Exhibit 10(b)
AMENDMENT NO. 1 AND WAIVER TO
FINANCING AGREEMENT
-------------------
AMENDMENT NO. 1 AND WAIVER, dated as of October 27, 2003
(this "Amendment"), to the Financing Agreement, dated as of October 8, 2003
---------
(the "Financing Agreement"), by and among Solutia Inc., a Delaware
-------------------
corporation (the "Parent") and Solutia Business Enterprises, Inc., a New
------
York corporation ("Solutia Business" and together with the Parent, each a
----------------
"Borrower" and collectively, the "Borrowers"), each subsidiary of the Parent
-------- ---------
listed as a "Guarantor" on the signature pages thereto (each a "Guarantor"
---------
and collectively, the "Guarantors" and together with the Borrowers, each a
----------
"Loan Party" and collectively, the "Loan Parties"), the lenders from time to
---------- ------------
time party thereto (each a "Lender" and collectively, the "Lenders"), Ableco
------ -------
Finance LLC, a Delaware limited liability company, as collateral agent for
the Lenders (in such capacity, together with any successors and assigns, if
any, the "Collateral Agent"), Wells Fargo Foothill, Inc., as administrative
----------------
agent for the Lenders (in such capacity, together with any successors and
assigns, if any, the "Administrative Agent") and Congress Financial
--------------------
Corporation (Central), an Illinois corporation (in such capacity, together
with any successors and assigns, if any, the "Documentation Agent", and
-------------------
together with the Collateral Agent and Administrative Agent, each an "Agent"
-----
and collectively, the "Agents").
------
Preamble
--------
The Borrowers and the Guarantors have requested that the
Collateral Agent and the Required Lenders (as defined in the Financing
Agreement) agree, and the Collateral Agent and the Required Lenders have
agreed, to certain amendments and waivers to the Financing Agreement.
Accordingly, the parties hereto hereby agree as follows:
1. Definitions. All terms used herein which are defined in
-----------
the Financing Agreement and not otherwise defined herein shall have the
meanings assigned to them in the Financing Agreement.
2. Amendments.
----------
(a) Paragraph (ii)(B) of the definition of the
term "Fixed Charge Coverage Ratio" in Section 1.01 of the Financing
Agreement is hereby amended in its entirety to read as follows:
"(B) Consolidated Net Interest Expense
of such Person and its Subsidiaries paid in cash during such period, plus"
----
(b) Section 7.01(a)(xvii) of the Financing
Agreement is hereby amended in its entirety to read as follows:
"(xvii) not later than Friday of every
calendar week, an updated 13 week cash flow projection, supplementing and
superseding the most recent cash flow projections delivered hereunder, with
a comparison of budget to actual and an explanation of any changes thereto,
together with appropriate supporting details and a statement of underlying
assumptions, such projections to be prepared on a reasonable basis and in
good faith and to be based on
assumptions believed by the Parent to be reasonable at the time made and
from the best information then available to the Parent; and"
(c) The second proviso of Section 7.01(m)(ii) of
the Financing Agreement is hereby amended in its entirety to read as
follows:
"; provided, further, that the Loan
-------- -------
Parties may consign Inventory to a third party (or enter into similar
arrangements with respect to Inventory), whether or not such third party has
entered into a Bailee Letter, with an aggregate Book Value of all such
Inventory not at any time exceeding $1,000,000."
(d) Section 7.01(s)(iv) of the Financing
Agreement is hereby amended in its entirety to read as follows:
"(iv) on or prior to November 26, 2003,
delivery of projected annual balance sheets, income statements and
statements of cash flows of the Parent and its Subsidiaries for the Fiscal
Year ending in 2006, which shall be in form and substance satisfactory to
the Collateral Agent,"
(e) Section 7.01(s)(v) of the Financing Agreement
is hereby amended in its entirety to read as follows:
"(v) on or prior to October 31, 2003,
delivery of pledge agreements under the laws of The Netherlands made by
Monchem International, Inc. and/or Solutia Dutch Newco pledging 65% of the
interest of Solutia Netherlands Holdings B.V. and such other documents as
the Collateral Agent may request in its sole discretion, exercised
reasonably, each in form and substance satisfactory to the Collateral
Agent,"
(f) Section 7.02(e) of the Financing Agreement is
hereby amended by (i) deleting the word "and" at the end of clause (xiii)
thereof, (ii) deleting the period at the end of clause (xiv) thereof and
inserting ", and" in lieu thereof and (iii) inserting the following new
clause (xv) at the end thereof:
"(xv) loans, advances and other
extensions of credit (including, without limitation, the forgiveness or
cancellation of existing Indebtedness), capital contributions or investments
by any Foreign Subsidiary to or in any wholly-owned Foreign Subsidiary."
(g) Section 8.05 of the Financing Agreement is
hereby amended by deleting paragraph (c) in its entirety and substituting
the following in lieu thereof:
"(c) Loan Parties shall not remove any
Inventory from the locations set forth or permitted herein, without the
prior written consent of the Administrative Agent and the Collateral Agent,
except (i) for sales of Inventory in the ordinary course of its business,
(ii) to move Inventory directly from one location set forth or permitted
herein to another such location, (iii) as otherwise expressly permitted in
Section 5(b) of the Security Agreement and (iv) for Inventory shipped from
the manufacturer thereof to such Loan Party which is in transit to the
locations set forth or permitted herein;"
2
(h) Exhibit H to the Financing Agreement is
hereby amended in its entirety to read as set forth on Annex A attached
hereto.
(i) Schedule 6.01(bb) of the Financing Agreement
is hereby amended by adding the following language on such Schedule:
"Locations of Inventory outside of the continental United States to the
extent expressly permitted by Section 8.05(c)(iii) of the Financing
Agreement."
(j) Schedule 7.02(b) of the Financing Agreement
is hereby amended by adding the following Capitalized Lease on such
Schedule:
- ----------------------------------------------------------------------------------------------------------------------
AMOUNT
"CAPITALIZED LEASE LESSOR LESSEE EXPIRY TERM OUTSTANDING LEASED PROPERTY
- ----------------------------------------------------------------------------------------------------------------------
Siemens AMCIS AG March 31, 48 months $2.5 million Certain
Leasing 2006 manufacturing
equipment,
including
communication
equipment"
- ----------------------------------------------------------------------------------------------------------------------
(k) Schedule II to the Pledge Agreement (as
defined in clause (i) of the Financing Agreement) is hereby amended as
follows:
(i) The (A) number of shares of Solutia
Netherlands Holdings B.V. (I) owned by Monchem International, Inc. is hereby
amended by deleting "18,200" and substituting in lieu thereof "182", and
(II) pledged by Monchem International, Inc. is hereby amended by deleting
"11,830" and substituting "118" in lieu thereof and (B) par value of the
shares of Solutia Netherlands Holdings B.V. is hereby amended by deleting
"shares of (euro)1 each" and substituting "shares of (euro)100 each" in lieu
thereof; and
(ii) The number of shares of Solutia
Argentina S.R.L. owned by Monchem, Inc. is hereby amended by deleting
"60,000" and substituting in lieu thereof "59,500", which amount represents
99% of the outstanding shares of Solutia Argentina S.R.L.
(l) Schedule III of the Security Agreement is
hereby amended by adding the following language at the end of such Schedule
under the heading "Collateral Locations - Locations of Inventory or
Equipment":
"Locations of Inventory outside of the
continental United States to the extent expressly permitted by Section
5(b)(iv) of the Agreement."
3
(m) Section 5(b) of the Security Agreement is
hereby amended in its entirety to read as follows:
"(b) Location of Equipment and
-------------------------
Inventory. Each Grantor will keep the Equipment and Inventory (other than
- ---------
used Equipment and Inventory sold in the ordinary course of business in
accordance with Section 5(g) hereof) at (i) one or more of the locations
specified therefor in Section 4(g) hereof, (ii) such other locations in the
continental United States, as the Grantors may elect, provided that, the
--------
Grantors give the Collateral Agent not less than 10 Business Days' prior
written notice of any such change in location of such Equipment and
Inventory with a book value in excess of $1,000,000 (when aggregated with
all other Collateral at the same location), and, in the case of relocation
of Equipment for purposes of repair in the ordinary course of business,
prompt (but in any event no more than 5 Business Days) written notice after
such relocation of Equipment with a book value in excess of $5,000,000 (when
aggregated with all other Collateral at the same location), (iii) solely
with respect to Inventory, such other locations in the continental United
States as the Grantors may elect pursuant to consignments (or other similar
arrangements) of Inventory as expressly permitted by the Financing Agreement
and (iv) solely with respect to Inventory, such other locations outside of
the continental United States as the Grantors may elect, provided that, in
--------
the case of this clause (iv) (A) the book value of such Inventory shall not
exceed an aggregate amount equal to $15,000,000 at any time outstanding, and
(B) such Inventory is transferred to such other location in the ordinary
course of business of such Grantor, and in each case of clauses (i), (ii)
and (iii) above accompanied by a new Schedule III hereto indicating each new
location of such Equipment, if applicable, and Inventory, and provided
--------
further that (other than with respect to clause (iv) above) (I) all action
has been taken to grant to the Collateral Agent a perfected, first priority
security interest in such Equipment and Inventory (subject only to Permitted
Liens that, as a matter of law, would be prior to Liens in favor of the
Collateral Agent, for the benefit of the Agents and the Lenders), and (II)
the Collateral Agent's rights in such Equipment and Inventory, including,
without limitation, the existence, perfection and priority of the security
interest created hereby in such Equipment and Inventory, are not adversely
affected thereby."
3. Schedules. Attached hereto as Annex B is copy of
---------
Schedule 1.01(A) to the Financing Agreement as in effect on the date hereof.
4. Waiver. Effective as of the Amendment Effective Date
------
(as defined below), and in reliance upon the representations and warranties
of the Borrowers and the Guarantors set forth in the Financing Agreement,
this Amendment and the other Loan Documents, and in accordance with Section
12.02 of the Financing Agreement, the Collateral Agent and the Required
Lenders hereby consent to, and waive any Event of Default that may otherwise
arise under the Financing Agreement or any of the other Loan Documents
resulting solely in connection with:
(a) the agreement by the Parent to transfer its
interest in the Thailon Six Six Limited ("Thailon") joint venture, which
-------
agreement shall result in the extinguishment or transfer of Indebtedness of
Thailon owing to the Parent as of the date of such transfer, which
Indebtedness includes the promissory notes, each dated April 13, 2001, made
by Thailon to the order of the Parent in the aggregate principal amount of
$7,200,000 and $1,000,000, respectively
4
(collectively, the "Thailon Notes"), provided that the aggregate amount of
-------------
cash proceeds received by the Parent in connection with such transaction
shall equal or exceed $2,335,372.55, of which $4,000 shall be allocated to
and treated under the Financing Agreement as the sale of the Parent's equity
interest in Thailon and $2,331,372.55 shall be allocated to and treated
under the Financing Agreement as the repayment of Indebtedness owing to the
Parent by Thailon; and
(b) the transfer by any of the Loan Parties of
Inventory to locations outside of the continental United States prior to the
Amendment Effective Date, provided that the Loan Parties have complied with
and are in compliance with the conditions contained in Section 5(b)(iv)(A)
and (B) of the Security Agreement (after giving effect to this Amendment).
5. Representations and Warranties. Each of the Borrowers
------------------------------
and the Guarantors hereby jointly and severally represents and warrants to
the Collateral Agent and the Required Lenders as follows:
(a) Each of the Loan Parties has all requisite
power and authority to execute, deliver and perform this Amendment, and to
perform the Financing Agreement, as amended hereby.
(b) The execution, delivery and performance of
this Amendment by each of the Loan Parties, and the performance by each of
the Loan Parties of the Financing Agreement, as amended hereby, (i) have
been duly authorized by all necessary action, (ii) do not and will not
contravene its charter or by-laws, its limited liability company or
operating agreement or its certificate of partnership or partnership
agreement, as applicable, or any applicable law or any contractual
restriction binding on or otherwise affecting it or any of its properties
(including, without limitation, the 2009 Note Indenture, the 1997 Indenture
or the Euro Indenture), (iii) do not and will not result in or require the
creation of any Lien (other than pursuant to any Loan Document and the 2009
Note Indenture) upon or with respect to any of its material properties, and
(iv) do not and will not result in any material default, noncompliance,
suspension, revocation, impairment, forfeiture or nonrenewal of any material
permit, license, authorization or approval applicable to its operations or
any of its properties.
(c) No authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority is required
in connection with the due execution, delivery and performance by any Loan
Party of this Amendment or the performance by any Loan Party of the
Financing Agreement, as amended hereby.
(d) This Amendment and the Financing Agreement,
as amended hereby, constitute the legal, valid and binding obligations of
each Loan Party, enforceable against such Persons in accordance with their
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws.
5
6. Conditions to Effectiveness. This Amendment shall
---------------------------
become effective as of October 16, 2003 (the "Amendment Effective Date"),
------------------------
only upon the satisfaction in full of the following conditions precedent:
(a) The Collateral Agent shall have received
counterparts of this Amendment that bear the signatures of each Borrower,
each Guarantor and the Required Lenders.
(b) The representations and warranties contained
in this Amendment and, after giving effect to Paragraph 4 hereof, in Article
VI of the Financing Agreement and each other Loan Document shall be correct
in all material respects on and as of the date hereof as though made on and
as of such date (except where such representations and warranties relate to
an earlier date in which case such representations and warranties shall be
true and correct as of such earlier date).
(c) After giving effect to Paragraph 4 hereof, no
Default or Event of Default shall have occurred and be continuing on the
date hereof or result from the Amendment becoming effective in accordance
with its terms.
7. Continued Effectiveness of the Financing Agreement and
------------------------------------------------------
Loan Documents. Each of Loan Parties hereby (a) acknowledges and consents to
- --------------
this Amendment, (b) confirms and agrees that each Loan Document to which it
is a party is, and shall continue to be, in full force and effect and is
hereby ratified and confirmed in all respects except that on and after the
Amendment Effective Date all references in any such Loan Document to the
"Financing Agreement", the "Agreement", "thereto", "thereof", "thereunder"
or words of like import referring to the Financing Agreement shall mean the
Financing Agreement as amended by this Amendment, and (c) confirms and
agrees that to the extent that any such Loan Document purports to assign or
pledge to the Collateral Agent for the benefit of the Agents and the
Lenders, or to grant to the Collateral Agent for the benefit of the Agents
and the Lenders a security interest in or Lien on, any collateral as
security for the obligations of any Loan Party from time to time existing in
respect of the Financing Agreement (as amended hereby) and the Loan
Documents, such pledge, assignment and/or grant of the security interest or
Lien is hereby ratified and confirmed in all respects. Nothing herein shall
be deemed to entitle any Loan Party to a consent to, or a waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Financing Agreement or any other
Loan Document in similar or different circumstances.
6
8. Miscellaneous.
-------------
(a) This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement. Delivery of an
executed counterpart of this Amendment by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Amendment.
Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment, but the failure to deliver an original executed counterpart shall
not affect the validity, enforceability and binding effect of this
Amendment.
(b) Section and paragraph headings herein are
included for convenience of reference only and shall not constitute a part
of this Amendment for any other purpose.
(c) THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW YORK WITHOUT REGARD
TO CONFLICTS OF LAW PRINCIPLES.
(d) The Borrowers will pay on demand all
reasonable fees, costs and expenses of the Collateral Agent and the Lenders
executing this Amendment in connection with the preparation, execution and
delivery of this Amendment or otherwise payable under the Financing
Agreement, including, without limitation, reasonable fees, disbursements and
other charges of Schulte Roth & Zabel LLP, counsel to the Collateral Agent.
7
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed and delivered as of the date set forth on the first
page hereof.
BORROWERS:
----------
SOLUTIA INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: Vice President and Treasurer
SOLUTIA BUSINESS ENTERPRISES, INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
GUARANTORS:
-----------
CPFILMS INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: Vice President
MONCHEM, INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
MONCHEM INTERNATIONAL, INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
SOLUTIA INVESTMENTS, LLC
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
SOLUTIA SYSTEMS, INC.
By: /s/ Kevin Wilson
----------------
Name: C. Kevin Wilson
Title: President
COLLATERAL AGENT:
----------------
ABLECO FINANCE LLC,
as Collateral Agent
By: /s/ Kevin P. Genda
------------------
Name: Kevin P. Genda
Title: Senior Vice President
REQUIRED LENDERS:
----------------
CONGRESS FINANCIAL CORPORATION
(CENTRAL)
By: /s/ Anthony Vizgirda
--------------------
Name: Anthony Vizgirda
Title: First Vice President
WELLS FARGO FOOTHILL, INC.
By: /s/ Robert Bernier
------------------
Name: Robert Bernier
Title: Vice President
ABLECO FINANCE LLC,
on behalf of itself and its affiliate assignees
By: /s/ Kevin P. Genda
------------------
Name: Kevin P. Genda
Title: Senior Vice President
FORTRESS CREDIT OPPORTUNITIES I LP
By: FORTRESS CREDIT OPPORTUNITIES I
GP LLC, its general partner
By: /s/ Constantine Dakolias
------------------------
Name: Constantine Dakolias
Title: Chief Credit Officer
GOLDENTREE HIGH YIELD MASTER
FUND, LTD.
By: GoldenTree Asset Management, LP
By: /s/ Thomas O'Shea
-----------------
Name: Thomas O'Shea
Title: Portfolio Manager
GOLDENTREE HIGH YIELD MASTER
FUND II, LTD.
By: GoldenTree Asset Management, LP
By: /s/ Thomas O'Shea
-----------------
Name: Thomas O'Shea
Title: Portfolio Manager
HIGHBRIDGE/ZWIRN SPECIAL
OPPORTUNITIES FUND, L.P.
By: Highbridge/Zwirn Capital Management, LLC
By: /s/ Daniel B. Zwirn
-------------------
Name: Daniel B. Zwirn
Title: Managing Principal
NYLON & FILMS, L.L.C.
By: Farallon Capital Management, L.L.C.,
Its Managing Member
By: /s/ Derek C. Schrier
--------------------
Name: Derek C. Schrier
Title: Managing Member
OAK HILL SECURITIES FUND, L.P.
By: Oak Hill Securities GenPar, L.P.
its General Partner
By: Oak Hill Securities MGP, Inc.,
its General Partner
By:
-----------------------------------
Name:
Title:
OAK HILL SECURITIES FUND II, L.P.
By: Oak Hill Securities GenPar, L.P.
its General Partner
By: Oak Hill Securities MGP, Inc.,
its General Partner
By:
-----------------------------------
Name:
Title:
LERNER ENTERPRISES, L.P.
By: Oak Hill Asset Management, Inc.,
as Advisor and Attorney-in-Fact to
Lerner Enterprises, L.P.
By:
-----------------------------------
Name:
Title:
PP&K FAMILY LTD. PARTNERSHIP
By: Oak Hill Asset Management, Inc.,
as Advisor and Attorney-in-Fact to
P&PK Family Ltd. Partnership
By:
-----------------------------------
Name:
Title:
CARDINAL INVESTMENT PARTNERS I, L.P.
By: Oak Hill Asset Management, Inc.,
as Advisor and Attorney-in-Fact to
Cardinal Investment Partners I, L.P.
By:
-----------------------------------
Name:
Title:
OAK HILL CREDIT PARTNERS I, LIMITED
By: Oak Hill CLO Management I, LLC,
as Investment Manager
By:
-----------------------------------
Name:
Title:
OAK HILL CREDIT PARTNERS II, LIMITED
By: Oak Hill CLO Management II, LLC,
as Investment Manager
By:
-----------------------------------
Name:
Title:
TRS THEBE LLC
By: /s/ Alice L. Wagner
-------------------
Name: Alice L. Wagner
Title: Vice President
UPPER COLUMBIA CAPITAL COMPANY, LLC
By:
-----------------------------------
Name:
Title: