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EXHIBIT 10.1
CREDIT AGREEMENT
This Credit Agreement ("Agreement") is made and entered into on April 18 1999,
by and between Tekelec, a California corporation ("Borrower") and Imperial Bank,
a California banking corporation ("Bank").
Subject to the terms and conditions of this Agreement, any security agreement(s)
executed by Borrower in favor of Bank, any note(s) executed by Borrower in favor
of Bank, or any other agreements executed in conjunction therewith
(collectively, the "Loan Documents"), Bank shall make the loans and or advances
(individually a "Loan" and collectively "Loans") referred to below to Borrower.
In consideration of mutual covenants and conditions hereof, the parties hereto
agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.01 ASSET BASED FORMULA LINE OF CREDIT COMMITMENT (ABL LINE OF CREDIT)
(a) FORMULA LINE OF CREDIT. Accounts Receivable Borrowing Base Constrained.
Subject to all the terms and conditions of this Agreement, provided that no
event of default then has occurred and is continuing, Bank shall upon Borrower's
request, make advances ("ABL Loans") to Borrower, from time to time and in such
amounts as Borrower shall request up to an aggregate principal amount
outstanding not to exceed:
(1) Seventy Five percent (75%) of Eligible Accounts and in no event
more than $15,000,000 (the "ABL Line of Credit"), as such eligible Accounts
Receivable may be adjusted from time to time as provided for under 4.19 of this
agreement.
If at any time or for any reason, the outstanding principal amount of
the ABL Loan Account (as defined below) is greater than the lessor of: (x) the
Borrowing Base or (y) the ABL Line of Credit, Borrower shall immediately pay to
Bank, in cash, the amount of such excess. Any commitment of Bank, pursuant to
the terms of this Agreement, to make ABL Loans shall expire on the ABL Maturity
Date (as hereinafter defined), subject to Bank's right to renew said commitment
in its sole and absolute discretion at Borrowers request. Any such renewal of
said commitment shall not be binding upon Bank unless it is in writing and
signed by an officer of Bank. Provided that no Event of Default (as hereinafter
defined) has occurred and is continuing, all or any portion of the ABL Loans
advanced by Bank which are repaid by Borrower shall be available for reborrowing
in accordance with the terms hereof. Borrower promises to pay to Bank the entire
outstanding unpaid principal balance (and all accrued unpaid interest thereon)
of the ABL Loan Account on the earlier of demand by Bank or June 30, 2000 ("ABL
Maturity Date").
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Notwithstanding the above, the ABL Line of Credit automatically
converts to a ABL Streamline Revolving Line of Credit if outstandings under the
ABL Line of Credit exceed seventy five percent (75%) of borrowing availability.
(b) LIMITATION ON ADVANCE OF ANY ABL LOANS. Notwithstanding any of the
provisions contained in Section 1.01(a) hereof, within Ninety (90) days from the
date of this Agreement, a representative of Bank shall have conducted an audit
of Borrower's books and records relating to the Accounts and Inventory and any
other Collateral for the ABL Loans and made extracts therefrom, and arranged for
verification of the Accounts, directly with the account debtors or otherwise,
and of the Inventory all with results satisfactory to Bank, the cost of such
audit of which shall be at Borrower's sole expense. Based on Bank's review of
such audit, and prior to the advance of an ABL Loan in accordance with the terms
of this hereof, Bank may adjust the Borrowing Base percentage, in its sole and
reasonable discretion, as provided for under Section 4.19 hereof.
(c) LOAN LEDGER ACCOUNT. The amount of each ABL Loan made by Bank to Borrower
hereunder shall be debited to the loan ledger account of Borrower maintained by
Bank for the ABL Line of Credit (herein called the "ABL Loan Account") and Bank
shall credit the ABL Loan Account with all loan repayments in respect thereof
made by Borrower. ABL Loans may only be used for, (1) working capital and (2)
the issuance of letters of credit ("Letters of Credit").
(d) ABL LOANS INTEREST. Borrower further promises to pay to Bank from the date
of the advance of the initial ABL Loan through the ABL Maturity Date, on or
before the tenth (10) day of each month, interest on the unpaid balance of the
ABL Loan Account at a rate of interest equal to zero percent (0%) per annum in
excess of the rate of interest which Bank has announced as its prime lending
rate (the "Prime Rate'), which shall vary concurrently With any change in the
Prime Rate. Interest shall be computed at the above rate on the basis of the
actual number of days during which the principal balance of the ABL Loans are
outstanding divided by 360, which shall for interest computation purposes be
considered one (1) year.
(e) APPLICATION OF RECEIPTS. All sums received by Bank, whether from Borrower or
from Borrower's account debtors shall be applied to the outstanding ABL Loan
balance immediately upon receipt thereof by the Bank. The Borrower will be
charged, on a monthly basis, for the uncollected balance fees.
(f) CERTAIN DEFINITIONS. As used herein the following terms shall have the
following meanings:
"Accounts" means any right to payment for goods sold or leased, or
rented, or to be sold or to be leased, or to be rented, or for services rendered
or to be rendered no matter how evidenced, including accounts receivable,
contract rights, chattel paper, instruments, purchase orders, notes, drafts,
acceptances, general intangibles and other forms of obligations and receivables.
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"Collateral" means any and all property of Borrower which is assigned
or hereafter is assigned to Bank as security or in which Bank now has or
hereafter acquires a security interest.
"Eligible Accounts" Eligible Accounts shall only include such accounts
as Bank in its sole discretion shall determine are eligible from time to time.
"Eligible Accounts" shall also NOT include any of the following:
(1) All Accounts under which payment is not received within 90 days
from any invoice date.
(2) All Accounts against which the account debtor or any other person
obligated to make payment thereon asserts any defense, offset counterclaim or
other right to avoid or reduce the liability represented by the Account.
(3) Any Accounts if the account debtor or any other person liable in
connection therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of creditors or whose
credit standing is unacceptable to Bank and Bank has so notified Borrower.
(4) Account balances over 90 days from invoice date. Exception: Foreign
accounts covered by foreign credit insurance or Commercial Letters of Credit
that allow more extended terms may be considered on a case by case basis.
(5) Credit balances greater than 90 days from invoice date.
(6) Accounts due from a debtor if 40% or more of the aggregate amount
of accounts of such debtor have at that time remained unpaid for more then 90
days from invoice.
(7) For accounts representing more than 20% of Borrower's total
accounts receivable, the balance in excess of the 20% is not eligible. However,
the Bank may deem, in its sole discretion, the entire amount, or any portion
thereof, eligible.
(8) Accounts with respect to international transactions unless insured
by an insurance company acceptable to the Bank or covered by letters of credit
issued or confirmed by a bank acceptable to the Bank. Bank, in its sole
discretion, may deem as eligible amounts due from major, publicly owned foreign
companies.
(9) Accounts with respect to which the account debtor is an officer,
director, shareholder, employee, subsidiary or affiliate of Borrower, excluding
Tekelec Airtronic Companies.
(10) Accounts where the account debtor is a seller to Borrower, whereby
a potential offset (contra) exists.
(11) Consignment or guaranteed sales.
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(12) Xxxx and hold accounts.
(13) Collection accounts.
(14) C.O.D. accounts.
(15) Salesmen's accounts for promotional purposes.
(16) All United States Government receivables, unless formally assigned
to the Bank.
(17) Accounts representing xxxxxxxx for service or maintenance
contracts or for inventory or equipment on rent to the account debtor outside
the normal course of business.
(19) Pre-xxxxxxxx.
(g) REQUESTS FOR ABL LOANS. Requests for ABL Loans hereunder shall be in writing
duly executed by Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1, which shall
disclose that Borrower is entitled to the amount of loan being requested.
(h) LETTER OF CREDIT USAGE AND SUBLIMIT. Subject to the availability of the ABL
Formula Line of Credit, at any time and from time to time from the date hereof
through the banking day immediately prior to the ABL Maturity Date, Bank shall
issue for the account of Borrower such standby and commercial letters of credit
("Letters of Credit") as Borrower may request, which request shall be made by
delivering to Bank a duly executed letter of credit application on Bank's
standard form; provided, however, that the outstanding and undrawn amounts under
all such Letters of Credit (i) shall not at any time exceed $1,000,000 and (ii)
shall be deemed to constitute ABL Loans for the purpose of calculating
availability under the ABL Line of Credit. Unless Borrower shall have deposited
with Bank cash collateral in an amount sufficient to cover all undrawn amounts
under each such Letter of Credit and Bank shall have agreed in writing, no
Letter of Credit shall have an expiration date that is later than the ABL
Maturity Date. All Letters of Credit shall be in form and substance acceptable
to Bank in its sole discretion and shall be subject to the terms and conditions
of Bank's form application and letter of credit agreement. Borrower will pay any
standard issuance and other fees that Bank notifies Borrower will be charged for
issuing and processing Letters of Credit for Borrower.
1.02 LATE CHARGE. If any installment payment, interest payment, principal
payment or principal balance due under the ABL Line of Credit is delinquent
twenty (20) or more days, Borrower agrees to pay Bank a late charge in the
amount of five percent (5%) of the payment so due and unpaid, in addition to the
payment; but nothing in this paragraph is to be construed as any obligation on
the part of the Bank to accept payment of any payment past due or less than the
total unpaid principal balance after maturity. All payments, at Bank's sole
discretion, shall be applied first to any late charges owing, then to interest
and the remainder, if any, to principal.
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1.03 DEFAULT RATE. If an Event of Default occurs hereunder, then during the
continuance thereof at the Bank's option, the interest rate shall be five
percent (5%) per year in excess of the rate otherwise applicable.
1.04 INTEREST CALCULATIONS. The term "Prime Rate" shall mean the rate that the
Bank has announced as its prime lending rate, which shall vary concurrently with
any change in the Prime Rate. Interest based on the Prime Rate shall vary
concurrently with any change in the Prime Rate. All interest shall be computed
at the rate specified in any note on the basis of the actual number of days
during which the principal balance of the corresponding Loans are outstanding
divided by 360, which shall for interest computation purposes be considered one
(1) year.
1.05 LOAN FEE(S). In addition to any other amounts due, or to become due,
concurrent with the execution hereof, in connection with the Formula Line of
Credit, Borrower shall pay to Bank a commitment fee of One Hundred One Thousand
Two Hundred Fifty Dollars ($101,250,00).
1.06 DOCUMENTATION FEE, COSTS AND EXPENSES. In addition to any other amounts
due, or to become due, concurrently with the execution hereof, Borrower agrees
to pay to Bank a documentation fee in the amount of $250.00, and all other costs
and expenses incurred by the Bank in the preparation of this Agreement, the
other Loan Documents and the perfection of any security interest granted to Bank
by Borrower.
1.07. COLLATERAL. Borrower shall grant or cause to be granted to Bank a first
priority lien on any and all assets of Borrower which is assigned or hereafter
is assigned to Bank as security or in which Bank now has or hereafter acquires a
security interest or pursuant to the terms of any security agreement, an
intellectual property security agreement or otherwise as security for all of
Borrower's obligations to Bank, all as may be subject to Section 5.03 herein
except for assets acquired from the purchase of IEX Corporation.
1.08 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all interest,
fees, costs, and/or expenses due under this Agreement by charging Borrower's
demand deposit account number 00-000-000 with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
2. REPRESENTATIONS OF BORROWER
Borrower represents and warrants that:
2.01 EXISTENCE AND RIGHTS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the state of California, without
limit as to the duration of its existence which shall survive at least five
years beyond the maturity of any Loans hereunder. Borrower is authorized and in
good standing to do business in the state of its incorporation; each Borrower
has the appropriate powers and adequate authority, rights and franchises to own
its property and to carry on its business as now conducted, and is duly
qualified and in good
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standing in each state in which the character of the properties owned by it
therein or the conduct of its business makes such qualification necessary; and
Borrower has the power and adequate authority to make and carry out this
Agreement. Borrower has no investment in any other business entity unless
specified in writing to Bank.
2.02 AGREEMENT AUTHORIZED. The execution, delivery and performance of this
Agreement and the Loan Documents are duly authorized and do not require the
consent or approval of any governmental body or other regulatory authority; are
not in contravention of or in conflict with any law or regulation or any term or
provision of Borrower's articles of incorporation, or similar document as the
case may be, and this Agreement is the valid, binding and legally enforceable
obligation of Borrower in accordance with its terms; subject only to bankruptcy,
insolvency or similar laws affecting creditors rights generally.
2.03 NO CONFLICT. The execution, delivery and performance of this Agreement and
the Loan Documents are not in contravention of or in conflict with any
agreement, indenture or undertaking to which Borrower is a party or by which it
or any of its property may be bound or affected, and do not cause any lien,
charge or other encumbrance to be created or imposed upon any such property by
reason thereof.
2.04 LITIGATION. Except as disclosed in writing to bank by Borrower, there is no
litigation or other proceeding pending or threatened against or affecting
Borrower which if determined adversely to Borrower or its interest would have a
material adverse effect on the financial condition of Borrower, and Borrower is
not in default with respect to any order, writ, injunction, decree or demand of
any court or other governmental or regulatory authority.
2.05 FINANCIAL CONDITION. The consolidated balance sheet of Borrower as of March
31, 1999, and the related profit and loss statement for the 3 month period ended
as of that date, a copy of which has heretofore been delivered to Bank by
Borrower, and all other statements and data submitted in writing by Borrower to
Bank in connection with this request for credit are true and correct, and said
balance sheet truly presents the financial condition of Borrower as of the date
thereof, and has been prepared in accordance with generally accepted accounting
principles on a basis consistently maintained. Since such date, except with
respect to Tekelec's acquisition of IEX Corporation, there have been no material
adverse changes in the financial condition or business of Borrower. Borrower has
no knowledge of any liabilities, contingent or otherwise, at such date not
reflected in said balance sheet, and Borrower has not entered into any special
commitments or substantial contracts which are not reflected in said balance
sheet, other than in the ordinary and normal course of its business, which may
have a materially adverse effect upon its financial condition, operations or
business as now conducted.
2.06 TITLE TO ASSETS. Borrower has good title to its assets, and the same are
not subject to any liens or encumbrances other than those permitted by Section
5.03 hereof.
2.07 TAX STATUS. Borrower has no liability for any delinquent state, local or
federal taxes, and, if Borrower has contracted with any government agency,
Borrower has no liability for renegotiation of profits.
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2.08 TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with the valid trademarks, trade names, copyrights, patents and license rights
of others.
2.09 REGULATION U. None of the proceeds of any Loan shall be used to purchase or
carry margin stock (as defined within Regulation U of the Board of Governors of
the Federal Reserve system).
2.10 ERISA. All defined benefit pension plans as defined in the Employees
Retirement Income Security Act of 1974, as amended ("ERISA"), of Borrower meet,
as of the date hereof, the minimum funding standards of Section 302 of ERISA,
and no Reportable Event or Prohibited Transaction as defined in ERISA has
occurred with respect to any such plan.
2.11 YEAR 2000 COMPLIANCE. Borrower and its subsidiaries, as applicable, have
reviewed the areas within their operations and business which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the Year 2000 Problem and have made related appropriate inquiry of
material suppliers and vendors, and based on such review and program, the Year
2000 Problem is not likely to have a material adverse effect upon its financial
condition, operations or business as now conducted. "Year 2000 Problem" means
the possibility that any computer applications or equipment used by Borrower may
be unable to recognize and properly perform date sensitive functions involving
certain dates prior to and any dates one or after December 31, 1999.
3. CONDITIONS PRECEDENT TO LOAN.
Prior to Bank being obligated to make any Loan pursuant to this Agreement, Bank
must receive all of the following, each of which must be in form and substance
satisfactory to Bank:
3.01 SECURITY AGREEMENT. Original, executed security agreement(s) by Borrower.
3.02 FINANCING STATEMENT. Financing statement(s) executed by Borrower.
3.03 INSURANCE. Borrower shall have delivered to Bank evidence of insurance
coverage required pursuant to that Agreement to Provide Insurance executed by
Borrower, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank, and where required by Bank, with loss payable endorsements
in favor of Bank.
3.05 ORGANIZATIONAL DOCUMENTS. Copies of the articles of incorporation, or
similar document, as the case may be, of the Borrower.
3.06 AUTHORIZATIONS. Certified copies of all action taken by the Borrower to
authorize the execution, delivery and performance of the Loan Documents.
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3.07 GOOD STANDING. Good standing certificates from the appropriate secretary of
state of the state in which the Borrower is organized and in each state in which
it is required to be qualified to do business, which the Bank acknowledges
receipt hereof.
3.08 ADDITIONAL DOCUMENTS. Such other documents as Bank may reasonably deem
necessary.
4. AFFIRMATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, under borrowings, or
other indebtedness, or so long as Bank has any obligation to extend credit to
Borrower it will, unless Bank shall otherwise consent in writing:
4.01 RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises and
other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business in an orderly manner without voluntary interruption and, if a
corporation or partnership, maintain and preserve its existence.
4.02 USE OF PROCEEDS. Use the proceeds of the Loans only for purposes specified
in Section l of this Agreement.
4.03 INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses and/or in the exercise of good business
judgment, and as required by that Agreement to Provide Insurance executed by
Borrower, with the Bank to be shown as Lenders Loss Payee on such policies.
4.04 TAXES AND OTHER LIABILITIES. Pay and discharge, before the same become
delinquent and before penalties accrue thereon, all taxes, assessments and
governmental charges upon or against it or any of its properties, and all its
other liabilities at any time existing, except to the extent and so long as:
(a) The same are being contested in good faith and by appropriate proceedings in
such manner as not to cause any materially adverse effect upon its financial
condition or the loss of any right of redemption from any sale thereunder; and
(b) It shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting practice) deemed by it to be adequate
with respect thereto.
4.05 RECORDS AND REPORTS. Maintain a standard and modern system of accounting in
accordance with generally accepted accounting principles on a basis consistently
maintained; permit Bank's representatives to have access to, and to examine its
properties, books and records at all reasonable times and upon reasonable notice
during normal business hours; and furnish Bank:
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(a) QUARTERLY FINANCIAL STATEMENT. As soon as available and in any event within
forty-five (45) days after the close of each quarter, a consolidated balance
sheet, profit and loss statement and reconciliation of Borrower's capital
balance accounts as of the close of such period and covering operations for the
portion of Borrower's fiscal year ending on the last day of such period, all in
reasonable detail and reasonably acceptable to Bank, in accordance with
generally accepted accounting principles on a basis consistently maintained by
Borrower and certified by an appropriate officer of Borrower.
(b) ANNUAL FINANCIAL STATEMENT. As soon as available, and in any event within
ninety (90) days after and as of the close of each fiscal year of Borrower, a
consolidated report of audit of Company, all in reasonable detail, audited by an
independent certified public accountant selected by Borrower and reasonably
acceptable to Bank, in accordance with generally accepted accounting principles
on a basis consistently maintained by Borrower and certified by an appropriate
officer of Borrower;
(c) AUDIT REPORTS. Promptly after the receipt thereof by Borrower, copies of any
detailed audit reports submitted to Borrower by independent accountants in
connection with each annual or interim work on the accounts of Borrower made by
such accountants;
(d) ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND INVENTORY AGINGS REPORTS. Within
fifteen (15) days from each month-end, deliver to Bank a detailed accounts
receivable aging reconciled to the general ledger of Borrower, a detailed
accounts payable aging reconciled to the Borrower's general ledger and setting
forth the amount of any book overdraft or the amount of checks issued but not
sent and an inventory certification outlining both inventory composition and
activity for the month. All the foregoing will be in a form and with such detail
as Bank may request from time to time.
(e) BORROWING BASE CERTIFICATE. Deliver to Bank, within fifteen (15) days from
each month, end a Borrowing Base Certificate including sales and cash receipts.
After the Revolving Line of Credit is converted to streamline, deliver such
certificate on a daily basis.
(f) TRANSACTION REPORTS. In the event that the ABL Line of Credit converts to
streamline, deliver to Bank daily transaction reports, together with payments in
kind, including Collateral activity and appropriate loan activity, certified by
an authorized signer of Borrower. The daily reports delivered to Bank include
the following Bank forms: AC-1 Accounts Receivable And Inventory Transaction
Report, AC-1 Schedule of Accounts Receivable Assigned, and AC-3 Schedule of
Collections.
(g) LIST OF CUSTOMERS. If requested by Bank, on a quarterly basis or more
frequently, provide Bank with an alphabetized list of customers including
addresses.
(h) STOCKHOLDER, SECURITY AND EXCHANGE COMMISSION STATEMENTS AND REPORTS.
Promptly after the same are available, copies of all such proxy statements,
financial statements and reports as Borrower or any subsidiary shall send to its
members or stockholders as appropriate, if any,
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and copies of all reports which Borrower or any subsidiary may file with the
Securities and Exchange Commission.
(i) OTHER INFORMATION. Such other information relating to the affairs of
Borrower as the Bank reasonably may request from time to time.
4.06 CURRENT RATIO. Maintain on a quarterly basis a consolidated minimum ratio
of total current assets (excluding all amounts due from stockholders, officers
and affiliates) divided by total current liabilities (including all amounts due
to stockholders, officers and affiliates) of 0.85:1.00.
4.07 QUICK RATIO. Maintain on a quarterly basis a consolidated quick ratio of
cash and accounts receivable to current liabilities of at least 0.75:1.0.
4.08 EFFECTIVE TANGIBLE NET WORTH. Maintain on December 31, 1999 and on a
quarterly basis thereafter, a consolidated Effective Tangible Net Worth (defined
as stockholder's equity less any value for goodwill, trademarks, patents,
copyrights, leaseholds, organization expense and other similar intangible items,
and any amounts due from stockholders, officers and affiliates, other than the
Tekelec Airtronic Companies, of not less than Twenty Million Dollars
($20,000,000).
4.9 DEBT TO EFFECTIVE TANGIBLE NET WORTH. Maintain on a quarterly basis a
consolidated ratio of total liabilities to Effective Tangible Net Worth (defined
as stockholder's equity less any value for goodwill, trademarks, patents,
copyrights, leaseholds, organization expense and other similar intangible items,
and any amounts due from stockholders, officers and affiliates) of not greater
than 2.00:1.0.
4.10 FUNDED DEBT TO EBITDA. Maintain quarterly on a consolidated basis a ratio
of Funded Debt to EBITDA of not more than 3.00 to 1.00, except for financial
quarter ending March 31, 2000 at which time the covenant will be 4.50 to 1.00.
Funded Debt shall mean all liabilities of whatever nature or duration consisting
of indebtedness for borrowed money or indebtedness (including obligations under
capital leases) incurred to finance the purchase of any asset, plus the
$15,000,000 line of credit from Bank. EBITDA shall mean the sum of (a) net
income after taxes, plus (b) interest expense, plus (c) accrued federal and
state income taxes, plus (d) depreciation and amortization expense. Long Term
Debt shall mean those debts or renewals or extensions thereof whose original
terms exceed one (1) year. EBITDA will be calculated by multiplying that
quarter's EBITDA by four (4).
4.11 OTHER SUBMISSIONS. Submit to Bank written evidence satisfactory to Bank, at
Bank's sole discretion, no later than December 31, 1999 that significant
progress has been made on, the refinancing of the One Hundred Million Dollars
($100,000,000) Note Payable to the sellers of IEX Corporation.
4.12 ERISA. Cause all defined benefit pension plans, as defined in ERISA, of
Borrower to, at all times, meet the minimum funding standards of Section 302 of
ERISA, and ensure that no Reportable Event or Prohibited Transaction, as defined
in ERISA, will occur with respect to any such plan.
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4.13 LAWS. At all times comply with, or cause to be complied with, all laws,
statues, rules, regulations, orders and directions of any governmental authority
having jurisdiction over Borrower or Borrower's business.
4.14 USE OF PROCEEDS. Use the proceeds of the Loans only for the purposes
specified in Section 1 herein.
4.15 GAAP. Compliance with all financial covenants shall be calculated based on
generally accepted accounting principles applied on a consistent basis as
maintained by Borrower.
4.16 YEAR 2000 COMPLIANT. Borrower shall perform all acts reasonably necessary
to ensure that (a) Borrower and any business in which Borrower holds a
substantial interest and (b) all customers, suppliers and vendors whose
compliance is likely to be material to Borrower's business, become Year 2000
Compliant in a timely manner. Such acts shall include, without limitation,
performing a comprehensive review and assessment of all Borrower's systems and
adopting a detailed plan, with itemized budget, for the remediation, monitoring
and testing of such systems. As used in this paragraph, "Year 2000 Compliant"
shall mean, in regard to any entity, that all software, hardware, firmware,
equipment, goods or systems utilized by or material to the business operations
or financial condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. Borrower shall, immediately
upon request, provide to Agent such certifications or other evidence of
Borrower's compliance with the terms of this paragraph as Bank may from time to
time require.
4.17 OPERATING ACCOUNTS. Maintain all primary accounts and banking relationship
with the Bank. Maintain, or cause to be maintained, on deposit with Bank,
non-interest bearing demand deposit balances sufficient to compensate Bank for
all services provided by Bank. Balances shall be calculated after reduction for
the reserve requirement of the Federal Reserve Board and uncollected funds. Any
deficiencies shall be charged directly to the Borrower on a monthly basis.
4.18 NOTICES. Promptly notify Bank in writing of (i) the occurrence of any Event
of Default hereunder or any event which upon notice and lapse of time would be
an Event of Default; (ii) all litigation affecting Borrower where the amount is
$1,000,000 or more; any substantial dispute which may exist between Borrower and
any governmental regulatory body or law enforcement authority; any change in
Borrower's name or principal place of business; or any other matter which has
resulted or might result in a material adverse change in Borrower's financial
condition or operations.
4.19 AUDITS. Permit representatives of Bank to conduct audits of Borrower's
books and records relating to the Accounts, Inventory and other Collateral and
make extracts therefrom, with results satisfactory to Bank, provided that Bank
shall use its best efforts to not interfere with the conduct of Borrower's
business, and to the extent possible to arrange for verification of the Accounts
directly with the account debtors obligated thereon or otherwise, all under
reasonable
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procedures acceptable to Bank and at Borrower's sole expense; provided further
that, prior to an Event of Default, Borrower shall not be responsible for the
expense of more than Two Thousand Five Hundred Dollars ($2,500) such audits, in
any fiscal year. Notwithstanding any of the provisions contained in Section
1.06(a) and 1.06(b) hereof, Borrower hereby acknowledges and agrees that upon
completion of any such audit Bank shall have the right to adjust the Borrowing
Base percentage, in its sole and reasonable discretion, based on its review of
the results of such collateral audit.
4.20 COVENANTS RELATING TO COLLATERAL. In addition to any covenants in any Loan
Document relating to any Collateral the Borrower agrees:
(a) To execute and deliver to Bank such assignments, including Bank's standard
forms of Specific or General Assignment covering individual Accounts, notices,
financing statements, and other documents and papers as Bank may require in
order to affirm, effectuate or further assure the assignment to Bank of the
Collateral or to give any third party, including the account debtors obligated
on the Accounts, notice of Bank's interest in the Collateral.
(b) Until Bank exercises its rights to collect the Accounts and Inventory
proceeds pursuant to Section 4.20(e), Borrower will collect with diligence all
Borrower's Accounts and Inventory proceeds. Any collection of Accounts or
Inventory proceeds by Borrower, whether in the form of cash, checks, notes, or
other instruments for the payment of money (properly endorsed or assigned where
required to enable Bank to collect same), shall be in trust for Bank, and
Borrower shall maintain adequate systems to identify all such collections
separate and apart from all other funds and property so as to be capable of
identification as the property of Bank and deliver said collections, together
with the proceeds of all cash sales, daily to Bank in the identical form
received. The proceeds of such collections when received by Bank may be applied
by Bank directly to the payment of Borrower's Loan Account or any other
obligation secured hereby. Any credit given by Bank upon receipt of said
proceeds shall be conditional credit subject to collection. Returned items at
Bank's option may be charged to Borrower's general account. All collections of
the Accounts and Inventory proceeds shall be set forth on an itemized schedule,
showing the name of the account debtor, the amount of each payment and such
other information as Bank may request.
(c) That until Bank exercises its rights to collect the Accounts or Inventory
proceeds pursuant to Section 4.20(e), Borrower may continue its present policies
with respect to returned merchandise and adjustments. However, Borrower shall,
within 10 days of the end of each month notify Bank of all cases outside the
normal course of business involving returns, repossessions, and loss or damage
of or to merchandise represented by the Accounts or constituting Inventory and
of any credits, adjustments or disputes arising in connection with the goods or
services represented by the Accounts or constituting Inventory and, in any of
such events, Borrower will immediately pay to Bank from its own funds (and not
from the proceeds of Accounts or Inventory) for application to Borrower's Loan
Account or any other obligation secured hereby the amount of any credit for such
returned or repossessed merchandise and adjustments made to any of the Accounts.
Until payment is made as provided herein or until release by Bank from its
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security interest, all merchandise returned to or repossessed by Borrower shall
be set aside and identified as the property of Bank and Bank shall be entitled
to enter upon any premises where such merchandise is located and take immediate
possession thereof and remove same.
(d) To promptly notify Bank of any attachment or other legal process levied
against any of the Collateral and any information received by Borrower relative
to the Collateral, including the Accounts, the account debtors or other persons
obligated in connection therewith, which may in any way affect the value of the
Collateral or the rights and remedies of Bank in respect thereto.
(e) That Bank may at any time, following an Event of Default and the
continuation thereof, without prior notice to Borrower, collect the Accounts and
Inventory proceeds and may give notice of assignment to any and all account
debtors, and Borrower does hereby make, constitute and appoint Bank its
irrevocable, true and lawful attorney with power to receive, open and dispose of
all mail addressed to Borrower, to endorse the name of Borrower upon any checks
or other evidences of payment that may come into the possession of Bank upon the
Accounts or as proceeds of Inventory; to endorse the name of the undersigned
upon any document or instrument relating to the Collateral; in its name or
otherwise, to demand, xxx for, collect and give acquittances for any and all
moneys due or to become due upon the Accounts; to compromise, prosecute or
defend any action, claim or proceeding with respect thereto; and to do any and
all things necessary and proper to carry out the purpose herein contemplated.
(f) To do all acts necessary to maintain, preserve and protect the Inventory,
keep all Inventory in good condition and repair and not to cause any waste or
unusual or unreasonable depreciation thereof.
(g) In the event any unpaid balance of Borrower's Loan Account shall exceed the
maximum amount of outstanding Loans to which the Borrower is entitled under
Section 1 hereof, Borrower shall immediately pay to Bank for credit to
Borrower's Loan Account the amount of such excess.
5. NEGATIVE COVENANTS OF BORROWER
Borrower agrees that so long as it is indebted to Bank, or so long as Bank has
any obligation to extend credit to Borrower, it will not, without Bank's written
consent:
5.01 TYPE OF BUSINESS; MANAGEMENT; CHANGE IN CONTROL. Make any substantial
change in the character of its business.
5.02 OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness outside the normal course of business for borrowed moneys other
than indebtedness incurred in connection with the acquisition of IEX Corporation
and the refinancing of such indebtedness and other than Loans from the Bank
except obligations now existing as shown in the financial statement dated March
31, 1999, excluding those obligations being refinanced by Bank, and other than
those Permitted Indebtedness as acknowledged by Bank hereto or sell or transfer,
either with or without recourse, any accounts or notes receivable or any moneys
due or to become due.
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5.03 LIENS AND ENCUMBRANCES. Create, incur, permit to exist, or assume outside
the normal course of business any mortgage, pledge, encumbrance, lien or charge
of any kind upon any asset now owned or hereafter acquired by it, other than
those in connection with the acquisition of IEX Corporation and those in
connection with the refinancing of the indebtedness thereof and other than liens
for taxes not delinquent and liens in Bank's favor and other than liens agreed
to in writing by Bank and other than those Permitted Liens as acknowledged by
Bank hereto.
5.04 LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or advances to
any person or other entity other than in the ordinary and normal course of its
business as now conducted or make any investment in the securities of any person
or other entity other than the United States Government; or guarantee or
otherwise become liable upon the obligation of any person or other entity,
except by endorsement of negotiable instruments for deposit or collection in the
ordinary and normal course of its business other than those listed in Schedule
5.04 attached hereto.
5.05 ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase or
otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings therefor,
or sell any assets except in the ordinary and normal course of its business as
now conducted; or sell, lease, assign, or transfer any substantial part of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted, including without limitation the
selling of any property or other asset accompanied by the leasing back of the
same and excluding the acquisition of IEX Corporation and those transactions
amounting to One Million Dollars or less.
6. EVENTS OF DEFAULT
The occurrence of any of the following events of default which, except for 6.04,
6.05 and 6.06, remains uncured for 10 days ("Events of Default") shall, at
Bank's option, terminate Bank's commitment to lend and make all sums of
principal and interest then remaining unpaid on all Borrower's indebtedness to
Bank immediately due and payable, all without demand, presentment or notice, all
of which are hereby expressly waived:
6.01 FAILURE TO PAY. Failure to pay any installment of principal or of interest
on any indebtedness of Borrower to Bank within five (5) days of its due date.
6.02 BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this Agreement or any Loan Document binding upon Borrower.
6.03 BREACH OF WARRANTY. Any of Borrower's representations or warranties made
herein or any statement or certificate at any time given in writing pursuant
hereto or in connection herewith shall be false or misleading in any material
respect.
6.04 INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent; or admit
its inability to pay its debts as they mature; or make an assignment for the
benefit of creditors; or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business.
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6.05 JUDGMENTS, ATTACHMENTS. Any money judgment in excess of $1,000,000, writ or
warrant of attachment, or similar process shall be entered or filed against
Borrower or any of its assets and shall remain unvacated, unbonded or unstayed
for a period of ten (10) days or in any event later than five (5) days prior to
the date of any proposed sale thereunder.
6.06 BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall not be dismissed within thirty (30) days
thereafter.
6.07 ADVERSE CHANGE. Any change which, in the reasonable opinion of Bank, is
materially adverse to the financial condition of Borrower or any Guarantor; or
should Bank, reasonably believe that the prospect of Borrower's payment or
performance hereunder or under any other agreement or instrument with Bank be
impaired.
6.08 OTHER DEFAULTS. Borrower, or any Guarantor of Borrower's obligations to
Bank, shall commit or do or fail to commit or do any act or thing which would
constitute an event of default under any of the terms of any other agreement,
document or instrument executed or to be executed by it concerning the
obligation to pay money.
6.09 ADVANCES. Notwithstanding anything to the contrary contained herein, Bank
shall have no duty to make advances while any event of default exists
notwithstanding any cure period provided for herein.
7. MISCELLANEOUS PROVISIONS
7.01 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of Bank
or any holder of notes issued hereunder, in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under this Agreement or any note(s) issued in connection with
a Loan that Bank may make hereunder, are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
7.02 COUNTERPARTS; ENTIRE AGREEMENT. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior agreements, written or oral, with respect thereto.
7.03 ATTORNEY'S FEES. Borrower will pay promptly to Bank without demand after
notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorneys' fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an Event of Default whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
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7.04 ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank
hereunder shall be cumulative and not alternative and shall be in addition to
all rights, powers and remedies given to Bank by law against Borrower or any
other person, including but not limited to Bank's rights of setoff or banker's
lien.
7.05 INUREMENT. The benefits of this Agreement shall inure to the successors and
assigns of Bank and the permitted successors and assigns of Borrower.
7.06 APPLICABLE LAW. This Agreement and all other agreements and instruments
required by Bank in connection therewith shall be governed by and construed
according to the laws of the state of California, to the jurisdiction of whose
courts the parties hereby agree to submit.
7.07 OFFSET. In addition to and not in limitation of all rights of offset that
Bank or other holder of the Loan may have under applicable law, Bank or other
holder of any note issued hereunder shall, upon the occurrence of any Event of
Default or any event which with the passage of time or notice would constitute
such an Event of Default, have the right to appropriate and apply to the payment
of the Loan any and all balances, credits, deposits, accounts or monies of
Borrower then or thereafter with Bank or other holder, within ten (10) days
after the Event of Default, and notice of the occurrence of any Event of Default
by Bank to Borrower.
7.08 SEVERABILITY. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
7.09 TIME OF THE ESSENCE. Time is hereby declared to be of the essence of this
Agreement and of every part hereof.
7.10 ACCOUNTING. All accounting terms shall have the meanings applied under
generally accepted accounting principles unless otherwise specified.
7.11 REFERENCE PROVISION.
(a) Other than (i) nonjudicial foreclosure and all matters in connection
therewith regarding security interests in real or personal property; or (ii) the
appointment of a receiver, or the exercise of other provisional remedies (any
and all of which may be initiated pursuant to applicable law), each controversy,
dispute or claim between the parties arising out of or relating to, this Credit
Agreement, any security agreement executed by Borrower in favor of Bank or any
note executed by Borrower in favor of Bank or any other agreement or instrument
issued in favor of Bank by Borrower (collectively in this Section, the
"Agreement") which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on which a
party subject to this Agreement gives written notice to all other parties that a
controversy, dispute or claim exists), will be settled by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the
California Code of Civil Procedure, or their
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successor section ("CCP"), which shall constitute the exclusive remedy for the
settlement of any controversy, dispute or claim concerning this Agreement,
including whether such controversy, dispute or claim is subject to the reference
proceeding and except as set forth above, the parties waive their rights to
initiate any legal proceedings against each other in any court or jurisdiction
other than the Superior Court in the County where the Real Property, if any, is
located or Los Angeles County if none (the "Court"). The referee shall be a
retired Judge of the Court selected by mutual agreement of the parties, and if
they cannot so agree within forty-five (45) days after the Claim Date, the
referee shall be promptly selected by the Presiding Judge of the Court (or his
representative). The referee shall be appointed to sit as a temporary judge,
with all of the powers for a temporary judge, as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for in
Rule 244 of the California Rules of Court (or any subsequently enacted Rule).
Each party shall have one peremptory challenge pursuant to CCP ss.170.6. The
referee shall (a) be requested to set the matter for hearing within sixty (60)
days after the date of selection of the referee and (b) try any and all issues
of law or fact and report a statement of decision upon them, if possible, within
ninety (90) days of the Claim Date. Any decision rendered by the referee will be
final, binding and conclusive and judgment shall be entered pursuant to CCP
ss.644 in any court in the state of California having jurisdiction. Any party
may apply for a reference proceeding at any time after thirty (30) days
following notice to any other party of the nature of the controversy, dispute or
claim, by filing a petition for a hearing and/or trial. All discovery permitted
by this Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide requested discovery for any
reason whatsoever, including, without limitation, legal objections raised to
such discovery or unavailability of a witness due to absence or illness. No
party shall be entitled to "priority" in conducting discovery. Depositions may
be taken by either party upon seven (7) days written notice, and request for
production or inspection of documents shall be responded to within ten (10) days
after service. All disputes relating to discovery which cannot be resolved by
the parties shall be submitted to the referee whose decision shall be final and
binding upon the parties. Pending appointment of the referee as provided herein,
the Superior Court is empowered to issue temporary and/or provisional remedies,
as appropriate.
(b) Except as expressly set forth in this Agreement, the referee shall determine
the manner in which the reference proceeding is conducted including the time and
place of all hearings, the order of presentation of evidence, and all other
questions that arise with respect to the course of the reference proceeding. All
proceedings and hearings conducted before the referee, except for trial, shall
be conducted without a court reporter except that when any party so requests, a
court reporter will be used at any hearing conducted before the referee. The
party making such a request shall have the obligation to arrange for and pay for
the court reporter. The costs of the court reporter at the trial shall be borne
equally by the parties.
(c) The referee shall be required to determine all issues in accordance with
existing case law and the statutory laws of the state of California. The rules
of evidence applicable to proceedings at law in the state of California will be
applicable to the reference proceeding. The referee shall be empowered to enter
equitable as well as legal relief, to provide all temporary and/or
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provisional remedies and to enter equitable orders that will be binding upon the
parties. The referee shall issue a single judgment at the close of the reference
proceeding which shall dispose of all of the claims of the parties that are the
subject of the reference. The parties hereto expressly reserve the right to
contest or appeal from the final judgment or any appealable order or appealable
judgment entered by the referee. The parties hereto expressly reserve the right
to findings of fact. conclusions of laws, a written statement of decision, and
the right to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
(d) In the event that the enabling legislation which provides for appointment of
a referee is repealed (and no successor statute is enacted), any dispute between
the parties that would otherwise be determined by the reference procedure herein
described will be resolved and determined by arbitration. The arbitration will
be conducted by a retired judge of the Court, in accordance with the California
Arbitration Act, ss.1280 through ss.1294.2 of the CCP as amended from time to
time. The limitations with respect to discovery as set forth hereinabove shall
apply to any such arbitration proceeding.
7.12 This Agreement may be modified only by a writing signed by all parties
hereto.
This Agreement is executed on behalf of the parties by duly authorized officers
as of the date first above written.
IMPERIAL BANK TEKELEC
("Bank") ("Borrower")
By: Nunilo Xxxxx By: Xxxxxx X. Xxxxx
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Its: Vice President Its: V. P. Finance and CFO
-------------------------------- ---------------------------
By: Xxxxxx X. Xxxxxx
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Its: V. P. General Counsel
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FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment ("Amendment") amends that certain Credit Agreement
("Agreement") dated April 18, 1999 by and between Tekelec ("Borrower") and
Imperial Bank ("Bank") as follows:
1. Section 4.9 of the Agreement is hereby amended in its entirety to read as
follows:
DEBT TO NET WORTH. Maintain on a quarterly basis a consolidated ratio of
total liabilities to Net Worth of not greater than 2.00:1.00
Except as provided above, the Agreement remains unchanged.
5. This Amendment is effective as of July 30, 1999, and the parties hereby
confirm that the Agreement as amended is in full force and effect.
TEKELEC IMPERIAL BANK
("Borrower") ("Bank")
By: Xxxxxx X. Xxxxx By: Nunilo Xxxxx
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Its: Vice Pres. Finance & CFO Its: Vice President
------------------------------- ---------------------------
By: Xxxxxxx Xxxxxxxx
-------------------------------
Its: President & CEO
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