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Exhibit 10.18
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment"), dated as
of May 13, 1999, is entered into among NETCOM SYSTEMS, INC., a California
corporation ("Borrower"), the lenders listed on the signature pages hereof
(collectively, the "Lenders"), and NATIONSBANK, N.A. (successor by merger to
NationsBank of Texas, N.A.), as Administrative Agent (in said capacity, the
"Administrative Agent").
BACKGROUND
A. The Borrower, the Lenders and the Administrative Agent heretofore
entered into that certain Credit Agreement, dated as of August 29, 1997 (the
"Credit Agreement"; the terms defined in the Credit Agreement and not otherwise
defined herein shall be used herein as defined in the Credit Agreement).
B. The Borrower, the Lenders and the Administrative Agent desire to make
an amendment to the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are all hereby acknowledged,
the Borrower, the Lenders and the Administrative Agent covenant and agree as
follows:
1. AMENDMENTS TO CREDIT AGREEMENT.
(a) Section 1.1 of the Credit Agreement is hereby amended by adding the
following defined terms thereto in proper alphabetical order to read as
follows:
"Cash and Cash Equivalents" means, collectively, the following
property: (i) cash (which, after the occurrence and during the continuance of
an Event of Default, shall exclude any cash proceeds of Accounts), (ii)
securities issued or directly and fully guaranteed or insured by the United
States Government or any agency or instrumentality thereof having maturities of
not more than one year from the date of acquisition, (iii) certificates of
deposit and Eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any Lender or with any
domestic commercial bank having capital and surplus in excess of $500,000,000,
(iv) repurchase
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obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) entered into
with any financial institution meeting the qualifications specified in
clause (iii) above, (v) commercial paper issued by any Lender of the parent
corporation of any Lender, and commercial paper rated A-2 or the equivalent
thereof by Standard & Poor's Ratings Group, a Division of McGraw-Hill,
Inc., a New York corporation, or P-2 or the equivalent thereof by Moody's
Investors Service, Inc., and in each case maturing within one year after
the date of acquisition, and (vi) a readily redeemable "money market mutual
fund" advised by a bank described in clause (iii) hereof, or an investment
advisor registered under Section 203 of the Investment Advisors Act of
1940, that has and maintains an investment policy limiting its investments
primarily to instruments of the types described in clauses (i) through (v)
hereof and having on the date of such Investment total assets of at least
One Hundred Million Dollars ($100,000,000.00)."
" 'Restricted Foreign Subsidiary' has the same meaning as the term
'Foreign Restricted Subsidiary'."
" 'Unencumbered Cash and Cash Equivalents' means Cash and Cash
Equivalents of the Borrower and the Restricted Subsidiaries of the Borrower
that are not subject to or covered by any Lien or any negative pledge,
escrow arrangement or other restriction on the use or disposition thereof
by the Borrower or the applicable Restricted Subsidiary of the Borrower;
provided, however, that to the extent that any of the Cash and Cash
Equivalents of the Borrower or any Restricted Subsidiaries of the Borrower
are subject to or covered by any Lien that (i) constitutes a Permitted Lien
under clause (q) or clause (r) of the definition of "Permitted Liens", and
(ii) secures only the customary and recurring service fees of the holder of
such Lien in connection with such Cash and Cash Equivalents, the portion of
such Cash and Cash Equivalents in excess of the aggregate amount of such
customary and recurring service fees for one calendar quarter (or such
longer period of time as the holder of such Lien may utilize in charging
such fees, if applicable) shall not be excluded from constituting
Unencumbered Cash and Cash Equivalents by virtue of the existence of such
Lien."
(b) The definition of "Permitted Distributions" set forth in Section 1.1
of the Credit Agreement is hereby amended by (i) adding the parenthetical clause
"(other than redemptions and dividends permitted by clause (e) of this
definition)" after the word "to" in the first line of clause (a) thereof and
(ii) adding the following after the last existing paragraph thereof:
"(e) redemptions of, and related dividends with respect to, the
NetCom Redeemable Preferred Stock if, and to the extent that,
(i) such redemptions and the payment of related dividends takes
place on or before December 31, 1999, (ii) such redemptions and
related dividends do not exceed $56,000,000 in the aggregate
amount, (iii) contemporaneously with such redemptions and the
payment of such related dividends, 100% of the
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Netcom Redeemable Preferred Stock is redeemed and cancelled by the
Borrower and the Borrower thereafter has no further payment
obligations in connection with such Netcom Redeemable Preferred
Stock, (iv) prior to the making and payment of any such redemptions
and related dividends, the Borrower has consummated an initial
Public Equity Offering of common stock of the Borrower and the
Borrower has received at least $65,000,000 in Net Cash Proceeds
therefrom, (v) immediately prior to, and after giving effect to,
such redemptions and the payment of such related dividends, no
Default or Event of Default exists, and (vi) at least 5 Business
Days prior to the date of making or payment (whichever is earlier)
of any such redemption or any such related dividend, the
Administrative Agent has received a Compliance Certificate from the
Borrower evidencing compliance with the requirements of clause (v)
above."
(c) The Administrative Agent and each of the Lenders hereby acknowledge
and agree that the prepayment provisions of Section 2.5(d) of the Credit
Agreement shall not apply to the Net Cash Proceeds received by the Borrower in
connection with the initial Public Equity Offering of common stock of the
Borrower contemplated by paragraph (e) of the definition of "Permitted
Distributions" in the Credit Agreement if the Borrower utilizes such Net Cash
Proceeds, or a portion thereof, to redeem and cancel 100% of the Netcom
Redeemable Preferred Stock in accordance with the provisions of such paragraph
(e).
(d) Section 7.15 of the Credit Agreement is hereby amended in its entirety
to read as follows:
"Section 7.15. Fiscal Year. Neither the Borrower nor any Restricted
Subsidiary of the Borrower shall change its fiscal year from December 31."
(e) Article 7 of the Credit Agreement is hereby amended by adding Section
7.19 to the end thereof to read as follows:
"Section 7.19 Minimum Liquidity. The Borrower and the Restricted
Subsidiaries of the Borrower shall, at all times after the payment of the
redemptions and related dividends with respect to the Redeemable Preferred
Stock pursuant to paragraph (e) of the definition of "Permitted
Distributions" in the Credit Agreement, on a consolidated basis, maintain
Unencumbered Cash and Cash Equivalents in an aggregate amount of at least
(i) $10,000,000 plus (ii) the aggregate outstanding principal balance of
the Revolving Credit Notes at such time."
(f) In addition to the scheduled payments of the outstanding principal
balance of the Term Loan Advances required by Section 2.8(b) of the Credit
Agreement and in addition to any
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other or additional payments that may be required under the Loan Documents with
respect to the Term Loan Advances, on each of the two Quarterly Dates
immediately next succeeding the consummation of the initial Public Equity
Offering of common stock of the Borrower contemplated by paragraph (e) of the
definition of "Permitted Distributions" the Borrower shall repay an additional
$5,000,000 of the outstanding principal amount of the Term Loan Advances. Such
additional principal payments by the Borrower shall be applied to the regularly
scheduled payment of the Term Loan Advances in the inverse order of their
maturity.
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its
execution and delivery hereof, the Borrower represents and warrants that, as of
the date hereof and after giving effect to the amendments contemplated by the
foregoing Section 1:
(a) the representations and warranties contained in the Credit Agreement
and the other Loan Documents are true and correct in all material respects on
and as of the date hereof as if made on and as of such date (except insofar as
any such representation or warranty relates specifically to a different date
by its own terms, in which case such representation or warranty is true and
correct in all material respects as of such specified date);
(b) no event has occurred and is continuing which constitutes a Default;
(c) the Borrower has full power and authority to execute and deliver
this First Amendment and the Credit Agreement, as amended hereby, and this
First Amendment and the Credit Agreement, as amended hereby, constitute the
legal, valid and binding obligations of the Borrower enforceable in accordance
with their respective terms, except as enforceability may be limited by
applicable debtor relief laws and by general principles of equity (regardless
of whether enforcement is sought in a proceeding in equity or at law) and
except as rights to indemnity may be limited by federal or state securities
laws; and
(d) no authorization, approval consent, or other action by, notice to,
or filing with, any governmental authority or other Person, is required for the
execution, delivery or performance by the Borrower of this First Amendment.
3. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be
effective as of May 13, 1999, subject to the following;
(a) The Administrative Agent shall have received counterparts of this
First Amendment executed by the Determining Lenders;
(b) The Administrative Agent shall have received counterparts of this
First Amendment executed by the Borrower, and
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(c) the Administrative Agent shall have received, in form and substance
satisfactory to the Administrative Agent and its counsel, such other documents,
certificates and instruments as the Administrative Agent shall require.
4. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this First Amendment, each reference in the
Credit Agreement to "this Agreement", "hereunder", or words of like import
shall mean and be a reference to the Credit Agreement, as amended by this First
Amendment.
(b) The Credit Agreement, as amended by this First Amendment, and all
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
5. COSTS, EXPENSES AND TAXES. The Borrower agrees to promptly pay all
reasonable out-of-pocket costs and expenses of the Administrative Agent in
connection with the preparation, negotiation, execution and delivery of this
First Amendment and the other instruments and documents to be delivered
hereunder (including, but not limited to, the reasonable fees and disbursements
of Special Counsel).
6. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument.
7. GOVERNING LAW; BINDING EFFECT. This First Amendment shall be governed
by and construed in accordance with the laws of the State of Texas and shall be
binding upon the Borrower and each Lender and their respective successors and
assigns.
8. HEADINGS. Section headings in this First Amendment are included
herein for convenience of reference only and shall not constitute a part of
this First Amendment for any other purpose.
9. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS FIRST
AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as the date first above written.
NETCOM SYSTEMS, INC.
By:
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Name:
--------------------------------
Title:
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NATIONSBANK, N.A. (successor by merger
to NationsBank of Texas, N.A.), as
Administrative Agent, Issuing Bank and
a Lender
By:
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Name:
--------------------------------
Title:
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BANKBOSTON, N.A., as Documentation Agent
and a Lender
By:
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Name:
--------------------------------
Title:
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