AMENDED AND RESTATED ADDENDUM A
To
MASTER EQUIPMENT LEASE
Attached to and by reference made a part of the Master Equipment Lease
dated September 29, 2000 and all Equipment Schedule A's dated
September 29, 2000 executed by Fifth Third Bank, Ohio Valley as
Lessor, and Kentucky Electric Steel, Inc. (the Lessee) as Lessee. This
Amended and Restated Addendum amends and restates that certain
Addendum A to the Master Lease dated September 29, 2000.
In consideration of Fifth Third Bank, Ohio Valley extending a 1ease in
the total amount of $8,536,082 to Lessee and various other prior and
existing extensions of credit and any additional extensions of credit
or renewals (the "lease", "notes", "loan", or "loans") Lessee agrees
as follows:
Representations and Warranties
To induce Lessor to make the lease, Lessee makes the following
representations and warranties, which shall survive the execution and
delivery of the lease:
1. Affirmative Covenants. The Lessee covenants, and agrees with
the Lessor that, until (a) all Obligations have been paid in
full, and (b) there exists no commitment by the Lessor which
could give rise to any Obligations, the Lessee will comply with
such of the following covenants:
(a) The financial information furnished to Lessor in
connection with its application for the lease and in the
financial statements submitted to Lessor is complete and
accurate in all material respects and Lessee has no
undisclosed direct or contingent liabilities which are
material in amount.
(b) Lessee is a corporation duly organized, existing and in
good standing under the laws of the State of Delaware, has
corporate power to carry on the business in which it is
engaged, and the obtaining and performance of the lease
have been duly authorized by all necessary action of the
board of directors and shareholders of the corporation
under the applicable law, and do not and will not (i)
violate any provisions of law or any of its organizational
or other organic documents, or (ii) result in a breach of,
constitute a default under, require any consent under, or
result in the creation, of any lien, charge, or
encumbrance upon any property of Lessee pursuant to any
instrument order, or other agreement to which Lessee is a
party or by which Lessee, any of its officers as such, or
any of its property is bound.
(c) There are no judgments, liens, encumbrances, or other
security interests outstanding against Lessee or any of
its property other than those disclosed to Lessor in
connection with its request for the lease.
(d) Lessee has not incurred any debts, liabilities, or
obligations, which are material in amount and has not
committed itself to incur any debts, liabilities, or other
obligations other than those disclosed to Lessor in
connection with the request for the lease or shown on the
financial statements submitted to Lessor.
(e) Proceeds of the lease will be used exclusively to repay
debt and other general corporate purposes.
(f) Reserve and keep in force all licenses, permits, and
franchises necessary for the proper conduct of its
business and duly pay and discharge all taxes,
assessments, and governmental charges upon Lessee or
against ▇▇▇▇▇▇'s property which are material in amount
before the date on which penalties attach thereto, unless
and to the extent only that the same shall be contested in
good faith and by appropriate proceedings.
(g) Periodic Financial Statements. Furnish to the Lessor in
writing as soon as available, but in no event more than
120 days after the end of each Annual accounting period of
the Lessee, statements of operations, changes in
shareholders' equity, and cash flows for such period and
for the period from the beginning of the current fiscal
year of the Lessee to the end of such period, and a
balance sheet as at the end of such period, all in detail
and scope reasonably satisfactory to the Lessor.
(h) Interim Statements. Within 60 days after the close of
each Quarter, Lessee will provide Lessor a balance sheet
and statement of operations on Lessee certified by Lessee
to be correct and accurate; and such other information
respecting the financial condition and operation of Lessee
as Lessor may from time to time reasonably request.
(i) At any time an annual or quarterly report is due and the
Lessee cannot comply with the provisions of this
Agreement, an executive officer of the Lessee shall
provide to the Lessor a certificate stating the respect in
which it has failed to do so.
(j) Record Audit. Upon reasonable prior notice and during
business hours, permit any representative or agent of
Lessor to examine and audit any or all Lessee's books,
assets, and records requested by ▇▇▇▇▇▇.
(k) Adverse Change. Inform Lessor immediately of any material
adverse change in the financial condition of Lessee Lessee
will also promptly inform ▇▇▇▇▇▇ of any litigation or
threatened litigation, which might substantially affect
▇▇▇▇▇▇'s financial condition.
(l) Certain Defined Terms. As used herein the following terms
will have the following meanings:
1.1 "Capital Expenditures" shall mean, for any period
and with respect to any person, the aggregate of all
expenditures by such person and its subsidiaries
with respect to such period which should be
capitalized according to GAAP on a consolidated
balance sheet of such person and its subsidiaries,
including all expenditures with respect to fixed or
capital assets which should be so capitalized and,
without duplication, the amount of all Capitalized
Rentals.
1.2 "Capitalized Rentals" of any person shall mean as of
the date of any determination thereof the amount at
which the aggregate rentals due and to become due
under all capitalized leases under which such person
is a lessee would be reflected as a liability on a
consolidated balance sheet of such person.
1.3 "Consolidated EBITDA" shall mean, for any period,
consolidated net earnings during such period, plus
(to the extent deducted in determining consolidated
net earnings) (a) all interest charges on all
indebtedness (including Capitalized Rentals) of the
Lessee and its subsidiaries, (b) all provisions of
any Federal, state or other income taxes made by the
Lessee and its subsidiaries during such period and
(c) depreciation, amortization, or any other non-
cash charges for the Lessee and its subsidiaries for
such period.
1.4 "Consolidated Tangible Net Worth" shall mean, at any
time, Consolidated stockholders equity (determined
in accordance with GAAP) after, without duplication,
(i) excluding the effect of changes in GAAP after
September 29, 2001 and (ii) excluding any write-
downs of assets occurring subsequent to September
29, 2001 (x) under Financial Accounting Standards
Board Statement No. 5 relating to asset impairment,
(y) under Financial Accounting Standards Board
Statement No. 121 relating to asset impairment
and/or (z) pursuant to section 382 of the Code,
minus the net book value of all assets of the Lessee
and its subsidiaries, after deducting any reserves
applicable thereto, which would be treated as
intangible under GAAP, including, without
limitation, goodwill, trademarks, trade names,
service marks, brand names, copyrights, patents and
unamortized debt discount and expense (other than
debt expenses incurred in connection with the
financial restructuring with Lessees noteholders and
lender occurring as of January 14, 2002),
organizational expenses and the excess of the equity
in any subsidiary over the cost of the investment in
such subsidiary.
1.5 "Debt Service" shall mean, with respect to any
period, the sum of the following: (a) all interest
charges on all indebtedness (including Capitalized
Rentals) of the Lessee and its subsidiaries for such
period and (b) all payments of principal in respect
of debt of the Lessee and its subsidiaries
(including Capitalized Rentals) paid or payable
during such period after eliminating all offsetting
debits and credits between the Lessee and its
subsidiaries and all other items required to be
eliminated in the course of the preparation of
consolidated financial statements of the Lessee and
its subsidiaries in accordance with GAAP.
1.6 "Debt Service Coverage Ratio" shall mean, at any
time, the ratio of (a) Consolidated EBITDA for the
period of four consecutive Fiscal Quarters ending
on, or most recently ended prior to, such time to
(b) debt Service for such period. Notwithstanding
the foregoing, in the fourth Fiscal Quarter of
Fiscal Year 2003 and each of the first three Fiscal
Quarters of Fiscal Year 2004, the Debt Service
Coverage Ratio shall be annualized by multiplying
Consolidated EBITDA for the actual number of Fiscal
Quarters elapsed since the end of the third Fiscal
Quarter of Fiscal Year 2003 at the time of
computation by a fraction, the numerator of which is
4 and the denominator of which is the actual number
of Fiscal Quarters elapsed since the end of the
third Fiscal Quarter of Fiscal Year 2003.
1.7 "Fiscal Quarter" shall mean a fiscal quarter of the
Lessee.
1.8 "Fiscal Year" shall mean a fiscal year of the
Lessee.
1.9 "Interest Coverage Ratio" shall mean, at any time,
the ratio of (a) Consolidated EBITDA for the period
of four consecutive Fiscal Quarters ending on, or
most recently ended prior to, such time to (b) all
interest charges on all indebtedness (including
Capitalized Rentals) of the Lessee and its
subsidiaries for such period. Notwithstanding the
foregoing, in the fourth Fiscal Quarter of Fiscal
Year 2003 and each of the first three Fiscal
Quarters of Fiscal Year 2004, the Interest Coverage
Ratio shall be annualized by multiplying
Consolidated EBITDA for the actual number of Fiscal
Quarters elapsed since the end of the third Fiscal
Quarter of Fiscal Year 2003 at the time of
computation by a fraction, the numerator of which is
4 and the denominator of which is the actual number
of Fiscal Quarters elapsed since the end of the
third Fiscal Quarter of Fiscal Year 2003.
(m) Minimum Consolidated Tangible Net Worth. The Company will
not, at any time during any period set forth below, permit
Consolidated Tangible Net Worth to be less than the amount
set forth opposite such period below:
Period
Minimum Consolidated
Tangible Net Worth
Fiscal Year 2002
$11,000,000
Fiscal Year 2003
$9,000,000
First two Fiscal Quarters
of Fiscal Year 2004
$10,000,000
Third Fiscal Quarter of
Fiscal Year 2004 and
thereafter
$11,000,000 plus an
aggregate amount
equal to 50% of
Consolidated Net
Earnings (but, in
each case, only if a
positive number) for
each completed
Fiscal Quarter
beginning with the
third Fiscal Quarter
of Fiscal Year 2004
(n) Minimum Consolidated EBITDA (a) The Lessee will not,
on the last day of any Fiscal Quarter set forth below,
permit Consolidated EBITDA calculated using Consolidated
EBITDA for the Fiscal Year to date as of the end of each
such period (except as otherwise indicated with respect to
the last two periods below) to be less than the amount set
forth opposite such period below:
Period (FQ = Fiscal
Quarter)
Minimum Consolidated
EBITDA
First FQ of Fiscal Year
2002
($2,300,000)
Second FQ of Fiscal Year
2002
($3,800,000)
Third FQ of Fiscal Year
2002
($4,150,000)
Fourth FQ of Fiscal Year
2002
($4,300,000)
First FQ of Fiscal Year
2003
($250,000)
Second FQ of Fiscal Year
2003
$535,000
Third FQ of Fiscal Year
2003 (Consolidated EBITDA
for such FQ only)
$1,438,000
Fourth FQ of Fiscal Year
2003 (Consolidated EBITDA
for such FQ only)
$1,356,000
(b) If Consolidated Tangible Net Worth on the last
day of any Fiscal Quarter set forth below is less than
$14,000,000, the Lessee will not, on the last day of such
Fiscal Quarter, permit Consolidated EBITDA for such Fiscal
Quarter to be less than the amount set forth opposite such
period below:
Period (FQ = Fiscal
Quarter)
Minimum Consolidated
EBITDA
First FQ of Fiscal Year
2004
$1,666,000
Second FQ of Fiscal Year
2004
$1,666,000
Third FQ of Fiscal Year
2004
$1,666,000
Fourth FQ of Fiscal Year
2004
$1,666,000
First FQ of Fiscal Year
2005 and thereafter
$2,441,000
(o) Interest Coverage Ratio. The Lessee will not, for any
Fiscal Quarter commencing with the Fiscal Quarter ending
in September 2003, permit the Interest Coverage Ratio to
be less than 1.10 to 1.00.
(p) Debt Service Coverage Ratio. The Lessee will not, for any
Fiscal Quarter commencing with the Fiscal Quarter ending
in September 2003, permit the Debt Service Coverage Ratio
to be less than 1.00 to 1.00.
(q) Capital Expenditures. The Lessee will not, and will not
permit any subsidiary to, make or become committed to make
(without duplication) any Capital Expenditure if the
aggregate amount of all Capital Expenditures made or
committed to be made by the Lessee and its subsidiaries in
(i) Fiscal Year 2002 would exceed $1,500,000, (ii) Fiscal
Year 2003 would exceed $1,500,000, plus an amount equal to
the maximum amount of Capital Expenditures which could
have been incurred in compliance with this Section in
Fiscal Year 2002 but were not incurred during Fiscal Year
2002, (iii) Fiscal Year 2004 would exceed $2,000,000 plus
an amount (which shall in no event exceed $1,000,000)
equal to the maximum amount of Capital Expenditures which
could have been incurred in compliance with this Section
in Fiscal Year 2003 but were not incurred during Fiscal
Year 2003 and (iv) Fiscal Year 2005 and each Fiscal Year
thereafter would exceed $3,000,000. Notwithstanding
anything to the contrary contained in this Section, the
foregoing limitations on Capital Expenditures for any
Fiscal Year shall be adjusted upward for any Capital
Expenditures that are necessary for compliance with
requirements of the United States Environmental Protection
Agency or any other Governmental Authority.
(r) Specific Equipment. Certain equipment as further
described in Exhibit A located at Ashland, Kentucky.
(s) Lien declaration. Lessee represents and warrants that
Lessor is the absolute owner of all equipment described
in the Equipment Schedule A dated as of September 29, 2000
and that such equipment is owned free and clear of all
liens, encumbrances, mortgages, and security interests of
any kind except as presented in the original lease
request.
Dated as of January 14, 2002
KENTUCKY ELECTRIC STEEL, INC. FIFTH THIRD BANK, OHIO VALLEY
By: \s\▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: \s\▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President & CFO Title: President
GENERAL ELECTRIC CAPITAL CORPORATION
By: \s\▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title Senior Risk Analyst
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