Exhibit 10.31
SECOND AMENDMENT TO
NOTE PURCHASE AGREEMENT
THIS SECOND AMENDMENT TO NOTE PURCHASE AGREEMENT is entered into as of
June 25, 1998 among BETZDEARBORN INC., a Pennsylvania corporation (the
"Company"), XXXXXX FIDUCIARY TRUST COMPANY ("Xxxxxx"), in its capacity as
successor Trustee (the "Trustee") of The BetzDearborn Inc. Employee Stock
Ownership and 401(k) Trust (the "ESOT") of the BetzDearborn Inc. Employee Stock
Ownership and 401(k) Plan (the "Plan"), and THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA ("Prudential").
W I T N E S S E T H:
WHEREAS, the Company adopted the Xxxx Laboratories, Inc. Employee Stock
Ownership Plan (the "Plan") effective January 1, 1989, changed the name of the
Plan to the name shown above and most recently amended and restated the Plan
effective January 1, 1994; and
WHEREAS, pursuant to the Plan and effective January 1,1989 the Company
entered into an Agreement of Trust with Mellon Bank, N.A. ("Mellon") as trustee
("Trustee"), thereby establishing the ESOT; and
WHEREAS, as of June 19, 1989, the ESOT and the Company entered into a
Note Purchase Agreement with Prudential whereby the ESOT sold and Prudential
purchased $100,000,000 principal amount of the ESOT's Notes (guaranteed by the
Company), all of which are still held by Prudential, which Note Purchase
Agreement was amended by a First Amendment thereto as of June 25, 1996 (as so
amended being herein called the "Note Agreement"); and
WHEREAS, as of October 1, 1992, the Company removed Mellon as Trustee,
appointed Xxxxxx as successor Trustee and amended and restated the foregoing
Agreement of Trust, retitling it as "Trust Agreement for Xxxx Laboratories Inc.
Employee Stock Ownership and 401(k) Plan," and continued the ESOT with the
successor Trustee; and
WHEREAS, the parties hereto desire to amend certain provisions of the
Note Agreement, as provided for herein.
NOW, THEREFORE, in consideration of the foregoing premises and mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Amendments to Note Agreement
(a) Paragraph 6 of the Note Agreement is hereby deleted in its
entirety, and the following is hereby inserted in lieu thereof:
6. NEGATIVE COVENANTS. The provisions of this paragraph 6 shall remain
in effect only so long as any Note shall remain outstanding.
6A. Minimum Consolidated Net Worth. Consolidated Net Worth will at no
time be less than an amount equal to the sum of (i) $295,000,000 plus (ii) an
amount equal to 25% of Consolidated Net Income for each. fiscal quarter of the
Company ending after June 30, 1997 and on
or prior to the date of determination, in each case, for which Consolidated Net
Income is positive (but with no deduction on account of negative Consolidated
Net Income for any fiscal quarter of the Company) plus (iii) 50% of the
aggregate net proceeds, including the fair market value of property other than
cash (as determined in good faith by the Board of Directors of the Company),
received by the Company from the issuance and sale after October 20, 1997 of any
capital stock of the Company (other than the proceeds of any issuance and sale
of any capital stock (x) to a Subsidiary of the Company or (y) which is required
to be redeemed, or is redeemable at the option of the holder, at any time) or in
connection with the conversion or exchange of any Debt of the Company into
capital stock of the Company after June 30, 1997.
6B. Mergers and Sales of Assets.
(a) The Company will not consolidate or merge with or into any
other Person; provided that the Company may merge with another Person
if (x) the Company is the corporation surviving such merger and (y)
after giving effect to such merger, no Default shall have occurred and
be continuing.
(b) The Company will not sell, lease or otherwise transfer,
directly or indirectly, assets (exclusive of assets transferred in the
ordinary course of business and any Permitted Receivables Disposition)
if after giving effect to such transfer the aggregate book value of
assets so transferred subsequent to October 20, 1997 would exceed 25%
of Consolidated Assets as of the day preceding the date of such
transfer.
6C. Negative Pledge. Neither the Company nor any Subsidiary will
create, assume or suffer to exist any Mortgage upon any asset now owned or
hereafter acquired by it, except:
(a) Mortgages existing on October 20, 1997 securing Debt
outstanding on such date in an aggregate principal or face amount not
exceeding $15,000,000;
(b) any Mortgage existing on any asset of any Person at the
time such Person becomes a Subsidiary and not created in contemplation
of such event;
(c) any Mortgage on any asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring or constructing such asset, provided that such Mortgage
attaches to such asset concurrently with or within 90 days after the
acquisition or completion of construction thereof;
(d) any Mortgage on any asset of any Person existing at the
time such Person is merged or consolidated with or into the Company or
a Subsidiary and not created in contemplation of such event;
(e) any Mortgage existing on any asset prior to the
acquisition thereof by the Company or a Subsidiary and not created in
contemplation of such acquisition;
(f) any Mortgage arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Mortgage permitted by
any of the foregoing clauses of this paragraph, provided that the
proceeds of such Debt are used solely for the foregoing purpose and to
pay financing costs and such Debt is not secured by any additional
assets;
(g) Mortgages arising in the ordinary course of its business
which (i) do not secure Debt or Derivatives Obligations (ii) do not
secure any obligation in an amount exceeding $25,000,000 and (iii) do
not in the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business;
(h) Mortgages on cash and cash equivalents securing
Derivatives Obligations, provided that the aggregate amount of cash and
cash equivalents subject to such Mortgages may at no time exceed
$25,000,000;
(i) Mortgages for current taxes, assessments and other
governmental charges not yet due and payable or being contested in good
faith and as to which adequate reserves in accordance with generally
accepted accounting principles have been established;
(j) Mechanics, materialmen's carrier's, warehousemen's or
similar Mortgages for sums not yet due and owing or being contested in
good faith and as to which adequate reserves in accordance with
generally accepted accounting principles have been established;
(k) Mortgages created in connection with Permitted
Securitization Transactions; provided that, except for the assets
transferred pursuant to Permitted Receivables Dispositions made in
connection with such Permitted Securitization Transactions, no such
Mortgage may extend to any assets of the Company or any Subsidiary of
the Company that is not a Bankruptcy Remote Subsidiary; and
(1) Mortgages not otherwise permitted by the foregoing clauses
of this paragraph 6C securing Debt in an aggregate principal or f ace
amount at any date not to exceed an amount equal to the excess of 10%
of Consolidated Net Worth over the aggregate Value of Sale-Leaseback
Transactions which would not have been permitted under paragraph 6F but
for this clause (1).
6D. Debt to Total Capital. The ratio of Consolidated Debt to Total
Capital shall not exceed during any period set forth below the applicable ratio
set forth below for such period. For purposes of this paragraph 6D Consolidated
Debt shall exclude accreted discount on Bankers' Acceptances under the Credit
Agreement in amounts not exceeding the amounts thereof as contemplated by the
Credit Agreement as in effect on June 25, 1998.
Period Ratio
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June 25, 1998 - December 30, 1998 67%
December 31, 1998 - December 30, 1999 63%
December 31, 1999 - December 30, 2000 59%
December 31, 2000 and thereafter 55%
6E. Debt of Subsidiaries. Total Debt of all Subsidiaries (excluding
Debt (i) of a Subsidiary to the Company and (ii) of a Subsidiary to a wholly
owned Subsidiary) will at no time exceed 30% of Total Capital. For purposes of
this paragraph 6E any preferred stock of a Consolidated Subsidiary held by a
Person other than the Company or a Wholly-Owned Consolidated Subsidiary shall be
included, at the higher of its voluntary or involuntary liquidation value, in
"Consolidated Debt" and in the "Debt" of such Consolidated Subsidiary.
6F. [This paragraph 6F has been intentionally left blank].
6G. Sale-Leaseback Transactions. Neither the Company nor any of its
Subsidiaries will engage in any Sale-Leaseback Transactions unless the Company
or such Subsidiary would be entitled, pursuant to the provisions of paragraph
6C, to incur Debt with a principal amount equal to or exceeding the Value of
such Sale-Leaseback Transaction secured by a Mortgage on the property to be
leased (after giving similar effect to all other Sale-Leaseback Transactions in
effect at such time). For purposes of this paragraph 6G and paragraph 6C(l),
"Value" means, with respect to a Sale-Leaseback Transaction, at any time, the
amount equal to the greater of (i) the net proceeds of the sale or transfer of
the property leased pursuant to such Sale-Leaseback Transaction and (ii) the
fair value in the opinion of the Board of Directors of the Company of such
property at the time of entering into such Sale-Leaseback Transaction, in either
case divided first by the number of full years of the term of the lease and then
multiplied by the number of full years of such term remaining at the time of
determination, without regard to any renewal or extension options contained in
the lease.
6H. Transactions with Affiliates. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, pay any funds to or for the
account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchaser or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Company or such Subsidiary as could have been obtained from a third party
who was not an Affiliate; provided that the foregoing provisions of this Section
shall not prohibit any such Person from declaring or paying any lawful dividend
or other payment ratably in respect of all of its capital stock, from paying
reasonable compensation to its directors and officers or from entering into
other transactions that the Company determines are in its best interests and
having a cost to such Person not in excess of $5,000,000.
(b) Clause (iv) of paragraph 9A of the Note Agreement is hereby amended
in its entirety to read as follows:
(iv) default in the performance, or breach, of any covenant of
the Company or, in the event the Company Notes are not outstanding, the
ESOT contained in paragraph 5 or 6 (other than a covenant a default in
whose performance or whose breach is elsewhere in this paragraph 9A
specifically dealt with), and (in the case of the covenants in
paragraph 5 and in paragraph 6C) the continuance of such default or
breach for a period of 30 days after the earlier of (x) knowledge
thereof by the Company and (y) the date there shall have been given to
the Company and the ESOT, by the holders of at least 25% in aggregate
unpaid principal amount of the Notes at the time outstanding, a written
notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(c) The following definitions set forth in paragraph 12A of the Note
Agreement are hereby modified in their entirety so that such definitions, as so
modified, shall read as follows:
"CONSOLIDATED NET WORTH" means at any date the consolidated
stockholders, equity of the Company and its Consolidated Subsidiaries determined
as of such date (other than any amount attributable to stock which is required
to be redeemed or is redeemable at the option of the holder, if certain events
or conditions occur or exist or otherwise), excluding the effect thereon of
foreign currency translation gains and losses arising after June 30, 1996.
"CREDIT AGREEMENT" means the Credit Agreement, dated as of October 20,
1997, among the Company, BetzDearborn Canada Inc., the banks parties thereto and
The Chase Manhattan Bank and The Chase Manhattan Bank of Canada as
Administrative Agents.
"PERMITTED SECURITIZATION TRANSACTION" means any receivables purchase
or financing transaction pursuant to which the Company or a Subsidiary
(including a Bankruptcy Remote Subsidiary) sells or grants a security interest
in its accounts receivable or its Subsidiaries (and related rights and property
as described in the definition of Permitted Receivables Disposition) or an
undivided interest therein, provided that (i) the aggregate principal or
invested amount outstanding at any one time under all such facilities shall not
exceed $150,000,000 and (ii) the recourse of the purchaser or lender with
respect to such transaction for losses resulting from an obligor's failure to
pay a receivable due to credit problems is limited to such accounts receivable
or an interest therein, and the collections thereof.
"TOTAL CAPITAL" means, at any date, the sum of (x) Consolidated Debt
plus (y) consolidated shareholders' equity of the Company and its Consolidated
Subsidiaries (including for this purpose any amount attributable to stock which
is required to be redeemed or is redeemable at the option of the holder, if
certain events or conditions occur or exist or otherwise), excluding the effect
thereon of foreign currency translation gains and losses arising after June 30,
1996, in each case determined at such date.
2. Representations and Warranties of the Company
The Company hereby incorporates the representations and warranties
contained in Sections 4.01, 4.02 and 4.03 of the Credit Agreement (together with
all related defined terms) as in effect on the date hereof by reference herein
to the same extent as if set forth at length herein (the "Incorporated
Provisions") and hereby makes such representations and warranties (to the
knowledge of the Company, when applicable under the Credit Agreement) for the
benefit of Prudential in connection with the execution and delivery of this
Amendment; provided, that references in the Incorporated Provisions to "this
Agreement" and "Notes" shall be taken as references to the Note Agreement as
amended hereby and to the Notes outstanding thereunder. The Company represents
and warrants to Prudential that no Default or Event of Default exists under the
Note Agreement, both before and after giving effect to the provisions of this
Amendment.
3. Effectiveness of Amendment
This Amendment shall become effective upon the execution and delivery
of a counterpart of this Amendment by all of the parties hereto.
4. Miscellaneous
(a) Capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Note Agreement.
(b) On and after the effective date of this Amendment, each reference
in the Note Agreement and the Notes shall mean and be a reference to the Note
Agreement as amended by this Amendment.
(c) The Note Agreement, as amended by this Amendment, is and shall
continue to be in full force and effect and is hereby in all respects ratified
and confirmed.
(d) This Amendment may be executed in any number of counterparts and by
any combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
BETZDEARBORN INC. EMPLOYEE STOCK
OWNERSHIP AND 401(K) TRUST
ESTABLISHED BY THE BETZDEARBORN
INC. EMPLOYEE STOCK OWNERSHIP AND
401(K) PLAN
By: XXXXXX FIDUCIARY TRUST COMPANY
as Trustee
By:
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Title:
BETZDEARBORN INC.
By:
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Title:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By:
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Title:
