First Amendment, dated as of September 29, 2023, to the Note Purchase and Private Shelf Agreement dated as of June 10, 2021 by and among Stepan Company, PGIM, Inc. and the purchasers thereto
Exhibit 10.4
EXECUTION VERSION
STEPAN COMPANY
First Amendment
Dated as of September 29, 2023
to
NOTE PURCHASE AND PRIVATE SHELF AGREEMENT
Dated as of June 10, 2021
first Amendment
to Note PURCHASE AND PRIVATE SHELF Agreement
This first Amendment dated as of September 29, 2023 (this “Amendment”) to that certain Note Purchase and Private Shelf Agreement dated as of June 10, 2021 is among Stepan Company, a Delaware corporation (the “Company”), each Subsidiary Guarantor party hereto and each holder of Notes (as hereinafter defined) that is a party hereto (collectively, the “Noteholders”).
Recitals:
A. Whereas, the Company has heretofore entered into that certain Note Purchase and Private Shelf Agreement dated as of June 10, 2021 (the “Note Purchase Agreement”) with each of the Purchasers listed in Schedule A thereto pursuant to which the Company issued and has outstanding (i) $50,000,000 aggregate principal amount of its 2.30% Senior Notes, Series 2021-A, due June 10, 2028 (the “Series 2021-A Notes”), (ii) $50,000,000 aggregate principal amount of its 2.73% Senior Notes, Series 2021-D, due December 10, 2031 (the Series 2021-D Notes”) and (iii) $50,000,000 aggregate principal amount of its 2.83% Senior Notes, Series 2022-B, due March 1, 2032 (the “Series 2022-B Notes”; together with the Series 2021-A Notes and the Series 2021-D Notes, collectively, the “Notes”);
B. Whereas, capitalized terms used herein shall have the respective meanings ascribed thereto in the Note Purchase Agreement unless herein defined or the context shall otherwise require;
C. Whereas, the Company has requested that the Noteholders make certain amendments to the Note Purchase Agreement;
D. Whereas, the Required Holders have agreed to the Company’s amendment request and the Required Holders now desire to amend the Note Purchase Agreement in the respects, but only in the respects, hereinafter set forth; and
E. Whereas, all requirements of law have been fully complied with and all other acts and things necessary to make this Amendment a valid, legal and binding instrument according to its terms for the purposes herein expressed have been done or performed.
Now, therefore, upon the full and complete satisfaction of the conditions precedent to the effectiveness of this Amendment set forth in Section 3.1 hereof, and in
consideration of good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the Company and the Noteholders do hereby agree as follows:
(h) Debt Rating — promptly following the occurrence thereof, notice of any change in the Debt Rating for the Notes (to the extent such Debt Rating is not a public rating); and
Section 9.9. Rating Requirements; Ratings Fee.
(a) On or prior to November 30, 2023, the Company shall deliver, or cause to be delivered, to each holder of Notes (i) a Private Rating Letter issued by an Acceptable Rating Agency setting forth the Debt Rating for the Notes and (ii) the related Private Rating Rationale Report with respect to such Debt Rating. From and after the delivery of such Private Rating Letter, the Company shall at all times maintain a Debt Rating for each Series of the Notes from an Acceptable Rating Agency.
(b) At any time that the Debt Rating maintained pursuant to clause (a) above is not a public rating, the Company will provide to each holder of a Note (i) at least annually (on or before December 31 of the applicable year) and (ii) promptly upon any change in such Debt Rating, an updated Private Rating Letter evidencing such Debt Rating and an updated Private Rating Rationale Report with respect to such Debt Rating. In addition to the foregoing information and any information specifically required to be included in any Private Rating Letter or Private Rating Rationale Report (as set forth in the respective definitions thereof), if the SVO or any other government authority having jurisdiction over any holder of any Notes from time to time requires any additional information with respect to the Debt Rating of the Notes, the Company shall use commercially reasonable efforts to procure such information from the Acceptable Rating Agency.
(c) Without limiting the Company’s obligations under the other clauses of this Section 9.9, if the Company has a Below Investment Grade Rating at any time during the period commencing with the First Amendment Effective Date and ending on December 31, 2024, in addition to the interest accruing on the Notes, the Company agrees to pay to each holder of a Note a fee (a “Rating Fee”) of 0.75% per annum computed on
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the daily average outstanding principal amount of such Notes during each fiscal quarter during which the Company has a Below Investment Grade Rating; provided that, in no event shall a Rating Fee be payable pursuant to this Section 9.9 for any period for which a Leverage Fee is payable pursuant to Section 10.2(b). Such Rating Fee shall begin to accrue on the first day of the fiscal quarter during which the Company receives a Below Investment Grade Rating and shall, subject to the immediately succeeding sentence, continue to accrue until the Company delivers a Debt Rating as required pursuant to Section 9.9(b) reflecting an Investment Grade Rating (for the avoidance of doubt regardless of whether such Investment Grade Rating is received after December 31, 2024). In the event such a Debt Rating evidencing an Investment Grade Rating is delivered, the Rating Fee shall cease to accrue on the last day of the fiscal quarter during which such Debt Rating is delivered.
The Rating Fee with respect to each Note for each fiscal quarter for which such fee accrues shall be calculated on the same basis as interest on such Note is calculated and shall be paid in arrears within three Business Days after the last day of each fiscal quarter during which the Company had a Below Investment Grade Rating and all accrued and unpaid Rating Fees on any principal amount of a Note being paid or prepaid shall be paid concurrently with such principal.
Section 10.2. Maximum Net Leverage Ratio.
(a) The Company will not permit the ratio (the “Net Leverage Ratio”), determined as of the end of each of its fiscal quarters ending on and after September 30, 2023, of (i) Consolidated Debt minus Qualified Cash, in each case as of the last day of the applicable fiscal quarter (it being understood that such difference shall not be less than zero) to (ii) Consolidated EBITDA for the period of four (4) fiscal quarters then ended, all calculated for the Company and its Subsidiaries on a consolidated basis, to be greater than the following ratios set forth below for the applicable fiscal quarter:
Quarter Ending | Net Leverage Ratio |
September 30, 2023 | 4.00 to 1.00 |
December 31, 2023 | 4.00 to 1.00 |
March 31, 2024 | 4.00 to 1.00 |
June 30, 2024 | 4.00 to 1.00 |
September 30, 2024 | 3.75 to 1.00 |
December 31, 2024 | 3.75 to 1.00 |
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March 31, 2025 and each fiscal quarter ending thereafter | 3.50 to 1.00 |
provided, that after the fiscal quarter ending June 30, 2024, the Company may, not more than two (2) times during the term of this Agreement, elect (an “Acquisition Holiday Election”) to increase the maximum Net Leverage Ratio permitted under this Section 10.2 to 4.00 to 1.00 for a period of four (4) consecutive fiscal quarters in connection with, and commencing with the first fiscal quarter ending after, an Acquisition (the “Acquisition Holiday Election Quarter”) if, the aggregate consideration paid or to be paid in respect of such Acquisition equals or exceeds $75,000,000 (it being understood that the Net Leverage Ratio shall return to less than or equal to 3.50 to 1.00 no later than the fifth fiscal quarter following the Acquisition Holiday Election Quarter) and the Company pays the additional fees required by Section 10.2(b).
(b) If the Net Leverage Ratio exceeds 3.50 to 1.00 as of the end of any fiscal quarter, as evidenced by an Officer’s Certificate delivered pursuant to Section 7.2(a), the Company shall pay a fee on the aggregate outstanding principal amount of the Notes on a per annum basis equal to 0.75% (the “Leverage Fee”; the Leverage Fee and the Rating Fee are collectively referred to herein as the “Additional Fee”). Such Leverage Fee shall begin to accrue on the first day of the fiscal quarter following the fiscal quarter in respect of which such Officer’s Certificate was delivered, and shall, subject to the immediately succeeding sentence, continue to accrue until the Company has provided an Officer’s Certificate pursuant to Section 7.2(a) demonstrating that, as of the last day of the fiscal quarter in respect of which such Officer’s Certificate is delivered, the Net Leverage Ratio is not more than 3.50 to 1.00. In the event such Officer’s Certificate evidencing that the Net Leverage Ratio is not more than 3.50 to 1.00 is delivered, the Leverage Fee shall cease to accrue on the last day of the fiscal quarter in respect of which such Officer’s Certificate is delivered.
Within 10 Business Days of the delivery of an Officer’s Certificate pursuant to Section 7.2(a) evidencing that Net Leverage Ratio exceeds 3.50 to 1.00, the Company shall pay to each holder of a Note the amount attributable to the Leverage Fee (the “Leverage Fee Payment”) which shall be the product of (i) the aggregate outstanding principal amount of Notes held by such holder (or its predecessor(s) in interest) as of the first day that the Leverage Fee begins to accrue with respect to the period covered by such Officer’s Certificate, (ii) 0.75% (to reflect the Leverage Fee) and (iii) 0.25 (to reflect that the Leverage Fee is payable quarterly). The Leverage Fee Payment, if any, shall be paid quarterly by wire transfer of immediately available funds to each holder of the Notes in accordance with the terms of this Agreement and all accrued and unpaid Leverage Fees on any principal amount of a Note being paid or prepaid shall be paid concurrently with such principal. The
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payment of a Leverage Fee shall not constitute a waiver of any Default or Event of Default.
“Acceptable Rating Agency” means (a) Fitch, Moody’s or S&P, or (b) or any other credit rating agency that is recognized as a nationally recognized statistical rating organization by the SEC and approved by the Required Holders, so long as, in each case, any such credit rating agency described in clause (a) or (b) above continues to be a nationally recognized statistical rating organization recognized by the SEC and is approved as a “Credit Rating Provider” (or other similar designation) by the NAIC.
“Below Investment Grade Rating” in respect of any Person means, at any time of determination, a Debt Rating of less than: (i) “BBB-” by S&P, (ii) “BBB-” by Fitch, (iii) “Baa3” by Moody’s or (iv) an equivalent Debt Rating by any other nationally recognized statistical rating agency.
“Debt Rating” means the debt rating of the Notes as determined from time to time by any Acceptable Rating Agency.
“First Amendment Effective Date” means September 29, 2023.
“Fitch” means Fitch, Inc. or, if applicable, its successor.
“Investment Grade Rating” in respect of any Person means, at any time of determination, a Debt Rating of at least: (i) “BBB-” by S&P, (ii) “BBB-” by Fitch, (iii) “Baa3” by Moody’s or (iv) an equivalent Debt Rating by any other nationally recognized statistical rating agency.
“Leverage Fee” is defined in Section 10.2(b).
“Leverage Fee Payment” is defined in Section 10.2(b).
“Moody’s” means Moody’s Investors Service, Inc. or, if applicable, its successor.
“Principal Credit Facility” means: (a) the Bank Credit Agreement, including any renewals, extensions, amendments, supplements, restatements, replacements or refinancing thereof, (b) the Note Purchase Agreement dated as of September 29, 2005, as Supplemented by that First
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Supplement thereto dated as of June 1, 2010 and that Second Supplement thereto dated as of November 1, 2011 and amended by that First Amendment thereto dated as of October 25, 2011, that Second Amendment thereto dated as of April 23, 2014 and that Third Amendment thereto dated January 30, 2018, including any renewals, extensions, amendments, supplements, restatements, replacements or refinancing thereof, (c) the Note Purchase Agreement dated as of June 27, 2013, by and among the Company and purchasers party thereto, as amended by the First Amendment thereto dated January 30, 2018, including any renewals, extensions, amendments, supplements, restatements, replacements or refinancing thereof, (d) the Note Purchase Agreement dated as of July 10, 2015, by and among the Company and purchasers party thereto, as amended by the First Amendment thereto dated January 30, 2018, including any renewals, extensions, amendments, supplements, restatements, replacements or refinancing thereof, (e) the Note Purchase and Master Note Agreement dated as of June 10, 2021, by and among the Company, NYL Investors LLC and the purchasers party thereto, including any renewals, extensions, amendments, supplements, restatements, replacements or refinancing thereof and (f) any agreement under which Debt of the Company or any Subsidiary in an aggregate amount of $100,000,000 or more is outstanding or which provides for a commitment to make loans, advances or other financial accommodations to the Company or any Subsidiary in an aggregate amount of $100,000,000 or more.
“Private Rating Letter” means a letter issued by an Acceptable Rating Agency in connection with any private debt rating for the Notes, which (a) sets forth the Debt Rating for the Notes, (b) refers to the Private Placement Number issued by Standard & Poor’s CUSIP Global Service in respect of the Notes, (c) addresses the likelihood of payment of both principal and interest on the Notes (which requirement shall be deemed satisfied if either (x) such letter includes confirmation that the rating reflects the Acceptable Rating Agency’s assessment of the Company’s ability to make timely payment of principal and interest on the Notes or a similar statement or (y) such letter is silent as to the Acceptable Rating Agency’s assessment of the likelihood of payment of both principal and interest and does not include any indication to the contrary), (d) includes such other information describing the relevant terms of the Notes as may be required from time to time by the SVO or any other Governmental Authority having jurisdiction over any holder of any Notes and (e) shall not be subject to confidentiality provisions or other restrictions which would prevent or limit the letter from being shared with the SVO or any other Governmental Authority having jurisdiction over any holder of any Notes.
“Private Rating Rationale Report” means, with respect to any Debt Rating, a report issued by the Acceptable Rating Agency in connection with such Debt Rating setting forth an analytical review of such series of Notes
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explaining the transaction structure, methodology relied upon, and, as appropriate, analysis of the credit, legal, and operational risks and mitigants supporting the assigned Debt Rating for such series of Notes, in each case, on the letterhead of the Acceptable Rating Agency or its controlled website and generally consistent with the work product that an Acceptable Rating Agency would produce for a similar publicly rated security and otherwise in form and substance generally required by the SVO or any other Governmental Authority having jurisdiction over any holder of any Notes from time to time. Such report shall not be subject to confidentiality provisions or other restrictions which would prevent or limit the report from being shared with the SVO or any other Governmental Authority having jurisdiction over any holder of any Notes.
“Qualified Cash” means, as of any date of determination, the amount by which the sum of (i) unrestricted and unencumbered cash or Permitted Investments of the Company and its Domestic Subsidiaries on deposit in accounts located in the United States on such date plus (ii) an amount equal to 65% of unrestricted and unencumbered cash or Permitted Investments of the Company and its Subsidiaries on deposit in accounts not located in the United States on such date exceeds $50,000,000; provided that in no event shall the amount of Qualified Cash exceed $100,000,000.
“Rating Fee” is defined in Section 9.9.
“S&P” means S&P Global Ratings or, if applicable, its successor.
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[Signature Pages Follow]
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IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed by an authorized representative as of the date first written above.
Very truly yours,
Stepan Company
By /s/ Luis E. Rojo
Name: Luis E. Rojo
Title: Vice President and Chief Financial Officer
Stepan Specialty Products, LLC
By /s/ Luis E. Rojo
Name: Luis E. Rojo
Title: Vice President and Chief Financial Officer
Stepan Surfactants Holdings, LLC
By /s/ Luis E. Rojo
Name: Luis E. Rojo
Title: Vice President and Chief Financial Officer
Accepted as of the date first written above.
The Prudential Insurance Company of America
Prudential Term Reinsurance Company
Gibraltar Universal Life Reinsurance Company
Prudential Universal Reinsurance Company
By: PGIM, Inc., as Investment Manager
By: /s/ Joshua Brooks
Vice President
We acknowledge that The Prudential Insurance Company of America holds (i) $25,000,000.00 2.30% Senior Notes, Series 2021-A, due June 10, 2028, (ii) $3,350,000.00 2.83% Senior Notes, Series 2022-B, due March 1, 2032 and (iii) $8,600,000.00 2.73% Senior Notes, Series 2021-D, due December 10, 2031
We acknowledge that Prudential Term Reinsurance Company holds $3,550,000.00 2.83% Senior Notes, Series 2022-B, due March 1, 2032
We acknowledge that Gibraltar Universal Reinsurance Company holds $3,050,000.00 2.83% Senior Notes, Series 2022-B, due March 1, 2032
We acknowledge that Prudential Universal Reinsurance Company holds $27,050,000.00 2.83% Senior Notes, Series 2022-B, due March 1, 2032
prudential ANNUITIES life ASSURANCE CORPORATION
By: Pruco Life Insurance Company (as Grantor)
By: PGIM, Inc. (as Investment Manager)
By: /s/ Joshua Brooks
Vice President
We acknowledge that Prudential Annuities Life Assurance Corporation holds (i) $1,500,000.00 2.30% Senior Notes, Series 2021-A, due June 10, 2028 and (ii) $8,100,000.00 2.73% Senior Notes Series 2021-D, due December 10, 2031
The Gibraltar Life Insurance Co., Ltd.
the prudential life insurance company, ltd.
By: PGIM Japan Co., Ltd., as Investment Manager
By: PGIM, Inc., as Sub-Adviser
By: /s/ Joshua Brooks
Vice President
We acknowledge that The Gibraltar Life Insurance Co., Ltd. holds $13,850,000.00 2.30% Senior Notes, Series 2021-A, due June 10, 2028
We acknowledge that The Prudential Life Insurance Company, Ltd. holds (i) $9,650,000.00 2.30% Senior Notes, Series 2021-A, due June 10, 2028 and (ii) $15,350,000.00 2.73% Senior Notes, Series 2021-D, due December 10, 2031
Highmark Inc.
Health Options, Inc.
The Independent Order of Foresters
Zurich American Life Insurance Company
By: PGIM Private Placement Investors, L.P.
(as Investment Advisor)
By: PGIM Private Placement Investors, Inc.
(as its General Partner)
By: /s/ Joshua Brooks
Vice President
We acknowledge that Highmark Inc. holds $5,000,000.00 2.83% Senior Notes, Series 2022-B, due March 1, 2032
We acknowledge that Health Options, Inc. holds $5,000,000.00 2.73% Senior Notes, Series 2021-D, due December 10, 2031
We acknowledge that The Independent Order of Foresters holds $5,000,000.00 2.83% Senior Notes, Series 2022-B, due March 1, 2032
We acknowledge that Zurich American Life Insurance Company holds (i) $3,000,000.00 2.83% Senior Notes, Series 2022-B, due March 1, 2032 and (ii) $12,950,000.00 2.73% Senior Notes, Series 2021-D, due December 10, 2031