EXHIBIT 10.23
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (the
"Amendment"), dated as of August 28, 1997, is entered into by
and among 3COM CORPORATION (the "Company"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, as agent for itself
and the Banks (the "Agent"), and the several financial
institutions party to the Credit Agreement (collectively, the
"Banks").
RECITALS
A. The Company, Banks, and Agent are parties to a Credit
Agreement dated as of December 20, 1996 (the "Credit
Agreement"), pursuant to which the Agent and the Banks have
extended certain credit facilities to the Company and its
Subsidiaries.
B. The Company has requested that the Banks agree to
certain amendments of the Credit Agreement.
C. The Banks are willing to amend the Credit Agreement,
subject to the terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties
hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings, if any,
assigned to them in the Credit Agreement.
2. Amendments to Credit Agreement.
(a) Section 1.01 of the Credit Agreement shall be
amended at the defined term "Applicable Rate" by amending and
restating such defined term in its entirety as follows:
"'Applicable Rate' means, for any day, with
respect to any Offshore Rate Loan or Base Rate Loan
and the commitment and letter of credit fees payable
hereunder, as the case may be, the lower of the
applicable rates per annum set forth in the chart
below under the caption "Base Rate Margin,"
"Offshore Rate Margin," "Commitment Fee,"
"Performance Standby Letter of Credit Fee," and
"Financial Standby Letter of Credit Fee," as the
case may be, based upon the respective Performance
Levels in effect under Test I or Test II; provided,
however, that Performance Level 1and Performance
Level 2 shall apply only if both Test I and Test II
are each met for such Performance Levels.
Performance Level 1
-------------------
Test I
Adjusted Leverage Ratio
< 0.10 to 1.00 and
Test II
Rating of A or A2 or better
Interest Margin
Base Rate Margin
0.00000%
Interest Margin
Offshore Rate Margin
0.20000%
Commitment Fee
0.06500%
Performance Standby Letter of Credit Fee
0.10000%
Financial Standby Letter of Credit Fee
0.20000%
Performance Level 2
-------------------
Test I
Adjusted Leverage Ratio
< 0.10 to 1.00 and
Test II
Rating of A- or A3
Interest Margin
Base Rate Margin
0.00000%
Interest Margin
Offshore Rate Margin
0.22500%
Commitment Fee
0.07500%
Performance Standby Letter of Credit Fee
0.11250%
Financial Standby Letter of Credit Fee
0.22500%
Performance Level 3
-------------------
Test I
Adjusted Leverage Ratio
< 0.10 to 1.00 or
Test II
Rating of BBB+ or Baa1
Interest Margin
Base Rate Margin
0.00000%
Interest Margin
Offshore Rate Margin
0.25000%
Commitment Fee
0.08500%
Performance Standby Letter of Credit Fee
0.12500%
Financial Standby Letter of Credit Fee
0.25000%
Performance Level 4
-------------------
Test I
Adjusted Leverage Ratio
< 0.25 to 1.00 but >= .10 to 1.00 or
Test II
Rating of BBB or Baa2
Interest Margin
Base Rate Margin
0.00000%
Interest Margin
Offshore Rate Margin
0.31250%
Commitment Fee
0.10000%
Performance Standby Letter of Credit Fee
0.15625%
Financial Standby Letter of Credit Fee
0.31250%
Performance Level 5
-------------------
Test I
Adjusted Leverage Ratio
< 0.30 to 1.00 but >= 0.25 to 1.00 or
Test II
Rating of BBB- or Baa3
Interest Margin
Base Rate Margin
0.00000%
Interest Margin
Offshore Rate Margin
0.37500%
Commitment Fee
0.12500%
Performance Standby Letter of Credit Fee
0.18750%
Financial Standby Letter of Credit Fee
0.37500%
Performance Level 6
-------------------
Test I
Adjusted Leverage Ratio
>= 0.30 to 1.00 or
Test II
Rating of BB+ or Ba1 or lower
Interest Margin
Base Rate Margin
0.00000%
Interest Margin
Offshore Rate Margin
0.50000%
Commitment Fee
0.17500%
Performance Standby Letter of Credit Fee
0.25000%
Financial Standby Letter of Credit Fee
0.50000%
The applicable Performance Level under Test I
as of any day shall be determined by reference to
the Adjusted Leverage Ratio as of the last day of
the fiscal quarter most recently ended on or prior
to such day, and any change in the Test I
Performance Level shall become effective upon the
delivery to the Agent of the Compliance Certificate
required to accompany the financial statements
delivered pursuant to Section 7.01 upon which such
change is based, which Compliance Certificate shall
set forth in reasonable detail the calculation of
the Adjusted Leverage Ratio. In the event the
financial statements required to be delivered under
Section 7.01 (or the Compliance Certificate required
to accompany such statements) are not delivered on
or prior to the date due, the Adjusted Leverage
Ratio shall be deemed to be at Performance Xxxxx 0
for purposes of Test I during the period from the
applicable due date to the date when such financial
statements and the accompanying Compliance
Certificate are delivered.
The applicable Performance Level under Test II
as of any day shall be determined by reference to
the Ratings by Xxxxx'x and S&P, respectively,
applicable on such day to the Index Debt. For
purposes of determining such Performance Level,
(a) if either Xxxxx'x or S&P shall not have in
effect a Rating for the Index Debt, then the
Applicable Rates shall be determined solely with
reference to the available Rating; (b) if the
Ratings established or deemed to have been
established by Xxxxx'x and S&P for the Index Debt
shall indicate different Performance Levels, the
Applicable Rate shall be based on the higher of the
two Ratings; and (c) if the Rating established or
deemed to have been established by Xxxxx'x or S&P
for the Index Debt shall be changed (other than as a
result of a change in the rating system of Xxxxx'x
or S&P), such change shall be effective as of the
date on which it is first announced by the
applicable rating agency. If the rating system of
Xxxxx'x or S&P shall change, or if both such rating
agencies shall cease to be in the business of rating
corporate debt obligations, the Company and the
Banks shall negotiate in good faith to amend this
definition to reflect such changed rating system or
the unavailability of Ratings from such rating
agencies and, pending the effectiveness of any such
amendment, the Applicable Rate shall be determined
at any time solely by reference to the Test I
Performance Level in effect at such time.
Each change in the Applicable Rate shall apply
during the period commencing on the effective date
of such change and ending on the date immediately
preceding the effective date of the next such
change. Notwithstanding the foregoing, at any time
prior to the time the first delivery of financial
statements under Section 7.01 after the Effective
Date, as defined in the First Amendment to Credit
Agreement among the Company, the Agent and the
Banks, the Applicable Rate shall be determined as if
the Adjusted Leverage Ratio were at Performance
Level 4."
(b) Section 8.16 of the Credit Agreement shall be
amended and restated in its entirety so as to read as follows:
"8.16 Tangible Net Worth. The Company shall not
permit its Tangible Net Worth, on a consolidated
basis, at the end of any fiscal quarter to be less
than the sum of (i) $1,800,000,000, plus (ii) 50% of
the Company's consolidated net income (but without
deducting any net losses for any period) earned in
each fiscal quarter, starting with the quarter ending
August 31, 1997, and ending with the quarter which,
at such time, is the most recently ended fiscal
quarter, less (iii) (without duplication) 100% of
restructuring and acquisition charges related to
Acquisitions permitted hereunder (if they are
expensed in the same fiscal quarter as such
Acquisition is completed) from and after the Closing
Date."
(c) Schedule 2 to the Compliance Certificate
shall be amended and restated in its entirety so as to read
as set forth in Schedule 2 attached hereto.
3. Representations and Warranties. The Company hereby
represents and warrants to the Agent and the Banks as follows:
(a) No Default or Event of Default has occurred and
is continuing.
(b) The execution, delivery and performance by the
Company of this Amendment have been duly authorized by all
necessary corporate and other action and do not and will not
require any registration with, consent or approval of, notice
to or action by, any Person (including any Governmental
Authority) in order to be effective and enforceable. The
Credit Agreement as amended by this Amendment constitutes the
legal, valid and binding obligations of the Company,
enforceable against it in accordance with its respective
terms, without defense, counterclaim or offset.
(c) All representations and warranties of the
Company contained in the Credit Agreement, as amended hereby,
are true and correct.
(d) The Company is entering into this Amendment on
the basis of its own investigation and for its own reasons,
without reliance upon the Agent, the Banks or any other
Person.
4. Effective Date. This Amendment will become
effective as of the date first above written (the "Effective
Date"), provided that the Agent has received from the Company
and each of the Banks a duly executed original (or, if elected
by the Agent, an executed facsimile copy) of this Amendment.
5. Reservation of Rights. The Company acknowledges and
agrees that the execution and delivery by the Agent and the
Banks of this Amendment shall not be deemed to create a course
of dealing or otherwise obligate the Agent or the Banks to
execute similar amendments under the same or similar
circumstances in the future.
6. Miscellaneous.
(a) Except as herein expressly amended, all terms,
covenants and provisions of the Credit Agreement are and shall
remain in full force and effect and all references therein to
such Credit Agreement shall henceforth refer to the Credit
Agreement as amended by this Amendment. This Amendment shall
be deemed incorporated into, and a part of, the Credit
Agreement.
(b) This Amendment shall be binding upon and inure
to the benefit of the parties hereto and thereto and their
respective successors and assigns. No third party
beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and
construed in accordance with the law of the State of
California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but
all such counterparts together shall constitute but one and
the same instrument. Each of the parties hereto understands
and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by
facsimile transmission to be followed promptly by mailing of a
hard copy original, and that receipt by the Agent of a
facsimile transmitted document purportedly bearing the
signature of a Bank or the Company shall bind such Bank or the
Company, respectively, with the same force and effect as the
delivery of a hard copy original. Any failure by the Agent to
receive the hard copy executed original of such document shall
not diminish the binding effect of receipt of the facsimile
transmitted executed original of such document of the party
whose hard copy page was not received by the Agent.
(e) This Amendment, together with the Credit
Agreement, contains the entire and exclusive agreement of the
parties hereto with reference to the matters discussed herein
and therein. This Amendment supersedes all prior drafts and
communications with respect thereto. This Amendment may not
be amended except in accordance with the provisions of
Section 11.01 of the Credit Agreement.
(f) If any term or provision of this Amendment
shall be deemed prohibited by or invalid under any applicable
law, such provision shall be invalidated without affecting the
remaining provisions of this Amendment or the Credit
Agreement, respectively.
(g) The Company covenants to pay to or reimburse
the Agent, upon demand, for all costs and expenses (including
reasonable Attorney Costs) incurred in connection with the
development, preparation, negotiation, execution and delivery
of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Amendment as of the date first above
written.
3COM CORPORATION
By: /s/ Xxxx X. Xxxxxxx
----------------------------
Xxxx X. Xxxxxxx
Title: SVP, General Counsel & Secretary
By:
Title:
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Xxxxx X. Xxxxxxxxxxx
-------------------------------
Xxxxx X. Xxxxxxxxxxx
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
as a Bank
By: /s/ Xxxxx X. Xxxxxxxxxxx
-------------------------------
Xxxxx X. Xxxxxxxxxxx
Title: Vice President
ALLIED IRISH BANKS, p.l.c.
By: /s/ Xxxxxx Xxxxxxxx
----------------------------
Xxxxxx Xxxxxxxx
Title: Senior Manager
CITICORP USA, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxx
Title: Attorney-in-Fact
MARINE MIDLAND BANK
By: /s/ Xxxxxxx Xxxxxxx
----------------------------
Xxxxxxx Xxxxxxx
Title: Vice President
XXXXXX GUARANTY TRUST
COMPANY OF NEW YORK
By: /s/ Xxxxxxx Xxxxx-Xxxxx
----------------------------
Xxxxxxx Xxxxx-Xxxxx
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Xxxx X. Xxxxxx
----------------------------
Xxxx X. Xxxxxx
Title: Managing Director
Date: ,
For the fiscal quarter/year
ended ,
Schedule 2
to the Compliance Certificate
($ in 000's) 1/
Actual Required/Permitted
1. Section 8.15 Adjusted Leverage Ratio.
The ratio of:
A. Adjusted Total Debt:
the difference of:
(i) Indebtedness 2/
plus _______
(ii) Guaranty Obligations 2/
plus _______
(iii) Synthetic Lease
Obligations
plus _______
(iv) L/C Obligations
less _______
(v) Existing Subordinated
Debt _______
(i)+(ii)+(iii)+(iv)-(v) = _______
B. Total Capital:
the sum of:
(i) Adjusted Total Debt
(from A above) _______
plus
(ii) Existing Subordinated
Debt _______
plus
(iii) Shareholders' Equity _______
(i)+(ii)+(iii) = _______
A
_____ = _______ Not greater than 0.35
B
2. Section 8.16 Tangible Net Worth.
Tangible Net Worth Not to be less than the sum of:
The difference of: A. $1,800,000,000
X. xxxxx book value of assets plus
less ____ B. 50% of consolidated net
income, commencing with
B. goodwill, licensing the fiscal quarter ending
agreements, patents, 8/31/97 and thereafter (not
trademarks, trade names, reduced by any quarterly
organization expense, loss) ____
treasury stock, unamortized
debt discount and premium, less
deferred charges, and other
like intangibles ____ C. (without duplication) all
restructuring and
less acquisition charges
related to permitted
C. applicable reserves ____ Acquisitions and
expended in same fiscal
less quarter as related
Acquisitions from and
D. liabilities (including after the Closing Date ____
accrued and deferred income
taxes and the Existing A + B - C = ____
Subordinated Debt) _______
= A - B - C - D = _______
3. Company to report on compliance
with Sections 8.01(j), 8.01(k),
8.01(q), 8.01(r), 8.02(c),
8.02(d), 8.02(e), 8.03, 8.04(e)
and 8.10(f) in such reasonable
detail as the Agent, at the
request of any Bank, may request
from time to time
____________
1/ All items determined on a consolidated basis and in accordance with
GAAP, consistently applied.
2/ See definition of Adjusted Total Debt for certain items excluded.
