THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT, dated as of September 13, 1996
(this "Amendment") by and among CELADON GROUP, INC., a Delaware corporation
("CG"), CELADON TRUCKING SERVICES, INC., a New Jersey corporation ("Trucking")
(collectively with CG, referred to as the "Companies" and individually, each a
"Company"), the Banks set forth on the signature pages of the Credit Agreement
referred to below (collectively, the "Banks" and individually, each a "Bank"),
NBD BANK, a Michigan banking corporation, formerly known as NBD Bank, N.A., as
co-agent for the Banks ("Co-Agent A") and THE FIRST NATIONAL BANK OF BOSTON, a
national banking association, as co-agent for the Banks ("Co-Agent B" and
together with Co-Agent A, referred to as the "Co-Agents").
RECITALS
A. CG, Trucking, the Banks and the Co-Agents are parties to a Credit
Agreement dated as of June 1, 1994, as amended by a First Amendment to Credit
Agreement dated as of October 31, 1994, a Second Amendment to Credit Agreement
dated as of October 31, 1995 and letter agreements dated January 31, 1996,
February 15, 1996 and June 29, 1996 (as amended, the "Credit Agreement").
B. The Companies have defaulted under the Credit Agreement.
C. The Companies have requested that the Co-Agents and the Banks waive
such defaults, and the Co-Agents and the Banks are willing to do so strictly in
accordance with the terms hereof, and provided the Credit Agreement is amended
as set forth herein, and the Companies have agreed to such amendments.
AGREEMENT
Based upon these recitals, the parties agree as follows:
1. Upon satisfaction of the conditions set forth in paragraph 4 hereof,
the Credit Agreement shall hereby be amended as of the effective date hereof as
follows:
(a) The definition of "Applicable Margin" shall be amended as follows:
(i) Line 4 in the table shall be deleted and line 4 below shall be
substituted in place thereof and new lines 5 and 6 shall be added to the table
to read as follows:
Revolving Credit Letter of Commitment
Loans Term Loans Credit Fees Fees
---------------- ---------- ----------- ---------
4. If the Leverage
Ratio is greater
than or equal to
2.25 to 1.0 and
less than 2.75 to
1.0 AND the Fixed
Charge Ratio is
less than or equal
to 1.35 to 1.0 and
greater than 1.20
to 1.00 1-3/8% 1-5/8% 1-3/8% 1/2%
5. If the Leverage
Ratio is greater
than or equal to
2.75 to 1.0 and
less than 3.0 to
1.0 AND the Fixed
Charge Coverage
Ratio is less than
or equal to 1.20 to
1.0 and greater than
1.10 to 1.0 1-5/8% 1-7/8% 1-5/8% 1/2%
6. If the Leverage
Ratio is greater
than or equal to
3.0 to 1.0 AND
the Fixed Charge
Coverage Ratio is
less than or equal
to 1.10 to 1.0 2% 2-1/4% 2% 1/2%
(ii) The last paragraph of such definition shall be
amended by deleting the reference in the fourth
sentence to "clause 3" and inserting "clause 6" in
place thereof and the following language shall be
added at the bottom of the last paragraph:
Notwithstanding the foregoing, the Companies, the Banks
and the Agent agree that the Applicable Margin shall be
as set forth in line
-2-
6 of the table above until the Banks receive the
financial statements for the fiscal quarter ending
September 30, 1996, at which time the Applicable Margin
shall be determined as set forth above.
(b) The definition of "Borrowing Base" shall be amended by adding the
following at the end thereof: "plus, (e) during such time as the Banks shall
have a first mortgage lien on the Property pursuant to the Mortgage, an amount
equal to 50% of the depreciated cost basis of the Property, which depreciated
cost basis shall not exceed $6,500,000".
(c) The definition of "Eligible Equipment" shall be amended by adding
the following language at the end of clause (e) therein: "provided" however,
equipment which is leased to Greenbriar Rental Services, Inc. on terms which the
Banks have consented to in writing in each case and which leases have been
assigned to Co-Agent A, for the benefit of the Banks, shall not be excluded from
"Eligible Equipment" pursuant to this clause (e)."
(d) The definition of "Fixed Charge Ratio" shall be amended by adding
the following language at the end of clause (A)(ii): "and all rents paid or
required to be paid by such person in connection with any sale/leaseback
transaction of the Property."
(e) The definition of "Fixed Charges" shall be amended by adding the
following language at the end of clause (e): "and all rents paid or required to
be paid by such person in connection with any sale/leaseback transaction of the
Property."
(f) New definitions of "Mortgage" and "Property" shall be added in
appropriate alphabetical order to read as follows:
"Mortgage" shall mean the mortgage, security
agreement and assignnent of rents entered into by
Celadon Real Estate Corp. granting a mortgage lien on
the Property to the Agent and the Banks to secure the
Advances under this Agreement, in form and substance
satisfactory to the Bank.
"Property" shall mean the headquarters of the
Companies located at 9503 East 33rd Street,
Indianapolis, Indiana 46236.
(g) The definition of "Security Documents" shall be amended by adding
the following language immediately after the reference to "Security Agreement"
contained therein: "the Mortgage".
(h) The definition of "Termination Date" in Section 1.1 shall be amended
by deleting the reference therein to "September 15, 1996" and inserting "April
1, 1997" in place thereof.
-3-
(i) A new definition of "Third Amendment Effective Date" shall be added
to read as follows:
"Third Amendment Effective Date" shall mean September
13, 1996.
(j) Section 5.1(d)(iv) shall be amended by adding the following language
immediately after the reference to "hereto" in line 2: "and a profit and loss
statement for Trucking prepared as of the end of such month".
(k) Section 5.1(f) shall be amended by adding a new paragraph at the end
thereof:
Celadon Real Estate Corp. executed and delivered
the Mortgage to Co-Agent A and the Banks on the Third
Amendment Effective Date. In the event the Companies
and Celadon Real Estate Corp. complete the
sale/leaseback transaction currently contemplated for
the Property, Co-Agent A shall execute and deliver to
the Companies a release of the Mortgage and the Banks
hereby authorize Co-Agent A to execute such release on
their behalf. In the event such sale/leaseback is not
completed on or before 90 days after the Third
Amendment Effective Date, the Companies also agree to
deliver, within 15 days thereafter, a survey, a title
insurance policy, environmental investigation and any
and all other documents or instruments reasonably
requested by the Banks in connection therewith, in each
case satisfactory to the Banks.
(l) Sections 5.2(a), (b), (c) and (d) shall be deleted in their entirety
and the following shall be inserted in place thereof:
(a) Tangible Net Worth. Permit or suffer the
Consolidated Tangible Net Worth of the Companies and
their Subsidiaries to be less than (i) at any time
during the period from and including September 30, 1996
to and including December 30, 1996, $35,250,000, (ii)
at any time during the period from and including
December 31, 1996 to and including March 30, 1997,
$36,250,000, (iii) at any time during the period from
and including March 31, 1997 to and including June 29,
1997, $36,750,000, (iv) at any time during the period
from and including June 30, 1997 to and including
September 29, 1997, $38,000,000, (v) at any time during
the period from and including September 30, 1997 to and
including December 30, 1997, $39,250,000, (vi) at any
time during
-4-
the period from and including December 31, 1997 to and
including March 30, 1998, $40,500,000, (vii) at any
time during the period from and including March 31,
1998 to and including June 29, 1998, $41,500,000, and
(viii) at any time thereafter, an amount equal to the
sum of (A) $43,000,000 p lus (B) an amount equal to 75%
of the Consolidated Cumulative Net Income (without
reduction for net loss) of the Companies and their
Subsidiaries, to be added as of the end of each fiscal
quarter of the Company commencing with the fiscal
quarter ending September 30, 1998 plus (C) an amount
equal to 80% of the proceeds received in connection
with the offering of any securities of any Company.
(b) Leverage Ratio. Permit or suffer the Leverage
Ratio as of the end of any fiscal quarter of the
Companies to be greater than: (i) as of the fiscal
quarter ending in September, 1996, 3.85 to 1.0, (ii) as
of the fiscal quarter ending in December, 1996, 3.45 to
1.0, (iii) as of the fiscal q quarter ending in March,
1997, 3.30 to 1.0, (iv) as of the fiscal quarter ending
in June, 1997, 3.15 to 1.0, (v) as of the fiscal
quarter ending in September, 1997, 3.0 to 1.0, (vi) as
of the fiscal quarter ending in December, 1997, 2.75 to
1.0, (vii) as of the fiscal quarter ending in March,
1998, 2.5 to 1.0 and (viii) as of the fiscal quarter
ending in June, 1998 and as of the end of each fiscal
quarter thereafter, 2.25 to 1.0.
(c) Fixed Charge Ratio. Permit or suffer the Fixed
Charge Ratio to be less than: (i) 0.85 to 1.0 as of and
for the fiscal quarter ending in September, 1996, (ii)
1.0 to 1.0 as of and for the fiscal quarter ending in
December, 1996 and for the immediately preceding fiscal
quarter, (iii) 1.05 to 1.0 as of and for the fiscal
quarter ending in March, 1997 and for the preceding two
fiscal quarters, (iv) 1.10 to 1.0 as of and for the
fiscal quarter ending in June, 1997 and for the
preceding three fiscal quarters, and (v) 1.20 to 1.0
thereafter, as of the end of each fiscal quarter of the
Companies for the preceding twelve-month period.
(d) Interest Coverage Ratio. Permit or suffer the
Interest Coverage Ratio to be less than (i) 1.0 to 1.0
as of and for the fiscal quarter ending in September,
1996, (ii) 1.50 to 1.0 as of and for the fiscal quarter
ending in December, 1996 and for the immediately
preceding fiscal quarter, (iii) 1.50 to 1.0 as of and
for the fiscal quarter ending in March, 1997 and for
the preceding two fiscal quarters, (iv) 1.75 to 1.0 as
of and for the fiscal quarter ending in June, 1997 and
for the preceding three fiscal quarters, (v) 2.25 to
-5-
1.0 as of and for the fiscal quarter ending in
September, 1997 and for the preceding three fiscal
quarters, and (vi) 2.5 to 1.0 thereafter, as of the end
of each fiscal quarter of the Companies for the
preceding twelve-month period.
(m) Section 5.2 shall be amended by adding a new Section 5.2(m) at the
end thereof to read as follows:
(m) EBIT. Permit or suffer the EBIT of Trucking
for each fiscal month to be less than $0 as of the end
of each fiscal month of Trucking.
(n) Schedules 4.4, 4.5, 4.13, 5.2(e), 5.2(f) and 5.2(k) attached to the
Credit Agreement shall be replaced with the forms of such respective Schedules
attached hereto.
2. From and after the effective date of this Amendment, references to
the "Credit Agreement" in the Credit Agreement, the Revolving Credit Notes, the
Term Notes, the Security Documents and all other documents executed pursuant to
the Credit Agreement shall be deemed references to the Credit Agreement as
amended hereby.
3. Each Company represents and warrants to the Co-Agents and the Banks
that:
(a) (i) The execution, delivery and performance of this Amendment by the
Company and all agreements and documents delivered pursuant hereto by the
Company have been duly authorized by all necessary corporate action and do not
and will not require any consent or approval of its stockholders, violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to it or
of its articles of incorporation or bylaws, or result in a breach of or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the Company is a party or by which
it or its properties may be bound or affected; (ii) no authorization, consent,
approval, license, exemption of or filing a registration with any court or
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary to the valid execution, delivery or
performance by the Company of this Amendment and all agreements and documents
delivered pursuant hereto and (iii) this Amendment and all agreements and
documents delivered pursuant hereto by the Company are the legal, valid and
binding obligations of the Company enforceable against it in accordance with the
terms thereof.
(b) After giving effect to the amendments contained herein and effected
pursuant hereto, the representations and warranties contained in Article IV of
the Credit Agreement are true and correct on and as of the effective date hereof
with the same force and effect as if made on and as of such effective date.
-6-
(c) Other than the Existing Defaults, as defined in and to be waived
pursuant to paragraph 5, no Event of Default (as defined in Article VI of the
Credit Agreement) and no Default shall have occurred and be continuing or will
exist under the Credit Agreement as of the effective date hereof
4. This Amendment shall not become effective until:
(a) The favorable written opinion of counsel for the Companies in form
and substance satisfactory to the Co-Agents;
(b) Celadon Real Estate Corp. shall have executed and delivered the
Mortgage to Co-Agent A;
(c) Trucking shall have assigned its interest as lessor in the lease
agreements with Greenbriar Rental Services, Inc. pursuant to an assignment
agreement in form and substance satisfactory to the Banks;
(d) The Company shall have delivered to the Banks a copy of the contract
between the Company and Chrysler Corporation regarding the Mexican business,
executed by all parties thereto;
(e) The Banks shall have completed their comprehensive field audit of
the Companies and the results of such audit shall be satisfactory to the Banks;
(f) The Companies shall have delivered to Co-Agent A such other
documents and instruments as the Co-Agents and the Banks may request; and
(g) The Company shall have paid an amendment fee to the Banks for their
pro rata benefit in the amount of $87,500 and all expenses of counsel described
in paragraph 6 hereof.
5. The Companies acknowledge that Events of Default have occurred
because: (a) the Companies have breached the covenants contained in Sections
5.2(a), (b), (c) and (d) of the Credit Agreement for the fiscal quarter ending
June 30, 1996; (b) the Companies have breached the Credit Agreement by including
in the Borrowing Base equipment which does not qualify as "Eligible Equipment"
because either Co-Agent A is not listed as lienholder on the title for such
equipment and, therefore, Co-Agent A does not hold a perfected security interest
in such equipment or the equipment is subject to a lease; (c) the Companies have
breached the covenant contained in Section 5.2(j) of the Credit Agreement
because Group repurchased approximately $130,000 of its capital stock during the
continuance of a Default and (d) the Companies have breached the covenant
contained in Section 5.2(e)(viii) because the Companies incurred additional
Indebtedness after the occurrence and during the continuance of an Event of
Default (the "Existing Defaults"). The Companies acknowledge that the Co-Agents
and the Banks have the
-7-
ability to accelerate all indebtedness and exercise all of their rights and
remedies under the Credit Agreement. In consideration of the execution of this
Amendment and subject to the satisfaction of all conditions required by
Paragraph 4 hereof, the Co-Agents and the Banks agree to waive the Existing
Defaults, provided that: (a) such waiver shall waive only the Existing Defaults
and does not waive any other Event of Default, including without limitation any
future Event of Default caused by any violation of Sections 5.2(a), (b), (c),
(d), (e) or j) or any miscalculation of the Borrowing Base and (b) the Companies
covenant and agree that they shall complete title applications for all
certificated vehicles/equipment for which NBD Bank, as Co-Agent A, is not listed
as lienholder and all such applications shall be submitted to the Illinois
Secretary of State within l5 days after the Third Amendment Effective Date,
copies of which shall promptly be submitted to the Banks to demonstrate
compliance with this covenant. This waiver shall not be deemed to be a waiver,
or a consent to any modification or amendment, of any other term or condition of
the Credit Agreement or any term or condition of any agreement, instrument or
document referred to therein or executed pursuant thereto, or to prejudice any
present or future right or rights which the Co-Agents or any of the Banks now
has or may have thereunder.
6. Each Company agrees to pay and save Co-Agents harmless from liability
for the payment of all costs and expenses arising in connection with this
Amendment, including the reasonable fees and expenses of Dickinson, Wright,
Moon, Van Dusen & Freeman, counsel to Co-Agent A, and Bingham, Dana & Gould,
counsel for Co-Agent B, in connection with the preparation and review of this
Amendment and any related documents and review of documents related to any
sale/leaseback transaction involving the Property.
7. The terms used but not defined herein shall have the respective
meanings ascribed thereto in the Credit Agreement. Except as expressly
contemplated hereby, the Credit Agreement, and all related notes, guaranties,
certificates, instruments and other documents, are hereby ratified and confirmed
and shall remain in full force and effect, and each Company acknowledges that it
has no defense, offset or counterclaim thereunder.
8. This Amendment shall be governed by and construed in accordance with
the laws of the State of Michigan.
9. This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Amendment by signing any such counterpart.
-8-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
CELADON GROUP, INC.
By: Don S. Snyder
----------------------------------------
Its: Chief Financial Officer
------------------------------------
CELADON TRUCKING SERVICES, INC.
By: Don S. Snyder
----------------------------------------
Its: Chief Financial Officer
------------------------------------
NBD BANK, formerly known as NBD Bank, N.A.,
individually and as Co-Agent A
By:
----------------------------------------
Its:
------------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Co-Agent B
By:
----------------------------------------
Its:
------------------------------------
-9-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
CELADON GROUP, INC.
By:
----------------------------------------
Its:
------------------------------------
CELADON TRUCKING SERVICES, INC.
By:
----------------------------------------
Its:
------------------------------------
NBD BANK, formerly known as NBD Bank, N.A.,
individually and as Co-Agent A
By: Michael C. Malony
---------------------------------------
Its: Vice President
-----------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Co-Agent B
By:
----------------------------------------
Its:
------------------------------------
-9-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
CELADON GROUP, INC.
By:
----------------------------------------
Its:
------------------------------------
CELADON TRUCKING SERVICES, INC.
By:
----------------------------------------
Its:
------------------------------------
NBD BANK, formerly known as NBD Bank, N.A.,
individually and as Co-Agent A
By:
----------------------------------------
Its:
------------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
individually and as Co-Agent B
By: Michael J. Blake
---------------------------------------
Its: Director
------------------------------------
-9-