Third Amendment to Credit Agreement



EXHIBIT 10.K 
 
EXECUTION VERSION 
 
THIRD AMENDMENT TO CREDIT AGREEMENT 
 
This THIRD AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is entered into as of December
30, 2002, by and among Mentor Graphics Corporation, an Oregon corporation (the “Company”), the several financial institutions party to the Credit Agreement referred to below (each a “Bank” and, collectively, the
“Banks”), The Bank of Nova Scotia, as documentation agent, Fleet National Bank, as syndication agent, and Bank of America, N.A., as administrative agent for the Banks (in such capacity, the “Agent”). 
 
WHEREAS, the Company, the Banks and the Agent entered into a
Credit Agreement dated as of January 10, 2001, as amended pursuant to that certain First Amendment to Credit Agreement dated as of January 24, 2002 and that certain Second Amendment to Credit Agreement dated as of April 16, 2002 (as so amended, and
as otherwise amended, modified or supplemented from time to time, the “Credit Agreement”); 
 
WHEREAS, the Company has requested the right to obtain financing in an aggregate principal amount not to exceed $50,000,000 to be secured
by a Lien on the Wilsonville Facility; 
 
WHEREAS,
as one alternative in obtaining such financing, the Company has requested permission to sell the Wilsonville Facility to the Special Purpose Subsidiary (as defined below), to allow the Special Purpose Subsidiary to obtain a loan in an aggregate
principal amount not to exceed $50,000,000 to be secured by a Lien on the Wilsonville Facility, and to lease the Wilsonville Facility from the Special Purpose Subsidiary. 
 
WHEREAS, for this and other purposes, the Company has requested that the Majority Banks agree to certain
amendments to the Credit Agreement and the Majority Banks have agreed to such request, subject to the terms and conditions of this Amendment; 
 
NOW, THEREFORE, the parties hereto agree as follows: 
 
1.    Definitions; References; Interpretation. 
 
(a)    Unless otherwise specifically
defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. 
 
(b)    Each reference to “this Amendment”, “hereof”, “hereunder”, “herein” and
“hereby” and each other similar reference contained in the Credit Agreement, and each reference to “the Credit Agreement” and each other similar reference in the other Loan Documents, shall from and after the Third Amendment
Effective Date (as defined in Section 4 hereof) refer to the Credit Agreement as amended hereby. 
 
(c)    The rules of interpretation set forth in Section 1.02 of the Credit Agreement shall be applicable to this Amendment. 
 









2.    Amendments to Credit Agreement.    Subject to the
terms and conditions hereof, the Credit Agreement is amended as follows: 
 
(a)    Section 1.01 of the Credit Agreement is hereby amended by adding the following new definition in proper alphabetical order: 
 
“‘Special Purpose Subsidiary’ means that certain wholly owned
Subsidiary created by the Company for the purposes of acquiring the Wilsonville Facility and obtaining a loan to be secured by a Lien on the Wilsonville Facility.” 
 
(b)    Section 1.01 of the Credit Agreement is hereby amended by amending and restating
the definition of “Wilsonville Facility” to read in its entirety as follows: 
 
“‘Wilsonville Facility’ means the Company’s principal facility and headquarters, consisting of
approximately 47.55 acres, located at 8005 S.W. Beckman Road, Wilsonville, Oregon.” 
 
(c)    Section 7.01 of the Credit Agreement is hereby amended by (i) deleting the word “and” at the end of subsection (r) thereof; (ii) deleting the period at the end of
subsection (s) thereof and inserting “; and” therefor; and (iii) adding the following as new subsection (t) thereof: 
 

	 	“(t)	 	a Lien on the Wilsonville Facility securing Indebtedness of the Company or the Special Purpose Subsidiary in an aggregate principal amount not exceeding $50,000,000
at any time.” 

 
(d)    Section 7.02 of the Credit Agreement is hereby amended by amending and restating subsection (e) thereof in its entirety to read as follows: 
 

	 	“(e)	 	(i) subject to Section 7.06 (without regard to the exception in the first clause of the first sentence of Section 7.06), the sale or other transfer of the
Wilsonville Facility to the Special Purpose Subsidiary, or (ii) any other sale of the Wilsonville Facility for fair market value (as determined in good faith at the time of such sale by the board of directors of the Company); provided in each
case that no Default or Event of Default then exists or would result from such sale;” 

 
(e)    Section 7.04 of the Credit Agreement is hereby amended by amending and restating subsection (c) thereof in its
entirety to read as follows: 
 

	 	“(c)	 	Investments by the Company in any of its Wholly-Owned Subsidiaries or by any of its Wholly-Owned Subsidiaries in the Company or another of its Wholly-Owned
Subsidiaries; provided, however, that Investments by the Company in the Special Purpose Subsidiary shall be limited to a contribution of the Wilsonville Facility and other Investments incidental or necessary to the capitalization of the
Special Purpose Subsidiary, the Special Purpose Subsidiary’s ownership of the Wilsonville Facility and its lease of the Wilsonville Facility to the Company;” 

 
 

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(f)    Section 7.05 of the Credit Agreement is hereby amended by amending and restating subsection (d) thereof in its entirety to read as follows: 
 

	 	“(d)	 	Indebtedness secured by Liens permitted by subsections 7.01(i), (j), (k), (m) and (t);” 

 
(g)    Section 7.05 of the Credit
Agreement is hereby further amended by (i) deleting the word “and” at the end of subsection (j) thereof; (ii) deleting the period at the end of subsection (k) thereof and inserting “; and” therefor; and (iii) adding the following
as new subsection (l) thereof: 
 

	 	“(l)	 	Indebtedness of the Company to the Special Purpose Subsidiary or of the Special Purpose Subsidiary to the Company, to the extent such Indebtedness results from an
Investment permitted under subsection 7.04(c).” 

 
(h)    Section 7.08 of the Credit Agreement is hereby amended by amending and restating subsection (e) thereof in its entirety to read as follows: 
 

	 	“(e)	 	Guaranty Obligations by the Company of Indebtedness and other obligations of a Subsidiary (other than the Special Purpose Subsidiary), or by any Subsidiary of the
Indebtedness and other obligations of the Company or any other Subsidiary (other than the Special Purpose Subsidiary), provided that, in each case, such Indebtedness and other obligations are otherwise permitted hereunder; and”


 
(i)    Section
7.09 of the Credit Agreement is hereby amended by amending and restating subsection (b) thereof in its entirety to read as follows: 
 

	 	“(b)	 	leases entered into by the Company or any Subsidiary after the Closing Date (i) pursuant to sale-leaseback transactions relating to assets the disposition of which
is permitted under subsection 7.02(g) or (ii) with respect to the Wilsonville Facility;” 

 
(j)    Section 7.14 of the Credit Agreement is hereby amended by amending and restating subsection (a) thereof in its
entirety to read as follows: 
 

	 	“(a)	 	Adjusted Quick Ratio.    The Company shall not as of the end of any fiscal quarter suffer or permit its ratio (determined in respect of
the Company and its Subsidiaries on a consolidated basis) of (i) cash plus the value (valued in accordance with GAAP) of all Cash Equivalents plus net current accounts receivable (valued in accordance with GAAP), other than cash, Cash
Equivalents and net current accounts receivable subject to a Lien securing Indebtedness, to (ii) Consolidated Current Liabilities (other than liabilities secured by a Lien on cash, Cash Equivalents or net current accounts receivable), to be less
than (A) prior to the closing of any financing relating to the Wilsonville Facility, the correlative ratio indicated in Table A below and (B) after the closing of any financing relating to the Wilsonville Facility, the correlative ratio indicated in
Table B below. 

 

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Table A

 

	 Period
	  	 Ratio

	

	 Fiscal quarter ended December 31, 2002 and Fiscal quarter ended March 31,
2003
	  	 0.70:1.00

	 Fiscal quarter ended June 30, 2003 and Fiscal quarter ended September 30,
2003
	  	 0.75:1.00

	 Each fiscal quarter ending thereafter
	  	 0.80:1.00


 
Table
B 
 

	 Period
	  	 Ratio

	

	 Fiscal quarter ended December 31, 2002
	  	 0.75:1.00

	 Fiscal quarter ended March 31, 2003
	  	 0.80:1.00

	 Fiscal quarter ended June 30, 2003
	  	 0.85:1.00

	 Fiscal quarter ended September 30, 2003 and
Each fiscal quarter ending
thereafter
	  	 0.90:1.00


 
(k)    A new Section 7.15 is hereby added as follows: 
 
“7.15 Assets of Special Purpose Subsidiary.    As of the end of any fiscal quarter the
Special Purpose Subsidiary shall not hold, and the Company shall not permit the Special Purpose Subsidiary to hold, assets other than the Special Purpose Subsidiary’s interest in the Wilsonville Facility and other assets incidental or necessary
to the capitalization of the Special Purpose Subsidiary, the Special Purpose Subsidiary’s ownership of the Wilsonville Facility and its lease of the Wilsonville Facility to the Company.” 
 
3.    Representations and
Warranties.    The Company hereby represents and warrants to the Agent and the Banks as of the Third Amendment Effective Date as follows: 
 
(a)    No Default or Event of Default has occurred and is continuing (or would result
from the amendment of the Credit Agreement contemplated hereby). 
 
(b)    The execution, delivery and performance by the Company of this Amendment and the Credit Agreement (as amended by this Amendment) have been duly authorized by all necessary corporate action and do not and
will not require any registration with, consent or approval of, or notice to or action by, any Governmental Authority in order to be effective and enforceable. 
 
(c)    This Amendment and the Credit Agreement (as amended by this Amendment) constitute the legal, valid and binding
obligations of the Company, enforceable against it in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally
or by equitable principles relating to enforceability. 
 

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(d)    All representations and warranties of the Company contained in the Credit Agreement are true and correct in all material respects (except to the extent such representations and warranties expressly refer to
an earlier date, in which case they shall be true and correct in all material respects as of such earlier date and except that this subsection (d) shall be deemed instead to refer to the last day of the most recent quarter and year for which
financial statements have then been delivered in respect of the representation and warranty made in subsections 5.11(a) and 5.11(b) of the Credit Agreement). 
 
(e)    The Company is entering into this Amendment on the basis of its own investigation and for its own reasons,
without reliance upon the Agent and the Banks or any other Person. 
 
4.    Conditions to Effectiveness. 
 
(a)    The effectiveness of Section 2 of this Amendment shall be subject to the satisfaction of each of the following conditions precedent (the date of such satisfaction being the
“Third Amendment Effective Date”): 
 
(1)    The Agent shall have received from the Company and each of the Majority Banks a duly executed original (or, if elected by the Agent, an executed facsimile copy) of this Amendment. 
 
(2)    On the Third Amendment Effective
Date, (i) after giving effect to Section 2 hereof, the representations and warranties contained in Section 3 hereof shall be true and correct in all material respects as of such date, as though made on and as of such date (except to the extent such
representations and warranties expressly refer to an earlier date); (ii) after giving effect to Section 2 hereof, no Default or Event of Default shall then exist; and (iii) the Company shall deliver to the Administrative Agent a certificate signed
by a Responsible Officer of the Company confirming the foregoing. 
 
(3)    The Company shall have paid to the Agent a non-refundable amendment fee for the benefit of each Bank that executes this Amendment by the close of business on December 30, 2002 in an amount equal to
0.15% of each such Bank’s Commitment, and any other fees referenced in Section 5(g) hereof (to the extent invoiced) of this Amendment. 
 
(4)    For purposes of determining compliance with the conditions specified in this Section 4(a), each Bank that has
executed this Amendment shall be deemed to have consented to, approved or accepted, or to be satisfied with, each document or other matter either sent, or made available for inspection, by the Agent to such Bank for consent, approval, acceptance or
satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Bank. 
 
(b)    From and after the Third Amendment Effective Date, the Credit Agreement is amended as set forth herein. Except
as expressly amended pursuant hereto, the Credit Agreement shall remain unchanged and in full force and effect and is hereby ratified and confirmed in all respects. 
 

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(c)    The Agent will notify the Company and the Banks of the occurrence of the Third Amendment Effective Date. 
 
5.    Miscellaneous. 
 
(a)    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 an obligation to execute similar waivers or amendments under the same or similar circumstances in the future. 
 
(b)    This Amendment shall be binding upon and inure to the benefit of the Company, the
Agent and the Banks and their respective successors and assigns. 
 
(c)    This Amendment shall be governed by and construed in accordance with the law of the State of California, provided that the Agent and the Banks shall retain all rights arising under Federal law.

 
(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
contains the entire and exclusive agreement of the parties hereto with reference to the matters discussed herein. This Amendment supersedes all prior drafts and communications with respect hereto or thereto. This Amendment may not be amended except
in accordance with the provisions of Section 10.01 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, the Credit Agreement or the Loan Documents. 
 
(g)    The Company agrees to pay or reimburse BofA (including in its capacity as Agent), upon demand, for all reasonable costs and expenses (including reasonable Attorney Costs)
incurred by BofA (including in its capacity as Agent) in connection with the development, preparation, negotiation, execution and delivery of this Amendment. 
 
[signature pages follow] 
 
 

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IN WITNESS
WHEREOF, the parties hereto have caused this Third Amendment to Credit Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. 
 
 

	 MENTOR GRAPHICS CORPORATION

	
	 By:
	 	 /S/    DENNIS WELDON


	 Name:
	 	 Dennis Weldon


	 Title:
	 	 Treasurer





	 
	
	 By:
	 	 /S/    DEAN FREED


	 Name:
	 	 Dean Freed


	 Title:
	 	 Vice President and General Counsel


	 
	 
	 BANK OF AMERICA, N.A., as Agent and as a Bank

	
	 By:
	 	 /S/    KEVIN MCMAHON


	 Name:
	 	 Kevin McMahon


	 Title:
	 	 Managing Director


	 
	 
	 BNP PARIBAS

	
	 By:
	 	  


	 Name:
	 	  


	 Title:
	 	  


	 
	 
	 
	
	 By:
	 	  


	 Name:
	 	  


	 Title:
	 	  


	 
	 
	 FLEET NATIONAL BANK

	
	 By:
	 	 /S/    LEE A.
MERKLE-RAYMOND


	 Name:
	 	 Lee A. Merkle-Raymond


	 Title:
	 	 Director




 

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	 THE BANK OF NOVA SCOTIA
  

	
	 By:
	 	 /S/    LISA ANN BEARD


	 Name:
	 	 Lisa Ann Beard


	 Title:
	 	 Director, Technology Group


	 
	 
	 MIZUHO CORPORATE BANK, LIMITED

	
	 By:
	 	 /S/    MASAHITO FUKUDA


	 Name:
	 	 Masahito Fukuda


	 Title:
	 	 Senior Vice President and Group Head




 

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