EXHIBIT 10.21
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT") is entered
into as of September 9, 1998, among DRYPERS CORPORATION, a Delaware corporation
(the "BORROWER"), the bank or banks listed on the signature pages hereof
(collectively, the "BANKS"), BANKBOSTON, N.A., a national banking association,
individually and as agent for itself and the other Banks and as issuer of
Letters of Credit (in its capacity as agent, the "AGENT").
R E C I T A L S:
A. The Agent, the Borrower and the Banks have entered into that certain
Credit Agreement dated as of April 1, 1998 (as the same may be amended,
modified, or supplemented from time to time, the "CREDIT AGREEMENT") subject to
the terms and conditions hereof..
B. The Borrower has requested the Agent and the Banks to amend certain
financial covenants contained in the Credit Agreement and to consent to certain
transactions proposed by the Borrower, which the Agent and the Banks are willing
to do subject to the terms and conditions hereof.
C. The Borrower, the Agent and the Banks desire to amend the Credit
Agreement as set forth herein.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the premises and other valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Borrower, the Banks and the Agent agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Unless otherwise specified herein, terms
defined in the Credit Agreement have the same meaning when used herein.
ARTICLE II
AMENDMENTS
Section 2.1 AMENDMENT TO DEFINITION OF BORROWING BASE. Effective as of
the date hereof, the definition of "Borrowing Base" appearing in SECTION 1.1 of
the Credit Agreement is hereby amended in its entirety to read as follows:
"BORROWING BASE" means an amount equal to the lesser of (a) the
maximum amount that may be funded hereunder without the Borrower
violating the Indenture or (b) the sum of (i) seventy-five percent (75%)
of the aggregate net book value of the accounts receivable of the
Borrower and its Restricted Subsidiaries, plus (ii) fifty percent (50%)
of the aggregate net book value of the inventory of the Borrower and its
Restricted Subsidiaries, less (iii) the maximum principal amount of the
Debt of Foreign Restricted Subsidiaries if and to the extent such Debt
has been Guaranteed by the Borrower as permitted by SECTION 10.1(O)
hereof, and less (iv) any amounts applied to the permanent reduction of
the Commitments pursuant to SECTION 2.10 hereof.
Section 2.2 AMENDMENT TO DEFINITION OF CONSOLIDATED EBITDA. Effective as
of the date hereof, the definition of "Consolidated EBITDA" appearing in SECTION
1.1 of the Credit Agreement is hereby amended in its entirety to read as
follows:
"CONSOLIDATED EBITDA" means, for any period the sum of, without
duplication Consolidated Net Income for such period, plus (or, in the
case of clause (e) below, plus or minus) the following items to the
extent included in computing Consolidated Net Income for such period:
(a) the amount that, in conformity with GAAP, would be set forth
opposite the caption "interest expense" (or any like caption) on a
consolidated statement of earnings of the Borrower and its Restricted
Subsidiaries for such period, including, without limitation, (i)
amortization of debt discount, (ii) the net cost of interest rate
contracts (including amortization of discounts), (iii) the interest
portion of any deferred payment obligation, (iv) amortization of debt
issuance costs and (v) the interest component of Capital Lease
Obligations, plus (b) the provision for federal, state, local and
foreign income or franchise taxes of the Borrower and its Restricted
Subsidiaries for such period, plus (c) the aggregate depreciation and
amortization expense of the Borrower and its Restricted Subsidiaries for
such period, plus (d) $6,000,000 for the fiscal quarter ending March 31,
1998 and $2,000,000 for the fiscal quarter ending June 30, 1998, plus
(e) any other non-cash charges for such period, and minus non-cash
credits for such period, other than non-cash charges or credits
resulting from changes in reserves for accounts receivable and
inventory, prepaid assets or accrued liabilities in the ordinary course
of business, plus (f) income from Unrestricted Subsidiaries accounted
for under the equity method of accounting, provided that such income is
actually paid in cash to the Borrower or a Restricted Subsidiary during
such period.
Section 2.3 AMENDMENT TO DEFINITION OF EURODOLLAR RATE. Effective as of
the date hereof, the definition of "Eurodollar Rate" appearing in SECTION 1.1 of
the Credit Agreement is hereby amended in its entirety to read as follows:
"EURODOLLAR RATE" means, for any Eurodollar Advance for any
Interest Period therefor, an interest rate per annum (rounded upwards,
if necessary, to the nearest 1/16 of 1%) at which Dollar deposits are
offered to BankBoston in immediately available funds two Business Days
prior to the first day of such Interest Period by leading banks in the
interbank eurodollar market selected by the Agent for a period
comparable to such Interest Period and in an amount comparable to the
principal amount of the Eurodollar Advance to which such Interest Period
relates. If BankBoston is not participating in a Eurodollar Advance
during any Interest Period therefor (pursuant to SECTION 5.3 or for any
other reason), the Eurodollar Rate for such Advance for such Interest
Period shall be the rate per annum (rounded upwards, if necessary, to
the nearest 1/16 of one percent) equal to the average of the offered
quotations appearing on Dow Xxxxx Market Services (formerly Telerate)
page 3750 (or, if such page shall not be available, any successor or
similar service as may be selected by the Agent) as of 11:00 a.m. London
time, or as soon thereafter as practicable, on the date two Business
Days prior to the first day of such Interest Period for Dollar deposits
having a term comparable to such Interest Period and in an amount
comparable to the principal amount of the Eurodollar Advance to which
such Interest Period relates.
Section 2.4 AMENDMENT TO SECTION 5.5. Effective as of the date hereof,
subsection (ii) of the last sentence of SECTION 5.5 of the Credit Agreement is
hereby amended to read as follows:
(ii) the interest component of the amount such Bank would have
bid in the interbank eurodollar market for Dollar deposits of leading
banks and amounts comparable to such principal amount and with
maturities comparable to such period.
Section 2.5 AMENDMENT TO SECTION 10.1. Effective as of the date hereof,
SECTION 10.1 of the Credit Agreement is hereby amended to add thereto the
following SUBSECTIONS (O) AND (P) which shall read as follows:
(o) Debt of Foreign Restricted Subsidiaries to the Agent or an
Affiliate thereof which has been Guaranteed by the Borrower; and
(p) Debt not to exceed $6,000,000 owing to Xxxxxxx & Xxxxxx
Company arising from the licensing to the Borrower of certain patents
owned by Xxxxxxx & Xxxxxx Company.
Section 2.6 AMENDMENT TO SECTION 11.2. Effective as of the date hereof,
SECTION 11.2 of the Credit Agreement is hereby amended in its entirety to read
as follows:
11.2 CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Borrower will
maintain or cause to be maintained, as of the end of each fiscal quarter
of the Borrower (beginning with the quarter ended September 30, 1998), a
Consolidated Fixed Charge Coverage Ratio of not less than the ratios set
forth below for the most recent four (4) fiscal quarters then ended:
RATIO FISCAL QUARTER ENDING
----- ---------------------
1.0 to 1.0 September 30, 1998
1.0 to 1.0 December 31, 1998
1.1 to 1.0 March 31, 1999
1.1 to 1.0 June 30, 1999
1.25 to 1.0 September 30, 1999
1.25 to 1.0 December 31, 1999
1.50 to 1.0 March 31, 2000
1.50 to 1.0 June 30, 2000
1.75 to 1.0 September 30, 2000 and thereafter
Section 2.7 AMENDMENT TO SECTION 11.3. Effective as of the date hereof,
SECTION 11.3 of the Credit Agreement is hereby amended in its entirety to read
as follows:
11.3 CONSOLIDATED FUNDED DEBT TO ADJUSTED CONSOLIDATED EBITDA
RATIO. The Borrower will maintain or cause to be maintained a ratio of
Consolidated Funded Debt, as of the end of each fiscal quarter
(beginning with the quarter ended September 30, 1998), to Adjusted
Consolidated EBITDA for the most recent four (4) fiscal quarters then
ended, of not greater than the ratios set forth below:
RATIO FISCAL QUARTER ENDING
----- ---------------------
6.25 to 1.00 September 30, 1998
6.00 to 1.00 December 31, 1998
6.00 to 1.00 March 31, 1999
6.00 to 1.00 June 30, 1999
5.00 to 1.00 September 30, 1999
5.00 to 1.00 December 31, 1999
4.50 to 1.00 March 31, 2000
4.50 to 1.00 June 30, 2000
September 30, 2000 and
3.00 to 1.00 thereafter
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 CONDITIONS. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent:
(a) The Agent shall have received all of the following, in form
and substance satisfactory to the Agent:
(1) RESOLUTIONS. Resolutions of the Board of Directors of
the Borrower certified by its secretary or an assistant secretary
which authorize the execution, delivery and performance by the
Borrower of this Amendment and any other Loan Documents executed
and/or delivered in connection herewith;
(2) INCUMBENCY CERTIFICATE. A certificate of incumbency
certified by the secretary or an assistant secretary of the
Borrower certifying the names of the officers of the Borrower who
are authorized to sign this Amendment and any other Loan
Documents executed and/or delivered in connection herewith,
together with specimen signatures of such officers;
(3) GOVERNMENTAL CERTIFICATES. Certificates of the
appropriate governmental officials of the jurisdiction of
incorporation of the Borrower as to the existence and good
standing of the Borrower, each dated a current date;
(4) OPINION OF COUNSEL. A favorable opinion of Fulbright &
Xxxxxxxx, L.L.P., legal counsel to the Borrower, as to such
matters as the Agent may reasonably request; and
(5) ADDITIONAL INFORMATION. Such additional documents,
instruments and information as the Agent or its legal counsel,
Xxxxxxxx Xxxxxxxx & Xxxxxx P.C., may reasonably request.
(b) The representations and warranties contained herein and in
all other Loan Documents, as amended hereby, shall be true and correct
as of the date hereof as if made on the date hereof, except for such
representations and warranties as are limited by their express terms to
a specific date.
(c) No Default shall have occurred and be continuing.
(d) The Agent shall have received an amendment fee in the amount
of $50,000.00.
(e) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments, and other legal matters incident thereto shall be
reasonably satisfactory to the Agent and its legal counsel, Xxxxxxxx
Xxxxxxxx & Xxxxxx P.C.
ARTICLE IV
CONSENTS
Section 4.1 CONSENT TO PRIMOSOFT TRANSACTIONS. The Borrower, together
with its wholly-owned subsidiary Drypers Asia Pte Ltd, a Singapore company
("DAPL"), proposes to purchase all of the ordinary shares and all of the
preference shares of Primosoft Sdn Bhd, a Malaysian company ("Primosoft") from
the various stockholders thereof (such transaction being hereinafter referred to
as the "Primosoft Acquisition") for total cash and non-cash consideration not to
exceed $12,500,000, net of proceeds received by the Borrower or DAPL from the
Primosoft Sale Leaseback (defined below). Concurrently with the closing of the
Primosoft Acquisition, Primosoft proposes to sell to Pioneer Corporation (M) Sdn
Bhd ("Pioneer") certain land and improvements located at Xxxxx Xxxxxxxxx,
Xxxxxxxx xx Xxxxxxxx, Xxxxx xx Xxxxxxxx, Xxxxxxxx (the "Plant"), and Pioneer
will then lease back the Plant to Primosoft under a lease guaranteed by the
Borrower (such transaction being hereinafter referred to as the "Primosoft Sale
Leaseback"). Pursuant to SECTIONS 10.1, 10.3, 10.5 and 10.7 of the Credit
Agreement, the Borrower has requested that the Agent consent to the Primosoft
Acquisition and the Primosoft Sale Leaseback. Subject to the conditions
described in SECTION 4.2 below, the Agent hereby consents to the Primosoft
Acquisition and the Primosoft Sale Leaseback and agrees that such
transactions shall not constitute a breach or violation of the Credit Agreement.
The consent granted herein is limited to the Primosoft Acquisition and the
Primosoft Sale Leaseback, and nothing contained herein shall be construed as a
consent by the Agent or the Banks with respect to any other transaction.
Section 4.2 CONDITIONS TO CONSENT. The consent to the Primosoft
Acquisition and the Primosoft Sale Leaseback granted under SECTION 4.1 above is
subject to compliance with the following conditions:
(a) The cash and non-cash consideration paid by the Borrower and
DAPL in connection with the Primosoft Acquisition shall be included in
all calculations for purposes of SECTION 10.3(A)(IV) and (V) of the
Credit Agreement;
(b) The original share certificates (and accompanying stock
powers duly executed in blank), if any, issued to the Borrower in
connection with the Primosoft Acquisition, but in any event not
exceeding 65% of the issued and outstanding capital stock of Primosoft,
shall be promptly delivered to the Agent pursuant to the Borrower Pledge
Agreement; and
(c) Promptly after the consummation of the Primosoft Acquisition,
DAPL shall execute and deliver to the Agent a Negative Pledge Agreement
in the form of Exhibit "G" to the Credit Agreement.
Section 4.3 CONSENT TO ACMA NEGATIVE PLEDGE. The Borrower proposes to
enter into an operating lease to be dated as of December 3, 1997 with ACMA USA,
Inc., a Delaware corporation ("ACMA"), covering a diaper machine (the "ACMA
Lease"). As a condition to entering into the ACMA Lease, ACMA has required that
the Borrower agree not to pledge or encumber the diaper machine which is the
subject of the ACMA Lease. Pursuant to SECTION 10.13 of the Credit Agreement,
the Borrower has requested that the Agent consent to the negative pledge
relating to the ACMA Lease. The Agent hereby consents to the negative pledge
relating to the ACMA Lease and agrees that such negative pledge shall not
constitute a breach or violation of SECTION 10.13 of the Credit Agreement,
provided that (a) the ACMA Lease at all times qualifies as an operating lease
(rather than as a capital lease) and (b) the Agent retains all of its rights
under the Borrower Security Agreement in the event that the Borrower acquires an
ownership interest in the diaper machine which is the subject of the ACMA Lease.
The consent granted herein is limited to the negative pledge relating to the
ACMA Lease, and nothing contained herein shall be construed as a consent by the
Agent or the Banks with respect to any other transaction.
Section 4.4 CONSENT TO SEAGRAM LEASE GUARANTY. Seler S.A., a subsidiary
of the Borrower, has entered into a lease contract dated August 31, 1998 with
Seagram de Argentina S.A. relating to a plant located in Xxxxxxx, Province of
Buenos Aires, Argentina (the "Seagram Lease"). Pursuant to SECTION 10.1 of the
Credit
Agreement, the Borrower has requested that the Agent consent to the Borrower's
guaranty of all obligations of Seler S.A. under the Seagram Lease. The Agent
hereby consents to the Borrower's guaranty of the Seagram Lease and agrees that
such guaranty shall not constitute a breach or violation of SECTION 10.1 of the
Credit Agreement. The consent granted herein is limited to the Borrower's
guaranty of the Seagram Lease, and nothing contained herein shall be construed
as a consent by the Agent or the Bank with respect to any other transaction.
ARTICLE V
RATIFICATIONS, REPRESENTATIONS AND WARRANTIES
Section 5.1 RATIFICATIONS. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Credit Agreement and, except as expressly modified and superseded
by this Amendment, the terms and provisions of the Credit Agreement and the
other Loan Documents are ratified and confirmed and shall continue in full force
and effect. The Borrower, the Agent, and the Banks agree that the Credit
Agreement as amended hereby and the other Loan Documents shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms.
Section 5.2 REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to the Agent and the Banks that (a) the execution,
delivery and performance of this Amendment and any and all other Loan Documents
executed and/or delivered in connection herewith have been authorized by all
requisite corporate action on the part of Borrower and will not violate the
articles of incorporation or bylaws of Borrower, (b) the representations and
warranties contained in the Credit Agreement, as amended hereby, and in each
other Loan Document are true and correct on and as of the date hereof as though
made on and as of the date hereof, except for such representations and
warranties as are limited by their express terms to a specific date; (c) no
Default has occurred and is continuing,(d) Borrower is in full compliance with
all covenants and agreements contained in the Credit Agreement as amended hereby
and the other Loan Documents to which it is a party; and (e) none of the
transactions contemplated by the Primosoft Acquisition and the Primosoft Sale
Leaseback shall constitute a breach or violation of, or a default under, the
Indenture.
ARTICLE VI
MISCELLANEOUS
Section 6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Amendment or any Loan Documents
furnished in connection with this Amendment shall survive the execution and
delivery of this Amendment and the other Loan Documents, and no investigation by
the Agent or any closing shall affect the representations and warranties or the
right of the Agent and the Banks to rely upon them.
Section 6.2 REFERENCES. Each of the Loan Documents, including the Credit
Agreement and any and all other agreements, documents, or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Credit Agreement as amended hereby, are hereby amended so that any
reference in such Loan Documents to the Credit Agreement shall mean a reference
to the Credit Agreement as amended hereby.
Section 6.3 EXPENSES OF THE AGENT. As provided in the Credit Agreement,
the Borrower agrees to pay on demand all reasonable costs and expenses incurred
by the Agent in connection with the preparation, negotiation, and execution of
this Amendment and the other Loan Documents executed pursuant hereto and any and
all amendments, modifications, and supplements thereto, including without
limitation the costs and reasonable fees of the Agent's legal counsel, and all
costs and expenses incurred by the Agent and the Banks in connection with the
enforcement or preservation of any rights under the Credit Agreement, as amended
hereby, or any other Loan Document, including without limitation the costs and
reasonable fees of legal counsel for the Agent and, at any time following and
during the continuance of an Event of Default, of legal counsel to each Bank.
Section 6.4 SEVERABILITY. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 6.5 APPLICABLE LAW. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS
EXECUTED PURSUANT HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS.
Section 6.6 COUNTERPARTS. This Amendment may be executed in a number of
identical counterparts, each of which shall be deemed an original. In making
proof of this instrument, it shall not be necessary for any party to account for
all counterparts, and it shall be sufficient for any party to produce but one
such counterpart bearing the signatures of all parties hereto.
Section 6.7 HEADINGS. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 6.8 PARTIES BOUND. This Amendment is binding upon and shall
inure to the benefit of the Agent, the Banks and the Borrower and their
respective successors and assigns, except the Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Agent and all of the Banks.
Section 6.9 ENTIRE AGREEMENT. THIS AMENDMENT, THE CREDIT AGREEMENT, THE
LOAN DOCUMENTS, AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND
DELIVERED IN CONNECTION WITH THIS AMENDMENT REPRESENT THE FINAL AGREEMENT AMONG
THE PARTIES HERETO, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES HERETO.
(Balance of page intentionally left blank.)
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to Credit Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
BORROWER:
DRYPERS CORPORATION
By: /s/XXXXXXXX X. XXXXXX
Name: Xxxxxxxx X. Xxxxxx
Title: CPO & Executive Vice President
AGENT AND
BANKS:
BANKBOSTON, N.A., as Agent and as a Bank
By: /s/ XXXXXXX X. XXXXXXX
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
