Exhibit 10.1

 

AMENDMENT NO. 1 AND WAIVER TO CREDIT AGREEMENT

 

AMENDMENT NO. 1 AND WAIVER TO CREDIT AGREEMENT, dated as of September 7, 2012
(this “Amendment”), among NEW ENTERPRISE STONE & LIME CO., INC. (the “Borrower”)
and the Lenders signatories hereto.

 

W I T N E S S E T H:

 

WHEREAS, the Borrower, the lenders from time to time parties thereto (the
“Lenders”) and Manufacturers and Traders Trust Company, individually, as the
Issuing Bank, a Lender, as the Swing Lender and as the Agent, are parties to the
Credit Agreement, dated as of March 15, 2012 (the “Existing Credit Agreement”);
terms not otherwise defined herein are used as defined in the Existing Credit
Agreement; and

 

WHEREAS, on the Borrower has notified the Agent that it will be unable to
deliver its financial statements for the fiscal year ended February 29, 2012 in
a timely way; and

 

WHEREAS, the Borrower has requested that the Lenders modify the requirement to
deliver the financial statements due on May 29, 2012 to allow them to be
delivered on October 1, 2012 and the Lenders are willing, subject to the terms
and conditions set forth herein, to modify the requirement under the Credit
Agreement, as more specifically set forth herein (the Existing Credit Agreement,
as amended by this Amendment, and as the same may be amended, restated, modified
or supplemented from time to time being referred to as the “Credit Agreement”);

 

NOW, THEREFORE, in consideration of the agreements herein contained, and for
other valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows.

 

ARTICLE 1.                             AMENDMENTS.  Upon satisfaction of the
conditions set forth in Article 3 below, effective as of the date hereof, the
Existing Credit Agreement shall be amended in the manner set forth below.

 

(a)                                  Section 1.1—Amendment to Definition of
“Borrowing Base”.  The definition of the term Borrowing Base set forth in
Section 1.1 (Defined Terms) of the Existing Credit Agreement is hereby amended
to add the following provisions following clause (e) thereof:

 

Notwithstanding the foregoing, at any time that the Fixed Charge Coverage Ratio
calculated on a trailing twelve month basis using the financial statements most
recently delivered pursuant to Subsection 6.1.2 (Delivery of Quarterly Financial
Statements) is less than 1.00 to 1.00, the Borrowing Base shall be an amount
equal to the sum of :

 

(A)                              the lesser of (i) $56,000,000 and
(ii) sixty—five percent (65%) of the Appraised Value of the Eligible Real
Property, plus

 

(B)                                seventy percent (70%) of all Eligible
Accounts, plus

 

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(C)                                forty percent (40%) of Eligible Inventory of
the Borrower and its Subsidiaries, minus

 

(D)                               any and all reserves that the Agent may (and
which the Agent is hereby entitled to) establish from time to time in its
Permitted Discretion, minus

 

(E)                                 any and all reserves that the Agent may (and
which the Agent is hereby entitled to) establish from time to time with respect
to Inventory that is branded or otherwise incorporates Intellectual Property in
its sole discretion.

 

(b)                                 Section 1.1—Amendment to Definition of
“EBITDA”.  The definition of the term EBITDA set forth in Section 1.1 (Defined
Terms) of the Existing Credit Agreement is hereby amended to

 

(i)                                     Remove the word “and” from immediately
before clause (d) therein.

 

(ii)                                  Insert the following before the final
period therein: “, (e) for any period ending on or before February 28, 2014, for
all purposes other than the calculation of Excess Cash Flow, (i) non-recurring
expenses related to the implementation of the enterprise-wide resources planning
system, (ii) non-recurring consulting fees of the Borrower’s consultants
relating to the implementation of the enterprise-wide resources planning system
and the review of the Profit and Liquidity Enhancement Plan and Reporting
Enhancement Plan, and (iii) non-recurring auditing expenses and fees from the
Borrower’s auditors, in each case, as may be approved by the Agent, and (f) such
other nonrecurring expenses as the Agent may approve.”

 

(c)                                  Section 1.1—Amendment to Definition of
“LIBOR”.  The definition of the term LIBOR set forth in Section 1.1 (Defined
Terms) of the Existing Credit Agreement is hereby amended to add the following
sentence at the end thereof:  “Notwithstanding the foregoing, LIBOR shall be
1.25% for any Interest Period if the rate obtained or determined using the means
described above is less than 1.25% for such Interest Period.”

 

(d)                                 Section 1.1—New Defined Terms.  The
following defined term is hereby added to Section 1.1 (Defined Terms) of the
Existing Credit Agreement:

 

Adjusted EBITDA:  means, for any period, EBITDA for such period plus the sum of
the following (without duplication, including without duplication of amounts
added back to Net Income in the calculation of EBITDA):

 

(a) onetime expenses related to the implementation of the enterprise-wide
resources planning system;

 

(b) consulting fees of the Borrower’s consultants that review the Profit and
Liquidity Enhancement Plan and Reporting Enhancement Plan to the extent that
such fees relate to the

 

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development, review or implementation of such plans;

 

(c) the pro forma annual reductions in accounts receivable and inventory set
forth in the Profit and Liquidity Enhancement Plan, giving effect thereto as
though such Profit and Liquidity Enhancement Plan had been fully implemented
prior to the commencement of such period, in an amount not to exceed $10,000,000
in fiscal year 2013 and $5,000,000 in fiscal year 2014; and

 

(d) for each of the fiscal years ending 2013 and 2014, the pro forma effect of
any initiatives or procedures that will be put in place during such year for any
improvements of EBITDA set forth in the Profit and Liquidity Enhancement Plan,
giving effect thereto as though such Profit and Liquidity Enhancement Plan had
been fully implemented prior to the commencement of such period.

 

Profit and Liquidity Enhancement Plan:  the meaning specified in Subsection
6.1.12 (Additional Reporting).

 

Reporting Enhancement Plan:  the meaning specified in Subsection 6.1.12
(Additional Reporting).

 

(e)                                  Subsection 6.1.2.  Subsection 6.1.2
(Delivery of Quarterly Financial Statements) of the Existing Credit Agreement is
hereby amended to insert the following sentence as the last sentence in such
Subsection:  “Notwithstanding the foregoing, Borrower may deliver the financial
statements required pursuant to this Subsection 6.1.2 for the fiscal quarters
ended May 31, 2012 and August 31, 2012 on or before November 30, 2012 (or such
later date as the Agent may agree) rather than the date set forth above.”

 

(f)                                    Subsection 6.1.3.  Subsection 6.1.3
(Delivery of Annual Financial Statements) of the Existing Credit Agreement is
hereby amended to insert the following sentence as the last sentence in such
Subsection:  “Notwithstanding the foregoing, Borrower may deliver the financial
statements required pursuant to this Subsection 6.1.3 for the fiscal year ended
February 29, 2012 on or before October 1, 2012 (or such later date as the Agent
may agree) rather than the date set forth above.”

 

(g)                                 Subsection 6.1.9. Subsection 6.1.9 (Field
Examinations) of the Existing Credit Agreement is hereby amended and restated in
its entirety to read as follows:

 

6.1.9 Field Examinations. The Agent may, at any time, during normal business
hours upon reasonable advance notice, conduct such field examinations as it may
deem necessary or advisable, in its discretion, to evaluate the Inventory,
Accounts and other assets of the Borrower and the other Loan Parties, which
field examinations shall be at the Borrower’s sole cost and expense.

 

(h)                                 Subsection 6.1.12.   A new Subsection 6.1.12
(Additional Reporting) shall be added immediately following Subsection 6.1.11,
which new subsection shall read as follows:

 

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6.1.12 Additional Reporting. As soon as practicable, and in any event no later
than October 1, 2012 (or such later date as the Agent may agree), the Borrower
shall deliver to the Agent (a) a revised set of projections through the Maturity
Date, which projections shall have been reviewed and discussed with the
Borrower’s financial consultant, and (b) a profit and liquidity Enhancement Plan
(the “Profit and Liquidity Enhancement Plan”), which shall include
identification of expense reduction and liquidity improvement opportunities and
timeline for the realization of the expense reductions and liquidity
improvements, which shall have been reviewed and discussed with the Borrower’s
financial consultant and which would result in a Fixed Charge Coverage Ratio,
calculated using Adjusted EBITDA rather than EBITDA, in excess of 1.00 to 1.00
for fiscal year 2013 and 2014.

 

As soon as practicable and in any event no later than October 15, 2012 (or such
later date as the Agent may agree), the Borrower shall deliver to the Agent, a
plan (the “Reporting Enhancement Plan”) for enhanced internal policies and
procedures for expense management and capital expenditures, in addition to
improve financial and collateral reporting.   The plan shall have been reviewed
and discussed with a nationally recognized independent public accounting firm
engaged by the Borrower.  The Reporting Enhancement Plan shall, among other
things, provide the timetable for each of Borrower and all of its Restricted
Subsidiaries by which Borrower and such Subsidiaries would be able to generate
the information referenced in Section 8.28 herein in a timely and accurate
manner, in addition to all other reporting required under the Credit Agreement.

 

For the sake of clarity, the requirements of this Section 6.1.12 are as stated
above and do not impose an obligation on the Borrower to achieve the Fixed
Charge Coverage Ratio (calculated using Adjusted EBITDA rather than EBITDA)
referred to in this Section 6.1.12, it being understood that the springing Fixed
Charge Coverage Ratio test set forth in Section 7.1 (Fixed Charge Coverage
Ratio) remains the only such fixed charge test in this Agreement.  Rather, the
Borrower is required to deliver the Profit and Liquidity Enhancement Plan as
more fully set forth above and to implement the recommendations set forth
therein.

 

(i)                                     Section 8.28.  Section 8.28 (Further
Assurances)  is hereby amended by adding the following at the end thereof:
“Promptly following delivery of  the Profit and Liquidity Enhancement Plan, the
Borrower shall implement the recommendations set forth therein, based upon a
timeline reasonably acceptable to the Agent. Promptly upon delivery of  the
Reporting Enhancement Plan, the Borrower shall implement based upon a timeline
reasonably acceptable to the Agent, the recommendations set forth in such plan
with the result that, consistent with the timeline established as aforesaid,
among other things,  (i) on a monthly basis within 30 days of month end, the
Borrower shall deliver a

 

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balance sheet, income statement and statement of cash flows (which requirement
shall modify Subsection 6.1.1 (Delivery of Monthly Financial Statements) above);
(ii) if at any time the Excess Availability shall be less than the greater of
(A) $35,000,000 or (B) 20% of the lesser of (x) the RC Commitment and (y) the
amount of the Borrowing Base, then thereafter the Borrower shall deliver a
weekly borrowing base certificate with updated billings, collections and any
adjustments, a weekly sales journal, a weekly cash receipts journal and a weekly
adjustments journal provided to the bank the following Tuesday of each week
(which requirement shall modify Subsection 6.1.7 (Borrowing Base Certificate)
above); and (iii)  the Borrower shall deliver an accounts receivable aging,
accounts payable aging and inventory report within 30 days of month end (which
requirement shall modify Subsection 6.1.10 (Aging Reports) above).”

 

ARTICLE 2.                             REPRESENTATIONS AND WARRANTIES.  In order
to induce the Lenders, the Issuing Bank, the Swing Lender and the Agent to agree
to amend the Existing Credit Agreement in the manner set forth herein, the
Borrower makes the following representations and warranties, which shall survive
the execution and delivery of this Amendment:

 

(a)                                  As of the date hereof, after giving effect
to the amendments and waivers herein, no Default or Event of Default has
occurred and is continuing;

 

(b)                                 Each of the representations and warranties
of the Borrower and the other Loan Parties made herein and in the other Loan
Documents is true and correct in all respects (or in all material respects if
any such representation or warranty is not by its terms already qualified as to
materiality) after giving effect to the amendments and waivers contemplated
hereby as though each such representation and warranty were made at and as of
the date hereof unless relating solely to an earlier date, in which case such
representation and warranty shall be true and correct in all respects as of such
earlier date (or in all material respects as of such earlier date if any such
representation or warranty is not by its terms qualified as to materiality);

 

(c)                                  No consent or approval of any third party,
including, without limitation, any governmental agency or authority, is
necessary with respect to any Loan Party in connection with the execution,
delivery and/or performance of this Amendment and/or the enforceability hereof. 
Upon execution by the parties set forth on the signature lines below, this
Amendment will constitute the legal, valid and binding obligation of the
Borrower, enforceable against it in accordance with the terms hereof; and

 

(d)                                 None of the Borrower or any Loan Party has
any existing claims or causes of action against the Agent, the Issuing Bank or
any of the Lenders in connection with the Loan Documents or the Secured
Obligations.

 

ARTICLE 3.                             EFFECTIVENESS.  The amendments to the
Existing Credit Agreement set forth herein shall become effective, as of the
date hereof, immediately upon the last to occur of the following:

 

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(a)                                  The Agent shall have received counterparts
of this Amendment duly executed and delivered on behalf of the Loan Parties and
the Majority Lenders.

 

(b)                                 The Agent shall have received payment by the
Borrower of all invoiced out-of-pocket fees, costs, expenses (including but not
limited to reasonable attorney fees) and other amounts required to be paid by
Borrower in connection with the execution and delivery of this Amendment or
otherwise under the Loan Documents.

 

(c)                                  The Agent shall have received such other
information as it shall reasonably request before clauses (a) and (b),
inclusive, above have been satisfied.

 

ARTICLE 4.                             MISCELLANEOUS.

 

4.1                                 Counterparts.  This Amendment may be
executed in counterparts and by different parties hereto in separate
counterparts, each of which, when executed and delivered, shall be deemed to be
an original and all of which, when taken together, shall constitute one and the
same instrument.  A photocopied, facsimile or pdf signature shall be deemed to
be the functional equivalent of a manually executed original for all purposes.

 

4.2                                 Ratification.  Except as set forth in
Articles 1 and 6, no amendment or modification is intended hereby.  The Existing
Credit Agreement, as amended and modified by this Amendment, and the other
agreements, documents and instruments delivered in connection with the Existing
Credit Agreement (and/or in connection with this Amendment) are, and shall
continue to be, in full force and effect, and each of the parties hereto hereby
confirms, approves and ratifies in all respects the Existing Credit Agreement,
as amended by this Amendment, and each of the other agreements, documents and
instruments delivered in connection with the Existing Credit Agreement (and/or
in connection with this Amendment).  Without limiting the generality of the
foregoing, the undersigned hereby confirm that, as of the date hereof, the
pledges and the security interest granted pursuant to such agreements continue
to secure all of the obligations under and in respect of (i) the Existing Credit
Agreement as amended hereby and (ii) the related agreements, documents and
instruments and acknowledges that it has no defenses or set offs to the amounts
due under the Loan Documents.

 

4.3                                 Payment of Expenses.  Without limiting other
payment obligations of the Borrower set forth in the Credit Agreement, the
Borrower agrees to pay all reasonable costs and expenses incurred by Agent in
connection with the preparation, execution and delivery of this Amendment and
any other documents, agreements and/or instruments which may be delivered in
connection herewith, including, without limitation, the reasonable fees and
expenses of Agent’s counsel, Drinker Biddle & Reath LLP.

 

4.4                                 Governing Law.  This Amendment shall be
construed in accordance with, and governed by, the internal laws of the
Commonwealth of Pennsylvania, without regard to the choice of law principles of
such state.

 

4.5                                 References.  From and after the effective
date of this Amendment, each reference in the Credit Agreement to “this
Agreement”, “hereof”, “hereunder” or words of like import, and all references to
the Credit Agreement in any and all agreements, instruments, certificates and
other documents relating to the Credit Agreement, shall be deemed to mean the

 

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Credit Agreement as modified and amended by this Amendment and as the same may
be further amended, modified or supplemented in accordance with the terms
thereof.

 

4.6                                 References.  From and after the effective
date of this Amendment, each reference in the Credit Agreement to “this
Agreement”, “hereof”, “hereunder” or words of like import, and all references to
the Credit Agreement in any and all agreements, instruments, certificates and
other documents relating to the Credit Agreement, shall be deemed to mean the
Credit Agreement as modified and amended by this Amendment and as the same may
be further amended, modified or supplemented in accordance with the terms
thereof.

 

ARTICLE 5.                             WAIVER.  Effective upon the satisfaction
of all conditions to the effectiveness of this Amendment, Lenders agree to waive
any Defaults or the Events of Default that would not have existed had the
amendments and modification set forth herein been in effect prior to the date
such conditions were satisfied, including, but subject to the provisos below,
any Defaults or Events of Default pursuant to Subsection 9.1.3 of the Credit
Agreement that may now exist or arise by reason of the breach by the Company of
its obligation under the Indentures to make timely delivery of financial
statements and related annual report on Form 10-K or quarterly report on Form
10-Q for the fiscal year ended February 28, 2012 and the fiscal quarter ended
May 31, 2012, provided that such waiver of Subsection 9.1.3 shall cease to apply
if notice of default is delivered by the Trustee thereof or by the applicable
noteholders under either of the Indentures relating to such financial statement
delivery and the cure period with respect thereto under the applicable Indenture
or Indentures has expired, it being understood that an Event of Default shall
arise notwithstanding the extensions in Section 1 above by virtue of Subsection
9.1.3 of the Credit Agreement if such a notice is given and the cure period with
respect thereto under the applicable Indenture or Indentures has expired. For
the sake of clarity, any failure by the Company to comply with Section 6.1.2 or
Section 6.1.3 or any other covenants of the Credit Agreement as amended by this
Amendment shall be a Default or Event of Default, as applicable, under the
Credit Agreement regardless of whether such failure would be a default or event
of default under the Indenture.  This waiver is limited to its express terms and
shall not imply any additional or future waivers (including waivers of the any
Defaults that occur or continue after the date of this Amendment), similar or
dissimilar.

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed by their respective, duly authorized officers as of the date first
above written.

 

 

 

NEW ENTERPRISE STONE & LIME CO., INC.

 

 

 

 

 

 

 

By

/s/ Paul I. Detwiler, III

 

Name:

Paul I. Detwiler, III

 

Title:

President, Chief Financial Officer and Secretary

 

[Signature Page to Amendment No. 1 and Waiver to Credit Agreement]

 

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MANUFACTURERS AND TRADERS TRUST COMPANY, in its capacity as the Agent, the
Issuing Bank, the Swing Lender and a Lender

 

 

 

 

 

By

/s/ Robert Bilger

 

Name:

Robert Bilger

 

Title:

Vice President

 

[Signature Page to Amendment No. 1 and Waiver to Credit Agreement]

 

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