Exhibit 10.22

 

AMENDMENT NO. 3 TO CREDIT AGREEMENT

 

This AMENDMENT NO. 3 TO CREDIT AGREEMENT (this “Amendment”) dated as of May 18,
2005 is by and among OMNOVA Solutions Inc., an Ohio corporation (“Borrower”),
the financial institutions party to this Amendment, as Lenders, and JPMorgan
Chase Bank, N.A. (successor by merger to Bank One, N.A. (Main Office Chicago)),
as Agent for the Lenders. Unless otherwise specified herein, capitalized terms
used in this Amendment shall have the meanings ascribed to them in the Credit
Agreement (as hereinafter defined).

 

RECITALS

 

WHEREAS, Agent, the Lenders named therein and the Borrower are parties to that
certain Credit Agreement, dated as of May 28, 2003 (as amended, the “Credit
Agreement”); and

 

WHEREAS, the Borrower has requested that Agent and Lenders, and Agent and
Lenders have agreed to, amend the Credit Agreement as described herein upon the
terms and conditions set forth herein;

 

NOW THEREFORE, in consideration of the mutual execution hereof and other good
and valuable consideration, the parties hereto agree as follows:

 

SECTION 1. Amendments to the Credit Agreement. Subject to the satisfaction of
the conditions precedent set forth in Section 8 hereof, the parties hereto
hereby agree to amend the Credit Agreement as follows:

 

(a) The definition of “Applicable Margin” set forth in Annex A of the Credit
Agreement is hereby amended by amending and restating the grids set forth
therein to read as follows:

 

If the Fixed Charge

Coverage Ratio is:

--------------------------------------------------------------------------------

 

Level of

Applicable Margins:

--------------------------------------------------------------------------------

   

<1.25

  Level V    

³1.25, but <1.50

  Level IV    

³1.50, but <1.75

  Level III    

³1.75, but <2.00

  Level II    

³2.00

  Level I    

 

Low to High

 

     Applicable Margins

--------------------------------------------------------------------------------

       Level I

--------------------------------------------------------------------------------

    Level II

--------------------------------------------------------------------------------

    Level III

--------------------------------------------------------------------------------

    Level IV

--------------------------------------------------------------------------------

    Level V

--------------------------------------------------------------------------------

 

Alternate Base Rate Revolving Loans

   0.0 %   0.25 %   0.50 %   0.75 %   1.00 %

Eurodollar Revolving Loans

   1.50 %   1.75 %   2.00 %   2.25 %   2.50 %

Letter of Credit Fee

   1.50 %   1.75 %   2.00 %   2.25 %   2.50 %

Unused Line Fee

   0.25 %   0.25 %   0.375 %   0.375 %   0.50 %

--------------------------------------------------------------------------------

(b) The definition of “Adjusted Net Earnings from Operations” set forth in Annex
A to the Credit Agreement is hereby amended by adding a new clause (k)
immediately after clause (j) in such definition (before the period) to read as
follows:

 

“; and (k) without duplication of any of the foregoing exclusions, costs and
expenses not to exceed $1,700,000 incurred in connection with the work stoppage
at Borrower’s Jeannette, Pennsylvania plant for the Fiscal Quarter ending
February 28, 2005.”

 

(c) The definition of “Maximum Inventory Loan Amount” set forth in Annex A to
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:

 

“Maximum Inventory Loan Amount” means (a) with respect to Inventory from
Borrower’s performance chemical division, an amount not to exceed $20,000,000
and (b) with respect to Inventory from Borrower’s decorative products and
building products divisions, an amount not to exceed $16,000,000.”

 

(d) The definition of “Permitted Acquisition” set forth in Annex A to the Credit
Agreement is hereby amended by amending and restating clause (ii) of the
definition of “Permitted Acquisitions” to read as follows:

 

“(ii) consideration provided by the Borrower for such Permitted Acquisition
shall consist solely of (A) equity in Borrower (or proceeds from equity issued
by Borrower), (B) proceeds of Debt issued pursuant to the last sentence of
Section 7.13 which is also subordinated to the Obligations on terms and
conditions satisfactory to Agent, (C) proceeds from asset sales or issuances of
equity to the extent expressly permitted under Section 3.3(a) of the Agreement,
(D) no more than $15,000,000 of Revolving Loans and/or (E) the proceeds from
Senior Notes issued after May 18, 2005 to the extent such Senior Notes are
permitted hereunder (including proceeds from any refinancing of the Senior Notes
permitted under Section 7.13 of the Agreement); provided, that the aggregate
purchase price for all Permitted Acquisitions shall not exceed $30,000,000
through the Stated Termination Date;”

 

(e) The definition of “Senior Notes” set forth in Annex A to the Credit
Agreement is hereby amended by deleting the language reading “in the aggregate
principal amount of $165,000,000” and replacing it with language reading “in the
aggregate principal amount not to exceed $185,000,000”.

 

(f) The definition of “Stated Termination Date” set forth in Annex A to the
Credit Agreement is hereby amended and restated as follows:

 

“Stated Termination Date” means November 30, 2009.

 

2

--------------------------------------------------------------------------------

(g) Section 3.2 of the Credit Agreement is hereby amended by amending and
restating the table of early termination fees set forth therein to read as
follows:

 

Period during which

early termination occurs

--------------------------------------------------------------------------------

 

Early Termination Fee

--------------------------------------------------------------------------------

On or prior to May 18, 2006 but after May 18, 2005

  1% of the Maximum Revolver Amount

On or prior to May 18, 2007 but after May 18, 2006

  0.75% of the Maximum Revolver Amount

On or prior to May 18, 2008 but after May 18, 2007

  0.5% of the Maximum Revolver Amount

After May 18, 2008

  0% of the Maximum Revolver Amount

 

(h) Section 3.3(a) of the Credit Agreement is hereby amended by amending and
restating Section 3.3(a) to read as follows:

 

“(a) Immediately upon receipt by Borrower or its Subsidiaries of proceeds of any
(i) sale or other disposition of Collateral (excluding Accounts and Inventory)
permitted under Section 7.9, (ii) sale of the stock of any Subsidiary of
Borrower or (iii) issuance of equity securities (other than equity issued in
connection with Borrower’s Plans) or issuance of Debt (other than Guaranties)
permitted under the last sentence of Section 7.13 (excluding proceeds of equity
or Debt issued to finance a Permitted Acquisition but only to the extent such
proceeds are received and paid to the sellers of the Target contemporaneously
with the consummation of the Permitted Acquisition or contemporaneously with the
date on which any other consideration is required to be paid to such sellers in
connection with such Permitted Acquisition), Borrower shall prepay the
Obligations in an amount equal to all such proceeds, net of (A) commissions and
other reasonable and customary transaction costs, fees and expenses properly
attributable to such transaction and payable by Borrower in connection therewith
(in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable
to holders of senior Liens (to the extent such Liens constitute Permitted Liens
hereunder), if any, and (D) an appropriate reserve for income taxes in
accordance with GAAP in connection therewith (“Net Proceeds”); provided, that to
the extent no Default or Event of Default has occurred and is continuing at the
time of or after giving effect to any sale or disposition of Collateral under
clause (i) or any issuance of equity by Borrower under clause (iii), Borrower
may use the proceeds thereof for any of its general corporate purposes
(including, without limitation, Permitted Acquisitions and repurchases of the
Senior Notes) to the extent not prohibited by this Agreement. Notwithstanding

 

3

--------------------------------------------------------------------------------

the foregoing, if a Default or an Event of Default has occurred and is
continuing, all Net Proceeds from the sale of Collateral subject to clause (i)
above or from any issuance of equity by Borrower under clause (iii) above shall
be applied to the Obligations. Any such prepayment required by this Section
3.3(a) shall be applied in accordance with Section 3.7.”

 

(i) Section 5.4 of the Credit Agreement is hereby amended by deleting reference
to the word “twice” and replacing it with the word “once”.

 

(j) Section 7.4 of the Credit Agreement is hereby amended by amending and
restating the parenthetical set forth therein to read as follows:

 

“(at the expense of the Borrower and, so long as no Event of Default has
occurred and is continuing, not to exceed three (3) times per year unless the
Fixed Charge Coverage Ratio for the twelve (12) month period most recently ended
is equal to or greater than 1.5:1.0 in which case such inspection shall not
exceed two (2) times per year unless an Event of Default has occurred and is
continuing)”

 

(k) Section 7.10 of the Credit Agreement is hereby amended by deleting the
reference in clause (ii) to $10,000,000” and replacing it with “$20,000,000.”

 

(l) Section 7.10 of the Credit Agreement is hereby amended by amending and
restating clause (iv) therein to read as follows:

 

“(iv) make a Permitted Acquisition; provided, that (A) all the terms and
conditions set forth in the definition of “Permitted Acquisition” are satisfied
at or prior to the effective date of such Permitted Acquisition, (B) no more
than $15,000,000 of Revolving Loans can be used to fund such Permitted
Acquisition, (C) the average daily Availability for the 90 day period ending on
the effective date of such Acquisition is equal to at least the sum of (x)
$30,000,000 plus (y) the amount of Revolving Loans used to fund any portion of
such Permitted Acquisition, (D) Availability at the time of and immediately
after giving effect to the consummation of such Permitted Acquisition is equal
to at least the sum of (x) $30,000,000 plus (y) the amount of Revolving Loans
used to fund any portion of such Permitted Acquisition, (E) the Fixed Charge
Coverage Ratio is at least 1.5:1.0 for the 3 month and 12 month periods ending
on the effective date of such Permitted Acquisition (provided, that to the
extent such 3 month period includes any of the months of November, December,
January or February, such 3 month period shall be increased to a 6 month period
ending on the effective date of such Permitted Acquisition) and (F) the
Acquisition Projections (as defined in the definition of Permitted Acquisition)
shall reflect that the Fixed Charge Coverage Ratio will be at least 1.5:1.0 for
each 12 month period ending after the effective date of such Permitted
Acquisition through the first anniversary of such effective date.”

 

4

--------------------------------------------------------------------------------

(m) Section 7.13 of the Credit Agreement is hereby amended by amending and
restating clause (e) therein to read as follows:

 

“(e) Debt evidencing a refunding, renewal or extension of the Debt described in
clause (b) above or on Schedule 6.9; provided, that in each case (i) the
principal amount thereof is not increased (except as permitted under the
definition of “Senior Notes”), (ii) the Liens, if any, securing such refunded,
renewed or extended Debt do not attach to any assets in addition to those
assets, if any, securing the Debt to be refunded, renewed or extended, (iii) no
Person that is not an obligor or guarantor of such Debt as of the Closing Date
shall become an obligor or guarantor thereof, and (iv) the terms of such
refunding, renewal or extension are no less favorable to the Borrower, the Agent
or the Lenders than the original Debt.”

 

(n) Section 7.14 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

 

“7.14 Prepayment. Neither the Borrower nor any of its Subsidiaries shall
voluntarily prepay any Debt, except (a) the Obligations in accordance with the
terms of this Agreement and (b) the Senior Notes to the extent permitted under
Section 3.3(a) of this Agreement.”

 

(o) Section 7.22 of the Credit Agreement is hereby amended by deleting reference
to the amount of “$20,000,000” and replacing it with the amount of
“$25,000,000.”

 

(p) Section 7.24 of the Credit Agreement is hereby amended by adding a new
sentence to the end thereof to read as follows:

 

“For purposes of this Section 7.24 only, the term “Availability” shall mean, at
any time, the lesser of (i) $110,000,000 or (ii) the Borrowing Base less in each
case the sum of (A) Reserves other than Reserves deducted in the calculation of
the Borrowing Base, (B) Aggregate Revolver outstandings and (C) $10,000,000.

 

SECTION 2. Representations And Warranties of Borrower. The Borrower represents
and warrants that:

 

(a) the execution, delivery and performance by the Borrower of this Amendment
has been duly authorized by all necessary corporate action and is a legal, valid
and binding obligation of such Person enforceable against such Person in
accordance with its terms, except as the enforcement thereof may be subject to
(i) the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law);

 

5

--------------------------------------------------------------------------------

(b) each of the representations and warranties contained in the Credit Agreement
is true and correct in all material respects on and as of the date hereof as if
made on the date hereof; and

 

(c) neither the execution, delivery and performance of this Amendment nor the
consummation of the transactions contemplated hereby does or shall contravene,
result in a breach of, or violate (i) any provision of Borrower’s certificate or
articles of incorporation or bylaws, (ii) any law or regulation, or any order or
decree of any court or government instrumentality, or (iii) any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which Borrower
is a party or by which it or any of its property is bound, except in any such
case to the extent such conflict or breach has been waived by a written waiver
document, a copy of which has been delivered to Agent on or before the date
hereof.

 

SECTION 3. Acknowledgments Regarding Credit Agreement.

 

(a) Except as specifically amended above, the Credit Agreement and the other
Loan Documents shall remain in full force and effect and are hereby ratified and
confirmed.

 

(b) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of Agent or the Lenders under
the Credit Agreement or any other Loan Documents, nor constitute a waiver of any
provision of the Credit Agreement or any other Loan Documents. Upon the
effectiveness of this Amendment, each reference in the Credit Agreement and the
other Loan Documents to “this Agreement”, “hereunder”, “hereof”, “herein” or
words of similar import shall mean and be a reference to the Credit Agreement,
as amended by this Amendment.

 

(c) Each Borrower hereby acknowledges and agrees that there is no defense,
setoff or counterclaim of any kind, nature or description to the Obligations or
the payment thereof when due.

 

SECTION 4. Costs And Expenses. As provided in Section 13.7 of the Credit
Agreement, the Borrower agrees to reimburse Agent for all fees, reasonable
out-of-pocket costs and expenses of the Agent (including attorney costs) in
connection with the preparation, execution, delivery and administration of this
Amendment (and the other documents to be delivered in connection herewith).

 

SECTION 5. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAWS PROVISIONS)
OF THE STATE OF ILLINOIS.

 

SECTION 6. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purposes.

 

SECTION 7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original, but
all such counterparts shall constitute one and the same instrument.

 

6

--------------------------------------------------------------------------------

SECTION 8. Effectiveness. This Amendment shall become effective upon:

 

(a) Receipt by the Agent of duly executed counterparts to this Amendment by the
Borrower and the Lenders; and

 

(b) Receipt by the Agent, for the ratable benefit of the Lenders, of an
amendment fee equal to $100,000, which fee shall be earned in full and payable
on the date hereof.

 

[Signature Page Follows]

 

7

--------------------------------------------------------------------------------

This Amendment No. 3 to Credit Agreement has been executed as of the day and
year first above written.

 

OMNOVA SOLUTIONS INC.

By:

 

/s/ Michael E. Hicks

--------------------------------------------------------------------------------

Its:

  Michael E. Hicks

Title:

  Senior Vice President and Chief Financial Officer

JPMORGAN CHASE BANK, N.A. (successor by

merger to Bank One, N.A. (Main Office Chicago))

By:

 

/s/ Andrew D. Hall

--------------------------------------------------------------------------------

Its:

  Andrew D. Hall

Title:

  Vice President

PNC BANK, NATIONAL ASSOCIATION

By:

 

/s/ Peter Redington

--------------------------------------------------------------------------------

Its:

  Peter Redington

Title:

  Assistant Vice President

FIFTH THIRD BANK

By:

 

/s/ Donald K. Mitchell

--------------------------------------------------------------------------------

Its:

  Donald K. Mitchell

Title:

  Vice President

LASALLE BUSINESS CREDIT, LLC

By:

 

/s/ Richard Pierce

--------------------------------------------------------------------------------

Its:

 

Richard Pierce

Title:

  Vice President

KEY BANK NATIONAL ASSOCIATION

By:

 

/s/John P. Dunn

--------------------------------------------------------------------------------

Its:

  John P. Dunn

Title:

  Vice President