FIRST AMENDMENT TO CREDIT AGREEMENT
Exhibit 10.16
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of December 15, 2005
by and between TEKELEC, a California corporation (“Borrower”) and XXXXX FARGO BANK, NATIONAL
ASSOCIATION (“Bank”).
RECITALS
WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that
certain Credit Agreement between Borrower and Bank dated as of December 15, 2004, as amended from
time to time (“Credit Agreement”).
WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set
forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said
changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree that the Credit Agreement shall be amended as follows:
1. The term “Tangible Net Worth” is hereby redefined as follows:
‘“Tangible Net Worth’ means the aggregate of total stockholders’ equity plus
subordinated debt less any intangible assets and goodwill.”
2. Section 1.1(a) is hereby amended by deleting “December 15, 2005” as the last day on which
Bank will make advances under the Line of Credit, and by substituting for said date “December 15,
2006,” with such change to be effective upon the execution and delivery to Bank of a promissory
note dated as of December 15, 2005 (which promissory note shall replace and be deemed the Line of
Credit Note defined in and made pursuant to the Credit Agreement) and all other contracts,
instruments and documents required by Bank to evidence such change.
3. Borrower may from time to time request in writing a reduction in the maximum principal
amount available under the Line of Credit. Each such reduction shall be in the minimum amount of
$1,000,000.00 and in increments of $1,000,000.00. Each such reduction shall take effect 5 calendar
days after Bank receives the written request therefor, provided that within such 5 day period (a)
Borrower executes and delivers to Bank a new Line of Credit Note reflecting the applicable
principal amount available thereunder, and (b) Borrower repays principal and/or causes the return
and cancellation of outstanding Letters of Credit such that the amount, if any, by which the then
outstanding principal balance of the Line of Credit (inclusive of the amount available to be drawn
under outstanding Letters of Credit plus amounts drawn and not yet reimbursed thereunder) exceeds
the new principal amount available thereunder.
4. Section 1.2(c) is hereby amended to read as follows:
“(c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to one
eighth of one percent (0.125%) per annum (computed on the basis of a 360-day year, actual
days elapsed) on the average daily unused amount of the Line of Credit, which fee shall be
calculated on a quarterly basis by Bank and shall be due and payable by Borrower in arrears
within 10 days after the last day of each calendar quarter.
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5. Clause (i) of Section 1.2(d) is hereby amended to read as follows:
“(i) fees upon the issuance of each Letter of Credit equal to three-tenths
percent (0.30%) per annum (computed on the basis of a 360-day year, actual days
elapsed) of the face amount thereof, and.”
6. The reference in Section 2.5 to “June 30, 2004” as the date of Borrower’s financial
statement is hereby amended to read “June 30, 2005.”
7. The reference in Section 3.1(c) to “December 31, 2003” is hereby amended to read “December
31, 2004.”
8. Section 3.2(b) is hereby amended to read as follows:
“(b) Notice of Borrowing. Bank shall have received a Notice of
Borrowing, in the form of Exhibit B hereto, with respect to each advance or an
Application for Letter of Credit, in the form of Exhibit C hereto, with respect to
each Letter of Credit not later than three (3) Business Days prior to the date of a
requested advance or Letter of Credit.”
9. Section 3.2(c) is hereby amended to read as follows:
“(c) Collateral. Borrower shall have deposited Sufficient Assets into
the Pledged Account not later than three (3) Business Days prior to the date of a
requested advance or Letter of Credit.”
10. Section 4.3(c) is hereby deleted, provided, however, that Borrower’s authorization set
forth in the parenthetical phrase therein shall remain in full force and effect.
11. Sections 4.3(a) and (b) are each hereby deemed amended by requiring that, in addition to
the financial statements (and other items) that are required to be delivered thereunder, Borrower
deliver to Bank, together with such financial statements, a compliance certificate executed by
Borrower’s Chief Financial Officer or Chief Executive Officer certifying Borrower’s compliance with
all affirmative and negative covenants set forth in the Credit Agreement.
12. Section 4.9(a) is hereby amended to read as follows:
“(a) Tangible Net Worth, determined as of the end of each fiscal quarter, not
less than an amount equal to 80% of Borrower’s Tangible Net Worth as of September
30, 2005.”
13. Except as specifically provided herein, all terms and conditions of the Credit Agreement
remain in full force and effect, without waiver or modification. All terms defined in the Credit
Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit
Agreement shall be read together, as one document.
14. Borrower hereby remakes all representations and warranties contained in the Credit
Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the
date of this Amendment there exists no Event of Default as defined in the Credit
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Agreement, nor any condition, act or event which with the giving of notice or the passage of
time or both would constitute any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day
and year first written above.
| XXXXX FARGO BANK, | ||||||
| TEKELEC | NATIONAL ASSOCIATION | |||||
By:
|
/s/ Xxxxxxx X. Xxxxxxx | By: | /s/ Xxxx X. Xxxxxxx | |||
Title:
|
Title: Senior Vice President | |||||
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XXXXX
|
Xxxx Xxxxxxx, CFA | U.S. Corporate Banking | ||
FARGO
|
Senior Vice President | MAC E2064-12B | ||
| 000 X. Xxxxx Xxx. | ||||
| 00xx Xxxxx | ||||
| Xxx Xxxxxxx, XX 00000 | ||||
| 000 000-0000 |
| Tekelec | March 15, 2006 | |||
| 0000 Xxxxxxxxx Xxxxxxx | ||||
| Xxxxxxxxxxx, XX 00000 | ||||
Attention:
|
Xxxxxxx Xxxxxxx | |||
| Chief Financial Officer | ||||
Ladies and Gentlemen,
Tekelec has advised Xxxxx Fargo Bank, National Association (“Bank”) that Tekelec has
discovered certain accounting errors (the “Accounting lssues”), and that accordingly Tekelec may
have breached (a) the representation set forth in the first sentence of Section 2.5 (the
“Applicable Representation”), and (b) the covenant set forth in the first clause of Section 4.2
(the “Applicable Covenant”), and that such Accounting lssues may have resulted in the occurrence of
the Events of Default described in the next paragraph. Tekelec has requested that Bank waive such
breaches and Events of Default and amend certain provisions of the Credit Agreement. All Section
numbers cited in this letter refer to Sections of the Credit Agreement dated as of December 15,
2004 by and between Tekelec and Bank, as amended from time to time (the “Credit Agreement”).
Bank hereby waives any breach(es) by Tekelec as a result of the Accounting lssues of the
Applicable Representation made by Tekelec to Bank from time to time prior to the date hereof and
through June 30, 2006, as well as the Event(s) of Default which may have occurred or may occur
(through June 30, 2006) under Section 6.1(b) as a result thereof. Bank also hereby waives any
breach by Tekelec as a result of the Accounting lssues of the Applicable Covenant with respect to
Tekelec’s books and records pertaining to any and all periods to and including, but not beyond, the
date hereof, as well as the Event(s) of Default which may have occurred under Section 6.1 (c) as a
result thereof. Bank also hereby waives any Event(s) of Default which may have occurred under
Section 6.1 (b) as a result of any Accounting lssues in the financial statements delivered by
Tekelec to Bank prior to the date hereof under Sections 4.3(a) and 4.3(b).
Except as specifically set forth in the preceding paragraph, Bank is not waiving, and reserves
all of its rights and remedies, with respect to any other breaches of the Credit Agreement or
Events of Default which may now exist or may hereafter occur, including, without limitation, of the
Applicable Representation and Applicable Covenant.
Tekelec hereby agrees that it shall deliver to Bank on or before June 30, 2006, a revised
financial statement of Borrower dated June 30, 2004 (the “Revised 6/30/04 Financial Statement”).
Bank and Tekelec hereby agree that from and after the date of such delivery, the Revised 6/30/04
Financial Statement (and not the financial statement delivered by Tekelec to Bank prior to the date
of execution of the Credit Agreement) shall be deemed to be the subject of the Applicable
Representation.
Bank further hereby agrees (and Tekelec, by signing below, agrees) that Section 4.3(a) (but
only with respect to FYE2005), and Section 4.3(b) (but only with respect to fiscal quarter end
3/31/06), are hereby deemed amended by requiring that all items described therein be delivered to
Bank no later than June 30, 2006. Accordingly, determination by Bank of Tekelec’s continuing
compliance with Section 4.9(a) (Tangible Net Worth) shall be based on (i)
the items so delivered no
later than June 30, 2006 and (ii) Borrower’s Tangible Net Worth as reflected in the 9/30/05
financial statements as revised to correct the Accounting Issues.
Except as so in full amended, and subject to the terms and conditions of this letter, the
Credit Agreement remains force and effect according to its terms.
| Sincerely, | ||||
| Xxxxx Fargo Bank, National Association | ||||
| By: | /s/ Xxxx X. Xxxxxxx | |||
| Title: | Senior Vice President | |||
| Tekelec | ||||
By:
|
/s/ Xxxxxxx X. Xxxxxxx | |||
Title:
|
CFO | |||
| Tekelec | May 25, 2006 | |||
| 0000 Xxxxxxxxx Xxxxxxx | ||||
| Xxxxxxxxxxx, XX 00000 | ||||
Attention:
|
Xxxxxxx Xxxxxxx | |||
| Chief Financial Officer | ||||
Capitalized terms used in this letter shall herein have the meanings given to them in the
letter dated March 15, 2006 executed by Xxxx Xxxxxxx, Senior Vice President, on behalf of Xxxxx
Fargo Bank, National Association and countersigned by Xxxxxxx Xxxxxxx, Chief Financial Officer, on
behalf of Tekelec (the “Prior Letter”) or, as applicable, in the Credit Agreement (as defined in
the Prior Letter).
Tekelec has advised Bank that due to the time required to correct the Accounting Issues, an
“Event of Default” may occur under the Indenture dated as of June 17, 2003 executed by Tekelec to
Deutsche Bank Trust Company Americas, as Trustee (the “Indenture”) in that Tekelec may not deliver
to the Trustee the 2005 Form 10-K required under Section 7.04 within the sixty-day cure period
contemplated in Section 8.01(e) of the Indenture (the “Indenture Reporting Default”). The
occurrence of the Indenture Reporting Default would constitute an Event of Default under Section
6.1(d) of the Credit Agreement (the “Specified Cross-Default”).
Tekelec hereby requests that Bank prospectively waive and Bank hereby prospectively waives the
Specified Cross-Default should the same occur.
In consideration of such waiver, Tekelec hereby agrees that in the event that the Indenture
Reporting Default occurs and Tekelec requests an advance(s) under the Line of Credit, said
request(s) shall be accompanied by a written certification by Tekelec’s Chief Financial Officer
that, as of the date of such request, the aggregate amount of Tekelec’s cash and marketable
securities is no less than $200,000,000.00 less the aggregate amount, if any, of repayments of
principal that have already been made by Tekelec under the Notes (as defined in said Indenture),
other than repayments made directly or indirectly with proceeds of the Line of Credit. Tekelec
understands, however, that advances under the Line of Credit shall continue to be available subject
to its compliance and in accordance with all terms and conditions of the Credit Agreement and other
Loan Documents, as supplemented by the terms of this paragraph and the Prior Letter.
In the event that Borrower files its 2005 Form10-K with the SEC by June 30, 2006, Bank agrees
that the time by which Borrower is required to deliver its Form 10-Q report for FQE3/31/06 to the
Bank shall be extended until July 17, 2006. The Prior Letter is hereby deemed amended in accordance
with this paragraph. Until such time as Borrower has filed its 2005 Form 10-K as required in this
paragraph:
(a) the definition of Sufficient Assets in the Credit Agreement shall be amended to read as
follows:
“Sufficient Assets” means cash, cash equivalents and/or Acceptable Securities in
an aggregate face amount equal to 120% of the amount of a requested advance or
USD-denominated Letter of Credit or 120% of the USD Equivalent Amount of a OAC-denominated
Letter of Credit,” and
(b) the Addendum to Security Agreement: Pledged Account dated as of November ___, 2004 executed by
Borrower shall be amended by replacing the sentence that reads as follows:
“The Collateral Value of the Pledged Account shall at all times be equal to or greater
than the sum of one hundred percent (100%) of the outstanding amount of Indebtedness secured
hereby (other than Indebtedness owing under or in connection with OAC-denominated Letters of
Credit) and 120% of the USD Equivalent Amount of Indebtedness owing under or in connection
with OAC-denominated Letters of Credit.”
with the following:
“The Collateral Value of the Pledged Account shall at all times be equal to or greater
than the sum of 120% of the outstanding amount of Indebtedness secured hereby (other than
Indebtedness owing under or in connection with OAC-denominated Letters of Credit) and 120%
of the USD Equivalent Amount of Indebtedness owing under or in connection with
OAC-denominated Letters of Credit.”
Following such filing of the 2005 Form 10-K, the terms of the Credit Agreement and the Addendum
shall apply without regard to the foregoing amendments.
Except as specifically set forth herein, Bank is not waiving, and reserves all of its rights
and remedies, with respect to any other breaches of the Credit Agreement or Events of Default which
may now exist or may hereafter occur, including, without limitation, any Event of Default under
Section 6.1(d) of the Credit Agreement not consisting of the Indenture Reporting Default.
Except as so amended, and subject to the terms and conditions of this letter, the Credit
Agreement remains in full force and effect according to its terms. The Prior Letter (as amended
above) also remains in full force and effect.
| Sincerely, | ||||
| Xxxxx Fargo Bank, National Association | ||||
| By: | /s/ Xxxxxxxxx Xxxxxxx | |||
| Title: | SVP | |||
Tekelec’s execution block is on the next page
Agreed: Tekelec
By:
|
/s/ Xxxxxxx X. Xxxxxxx | |||
Title:
|
Sr. VP CFO | |||
Date:
|
5/25/06 |
