to by the
local plant implementation committee.
E. RATE OF PAY
An employee who would have been laid off but for this ESP and who is
working in a new job assignment shall receive:
1. The established rate of pay, including applicable incentives or
bonuses, of the job performed, or
113
<PAGE> 114
2. In the case of an assignment not falling within the description
of an established job, the rate of pay determined by the local
plant implementation committee; however, where the local plant
implementation committee is unable to reach agreement, the rate
of pay for such an assignment shall be the standard hourly wage
rate for Job Class 2.
F. VOLUNTARY LAYOFF PRACTICES AND AGREEMENTS
1. Upon the effective date of this ESP, all existing practices,
agreements, or working conditions which permit voluntary layoffs
will be maintained. No employee who elects voluntary layoff shall
be disqualified from or lose accrual toward long term layoff
protection benefits if, while he is on such layoff, a triggering
event under Paragraph B occurs which precludes the employee's
return to active employment.
G. EXISTING RIGHTS
1. Except as expressly provided in this ESP, nothing in the ESP
shall interfere with, limit, detract from, or adversely affect in
any way the rights and obligations of the parties set forth in
other provisions of the Basic Labor Agreement.
114
<PAGE> 115
April 9, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Re: Productivity
Dear Mr. Alexander:
The parties recognize that employment security and productivity
improvements are inseparably linked to attaining sustained profitability.
Accordingly, the parties agree to the following in order to maximize the
effective utilization of the work force and equipment and to achieve continuous
improvement through attrition and by implementing new and innovative approaches
to the way work is performed.
1. To accomplish gains in productivity and take advantage of
attrition to the fullest extent possible, the Partnership
Committee will work vigorously to institute modern work
practices which can include, but are not limited to,
self-directed work teams, job restructuring, seniority unit
restructuring, job assignment changes, operator-assisted
maintenance, and practice and scheduling changes.
2. This process will be managed by the Partnership Committee which
may call upon Department Level Board Committees to facilitate
changes agreed to pursuant to this letter to avoid filling or
backfilling attrition vacancies. The Participation Teams will
have a duty and responsibility to work in good faith to
facilitate attrition-based force reductions and to drive
continuous improvement through the establishment of measurements
of performances and productivity goals. Goals will be based on a
continual improvement in the Company's competitive position.
3. In November of each year, the Partnership Committee will develop
a proposed attrition-based force reduction plan and the
respective measurements of performance for the coming year. The
pace of work force reductions will be continuously monitored by
the Partnership Committee. On or about October 1 of each year,
an assessment will be made of the attrition reductions to date.
In the event that attrition is occurring at a rate which will
substantially exceed or fail to reach any goals adopted pursuant
to this letter, the parties will modify the attrition reduction
plan for the following year.
115
<PAGE> 116
Mr. Dallas Alexander
April 9, 1998
Page 2
- -------------------------
4. This agreement shall become a part of the Employment Security
Plan.
Very truly yours,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
------------------------------------
Carl E. Ramnitz
Vice President
Human Resources
ACKNOWLEDGED AND AGREED TO
this ____ day of April, 1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
-----------------------------
Dallas Alexander
116
<PAGE> 117
MEMORANDUM OF AGREEMENT
JOB ASSIGNMENTS FROM THE
EMPLOYMENT SECURITY POOL
Pursuant to Section D of the Employment Security Plan (the "Plan"), the parties
agree as follows:
1. Any eligible employee who, absent the Plan would have been laid off after
exercising all seniority rights, including applicable seniority pool rights,
shall be placed in the Employment Security Pool.
2. Any employee in the Employment Security Pool may be assigned such duties as
the Company elects, including but not limited to:
a. Training or retraining.
b. Any bargaining unit work which would otherwise be contracted out;
provided, however, that such assignment shall be without prejudice to any right
the Company may have to contract out such work and shall be deemed to not
interrupt an otherwise consistent practice under Article I in the Agreement.
c. Any bargaining unit work which could be performed at regular rates,
rather than at overtime rates.
d. Any work which otherwise would not be performed; provided, however,
that the Company may discontinue such work at any time.
e. Any bargaining unit work for which no employee not in the Employment
Security Pool has a permanent right.
f. Any work normally performed by non-bargaining unit personnel;
provided, however, that such assignment shall be without prejudice to the
Company's right to discontinue the assignment of such work to Bargaining Unit
employees.
3. Any employee assigned to the Pool will not have the right to select an
assignment within the Pool regardless of seniority.
4. Any employee who would otherwise be assigned to the Employment Security Pool
has at the time of such demotion the option of taking a voluntary layoff. If the
voluntary layoff is selected, the employee is required to stay on layoff for
thirty (30) calendar days, unless called back to a job above the Employment
Security Pool. If the employee would like to return to work after thirty (30)
days, and is otherwise entitled to work pursuant to the terms of the Employment
Security Plan, the employee must sign a return to work slip at the Geneva
Employment Office. Such employee will be returned to work the week following
submission of the signed request.
117
<PAGE> 118
This agreement shall become a part of the Plan.
UNITED STEELWORKERS OF AMERICA GENEVA STEEL COMPANY
By: /s/ Dallas Alexander By: /s/ Carl E. Ramnitz
-------------------------- -------------------------
Dallas Alexander Carl E. Ramnitz
118
<PAGE> 119
April 9, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Re: Employment Security Implementation Committee
Dear Mr. Alexander:
With the adoption of the Employment Security Plan, the parties agree to
the establishment of an implementation committee to address issues that may
arise under the Plan.
An Implementation Committee shall be established in the plant, and shall
be comprised of at least three members appointed by the Local Union and an equal
number appointed by the Company.
The Implementation Committee shall meet weekly to resolve, consistent
with the Labor Agreement, any implementation issue that may arise. After the ESP
has been in place, the Committee shall meet as required, or upon the request of
three committee members.
The costs of meeting, including lost time if necessary, shall be met by
the Company.
Very truly yours,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
------------------------------------
Carl E. Ramnitz
Vice President
Human Resources
ACKNOWLEDGED AND AGREED TO
this ____ day of April, 1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
---------------------------------
Dallas Alexander
119
<PAGE> 120
April 16, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Dear Mr. Alexander:
In connection with our establishment of an Employment Security Plan
("ESP") as a part of the 1998 Labor Agreement, it was agreed that the provisions
of Paragraph B.6. relating to the shutdown of a department or a substantial
portion thereof, should apply to employees displaced as a result of certain
changes in technology.
For purposes of this letter, changes in technology shall be defined as
installation of (i) additional or new slab heating capacity (e.g., walking beam
furnace), (ii) new technology for ironmaking (e.g., Hismelt, Corex), (iii)
tilting spouts at the blast furnace, or (iv) substantial pipe mill
modernization.
Very truly yours,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
------------------------------------
Carl E. Ramnitz
Vice President
Human Resources
ACKNOWLEDGED AND AGREED TO
this ____ day of April, 1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
---------------------------------
Dallas Alexander
120
<PAGE> 121
April 16, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Re: Employment Security
Dear Mr. Alexander:
In recognition of Geneva Steel's size, and geographical location, the
parties have agreed that notwithstanding any other provision of this Employment
Security Plan ("ESP"):
The ESP shall be suspended on the first day of the first calendar week
immediately following any week in which the actual or scheduled
production on the 132" Mill falls below 34,885 tons per week. The
Company will not sell slabs purposely to erode the work performed by the
Bargaining Unit through application of the foregoing sentence. The ESP
shall be similarly suspended, but only with respect to the number of
employees directly or indirectly affected thereby, in the event that the
actual turns on the Pipe Mill fall below ten (10) eight (8) hour turns
per week and/or hot-rolled, flat-plate production on the 132" Mill falls
below 5,581 tons per week. If actual or scheduled production returns to
a level above the foregoing levels for a four (4) week period, the ESP
will be reinstated on the first day of the first calendar week
immediately following four (4) week period.
Very truly yours,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
------------------------------------
Carl E. Ramnitz
Vice President
Human Resources
ACKNOWLEDGED AND AGREED TO
this ____ day of April, 1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
---------------------------------
Dallas Alexander
121
<PAGE> 122
April 16, 1998
Mr. Dallas Alexander
United Steelworkers of America
Subdistrict 5
5300 South 360 West, Suite 350
Murray, Utah 84123
Re: Employment Security
Dear Mr. Alexander:
Notwithstanding any other provision of the ESP, the layoff protections
afforded thereunder shall not apply (i) September 1, 1998, or (ii) when the
number of employees permanently separated from employment (quits and
retirements) after the date hereof, in addition to those on layoff, reaches a
total of 200, whichever comes first.
Very truly yours,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
-------------------------------------
Carl E. Ramnitz
Vice President
Human Resources
ACKNOWLEDGED AND AGREED TO
this ____ day of April, 1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
----------------------------------
Dallas Alexander
122
<PAGE> 123
APPENDIX T
LETTER OF AGREEMENT RE: CONTRACTING OUT
Mr. Dallas Alexander
District 12, Subdistrict 5
United Steelworkers of America
5300 S. 360 W., Suite 350
Murray, Utah 84123
Dear Mr. Alexander:
This letter will confirm an understanding reached in the 1998
negotiations. In that bargaining, the Union sought clarification of an issue
arising under the contracting out provisions of other steel company basic labor
agreements.
The Union pointed to a group of arbitration decisions addressing the
question whether the assignment or transfer of bargaining unit work to other
company locations outside the bargaining unit or to other units at the same
location (represented by unions other than the USWA) falls within the provisions
of the contracting out clause. At least one reported case answers in the
affirmative, while other decisions go the other way.
In our 1998 negotiations, the Union advanced persuasive reasons for why
our contracting out clause, as currently proposed, adopts the approach of the
affirmative decision referred to above. Nonetheless, to clarify the point and
remove any doubt, the Union sought this letter of understanding to express our
mutual agreement on the point.
Accordingly, the contracting out clause of our agreement shall be
understood to apply to the assignment or transfer of bargaining work to other
company locations outside the bargaining unit.
Sincerely,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
------------------------------------
Carl E. Ramnitz
Vice President
Human Resources
123
<PAGE> 124
Mr. Dallas Alexander
Subdistrict 5
United Steelworkers of America
5300 South 360 West, Suite 350
Murray, Utah 84123
Re: Letter Agreement on Work, i.e., "As Is, Where Is"
Dear Mr. Alexander:
This will confirm our understanding that an "As Is, Where Is," sale of
assets is a legitimate commercial transaction that is a business decision not
designed to deprive Bargaining Unit employees of work assignments.
If such sale of assets involves the use of a vendor or contractor to
perform a service (i.e. scrap preparation) and such assets are returned for the
Company's use or sale as part of the transaction, such transaction shall be
considered as contracting out and subject to the provisions of Article 1,
Section 3 of this Agreement. "As Is, Where Is" shall be deemed to include only
assets sold in-place at the Company and shall exclude natural resources.
Sincerely,
GENEVA STEEL COMPANY
By: /s/ Carl E. Ramnitz
---------------------------------
Carl E. Ramnitz
Vice President
Human Resources
ACKNOWLEDGED AND AGREED TO
this ____ day of ___________, 1998.
UNITED STEELWORKERS OF AMERICA
By: /s/ Dallas Alexander
--------------------------------
Dallas Alexander
124
<PAGE> 1
Exhibit 10.36
SECOND AMENDMENT
TO
TACONITE PELLET SALES AGREEMENT
THIS SECOND AMENDMENT TO TACONITE PELLET SALES AGREEMENT (the
"Amendment") is made and entered into as of the 30th day of September, 1998 by
and between GENEVA STEEL COMPANY, a Utah corporation ("Buyer") and USX
CORPORATION, a Delaware corporation ("Seller").
WITNESSETH:
WHEREAS, Buyer and Seller heretofore entered into a certain TACONITE
PELLET SALES AGREEMENT, effective (by its terms) as of September 1, 1994, as
amended on July 25, 1997 (collectively, the "Agreement") covering Buyer's
purchase and Seller's sale of taconite pellets in accordance with the terms and
conditions as provided under the Agreement; and
WHEREAS, Buyer and Seller, for various business-related reasons,
mutually desire to amend the term and certain other provisions of the Agreement
as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants herein contained, Buyer and Seller, intending to be legally bound,
hereby agree as follows:
1. Term. Article I of the Agreement is hereby amended by substituting
the date "December 31, 1999" in lieu of the date "August 31, 1999" in the second
line thereof.
2. Quantity. Article II, Section A of the Agreement is hereby amended by
inserting "December 31, 1999" in lieu of "August 31, 1999" in the last line of
the table of Minimum Tons and Maximum Tons for each Contract Year of the
Agreement as set forth in said Section A.
<PAGE> 2
3. Fifth Contract Year. Article V, Section E of the Agreement is hereby
amended by substituting the date "December 31, 1999" in lieu of the date "August
31, 1999" in the seventh and eight lines of said Section E.
IN WITNESS WHEREOF, Buyer and Seller have caused this Amendment to be
executed by their respective authorized representatives, effective on the day
and year first above written.
GENEVA STEEL COMPANY
a Utah corporation
By: /s/ Ken C. Johnsen
--------------------------------
Ken C. Johnsen
Executive Vice President
USX CORPORATION
a Delaware corporation
By: /s/ Keith H. Jansen
--------------------------------
Its: Director-Raw Materials
2
<PAGE> 1
Exhibit 13
SELECTED FINANCIAL DATA
(Dollars in thousands, except per share and per ton data)
<TABLE>
<CAPTION>
OPERATING STATISTICS 1998 1997 1996 1995 1994
--------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 720,453 $ 726,669 $ 712,657 $665,699 $ 486,062
Gross margin 61,321 60,691 50,350 71,508 15,514
Income (loss) from operations 21,394 38,204 25,729 47,713 (6,791)
Income (loss) before extraordinary item (18,943) (1,268) (7,238) 11,604 (16,696)
Net income (loss) (18,943) (1,268) (7,238) 11,604 (26,230)
Net income (loss) applicable to
common shares (30,715) (11,608) (16,327) 3,606 (33,276)
Diluted net income (loss) per common share
before extraordinary item (1.90) (.74) (1.07) .24 (1.57)
Diluted net income (loss) per common share (1.90) (.74) (1.07) .24 (2.20)
BALANCE SHEET STATISTICS
Cash and cash equivalents $ -- $ -- $ 597 $ 12,808 $ --
Working capital (298,416) 67,063 71,065 33,045 46,797
Current ratio .39 1.66 1.64 1.29 1.49
Net property, plant and equipment 411,174 458,315 454,523 470,390 453,286
Total assets 605,165 646,070 657,386 628,797 606,815
Long-term debt -- 399,906 388,431 342,033 357,348
Redeemable preferred stock 56,917 56,169 55,437 51,031 43,032
Stockholders' equity 53,208 82,603 92,827 108,074 103,664
Long-term debt as a percentage
of stockholders' equity -- 484% 418% 316% 345%
ADDITIONAL STATISTICS
Operating income (loss) per ton shipped $ 10.68 $ 17.90 $ 12.00 $ 24.99 $ (4.63)
Capital expenditures (1) 10,893 47,724 26,378 68,025 164,918
Depreciation and amortization 44,182 44,959 44,415 39,308 29,870
Cash flows from operating activities 25,847 32,070 (19,520) 84,130 (28,018)
Raw steel production (tons in thousands) 2,390 2,460 2,428 2,145 1,890
Steel products shipped (tons in thousands) 2,003 2,135 2,145 1,909 1,467
</TABLE>
(1) Capital expenditures for the year ended September 30, 1998 included
an offset of $12.5 million relating to an insurance claim settlement.
Absent the offset, capital expenditures were $23.4 million for the
year ended September 30, 1998.
PRICE RANGE OF COMMON STOCK
The following table sets forth, for the periods indicated, the high and low
sales prices for the Class A common stock as reported on the NYSE Composite
Tape.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1997 HIGH LOW
<S> <C> <C>
First Quarter ended December 31 $ 4 1/2 $ 2 3/4
Second Quarter ended March 31 3 5/8 2
Third Quarter ended June 30 3 1/2 2 1/4
Fourth Quarter ended September 30 4 1/4 2 5/8
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30, 1998 HIGH LOW
<S> <C> <C>
First Quarter ended December 31 $ 3 7/8 $ 1 15/16
Second Quarter ended March 31 3 11/16 1 15/16
Third Quarter ended June 30 4 1/4 2 1/4
Fourth Quarter ended September 30 2 5/8 1 3/16
</TABLE>
<PAGE> 2
As of November 30, 1998, the Company had 14,700,478 shares of Class A common
stock outstanding, held by 654 stockholders of record, and 19,151,348 shares of
Class B common stock outstanding, held by five stockholders of record. The Class
B common stock is convertible into Class A common stock at ten shares of Class B
for one share of Class A.
<PAGE> 3
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 years indicated:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 91.5 91.6 92.9
------ ------ ------
Gross margin 8.5 8.4 7.1
Selling, general and administrative expenses 3.0 3.1 3.5
Write-down of impaired assets 2.5 -- --
------ ------ ------
Income from operations 3.0 5.3 3.6
Other income (expense):
Interest and other income 0.0 0.0 0.1
Interest expense (5.9) (5.6) (5.1)
Other expense -- -- (0.2)
------ ------ ------
Loss before benefit for income taxes (2.9) (0.3) (1.6)
Benefit for income taxes (0.3) (0.1) (0.6)
------ ------ ------
Net loss (2.6) (0.2)% (1.0)%
====== ====== ======
</TABLE>
The following table sets forth the sales product mix as a percentage of net
sales for the years indicated:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Plate 62.1% 45.4% 45.0%
Sheet 18.2 30.2 29.7
Pipe 10.5 9.6 6.6
Slab 7.0 11.9 15.9
Non-steel 2.2 2.9 2.8
------ ------ ------
100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
<PAGE> 4
Fiscal Year Ended September 30, 1998 Compared
With Fiscal Year Ended September 30, 1997
Net sales decreased 0.9% due to decreased shipments of approximately 131,500
tons, mostly offset by an increase in overall average selling prices and a net
shift in product mix to higher-priced plate and pipe products from lower-priced
sheet and slab products for the year ended September 30, 1998 as compared to the
previous fiscal year. The weighted average sales price (net of transportation
costs) per ton of plate, pipe, sheet and slab products increased by 0.5%, 2.4%,
1.2% and 2.0%, respectively, in the year ended September 30, 1998 compared to
the previous fiscal year. The increases in prices were due primarily to strong
steel demand through the first three quarters of the 1998 fiscal year as well as
other market factors. Selling prices on all products declined significantly
during the fourth quarter of the 1998 fiscal year primarily as a result of
increased supply from imports as discussed below. Shipped tonnage of plate and
pipe products increased approximately 308,400 tons or 35.0%, and 9,300 tons or
5.5%, respectively, while shipped tonnage of sheet and slab products decreased
approximately 294,400 tons or 40.9%, and 154,800 tons or 42.4%, respectively,
between the two periods. Consistent with the Company's strategic objectives,
plate shipments increased as a result of expanded utilization of outside
processors to level and cut plate from coils, improved operations of the
Company's cut-to-length facilities and strong demand through June 30, 1998.
During the fourth quarter of 1998, order entry, shipments and pricing for all of
the Company's products were adversely affected by, among other things, increased
imports. As a result of the increased supply of imports and other market
conditions, the Company's overall price realization and shipments will continue
to decrease significantly in the first quarter of fiscal year 1999 and are
expected to remain at low levels at least through the second quarter of fiscal
1999 and negatively impact the financial performance of the Company during such
periods. As of November 30, 1998, the Company had estimated total orders on hand
of approximately 74,000 tons compared to approximately 309,000 tons as of
November 30, 1997.
Foreign competition is a significant factor in the steel industry and has
adversely affected product prices in the United States and tonnage sold by
domestic producers. The intensity of foreign competition is substantially driven
by fluctuations in the value of the United States dollar against several other
currencies as well as the strength of the United States economy relative to
foreign economies. In addition, many foreign steel producers are controlled or
subsidized by foreign governments whose decisions concerning production and
exports may be influenced in part by political and social policy considerations
as well as by prevailing market conditions and profit opportunities.
Historically, coiled and flat plate imports have represented approximately 20%
of total U.S. consumption. In the summer of 1998, the steel industry began
experiencing an unprecedented surge in imports. Approximately 40% of recent
domestic plate and hot roll sheet consumption has been supplied by imports.
Imports have similarly increased in each of the Company's other product lines.
The surge in imports from various countries is in part the result of depressed
economies in various regions, which have greatly reduced steel consumption,
causing steel producers to dramatically increase exports to the United States,
one of the few strong markets for steel consumption. The Company, as well as
other domestic steel producers, believes that foreign producers are selling
product into the U.S. market at dumped prices and are adversely affecting
domestic shipments and pricing.
While a previous import surge in 1996 primarily involved only flat plate, the
current surge includes all of the Company's products. As a result, from May 1998
to November 1998, the Company's plate and sheet prices fell by 12.2% and 12.7%,
respectively. Concurrently, the Company has been forced to reduce production by
approximately 50%, resulting in higher costs per ton and production
inefficiencies, as well as a significant decline in operating results and cash
flow. During September 1998 through November 1998, the Company's total shipments
were approximately 302,000 tons as compared to 493,000 tons for the same period
in 1997.
On September 30, 1998, the Company and eleven other domestic steel producers
filed anti-dumping actions against hot- rolled coiled steel imports form Russia,
Japan and Brazil (the "Coiled Products Cases"). The group also filed a subsidy
(countervailing duty) case against Brazil. In mid November 1998, the
International Trade Commission (the "ITC") made a unanimous affirmative
preliminary injury determination. Preliminary dumping margins will be announced
by the Department of Commerce ("DOC") in February 1999, with final margins
announced between May-July 1999. The ITC is expected to make its final injury
determination between July-September 1999. If affirmative, the final
determinations by the ITC and
<PAGE> 5
DOC will result in duties against imported hot-rolled coil products from the
offending countries. Under applicable law, the U.S. Administration may settle
some or all of the cases if the settlement has the effect of removing the injury
or threat of injury caused by the imports. Settlements, called suspension
agreements, typically involve import volume and/or price limitations
The Company and other U.S. producers will participate in these reviews in
support of a five year extension of these orders. The outcome of these reviews
cannot currently be predicted. Imports of hot-rolled coil products from the
subject countries that arrive in the U.S. after mid-November 1998 are at risk
that duties eventually imposed in the Coiled Products Cases could be applied
retroactively to that date. Consequently, the Company expects that such imports
will likely decline. As a result, the Company expects that its production
levels, shipments and pricing of those products will increase as imports decline
and excess inventory levels are reduced. There is, however, no assurance that
the trade cases will be successful, that duties will be imposed, that imports
from countries not named in the Coiled Products Cases will not increase or that
domestic shipments or prices will rise. The Company continues to monitor imports
of all its products and will very likely file additional trade cases or take
other trade action in the future. Existing trade laws and regulations may be
inadequate to prevent the adverse impact of such an unprecedented world
financial crisis; consequently, imports could pose continuing or increasing
problems for the domestic steel industry and the Company.
A five year sunset review of anti-dumping countervailing duty orders against
the countries on plate will begin November 1999 and should be concluded by the
end of 2000.
Domestic competition remains intense and imported steel continues to adversely
affect the market. Moreover, additional production capacity is being added in
the domestic market. The Company sells substantially all of its products in the
spot market at prevailing market prices. The Company believes its percentage of
such sales is significantly higher than that of most of the other domestic
integrated producers. 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.
On November 2, 1998, the Company signed a new, three-year agreement with
Mannesmann Pipe and Steel ("Mannesmann"). Under the agreement, Mannesmann will
extend its responsibility for the marketing of the Company's steel products to
throughout the continental United States. Mannesmann previously marketed the
Company's products in fifteen midwestern states and to certain customers in the
eastern United States. The Company expects that this new arrangement will
strengthen its domestic sales efforts. The Company's existing sales force will
remain Company employees, but will be directed by Mannesmann. The Company has
also made several other organizational changes designed to improve product
distribution and on-time delivery.
The Mannesmann agreement requires Mannesmann to purchase and pay for the
Company's finished goods inventory as soon as it has been assigned to or
otherwise identified with a particular order. Mannesmann then sells the product
to end customers at the same sales price Mannesmann paid the Company plus a
variable commission. The Company remains responsible for customer credit and
product quality problems. The Company estimates that when fully implemented
successfully, the new arrangement will significantly reduce its working capital
balances and, as a result, improve the Company's liquidity by approximately $17
to $25 million. Although the Company estimates that full implementation of the
Mannesmann agreement will have the foregoing positive net liquidity effect, the
agreement will also reduce inventory and accounts receivable balances otherwise
included in the Company's borrowing base under the Revolving Credit Facility.
Full implementation of the Mannesmann agreement is expected to be completed
during the third quarter of fiscal 1999. There can be no assurance that the
Mannesmann agreement can be fully implemented quickly or that the new sales
approach will be successful.
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, remained relatively
constant at 91.5% for the year ended September 30, 1998 as compared to the
previous fiscal year as a result of an increase in average selling prices per
ton offset by increased product costs per ton. The overall average cost of sales
per ton shipped increased approximately $17 per ton between the two periods,
primarily as a result of a significant shift in product mix to higher-cost plate
and pipe products from lower-cost sheet and slab products and increased
operating costs. Operating costs increased as a result of reduced product
yields, lower overall production volume, increased depreciation expense,
increased wages and benefits and other increased operating costs. These higher
costs were partially offset by increased production throughput rates for most
products and reduced inbound freight rates.
In an effort to reduce labor costs, the Company implemented a voluntary
resignation program and an early retirement option during the fiscal year for
union-eligible employees. In return for voluntary resignations (excluding
retirements), the
<PAGE> 6
program provided each of up to 200 active union-eligible employees that
submitted their resignations on or prior to July 31, 1998 a one-time, lump-sum
payment of $10,000, full vesting in the Company's 401-k and defined contribution
pension plans and two-months of additional medical and dental insurance
benefits. With respect to voluntary retirements, the program provided for a
one-time, lump-sum payment of $10,000 to each of up to 150 active union-eligible
employees who voluntarily retire prior to December 31, 1998. This benefit is in
addition to any other benefits payable under the collective bargaining
agreement. The Company recognized charges in the fourth fiscal quarter of 1998
to reflect the cost of the foregoing programs. Since implementing the programs,
the Company has achieved 209 permanent reductions of union-eligible employees
through the programs and normal attrition. In addition, the Company has laid off
453 union- eligible employees because of reduced production levels. Since
January 1, 1998, the Company has also reduced its non-union workforce by 149
employees through terminations, layoffs and normal attrition. The reductions are
one of several steps being taken by the Company to improve short and long-term
operating results. The Company anticipates further staff and workforce
restructuring as it streamlines business and production processes.
Depreciation costs included in cost of sales decreased approximately $0.7
million for the year ended September 30, 1998 compared with the same period in
the previous fiscal year. This decrease was due to offsets for depreciation
expense previously taken on equipment reimbursed as part of the settlement of an
insurance claim relating to a January 1996 power outage (the "Insurance
Settlement"). This decrease was partially offset by increases in the asset base
as a result of completion of the rolling mill finishing stand upgrades and a
reline and repairs to a blast furnace.
Selling, general and administrative expenses for the year ended September 30,
1998 decreased approximately $0.4 million as compared to the same period in the
previous fiscal year. These lower expenses resulted primarily from selling,
general and administrative offsets of $2.1 million recorded as a result of the
Insurance Settlement and cost savings related to the staff and support personnel
reductions. These lower expenses were offset in part by increased outside
services associated with, among other things, training costs relating to
implementation of enterprise-wide business systems.
Interest expense increased approximately $1.8 million during the year ended
September 30, 1998 as compared to the same period in the previous fiscal year as
a result of higher average levels of borrowing.
For the years ended September 30, 1998 and 1997, the Company recognized a
benefit for income taxes by carrying back the loss against income from a prior
period. For the year ended September 30, 1998, the Company was only able to
carryback a portion of its loss. As of September 30, 1998, the Company has a net
operating loss carryforward for book purposes of approximately $6.1 million.
Fiscal Year Ended September 30, 1997 Compared
With Fiscal Year Ended September 30, 1996
Net sales increased 2.0% due to a shift in product mix to higher-priced pipe and
plate products from lower-priced slab products offset in part by a decrease in
shipments of approximately 10,200 tons and a decrease in overall average selling
prices for the year ended September 30, 1997 as compared to the previous fiscal
year. The weighted average sales price (net of transportation costs) per ton of
plate, pipe and slab products decreased by 2.4%, 1.6% and 0.6%, respectively,
while the weighted average sales price of sheet products increased by 3.5% in
the year ended September 30, 1997 compared to the previous fiscal year. The
decrease in plate prices was due to continued pricing pressure from unfairly
traded imports and other market factors. Shipped tonnage of plate and pipe
increased approximately 44,900 tons or 5.4% and 56,300 tons or 50.2%,
respectively, while shipped tonnage of sheet and slab products decreased
approximately 200 tons or 0.03% and 111,200 tons or 23.3%, respectively, between
the two periods. During the third and fourth quarters a shortage of railcars
increased costs and caused shipments to be slightly lower than expected.
Consistent with the Company's strategic objectives, plate shipments increased,
in part through utilization of outside processors to level and cut plate from
coils. The Company continued to sell slabs to maximize production from the
continuous caster while efforts to increase rolling mill throughput continued.
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 alleged large
dumping margins and also set forth the injury to the U.S. industry caused by
dumped imports from the
<PAGE> 7
subject countries. The United States Department of Commerce issued a final
affirmative determination of dumping for each country in October 1997, finding
substantial dumping margins on cut-to-length steel plate imports from those
countries. In December 1997, the International Trade Commission ( "ITC") voted
unanimously that the United States industry producing cut-to-length carbon steel
plate was injured due to imports of dumped cut-to-length plate from the People's
Republic of China, the Russian Federation, Ukraine and the Republic of South
Africa. The United States negotiated suspension agreements that became effective
upon the affirmative final conclusive determination in November 1997. Those
agreements limit imports of cut-to-length carbon steel plate from the four
countries to a total of approximately 440,000 tons per year for the next five
years, a reduction of about two-thirds from 1996 import levels, and provide
import price limits intended to remove the injurious impact of the imports. Any
violation or abrogation of the suspension agreements will result in immediate
imposition of the dumping duties found by the Commerce Department.
The Company's cost of sales, as a percentage of net sales, decreased to 91.6%
for the year ended September 30, 1997 from 92.9% for the previous fiscal year as
a result of an increase in net sales in fiscal year 1997. The overall average
cost of sales per ton shipped increased approximately $3 per ton between the two
periods primarily as a result of the shift in product mix to higher-cost plate
and pipe 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 and repairs, production disruptions associated with the rolling mill
finishing stand upgrades, higher wages and benefits and other increased costs.
The increases in costs were partially offset by significant improvements in
production yield and throughput rates, although these operating improvements
regressed late in the year.
Depreciation costs included in cost of sales increased approximately $1.0
million for the year ended September 30, 1997 compared with the previous fiscal
year. This increase was due to increases in the asset base resulting primarily
from the No. 1 blast furnace reline and repair.
Selling, general and administrative expenses for the year ended September 30,
1997 decreased approximately $2.1 million as compared to the previous fiscal
year. These lower expenses resulted primarily from Company efforts to reduce
administrative staff, to decrease outside services and to reduce other costs.
Interest expense increased approximately $4.5 million during the year ended
September 30, 1997 as compared to 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 and the termination of the
Company's previous prepayment arrangement with Mannesmann.
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 $1.7 million
for the year ended September 30, 1998, as compared with the previous fiscal
year.
Liquidity and Capital Resources
The Company's liquidity requirements arise from capital expenditures and working
capital requirements, including interest payments. In the past, 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.
In March 1993, the Company issued in a public offering $135 million principal
amount of 11 1/8% senior notes (the "11 1/8% Senior Notes" and, together with
the 9 1/2% Senior Notes discussed below, the "Senior Notes"). The 11 1/8% Senior
Notes mature in 2001, are unsecured and require interest payments semi-annually
on March 15 and September 15. Since March 1998, the 11 1/8% Senior Notes are
redeemable, in whole or in part, at the option of the Company, subject to
certain redemption premiums. A portion of the proceeds from the 11 1/8% Senior
Notes offering was used to repurchase, at par value, approximately $70 million
aggregate principal amount of term debt.
In connection with the offering of the 11 1/8% Senior Notes, the Company issued
$40 million of 14% cumulative redeemable exchangeable preferred stock (the
"Redeemable Preferred Stock") at a price of $100 per share and warrants to
purchase an aggregate of 1,132,000 shares of Class A common stock. The
Redeemable Preferred Stock consists of 400,000 shares, no par
<PAGE> 8
value, with a liquidation preference of approximately $151 per share as of
September 30, 1998. Dividends accrue at a rate equal to 14% per annum of the
liquidation preference and, except as provided below, are payable quarterly in
cash from funds legally available therefor. For dividend periods ending before
April 1996, the Company had the option to add dividends to the liquidation
preference in lieu of payment in cash. Prior to April 1996, the Company elected
to add the dividends to the liquidation preference. The Redeemable Preferred
Stock is exchangeable, at the Company's option, into subordinated debentures of
the Company due 2003 (the "Exchange Debentures"). The Company is obligated to
redeem all of the Redeemable Preferred Stock in March 2003 from funds legally
available therefor. The Company's ability to pay cash dividends on 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 quarterly preferred stock dividends beginning with the
dividend due June 15, 1996. Unpaid dividends were approximately $25.3 million at
September 30, 1998. Based on the Company's current financial situation, the
Company does not expect to pay dividends on the Redeemable Preferred Stock in
the foreseeable future. Unpaid dividends accumulate until paid and accrue
additional dividends at a rate of 14% per annum. As a result of the Company's
inability to pay four full quarterly dividends, the holders of the Redeemable
Preferred Stock elected two directors on May 30, 1997. 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. Both the
Redeemable Preferred Stock and/or the Exchange Debentures are redeemable, at the
Company's option, subject to certain redemption premiums. While not affecting
net income (loss), dividends and the accretion required over time to amortize
the original issue discount associated with the Redeemable Preferred Stock will
negatively impact quarterly earnings per share by approximately $.20 per share.
The warrants to purchase the Company's Class A common stock are exercisable at
$11 per share, subject to adjustment in certain circumstances, and expire in
March 2000.
In February 1994, the Company completed a public offering of $190 million
principal amount of 9 1/2% senior notes (the "9 1/2% Senior Notes"). The 9 1/2%
Senior Notes mature in 2004, are unsecured and require interest payments
semi-annually on January 15 and July 15. After January 1999, the 9 1/2% Senior
Notes are redeemable, in whole or in part, at the option of the Company, subject
to certain redemption premiums. A portion of the proceeds from the 9 1/2% Senior
Notes offering was used to repay the Company's remaining outstanding term debt
of approximately $90 million aggregate principal amount and to pay contractual
prepayment premiums of approximately $12.3 million.
On May 14, 1996, the Company amended and restated its revolving credit facility
(the "Revolving Credit Facility") with a syndicate of banks led by Citicorp USA,
Inc., as agent. The Revolving Credit Facility is used primarily for the working
capital and capital expenditure needs of the Company. The Revolving Credit
Facility, in the amount of up to $125 million, is secured by the Company's
inventories, accounts receivable, general intangibles, and proceeds thereof, and
expires on May 14, 2000. Interest is payable monthly at the defined base rate
(8.50% at September 30, 1998) plus 1.50% or the defined LIBOR rate (5.00% at
September 30, 1997) plus 2.75%. The Company pays a monthly commitment fee based
on an annual rate of .50% of the average unused portion of the borrowing limit
under the Revolving Credit Facility. The amount available to the Company under
the Revolving Credit Facility has generally ranged between 50 to 60 percent, in
the aggregate, of eligible inventories plus 85 percent of eligible accounts
receivable. Borrowing availability under the Revolving Credit Facility is also
subject to other financial tests and covenants. As of September 30, 1998, the
Company's eligible inventories and accounts receivable supported access to
$117.1 million under the Revolving Credit Facility. As of September 30, 1998,
the Company had $60.8 million in borrowings and $10.8 million in letters of
credit outstanding under the Revolving Credit Facility, leaving $45.5 million in
additional borrowing availability. As a consequence of reduced production and
sales volumes, the Company's inventory and account receivable borrowing base has
declined since September 30, 1998. In addition, borrowings under the Revolving
Credit Facility have been used to fund operating losses and reductions in
accounts payable. Consequently, the Company's borrowing availability under the
Revolving Credit Facility has declined. As of December 18, 1998, borrowing
availability was $21.3 million, with $58.2 million in borrowings and $10.8
million in letters of credit outstanding. As the Mannesmann agreement described
above is fully implemented, it is expected to generate liquidity for the Company
but will also reduce the borrowing base under the Revolving Credit Facility.
As a result of the Company's recent financial performance, the Company recently
sought and received an amendment to the Revolving Credit Facility with respect
to both the tangible net worth and interest coverage covenants, among other
things. The Company will require additional modifications, waivers or
forbearances to those and other terms of the Revolving Credit Facility prior to
January 7, 1999. The Company has held several meetings with the banking group
for the Revolving Credit Facility. The Company anticipates that the banking
group will grant short-term covenant relief either by way of a waiver or a
<PAGE> 9
forbearance with respect to certain potential or actual defaults. The Company
believes that such waiver or forbearance would not be granted if the Company
intended to make the interest payment due January 15, 1999 on the 9 1/2% Senior
Notes, as discussed below. The banking group will, however, continue to closely
monitor the Company's liquidity and may withdraw its waiver or forbearance or
take other action with respect to, among other things, the terms upon which the
Company may borrow or the Company's continued access to borrowings. There can be
no assurance that the Company will receive the waiver or forbearance, that the
banking group will not require other changes in the terms upon which borrowings
under the Revolving Credit Facility are made, or that the banking group will
continue to permit the Company to incur borrowings thereunder, in which event
the Company's operations would be substantially curtailed and its financial
condition materially adversely affected.
The terms of the Revolving Credit Facility and of the Company's 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.
Besides the above-described financing activities, the Company's major source of
liquidity over time has been cash provided by operating activities. Net cash
provided by operating activities was $25.8 million for the year ended September
30, 1998, as compared with net cash provided by operating activities of $32.1
million for the year ended September 30, 1997. The sources of cash for operating
activities during the year ended September 30, 1998, included depreciation and
amortization of $44.2 million, a decrease in prepaid expenses of $13.8 million,
an increase in accrued liabilities of $1.6 million and an increase in accrued
interest payable of $0.5 million. These sources of cash were offset in part by
an increase in inventories of $15.1 million, a decrease in accounts payable of
$12.2 million, an increase in accounts receivable of $3.3 million, a net loss
before the write-down of impaired assets of $3.2 million and a decrease in
accrued payroll and related taxes of $0.5 million. Finished goods inventories
have increased as a result of, among other things, use of outside processors and
transloading centers and increased volumes. On August 11, 1998, the Company
settled a lawsuit against Commerce and Industry Insurance Company relating to an
insurance claim arising from a January 1996 power outage. Under the terms of the
settlement, the Company received $24.5 million in September 1998 ($11.0 million
is included above in the decrease in prepaid expenses).
The Company is required to make substantial interest payments on the Senior
Notes. Currently, the Company's annual cash interest expense, including the
Revolving Credit Facility, is approximately $40 million. As a result of reduced
shipments and price realization caused primarily by the recent surge in imports
of the Company's products, the Company's liquidity has declined significantly.
As stated earlier, the Company had approximately $21.3 million in borrowing
availability under its Revolving Credit Facility as of December 18, 1998. In
light of the uncertainties surrounding both near-term market conditions and
continued access to borrowings under the Revolving Credit Facility, the Company
has elected to preserve liquidity by not making the interest payment of
approximately $9.0 million due January 15, 1999 on the Company's 9 1/2% Senior
Notes, which will result in a default under the terms thereof. Such a default,
if not timely cured, gives right to the legal remedies available under the
relevant bond indenture, including the possibility of acceleration. Similarly,
under the terms of the Senior Notes, nonpayment of interest on one of the two
series results in a cross default with respect to the other and may violate
other terms thereof. The Revolving Credit Facility also contains a similar cross
default provision. The Company anticipates that, as a part of the waiver or
forbearance described above, the banking group for the Revolving Credit Facility
will temporarily waive or forbear from acting upon such a cross default. The
Company has retained financial and legal advisors, who are reviewing the
financial alternatives available to the Company, including without limitation a
possible debt restructuring.
On April 17, 1998, the United Steelworkers of America and the Company reached
agreement on a new, three year labor contract. The labor agreement includes
increases in wages, pensions, and other benefits that are expected to increase
the Company's labor costs by an average of slightly more than three percent a
year. As a part of the contract, the parties also agreed upon several
initiatives intended to improve profitability and assist the Company in
restructuring its workforce. The agreement was ratified by the local bargaining
unit in May 1998.
<PAGE> 10
Capital expenditures were $10.9 million, $47.7 million and $26.4 million for
fiscal years 1998, 1997 and 1996, respectively. Capital expenditures for 1998
were lower than expected primarily as a result of the Company reducing certain
capital expenditures in light of market conditions late in the fiscal year.
Capital expenditures for fiscal year 1999 are estimated at approximately $15 to
$20 million, which includes implementation of new business and financial
software and various other projects designed to reduce costs and increase
product quality and throughput. Given current market conditions and the
uncertainties created thereby, the Company is continuing to closely monitor its
capital spending levels. The Company is implementing SAP software, an
enterprise-wide business system. The Company expects to benefit significantly
from such implementation, including addressing the year 2000 issues inherent in
its mainframe legacy systems. The project is currently estimated to cost $8.0 to
$10.0 million ($5.0 million of which has been spent as of September 30, 1998),
with implementation completed in 1999 (see year 2000 discussion below).
Depending on market, operational, liquidity and other factors, the Company may
elect to adjust the design, timing and budgeted expenditures of its capital
plan.
The Company is a member of a limited liability company which has entered into a
cooperative agreement with the United States Department of Energy ("DOE") for
the demonstration of a cokeless ironmaking facility and associated power
generation and air separation facilities. As of September 30, 1998, the Company
had spent (net of DOE reimbursement) approximately $1.2 million in connection
with the project. Expenditures on the project are subject to government cost
sharing arrangements. Completion of the project remains subject to several
contingencies.
Year 2000 Issues
The Company is actively assessing and correcting potential year 2000 information
system issues in the following areas: (i) the Company's information technology
systems; (ii) the Company's non-information technology systems (i.e., machinery,
equipment and devices which utilize built in or embedded technology); and (iii)
third party suppliers and customers. The Company is undertaking its year 2000
review in the following phases: awareness (education and sensitivity to the year
2000 issue), identification (identifying the equipment processes or systems
which are susceptible to the year 2000 issue), assessment (determining the
potential impact of year 2000 on the equipment, processes and systems identified
during the previous phase and assessing the need for testing and remediation),
testing/verification (testing to determine if an item is year 2000 ready or the
degree to which it is deficient), and implementation (carrying out necessary
remedial efforts to address year 2000 readiness, including validation of
upgrades, patches or other year 2000 fixes).
During fiscal year 1997, the Company selected and started the implementation of
SAP software, an enterprise-wide business system. This system affects nearly
every aspect of the Company's operations. During fiscal year 1998, the Company
installed new year 2000 compliant HP computer hardware and SAP modules for
financial accounting, purchasing and accounts payable, raw materials inventory
control and accounts receivable. The Company is performing final integration
testing and validation on various other SAP modules. The human resource and
payroll module is expected to be implemented on January 1, 1999. In early 1999,
the Company will also implement other SAP modules, including sales and
distribution, materials management, production planning, and product costing and
other management information systems. The HP hardware, operating systems and
software installed are year 2000 ready. The Company expects to test these
hardware, operating systems and software applications in early 1999 to confirm
year 2000 readiness. The Company has identified other hardware, operating
systems and software applications used in its process control and other
information systems and is in the process of obtaining year 2000 compliance
information from the providers of such hardware, operating systems and
applications software. The Company expects to work with vendors to test the year
2000 readiness of such hardware, operating systems and software application
systems. The Company is also reviewing and testing internally developed software
applications for the year 2000 issue.
The Company has substantially completed inventorying its non-information
technology systems and is assessing the year 2000 issues to determine
appropriate testing and remediation. The Company anticipates completing the
assessment of its major non-information technology systems and to start any
necessary testing and implementation efforts for business critical
non-information technology systems in the second quarter of calendar 1999.
The Company has significant relationships with various third parties, and the
failure of any of these third paries to achieve year 2000 compliance could have
a material adverse impact on the Company's business, operating results and
financial condition. These third parties include energy and utility suppliers,
financial institutions, material and product suppliers,
<PAGE> 11
transportation providers, and the Company's significant customers. The Company
expects to audit/review each major third-party supplier to confirm their year
2000 readiness. The audit/review process will continue into the first and second
calendar quarters of 1999.
Through September 30, 1998, the Company has incurred approximately $5 million in
costs to improve the Company's information technology systems and for year 2000
readiness efforts. Of this amount, most represents the costs of implementing and
transitioning to new computer hardware and software for its SAP enterprise-wide
business systems. Approximately 90% of these costs have been capitalized.
Training and re-engineering efforts have been expensed. The Company anticipates
incurring an additional $3 to $5 million in connection with the year 2000
readiness efforts. The Company expects to have all year 2000 readiness efforts
completed by September 30, 1999.
The Company is in the process of preparing contingency plans for critical areas
to address year 2000 failures if remedial efforts are not fully successful. The
Company's contingency plans are expected to target the Company's most reasonably
likely worst case scenarios and to include items such as maintaining an
inventory buffer, providing for redundant information technology systems and
establishing alternative third-party logistics. The Company's contingency plans
will be based in part on the results of third-party supplier questionnaires, and
thus are not fully developed at this time. Completion of initial contingency
plans is targeted for the summer of 1999 (which plans will thereafter be revised
from time to time as deemed appropriate).
No assurance can be given that the Company will not be materially adversely
affected by year 2000 issues. The Company may experience material unanticipated
problems and costs caused by undetected errors or defects in its internal
information technology and non-information technology systems. In addition, the
failure of third-parties to timely address their year 2000 issues could have a
material adverse impact on the Company's business, operations and financial
condition. If, for example, third party suppliers become unable to deliver
necessary materials, parts or other supplies, the Company would be unable to
timely manufacture products. Similarly, if shipping and freight carriers were
unable to ship product, the Company would be unable to deliver product to
customers.
The foregoing discussion of the Company's year 2000 readiness includes
forward-looking statements, including estimates of the timeframes and costs for
addressing the known year 2000 issues confronting the Company, and is based on
management's current estimates, which were derived using numerous assumptions.
There can be no assurance that these estimates will be achieved, and actual
events and results could differ materially from those anticipated. Specific
factors that might cause such material differences include, but are not limited
to, the availability of personnel with required remediation skills, the ability
of the Company to identify and correct or replace all relevant computer code and
the success of third parties with whom the Company does business in addressing
their year 2000 issues.
Factors Affecting Future Results
This report contains a number of forward-looking statements, including, without
limitation, statements contained in this report relating to the Company's
ability to improve and optimize operations as well as ontime delivery and
customer service, the Company's objective to increase higher-margin sales while
reducing lower-margin sales, the Company's ability to compete with the
additional production capacity being added in the domestic plate and sheet
markets, the Company's ability to compete against imports and the effect of
imports and trade cases on the domestic market, the outcome of trade cases, the
Company's expectation that prices and shipments will remain lower at least in
the first and second fiscal quarters of 1999, the potential commercial and
liquidity benefits of the Mannesmann agreement, the successful implementation of
the Mannesmann agreement, the Company's anticipated additional personnel
reductions among the management and union-eligible employees, the Company's
ability to maintain previous personnel reductions, continued access to the
Revolving Credit Facility and obtaining a waiver or forbearance with respect to
certain potential or actual defaults under the Revolving Credit Facility or the
Senior Notes, the future actions of the banking group for the Company's
Revolving Credit Facility, the Company's ability to restrict capital spending,
the effect of SAP implementation, the Company's plan to become year 2000
compliant, the effect of inflation and any other statements contained herein to
the effect that the Company or its management "believes," "expects,"
"anticipates," "plans" or other similar expressions. There are a number of
important factors that could cause actual events or the Company's actual results
to differ materially from those indicated by such forward-looking statements.
These factors include, without limitation, those set forth herein.
<PAGE> 12
The Company's future operations will be impacted by, among other factors,
pricing, product mix, throughput levels and production efficiencies. The Company
has efforts underway to improve throughput rates 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 throughput capacity. Pricing and
shipment levels in future periods are key variables to the Company's future
operating results that remain subject to significant uncertainty. These
variables will be affected by several factors including the level of imports,
future capacity additions, product demand and other market factors such as
increased domestic production capacity.
The short-term and long-term liquidity of the Company also is dependent upon
several other factors, including continued access to the Company's Revolving
Credit Facility, reaction to the Company's failure to make the January 15, 1999
interest payment under the 9 1/2% Senior Notes, availability of capital, 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. In
addition, because of the Company's current financial situation and covenant
compliance issues relating to its Revolving Credit Facility and its decision not
to pay the January 15 interest payment under the 9 1/2% Senior Notes, the
Company's financial flexibility is limited. During the months ahead, the Company
will be forced to make difficult decisions regarding, among other things, the
future direction and capital structure of the Company. Many of the foregoing
factors, of which the Company does not have complete control, may materially
affect the performance and financial condition of the Company.
Inflation can be expected to have an effect on many of the Company's operating
costs and expenses. Due to worldwide competition in the steel industry, the
Company may not be able to pass through such increased costs to its customers.
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Geneva Steel Company:
We have audited the accompanying consolidated balance sheets of Geneva Steel
Company (a Utah corporation) and subsidiaries as of September 30, 1998 and 1997,
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended September 30, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Geneva Steel Company
and subsidiaries as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has experienced recurring net
losses applicable to common shares of $30.7 million, $11.6 million and $16.3
million during the years ended September 30, 1998, 1997 and 1996, respectively.
Restricted payment limitations under the Company's Senior Notes preclude payment
of preferred stock dividends. Additionally, as a result of lower shipments and
declining prices resulting from increases of imports into the Company's markets,
the Company may suffer a significant loss applicable to common shares and a
negative cash flow from operations for the year ending September 30, 1999. These
market conditions and their effect on the Company's liquidity may further
restrict the Company's use of cash which may result in the Company not making
interest payments related to its Senior Notes. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are partially described in Note 1. The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
Salt Lake City, Utah
December 4, 1998
<PAGE> 14
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30,
-------------------------
ASSETS 1998 1997
--------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ -- $ --
Accounts receivable, less allowance for doubtful
accounts of $6,411 and $4,564, respectively 63,430 60,163
Inventories 113,724 100,081
Deferred income taxes 8,118 3,059
Prepaid expenses and other 2,964 5,291
Related party receivable 270 753
--------- ---------
Total current assets 188,506 169,347
--------- ---------
Property, Plant and Equipment:
Land 1,990 1,990
Buildings 16,119 16,109
Machinery and equipment 640,363 645,807
Mineral property and development costs 1,000 8,425
--------- ---------
659,472 672,331
Less accumulated depreciation (248,298) (214,016)
--------- ---------
Net property, plant and equipment 411,174 458,315
--------- ---------
Other Assets 5,485 18,408
--------- ---------
$ 605,165 $ 646,070
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
<PAGE> 15
CONSOLIDATED BALANCE SHEETS (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30,
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
--------- ---------
<S> <C> <C>
Current Liabilities:
Senior notes $ 325,000 $ --
Revolving credit facility 60,769 --
Accounts payable 34,117 46,348
Accrued liabilities 25,005 23,671
Accrued payroll and related taxes 9,454 11,715
Accrued dividends payable 25,315 14,290
Accrued interest payable 5,080 4,559
Accrued pension and profit sharing costs 2,182 1,701
--------- ---------
Total current liabilities 486,922 102,284
--------- ---------
Long-Term Debt -- 399,906
--------- ---------
Deferred Income Tax Liabilities 8,118 5,108
--------- ---------
Commitments and Contingencies (Note 6)
Redeemable Preferred Stock, Series B, no par value;
400,000 shares authorized, issued and outstanding,
with a liquidation value of $60,443 56,917 56,169
--------- ---------
Stockholders' Equity:
Preferred stock, no par value; 3,600,000 shares authorized
for all series, excluding Series B, none issued -- --
Common stock-
Class A, no par value; 60,000,000 shares authorized,
14,705,265 shares issued 87,979 87,979
Class B, no par value; 50,000,000 shares authorized,
19,151,348 shares issued and outstanding 10,110 10,110
Warrants to purchase Class A common stock 5,360 5,360
Accumulated deficit (47,749) (11,399)
Less 4,787 and 719,042 Class A common stock treasury shares,
respectively, at cost (2,492) (9,447)
--------- ---------
Total stockholders' equity 53,208 82,603
--------- ---------
$ 605,165 $ 646,070
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
<PAGE> 16
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 720,453 $ 726,669 $ 712,657
Cost of sales 659,132 665,978 662,307
--------- --------- ---------
Gross margin 61,321 60,691 50,350
Selling, general and administrative expenses 22,116 22,487 24,621
Write-down of impaired assets 17,811 -- --
--------- --------- ---------
Income from operations 21,394 38,204 25,729
--------- --------- ---------
Other income (expense):
Interest and other income 356 412 552
Interest expense (42,483) (40,657) (36,199)
Other expense -- -- (1,749)
--------- --------- ---------
(42,127) (40,245) (37,396)
--------- --------- ---------
Loss before benefit for income taxes (20,733) (2,041) (11,667)
Benefit for income taxes (1,790) (773) (4,429)
--------- --------- ---------
Net loss (18,943) (1,268) (7,238)
Less redeemable preferred stock dividends and
accretion for original issue discount 11,772 10,340 9,089
--------- --------- ---------
Basic and diluted net loss applicable to common shares $ (30,715) $ (11,608) $ (16,327)
========= ========= =========
Basic and diluted net loss per common share $ (1.90) $ (.74) $ (1.07)
========= ========= =========
Weighted average common shares outstanding 16,155 15,660 15,309
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE> 17
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Shares Issued Amount
-------------------------- -----------------------
WARRANTS
TO PURCHASE RETAINED
COMMON COMMON COMMON COMMON COMMON EARNINGS
CLASS A CLASS B CLASS A CLASS B CLASS A (DEFICIT)
---------- ----------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1995 14,695,265 19,251,348 $ 87,926 $ 10,163 $ 5,360 $ 22,754
Conversion of Class B common stock
into Class A common stock 10,000 (100,000) 53 (53) -- --
Issuance of Class A common stock to
employee savings plan -- -- -- -- -- (1,350)
Redeemable preferred stock dividends -- -- -- -- -- (8,372)
Redeemable preferred stock accretion
for original issue discount -- -- -- -- -- (717)
Net loss -- -- -- -- -- (7,238)
---------- ----------- --------- --------- --------- ---------
Balance at September 30, 1996 14,705,265 19,151,348 87,979 10,110 5,360 5,077
Issuance of Class A common stock to
employee savings plan -- -- -- -- -- (4,868)
Redeemable preferred stock dividends -- -- -- -- -- (9,608)
Redeemable preferred stock accretion
for original issue discount -- -- -- -- -- (732)
Net loss -- -- -- -- -- (1,268)
---------- ----------- --------- --------- --------- ---------
Balance at September 30, 1997 14,705,265 19,151,348 87,979 10,110 5,360 (11,399)
Issuance of Class A common stock to
employee savings plan -- -- -- -- -- (5,635)
Redeemable preferred stock dividends -- -- -- -- -- (11,025)
Redeemable preferred stock accretion
for original issue discount -- -- -- -- -- (747)
Net loss -- -- -- -- -- (18,943)
---------- ----------- --------- --------- --------- ---------
Balance at September 30, 1998 14,705,265 19,151,348 $ 87,979 $ 10,110 $ 5,360 $ (47,749)
========== =========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
TREASURY
STOCK TOTAL
--------- ---------
<S> <C> <C>
Balance at September 30, 1995 $ (18,129) $ 108,074
Conversion of Class B common stock
into Class A common stock -- --
Issuance of Class A common stock to
employee savings plan 2,430 1,080
Redeemable preferred stock dividends -- (8,372)
Redeemable preferred stock accretion
for original issue discount -- (717)
Net loss -- (7,238)
--------- ---------
Balance at September 30, 1996 (15,699) 92,827
Issuance of Class A common stock to
employee savings plan 6,252 1,384
Redeemable preferred stock dividends -- (9,608)
Redeemable preferred stock accretion
for original issue discount -- (732)
Net loss -- (1,268)
--------- ---------
Balance at September 30, 1997 (9,447) 82,603
Issuance of Class A common stock to
employee savings plan 6,955 1,320
Redeemable preferred stock dividends -- (11,025)
Redeemable preferred stock accretion
for original issue discount -- (747)
Net loss -- (18,943)
--------- ---------
Balance at September 30, 1998 $ (2,492) $ 53,208
========= =========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE> 18
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(18,943) $ (1,268) $ (7,238)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation 42,272 43,048 42,077
Amortization of loan fees 1,910 1,911 2,338
Deferred income tax benefit (2,049) (760) (3,569)
(Gain) loss on asset disposal (30) 863 (46)
Write-down of impaired assets 17,811 -- --
(Increase) decrease in current assets -
Accounts receivable, net (3,267) 16,364 (41,349)
Inventories (15,143) (6,942) (3,230)
Prepaid expenses and other 13,821 (2,634) (749)
Increase (decrease) in current liabilities -
Accounts payable (12,231) (13,227) (8,364)
Accrued liabilities 1,635 2,991 (692)
Accrued payroll and related taxes (941) 2,232 1,279
Production prepayments -- (9,763) (237)
Accrued interest payable 521 (187) 136
Accrued pension and profit sharing costs 481 (558) 124
-------- -------- --------
Net cash provided by (used for) operating activities 25,847 32,070 (19,520)
-------- -------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (10,893) (47,724) (26,378)
Proceeds from sale of property, plant and equipment 34 21 213
Change in other assets -- 1,238 (11,361)
-------- -------- --------
Net cash used for investing activities $(10,859) $(46,465) $(37,526)
-------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE> 19
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of long-term debt $ 25,649 $ 51,987 $ 59,752
Payments on long-term debt (39,785) (40,513) (13,354)
Payments for deferred loan costs and other assets -- (4) (1,563)
Change in bank overdraft (852) 2,328 --
-------- -------- --------
Net cash provided by (used for) financing activities (14,988) 13,798 44,835
-------- -------- --------
Net decrease in cash and cash equivalents -- (597) (12,211)
Cash and cash equivalents at beginning of year -- 597 12,808
-------- -------- --------
Cash and cash equivalents at end of year $ -- $ -- $ 597
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 40,052 $ 38,934 $ 34,386
Income taxes -- -- 367
</TABLE>
Supplemental schedule of noncash financing activities:
For the year ended September 30, 1996, the Company increased the
redeemable preferred stock liquidation preference by $3,690 in lieu of
paying cash dividends. For the years ended September 30, 1998, 1997 and
1996, redeemable preferred stock was increased by $747, $732 and $717,
respectively, for the accretion required over time to amortize the
original issue discount on the redeemable preferred stock incurred at the
time of issuance. As of September 30, 1998, accrued dividends of $25,315
were unpaid.
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 NATURE OF OPERATIONS AND BUSINESS CONDITIONS
The Company's steel mill manufactures a wide range of coiled and flat plate,
sheet, pipe and slabs for sale to various distributors, steel processors or
end-users primarily in the western and central United States.
The Company has experienced recurring net losses applicable to common shares of
$30.7 million, $11.6 million and $16.3 million during the years ended September
30, 1998, 1997 and 1996, respectively. Restricted payment limitations under the
Company's Senior Notes preclude payment of preferred stock dividends.
Additionally, as a result of lower shipments and declining prices resulting from
increases of imports into the Company's markets, the Company may suffer a
significant net loss applicable to common shares and a negative cash flow from
operations for the year ending September 30, 1999. These market conditions and
their effect on the Company's liquidity may further restrict the Company's use
of cash which may result in the Company not making interest payments related to
its senior notes. These matters raise substantial doubt about the Company's
ability to continue as a going concern. The Company's continued existence is
dependent upon several factors including the Company's ability to return to
normal production and shipment levels.
The Company's near and long-term operating strategies focus on exploiting
existing and potential competitive advantages while eliminating or mitigating
competitive disadvantages. In response to current market conditions and as a
part of its ongoing corporate strategy, the Company is pursuing several
initiatives intended to increase liquidity and better position the Company to
compete under current market conditions. Several completed and ongoing
initiatives are as follows:
Since September 30, 1997, the Company has reduced administrative staff by
approximately 36 percent, operating management by 50 percent, and production
employees by 16 percent. These headcount reductions are expected to
significantly reduce overall operating expense on an annualized basis. The
Company has also placed 460 employees on layoff status. The Company must offer
employment to laid-off employees when production volume increases. Nevertheless,
to the extent these employees do not desire to return, the Company intends to
capture the attrition created thereby to the maximum extent possible. The
Company is also successfully implementing an union-management partnership
designed to reduce costs and increase efficiency.
The Company has and is pursuing aggressive cost cutting programs. As compared to
November 1997, the Company's monthly spending for administrative costs
(including employment costs) in November 1998 declined by $1.1 million, or 22
percent. Similarly, the Company's monthly spending on products and services for
operations has declined significantly. This reduction is, in part, due to lower
production levels. Nevertheless, operations spending generally increases as
production declines. The Company is currently completing installation of an
enterprise-wide business system that it expects will further reduce employment
costs and result in other significant cost savings.
On November 2, 1998, the Company signed a new, three-year agreement with
Mannesmann Pipe and Steel ("Mannesmann"). Under the agreement, Mannesmann will
market the Company's steel products throughout the continental United States.
Mannesmann previously marketed the Company's products in multiple midwestern
states and to certain customers in the eastern United States. The Company's
existing sales force will remain Geneva Steel employees, but will be directed by
Mannesmann. The Company has also made several other organizational changes
designed to improve product distribution and on-time delivery.
The Mannesmann agreement requires Mannesmann to purchase and pay for the
Company's finished inventory as soon as it has been assigned to or otherwise
identified with a particular order. Mannesmann then sells the products to end
customers at the same sales price Mannesmann paid the Company plus a variable
commission. The Company remains responsible for customer credit and product
quality problems. The Company estimates that, when fully implemented, the new
arrangement will significantly reduce its working capital balances and, as a
result, will improve the Company's liquidity by approximately $17 to $25
million.
<PAGE> 21
Current market conditions have forced the Company to operate only one of its
three blast furnaces and to similarly reduce production throughout the mill.
Reduced production levels adversely affect production efficiencies,
significantly increasing product cost per ton. The Company is attempting to
optimize production efficiency at these lower volume levels by, among other
things, reducing shifts, idling certain facilities and altering production
scheduling.
Current market conditions have and are significantly affecting the Company's
operating results and liquidity. During the months ahead, the Company will be
forced to make difficult decisions regarding, among other things, the future
direction and capital structure of the Company. The Company has retained
financial and legal advisors, who are reviewing the financial alternatives
available to the Company, including without limitation a possible debt
restructuring.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Geneva Steel Company and its wholly-owned subsidiaries (collectively, the
"Company"). Intercompany balances and transactions have been eliminated in
consolidation.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid income-earning securities with an initial maturity of ninety days or less
to be cash equivalents. Cash equivalents are stated at cost plus accrued
interest, which approximates fair market value. The Company's cash management
system utilizes a revolving credit facility with a syndicate of banks (see Note
3).
Inventories
Inventories include costs of material, labor and manufacturing overhead.
Inventories are stated at the lower of cost (using a weighted-average method) or
market value. The composition of inventories as of September 30, 1998 and 1997
was as follows (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Raw materials $ 29,250 $ 26,783
Semi-finished and finished goods 78,746 65,406
Operating materials 5,728 7,892
-------- --------
$113,724 $100,081
======== ========
</TABLE>
Operating materials consist primarily of production molds, platforms for the
production molds and furnace lining refractories.
Insurance Claim Receivable
In August 1998, the Company settled its insurance claim related to a January
1996 plant-wide power outage associated with unusual weather conditions and an
operator error. The Company received $24.5 million in September 1998 to resolve
the claim. The Company's carrier under the primary layer of insurance previously
paid the Company $5.0 million in the fall of 1996. During fiscal years 1997 and
1996, the Company recorded $3.7 million and $12.3 million, respectively, as an
offset to cost of goods sold in the accompanying consolidated financial
statements. Upon settlement of the claim, the Company recorded a $2.1 million
offset to selling, general, and administrative expense, a reduction in property,
plant and equipment of approximately $12.5 million and operating cost offsets of
approximately $3.0 million primarily for depreciation expense previously taken
on the reimbursed equipment in the accompanying consolidated financial
statements.
<PAGE> 22
As of September 30, 1997, the Company had an insurance claim receivable of $11.0
million included in other assets in the accompanying consolidated financial
statements.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated using the
straight-line method over their estimated useful lives as follows:
Buildings 31.5 years
Machinery and Equipment 2-30 years
Interest related to the construction or major rebuild of facilities is
capitalized and amortized over the estimated life of the related asset.
Capitalization of interest ceases when the asset is placed in service. The
Company capitalized approximately $0.3 million, $0.5 million and $2.1 million of
interest during the years ended September 30, 1998, 1997 and 1996, respectively.
Maintenance and repairs are charged to expense as incurred and costs of
improvements and betterments are capitalized. Upon disposal, related costs and
accumulated depreciation are removed from the accounts and resulting gains or
losses are reflected in income.
Major spare parts and back-up facilities for machinery and equipment are
capitalized and included in machinery and equipment in the accompanying
consolidated financial statements. Major spare parts are depreciated using the
straight-line method over the useful lives of the related machinery and
equipment.
Costs incurred in connection with the construction or major rebuild of
facilities are capitalized as construction in progress. No depreciation is
recognized on these assets until placed in service. As of September 30, 1998 and
1997, approximately $13.6 million and $43.7 million, respectively, of
construction in progress was included in machinery and equipment in the
accompanying consolidated financial statements.
Mineral property and development costs are depleted using the units of
production method based upon estimated recoverable reserves. Accumulated
depletion is included in accumulated depreciation in the accompanying
consolidated financial statements. The Company wrote-down certain impaired
mineral property development costs during 1998 by approximately $6.6 million
(see discussion below).
Other Assets
Other assets consist primarily of deferred loan costs incurred in connection
with obtaining long-term financing. The deferred loan costs are being amortized
on a straight-line basis over the term of the applicable financing agreement.
Accumulated amortization of deferred loan costs totaled $8.5 million and $6.6
million at September 30, 1998 and 1997, respectively. At September 30, 1997,
other assets also included the insurance claim receivable described above of
approximately $11.0 million.
Revenue Recognition
Sales are recognized when the product is shipped to the customer. Sales are
reduced by the amount of estimated customer claims. As of September 30, 1998 and
1997, reserves for estimated customer claims of $4.8 million and $2.9 million,
were included in the allowance for doubtful accounts in the accompanying
consolidated financial statements.
Income Taxes
The Company recognizes a liability or asset for the deferred tax consequences of
temporary differences between the tax basis of assets and liabilities and their
reported amounts in the consolidated financial statements that will result in
taxable or deductible amounts in future years when the reported amounts of the
assets and liabilities are recovered or settled.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of trade receivables. In the normal course of
business, the Company provides credit terms to its customers. Accordingly, the
<PAGE> 23
Company performs ongoing credit evaluations of its customers and maintains
allowances for possible losses which, when realized, have been within the range
of management's expectations.
Accounting for the Impairment of Long-Lived Assets
The Company accounts for impairment of long-lived assets in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
which was issued in March 1995. SFAS No. 121 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the book value of the asset may not be recoverable. The Company evaluates
at each balance sheet date whether events and circumstances have occurred that
indicate possible impairment. In accordance with SFAS No. 121, the Company uses
an estimate of the future undiscounted net cash flows of the related asset or
asset grouping over the remaining life in measuring whether the assets are
recoverable. During fiscal year 1998, the Company wrote down approximately $17.8
million of impaired long-lived assets. The write-down included $8.5 million of
in-line scarfing equipment, $6.6 million of mineral property development costs
and 2.7 million of other machinery and equipment. Based on the operating record
of the Company's continuous caster and recent reduced production levels, the
Company believes that sustained use of the in-line scarfing equipment is
unlikely. In addition, the use by the Company of iron-ore pellets purchased from
third parties and recent reduced production levels has caused the Company to
decrease the estimated value to it of the mineral development costs. Based on
the Company's expectation of future undiscounted net cash flow, these assets
have been written-down to their impaired value.
Basic and Diluted Net Income (Loss) Per Common Share
In February 1997, SFAS No. 128 "Earnings Per Share" was issued. This statement
specifies requirements for computation, presentation and disclosure of earnings
per share ("EPS"). SFAS No. 128 simplifies the standards for computing EPS and
replaces the presentations of Primary EPS and Fully Diluted EPS with Basic EPS
and Diluted EPS. The Company adopted SFAS No. 128 during the quarter ended
December 31, 1997. The adoption of SFAS No. 128 did not result in an adjustment
to the basic net loss per common share for the years ended September 30, 1998,
1997 and 1996, presented in the accompanying consolidated statements of
operations.
Basic net income (loss) per common share is calculated based upon the weighted
average number of common shares outstanding during the periods. Diluted net
income (loss) per common share is calculated based upon the weighted average
number of common shares outstanding plus the assumed exercise of all dilutive
securities using the treasury stock method. For the years ended September 30,
1998, 1997 and 1996, stock options and warrants prior to conversion are not
included in the calculation of diluted net loss per common share because their
inclusion would be antidilutive. For the year ended September 30, 1998,
2,075,322 common stock equivalents were not included in the calculation of
diluted weighted average common shares outstanding because they were
antidilutive. Class B common stock is included in the weighted average number of
common shares outstanding as 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 loss for the years ended September 30, 1998, 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 of issuance.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
the reporting and display of comprehensive income and its components. This
statement requires an "all-inclusive" approach which specifies that all
revenues, expenses, gains and losses recognized during the period be reported in
income, regardless of whether they are considered to be results of operations of
the period. The statement is effective for fiscal years beginning after December
15, 1997, and accordingly, the Company will adopt SFAS No. 130 in fiscal year
1999. The Company believes that adoption of SFAS No. 130 will not have a
material impact on its consolidated financial statements
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 requires that public
enterprises report certain information about operating segments. The statement
specifies disclosure requirements about the products and services of a company,
the geographic areas in which it operates, and its major customers. SFAS No. 131
is effective for fiscal years beginning after December 15, 1997, and
accordingly, the Company will adopt this statement in fiscal year 1999.
<PAGE> 24
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded on
the balance sheet as either an asset or liability measured at fair value. The
statement also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. This statement is effective for fiscal years beginning after June 15, 1999,
and is not expected to have a material impact on the Company's consolidated
financial statements.
3 LONG-TERM DEBT
The aggregate amounts of principal maturities of long-term debt as of September
30, 1998 and 1997 consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Senior term notes issued publicly, interest payable January 15 and July 15 at 9.5%,
principal due January 15, 2004, unsecured $190,000 $190,000
Senior term notes issued publicly, interest payable March 15 and September 15 at
11.125 %, principal due March 15, 2001, unsecured 135,000 135,000
Revolving credit facility from a syndicate of banks, interest payable
monthly at the defined base rate (8.50% at September 30, 1998, plus
1.50% or the defined LIBOR rate (5.00% at September 30, 1998) plus
2.75%, due May 14, 2000 (see discussion below), secured by inventories
and accounts receivable 60,769 74,906
-------- --------
385,769 399,906
Less current portion of Senior Notes and Revolving Credit Facility 385,769 --
-------- --------
$ -- $399,906
======== ========
</TABLE>
On May 14, 1996, the Company amended and restated its revolving credit facility
(the "Revolving Credit Facility") with a syndicate of banks led by Citicorp USA,
Inc., as agent. The Revolving Credit Facility is used primarily for the working
capital and capital expenditure needs of the Company. The Revolving Credit
Facility, in the amount of up to $125 million, is secured by the Company's
inventories, accounts receivable, general intangibles, and proceeds thereof, and
expires on May 14, 2000. Interest is payable monthly at the defined base rate
(8.50% at September 30, 1998) plus 1.50%, or the defined LIBOR rate (5.00% at
September 30, 1998) plus 2.75%. The Company pays a monthly commitment fee based
on an annual rate of .50% of the average unused portion of the borrowing limit
under the Revolving Credit Facility. The amount available to the Company under
the Revolving Credit Facility has generally ranged between 50 and 60 percent, in
the aggregate, of eligible inventories plus 85 percent of eligible accounts
receivable. Borrowing availability under the Revolving Credit Facility is also
subject to other financial tests and covenants. As of September 30, 1998, the
Company's eligible inventories and accounts receivable supported access to
$117.1 million under the Revolving Credit Facility. As of September 30, 1998,
the Company had $60.8 million in borrowings and $10.8 million in letters of
credit outstanding under the Revolving Credit Facility, leaving $45.5 million in
additional borrowing availability. Certain deferred fees associated with
establishing the Company's receivables securitization facility were expensed
during the year ended September 30, 1996.
As a result of the Company's recent financial performance, the Company recently
sought and received an amendment to the Revolving Credit Facility with respect
to both the tangible net worth and interest coverage covenants, among other
things. The Company will require additional modifications, waivers or
forbearances to those and other terms of the Revolving Credit Facility prior to
January 7, 1999. The Company has held several meetings with the banking group
for the Revolving Credit Facility. The Company anticipates that the banking
group will grant short-term covenant relief either by way of a waiver or a
forbearance with respect to certain potential or actual defaults. The Company
believes that such waiver or forbearance would not be granted under the terms of
the existing agreement if the Company intended to make the interest payment due
January 15, 1999 on the 9 1/2% Senior Notes. The banking group will, however,
continue to closely monitor the Company's liquidity and
<PAGE> 25
may withdraw its waiver or forbearance or take other action with respect to,
among other things, the terms upon which the Company may borrow or the Company's
continued access to borrowings. There can be no assurance that the Company will
receive the waiver or forbearance, that the banking group will not require other
changes in the terms upon which borrowings under the Revolving Credit Facility
are made, or that the banking group will continue to permit the Company to incur
borrowings thereunder, in which event the Company's operations would be
substantially curtailed and its financial condition materially adversely
affected.
The terms of the Revolving Credit Facility and the Company's $190 million 9 1/2%
Senior Notes issued in January 1994 (the "9 1/2% Senior Notes") and $135 million
11 1/8% Senior Notes issued in March 1993 (the "11 1/8% Senior Notes" and
together with the 9 1/2% Senior Notes 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, a limitation on the incurrence of additional
indebtedness unless certain financial tests are satisfied, a limitation on
mergers, consolidations and dispositions of assets and limitations on liens.
Based on such covenants, as of September 30, 1998, the Company was restricted
from payment of cash dividends. In the event of a change in control, the Company
must offer to purchase all Senior Notes then outstanding at a premium.
In light of the uncertainties surrounding both near-term market conditions and
continued access to borrowings under the Revolving Credit Facility, the Company
has elected to preserve liquidity by not making the interest payment of
approximately $9.0 million due January 15, 1999 on the Company's 9 1/2% Senior
Notes, which will result in a default under the terms thereof. Such a default,
if not timely cured, gives right to the legal remedies available under the
relevant bond indenture, including the possibility of acceleration. Similarly,
under the terms of the Senior Notes, nonpayment of interest on one of the two
series results in a cross default with respect to the other and may violate
other terms thereof. The Revolving Credit Facility also contains a similar cross
default provision. The Company anticipates that, as a part of the waiver or
forbearance described above, the banking group for the Revolving Credit Facility
will temporarily waive or forbear from acting upon such a cross default.
The Company estimates that the aggregate fair market value of its debt and
related obligations was approximately $137.4 million as of September 30, 1998.
These estimates were based on quoted market prices or current rates offered for
debt with similar terms and maturities.
4 MAJOR CUSTOMER (DISTRIBUTOR) AND INTERNATIONAL SALES
During the years ended September 30, 1998, 1997, and 1996, the Company derived
approximately 33%, 33% and 31%, respectively, of its net sales through one
customer, which is a distributor to other companies. International sales during
the years ended September 30, 1998, 1997 and 1996 did not exceed 10%.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report incorporated by reference in this Form 10-K, into
the Company's previously filed Registration Statement on Form S-8, File No.
33-40867 and the Company's previously filed Registration Statement on Form S-3,
File No. 33-64548.
ARTHUR ANDERSEN LLP
Salt Lake City, Utah
December 28, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 63,430
<ALLOWANCES> 6,411
<INVENTORY> 113,724
<CURRENT-ASSETS> 188,506
<PP&E> 659,472
<DEPRECIATION> (248,298)
<TOTAL-ASSETS> 605,165
<CURRENT-LIABILITIES> 486,922
<BONDS> 0
56,917
0
<COMMON> 95,597
<OTHER-SE> (42,389)
<TOTAL-LIABILITY-AND-EQUITY> 605,165
<SALES> 720,453
<TOTAL-REVENUES> 720,453
<CGS> 659,132
<TOTAL-COSTS> 659,132
<OTHER-EXPENSES> 39,927
<LOSS-PROVISION> 5,076
<INTEREST-EXPENSE> 42,127
<INCOME-PRETAX> (20,733)
<INCOME-TAX> (1,790)
<INCOME-CONTINUING> (18,943)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,943)
<EPS-PRIMARY> (1.90)
<EPS-DILUTED> (1.90)
</TABLE>
