Item 1. Financial Statements

EX-10.1 3 f89132exv10w1.txt EXHIBIT 10.1 EXHIBIT 10.1 EXECUTION VERSION THIRD AMENDMENT AGREEMENT This THIRD AMENDMENT AGREEMENT (this "Amendment") is entered into as of February 13, 2003, among SOLECTRON CORPORATION, a Delaware corporation (the "Borrower"), GOLDMAN SACHS CREDIT PARTNERS L.P. ("GSCP"), as sole lead arranger, sole book runner and co-syndication agent, JPMORGAN CHASE BANK ("JPMorgan"), as co-syndication agent, THE BANK OF NOVA SCOTIA ("Scotiabank"), as documentation agent, each lender from time to time party to the Credit Agreement referred to below (each, a "Lender," and collectively, the "Lenders"), and Bank of America, N.A., as Administrative Agent. The Borrower, GSCP, JPMorgan, Scotiabank, the Lenders, and the Administrative Agent entered into a Credit Agreement dated as of February 14, 2002, which agreement was amended by an Amendment Agreement dated as of June 18, 2002, and a Second Amendment Agreement dated as of August 19, 2002 (as in effect as of the date of this Amendment, the "Credit Agreement"). The Borrower has requested that the Lenders agree to certain amendments to the Credit Agreement, and the Lenders have agreed to such request, subject to the terms and conditions of this Amendment. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: 1. Definitions; References; Interpretation. (a) Unless otherwise specifically defined herein, each term used herein (including in the Recitals hereof) which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. (b) As used herein, "Amendment Documents" means this Amendment, the Consent and Agreement related hereto and the Credit Agreement (as amended by this Amendment). (c) Each reference to "this Agreement," "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 Effective Date refer to the Credit Agreement as amended hereby. (d) The rules of interpretation set forth in Sections 1.02 and 1.05 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 shall be amended as follows, effective as of the date of satisfaction of the conditions set forth in Section 4 (the "Effective Date"): 1. (b) Amendments to Article I of the Credit Agreement. (1) The defined term "Applicable Rate" shall be amended as follows: (A) By replacing the table contained therein with the following table:

(B) In the defined term "Debt Rating" contained therein, by replacing the phrase "Level 5" with "Level 6". (2) The defined term "Cash Interest Coverage Ratio" shall be amended in its entirety to read as follows: "Cash Interest Coverage Ratio" means, as of any date of determination, the ratio of: (a) the sum of (i) Consolidated EBITDA for the fiscal quarter ending on such date, (ii) the Non-Cash Restructuring Charges deducted in calculating Consolidated Net Income for such fiscal quarter, (iii) the Goodwill Impairment Charges deducted in calculating Consolidated Net Income for such fiscal quarter, (iv) the Cash Restructuring Charges deducted in calculating Consolidated Net Income for such fiscal quarter, provided, that the cumulative aggregate amount of Cash Restructuring Charges 2. from and after November 30, 2002, shall not exceed $200,000,000.00, and (v) charges for such fiscal quarter relating to inventory write-downs taken in accordance with GAAP on or after November 30, 2002, and on or before February 29, 2004, not to exceed $150,000,000.00 in the aggregate; to (b) Consolidated Cash Interest Charges during such fiscal quarter. (3) The defined term "Cash Restructuring Charges" shall be amended by deleting the proviso at the end thereof. (4) The defined term "Class" shall be amended by (A) replacing the word "and" with a comma (",") and (B) inserting the following before the period at the end thereof: " and (d) the Additional Secured Obligation Providers." (5) The defined term "Consolidated EBITDA" shall be amended in its entirety to read as follows: "Consolidated EBITDA" means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, an amount equal to (a) Consolidated Net Income, plus (b) (i) Consolidated Interest Charges, (ii) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, and (iii) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, minus (or plus) (c) gains (or losses) on the retirement of Indebtedness to the extent increasing (or decreasing) Consolidated Net Income. (6) The defined term "Consolidated Tangible Net Worth" shall be amended in its entirety to read as follows: "Consolidated Tangible Net Worth" means, as of any date of determination, for the Borrower and its Subsidiaries on a consolidated basis, (a) Shareholders' Equity of the Borrower and its Subsidiaries on that date minus (b) the Intangible Assets of the Borrower and its Subsidiaries on that date plus (c) (i) the cumulative aggregate after-tax Non-Cash Restructuring Charges deducted in calculating Consolidated Net Income in any quarter ending after November 30, 2002, (ii) the cumulative aggregate Goodwill Impairment Charges deducted in calculating Consolidated Net Income in any quarter ending after November 30, 2002, (iii) the cumulative aggregate after-tax Cash Restructuring Charges deducted in calculating Consolidated Net Income in any quarter ending after November 30, 2002, and (iv) after-tax charges relating to inventory write-downs taken in accordance with GAAP from November 30, 2002, to February 29, 2004, not to exceed $150,000,000.00 in the aggregate; provided, that for purposes of calculating Consolidated Tangible Net Worth, such cumulative aggregate Non-Cash Restructuring Charges and Cash Restructuring Charges shall not exceed $400,000,000.00; and provided, further, that to the extent any Goodwill Impairment Charge results in any upward adjustment of Shareholders' Equity of the Borrower and its Subsidiaries, then such adjustment shall be excluded from the calculation of Consolidated Tangible Net Worth as of such date of determination for purposes of testing the Borrower's compliance with Section 7.13(b) (the intent of the parties being that the effect of any such Goodwill 3. Impairment Charge and any related adjustment effected as part of the calculation of Consolidated Tangible Net Worth for the purposes of testing the Borrower's compliance with Section 7.13(b) be neutral). (7) The defined term "Lenders" shall be amended by inserting ", the Security Agreement" after "Pledge Agreement" and by inserting the following at the end thereof: "and any Additional Secured Obligation Providers". (8) The defined term "Loan Documents" shall be amended by inserting after the phrase "the Pledge Agreement," the phrase "the Security Agreement,". (9) The defined term "Maturity Date" shall be amended by replacing clause (b) with the following text: "(b) for Additional Secured Obligations and Interest Rate Swaps, such maturity date as set forth in the applicable Additional Secured Obligation Document or Joinder Agreement". (10) The defined term "Non-Cash Restructuring Charges" shall be amended by deleting the proviso at the end thereof. (11) The defined term "Obligations" shall be amended in the proviso by: (A) Inserting after the phrase "the Pledge Agreement," the following: "the Security Agreement,"; (B) Inserting after the phrase "Interest Rate Swaps" the following: ", Additional Secured Obligations"; (C) Inserting the following proviso at the end: ", and provided, further, that for purposes of the Security Agreement, "Obligations" shall exclude (i) any Interest Rate Swap and Joinder Agreement in respect of any Interest Rate Swap secured by any cash collateral, and (ii) any Additional Secured Obligations to the extent that they arise from any liabilities in respect of (A) the mark-to-market value of any foreign exchange contracts exceeding $75,000,000 at any time outstanding, or (B) any treasury management facilities exceeding three days' exposure." (12) The defined term "Permitted Acquisition" shall be amended by (A) replacing the period at the end thereof with a semicolon and (B) inserting the following proviso thereafter: "and provided, further, that the aggregate amount of Permitted Acquisitions during any twelve-month period beginning on or after November 30, 2002, shall not exceed $300,000,000.00." (13) The defined term "Receivables" shall be amended in its entirety to read as follows: 4. "Receivables" means all rights to payment arising out of the sale or lease of goods or the performance of services in the ordinary and usual course of business, however evidenced. (14) The following additional defined terms shall be inserted in the proper alphabetical order: "Additional Secured Obligations" means any direct or indirect liability, contingent or otherwise, of the Borrower or any of its Subsidiaries in respect of any foreign exchange and cash management services (including treasury, depository, overdraft, credit or debit card, electronic funds transfer and other cash management arrangements) provided by any Lender, including obligations for the payment of fees, interest, charges, expenses, attorneys' fees and disbursements in connection therewith. "Additional Secured Obligation Documents" means any documents, instruments or agreements evidencing any Additional Secured Obligations. "Additional Secured Obligation Provider" means any Lender making credit extensions to the Borrower or any Subsidiaries pursuant to any Additional Secured Obligation Documents. "Annualized EBITDA" means (a) for the fiscal quarter of the Borrower ending on February 28, 2003, Consolidated EBITDA for such fiscal quarter multiplied by 4.0, (b) for the two-fiscal-quarter period of the Borrower ending on May 31, 2003, Consolidated EBITDA for such period multiplied by 2.0, (c) for the three-fiscal-quarter period of the Borrower ending on August 31, 2003, Consolidated EBITDA for such period divided by 0.75 and (d) for each four-fiscal-quarter period of the Borrower ending on November 30, 2003, and thereafter, Consolidated EBITDA for such period. For purposes of calculating Annualized EBITDA, Consolidated EBITDA for any period shall include (i) the Non-Cash Restructuring Charges deducted in calculating Consolidated Net Income for such period, (ii) the Goodwill Impairment Charges deducted in calculating Consolidated Net Income for such period, (iii) the Cash Restructuring Charges deducted in calculating Consolidated Net Income for such period, provided that the cumulative aggregate amount of Cash Restructuring Charges taken from and after the quarter ending on November 30, 2002, shall not exceed $200,000,000.00 in the aggregate, and (iv) charges for such period relating to inventory write-downs taken in accordance with GAAP from November 30, 2002, to February 29, 2004, not to exceed $150,000,000.00 in the aggregate. "Approved Foreign Receivables Debtor" means (i) any Receivables Debtor located in Japan or a country in North America or Europe that is a member of the Organization for Economic Cooperation and Development and (ii) any other Receivables Debtor who is not a resident of or located in the United States and is not organized under the laws of the United States or any state thereof approved in writing by the Required Lenders. "Borrowing Base" means, as of any date of determination, the sum of (a) the then applicable Receivables Advance Rate multiplied by the aggregate Dollar amount of the 5. Receivables of the Borrower and its U.S. Subsidiaries as of the last day of the most recently ended calendar month and (b) 100% of the amount of Eligible Cash Collateral as of the last day of the most recently ended calendar month. "Borrowing Base Certificate" means a certificate signed by a Responsible Officer of the Borrower, in substantially the form of Exhibit N, with such changes thereto as the Administrative Agent may from time to time reasonably request. "Borrowing Base Date" means October 31, 2003, if the Borrower shall not have consummated a Minimum Capital Raise on or before such date. "Capital Raise" means one or more issuances by the Borrower after February 13, 2003, of new Debt Securities in an aggregate amount of at least $300,000,000.00. "Debt Securities" means Indebtedness of the Borrower of the type contemplated by clause (a) of the definition of Indebtedness and having a maturity date occurring on or after August 13, 2005. "Eligible Cash Collateral" means all Dollar-denominated cash and cash equivalents pledged to the Collateral Agent, for the benefit of the Lenders, as collateral for the Obligations, and which are held by the Administrative Agent pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent. Any such cash collateral shall be maintained in interest bearing deposit accounts at Bank of America or other institutions satisfactory to it and shall be subject to such Lien documentation as the Administrative Agent shall reasonably request. Such collateral shall be subject to a valid, first priority Lien in favor of the Collateral Agent, for the benefit of the Lenders. Cash Collateral for the L/C Obligations shall not constitute Eligible Cash Collateral. Notwithstanding the foregoing, in no event shall the Lien documentation restrict the ability of the Borrower to access or withdraw such cash or cash equivalents unless an Event of Default shall have occurred and is continuing or the sum of the Outstanding Amount of all Revolving Loans and L/C Obligations and the 364-Day Outstanding Amount shall exceed the Borrowing Base then in effect. "Excluded U.S. Subsidiary" means a U.S. Subsidiary that is a dormant, inactive or name-holding Subsidiary and that does not own or hold any collateral of the type described in the Security Agreement with a book value equal to or exceeding $10,000.00. Notwithstanding the foregoing, the term "Excluded U.S. Subsidiary" shall include any Special Purpose Subsidiary and U.S. Robotics Corporation. "Ineligible Receivables" means, with respect to the Receivables of the Borrower or any U.S. Subsidiary, any of the following: (a) Receivables for which the Borrower's or such Subsidiary's right to receive payment has not been fully earned by performance or is contingent upon the fulfillment of any condition whatsoever or which otherwise do not arise from a bona fide completed transaction; 6. (b) Receivables which constitute a contra account or against which there are asserted any requests for adjustment, defenses, counterclaims, discounts (other than normal trade discounts granted in the ordinary course of business), credits or offsets of any nature, whether well-founded or otherwise, to the extent thereof; (c) Receivables that do not comply with all applicable Laws in any material respect; (d) Receivables which represent a prepayment or progress payment or arising out of the placement of goods on consignment, guaranteed sale or other arrangement by reason of which the payment by the Receivables Debtor may be conditional or contingent; (e) Receivables which are not owned by the Borrower or applicable U.S. Subsidiary free and clear of all Liens and rights of others (other than the Liens in favor of the Collateral Agent on behalf of the Lenders and other nonconsensual Permitted Liens); (f) Receivables in which the Collateral Agent on behalf of the Lenders shall not have a valid and perfected first-priority Lien; (g) Receivables owing by any officer, director, employee, agent, partner, Subsidiary or Affiliate of the Borrower; (h) Receivables owing by the United States or any department, agency or instrumentality thereof unless the Administrative Agent has agreed to the contrary in writing and the Borrower or applicable U.S. Subsidiary has complied with the Federal Assignment of Claims Act with respect to such Receivables; (i) Receivables denominated in a currency other than Dollars or owing by any Receivables Debtor who is not a resident of or located in the United States and is not organized under the laws of the United States or any state thereof (other than any Approved Foreign Receivables Debtor); (j) Receivables not paid in full within 60 days from the invoice due date; (k) Receivables owing by any Receivables Debtor or any of its Affiliates who has failed to make full payment within 60 days from the invoice due date on more than 10% of the aggregate amount of Receivables owing to the Borrower and its U.S. Subsidiaries by such Receivables Debtor; (l) that portion of Receivables owing by any single Receivables Debtor or any of its Affiliates whose S&P/Moody's Rating is not at least BBB-/Baa3 which exceeds 10% of the aggregate amount of Receivables owing to the Borrower and its U.S. Subsidiaries by all Receivables Debtors; 7. (m) Receivables owing by any Receivables Debtor or any of its Affiliates who is the subject of a proceeding under any Debtor Relief Law; (n) Receivables which are evidenced by a promissory note or other instrument; (o) Receivables with respect to which the terms or conditions prohibit or restrict assignment or collection rights unless such prohibitions or restrictions are not enforceable under applicable law; (p) Receivables of any Receivables Debtor whose S&P/Moody's Rating or whose Affiliate's S&P/Moody's Rating is lower than the lower of B-/B3; and (q) Receivables with respect to which the Administrative Agent, in its reasonable discretion, deems the creditworthiness or financial condition of the Receivables Debtor to be unsatisfactory or the prospect of payment or performance to be impaired in any material respect, and other Receivables which, in the Administrative Agent's reasonable discretion, are otherwise ineligible. "Liquidity Ratio" means, as of any date of determination, the ratio of: (a) the sum of (i) cash, (ii) cash equivalents, (iii) marketable securities and (iv) accounts receivable, in each case not subject to a Lien (other than Liens in favor of the Collateral Agent pursuant to the Loan Documents and any nonconsensual Permitted Liens); to (b) (i) all accounts payable of the Borrower and its Subsidiaries on a consolidated basis and (ii) Consolidated Indebtedness other than (A) Subordinated Indebtedness, (B) Indebtedness under LYONs, (C) Attributable Indebtedness of the Borrower and its Subsidiaries on a consolidated basis in respect of capital leases and Synthetic Lease Obligations which are fully cash collateralized, (D) Indebtedness of the Borrower and its Subsidiaries on a consolidated basis described in clause (b) of the definition of "Indebtedness," unless any such Indebtedness constitutes a matured reimbursement obligation or matured payment obligation and is no longer contingent unless cash collateralized, or described in clause (c) of the definition of "Indebtedness," and (E) any Guarantee Obligations related to any of the foregoing. "Minimum Capital Raise" means, at any time after February 13, 2003, the receipt by the Borrower of (a) aggregate gross proceeds through one or more (i) issuances by the Borrower of equity or (ii) incurrences of unsecured Indebtedness not amortizing or maturing prior to February 14, 2005, and/or (b) aggregate Net Proceeds in respect of any divestitures of assets or property by the Borrower, or any combination thereof, in an amount of at least $300,000,000.00, in cash or cash equivalents. "Net Proceeds" means, with respect to any divestiture of assets or property by any Person, the aggregate consideration received by such Person from such divestiture minus the amount of reasonable fees and commissions actually paid by such Person to Persons other than such Person or any Affiliate of such Person in connection therewith. 8. "Receivables Advance Rate" means, as of any date of determination, (a) 50% or (b) if the percentage of the Receivables of the Borrower and its U.S. Subsidiaries constituting Ineligible Receivables as of the last day of the most recently ended calendar month exceeds 40%, 50% minus 90% of the amount by which such percentage exceeds 40%. "Receivables Debtor" means any Person obligated on a Receivable. "S&P/Moody's Rating" means, with respect to any Person as of any date of determination, the rating assigned by either S&P or Moody's to such Person's senior unsecured non-credit enhanced long-term debt. "Security Agreement" means the Security Agreement made by the Borrower and each U.S. Subsidiary (other than the Excluded U.S. Subsidiaries) in favor of the Collateral Agent for the benefit of the Lenders, in substantially the form of Exhibit M. "364-Day Lender" means, at any time, a lender party to the 364-Day Credit Agreement. "364-Day Outstanding Amount" means, at any time, the aggregate outstanding principal amount of all loans under the 364-Day Credit Agreement. (15) The defined terms "Cash Interest Coverage Ratio Compliance Date" and "Restructuring Charges" shall be deleted. (c) Amendments to Article II of the Credit Agreement. (1) Section 2.01 shall be amended by inserting the following at the end of the first sentence thereof: "; and provided, further, that at any time after the Borrowing Base Date, the sum of the Outstanding Amount of all Revolving Loans and L/C Obligations and the 364-Day Outstanding Amount shall not exceed the Borrowing Base then in effect" (2) Section 2.04 shall be amended by inserting the following at the end thereof: "At any time after the Borrowing Base Date, if the sum of the Outstanding Amount of all Revolving Loans and L/C Obligations and the 364-Day Outstanding Amount shall exceed the Borrowing Base then in effect, the Borrower, upon becoming aware of such excess, shall immediately prepay Revolving Loans or loans under the 364-Day Credit Agreement, or a combination thereof, in an amount equal to such excess." (3) Section 2.08(c) shall be amended by inserting before the word "respectively" the following: "and the fee letter dated January 30, 2003, between the Borrower, Bank of America and Banc of America Securities LLC". (4) Section 2.12 shall be deleted in its entirety. 9. (5) Section 2.13(a) shall be amended by deleting clauses (i) and (1) in their entirety. (d) Amendments to Article IV of the Credit Agreement. (1) Section 4.02(d) shall be renumbered as Section 4.02(e). (2) A new Section 4.02(d) shall be inserted therein as follows: "(d) If such Credit Extension is on or after the Borrowing Base Date, the Borrower shall have delivered to the Administrative Agent the completed Borrowing Base Certificate, together with the related collateral reports, required under Section 6.16, and the statements contained therein shall be true, correct and complete on and as of the date of such Credit Extension as though made on and as of such date, except for changes in the information set forth in such Borrowing Base Certificate in the ordinary course of business. The giving of any Request for Credit Extension and the acceptance by the Borrower of the proceeds of a Credit Extension shall each be deemed a certification to the Administrative Agent and the Lenders that on and as of the date of such Credit Extension such statements are true, correct and complete, except for changes in the information set forth in such Borrowing Base Certificate in the ordinary course of business." (e) Amendment to Article V of the Credit Agreement. Section 5.18 shall be amended in its entirety to read as follows: "5.18 SECURITY INTEREST. The Loan Documents create for the benefit of the Lenders a valid and perfected security interest in the collateral described in the Pledge Agreement (except that with respect to the pledge of any Capital Stock of First Tier Foreign Subsidiaries, a perfected security interest to the extent applicable), subject to no other Liens (other than as expressly permitted by the Pledge Agreement), and a valid and perfected security interest in the collateral described in the Security Agreement, subject to no other Liens (other than Liens expressly permitted by the Security Agreement), securing in each case the payment of the Obligations, and all filings and other actions necessary or desirable to perfect or protect such security interests have been duly taken or arrangements therefor reasonably satisfactory to the Administrative Agent have been made." (f) Amendments to Article VI of the Credit Agreement. (1) Section 6.14 shall be amended by: (A) amending subsection (a)(ii) by replacing the phrase "SLR C.V. (as defined therein)" with the phrase "SLR C.V. (as defined therein) or any entity organized under the laws of the Cayman Islands holding all of the Capital Stock of SLR C.V. (provided that SEH (as defined therein) holds at least 90% of the Capital Stock of such entity)"; and (B) adding a new subsection (c) thereto as follows: 10. "(c) If, at any time, the Borrower incorporates, creates or acquires any additional U.S. Subsidiary (other than an Excluded U.S. Subsidiary), or the status of any Excluded U.S. Subsidiary (other than U.S. Robotics Corporation) shall change so that it no longer meets the definition of "Excluded U.S. Subsidiary," then, at the Borrower's expense: (i) within 45 days after such incorporation, creation or acquisition, or after any U.S. Subsidiary no longer qualifies as an Excluded U.S. Subsidiary, the Borrower shall (A) cause such U.S. Subsidiary to duly execute and delivery to the Administrative Agent a security agreement in substantially the form of Exhibit M or a supplement thereto and (B) deliver evidence satisfactory to the Administrative Agent that the Lien granted to the Collateral Agent for the benefit of the Lenders on the collateral described in such security agreement is a valid and perfected security interest and that no Lien (other than Liens permitted by the Security Agreement) exists on any such collateral other than the Lien granted to the Collateral Agent for the benefit of the Lenders and the 364-Day Lenders pursuant to the Loan Documents; and (ii) at any time and from time to time, the Borrower shall promptly execute and deliver all further instruments and documents and take all such other action as the Administrative Agent may reasonably believe necessary or desirable to obtain the full benefits of, or in perfecting and preserving the Liens of, the pledges and guaranties contemplated by this Section 6.14." (2) A new Section 6.16 shall be added thereto as follows: "6.16 BORROWING BASE CERTIFICATE. The Borrower shall deliver to the Administrative Agent by no later than October 31, 2003, unless a Minimum Capital Raise has been consummated on or before such date, (a) a completed Borrowing Base Certificate and (b) full and complete reports with respect to the Receivables of the Borrower and its U.S. Subsidiaries, including information as to concentration, aging, identity of Receivables Debtors, letters of credit securing Receivables, disputed Receivables and other matters, as the Administrative Agent shall reasonably request. After the Borrowing Base Date, the Borrower shall deliver to the Administrative Agent, as soon as available but in any event by no later than ten Business Days after the end of each calendar month, a completed Borrowing Base Certificate, together with the related collateral reports described above." (3) A new Section 6.17 shall be added thereto as follows: "6.17 SECURITY AGREEMENT COLLATERAL. Not later than March 31, 2003, the Borrower shall deliver to the Administrative Agent to the extent not delivered prior thereto: (a) evidence satisfactory to the Administrative Agent that the Lien granted to the Collateral Agent for the benefit of the Lenders in the collateral described in the Security Agreement is a perfected security interest, subject to no other Liens (other than Liens permitted thereby), (b) confirmation of the accuracy 11. of its prior certification of the U.S. Subsidiaries and the Excluded U.S. Subsidiaries, and (c) such other items as reasonably requested by the Administrative Agent in connection with the Security Agreement, including opinions of counsel to the Borrower and the U.S. Subsidiaries party to the Security Agreement, search reports and other certificates and documents." (g) Amendments to Article VII of the Credit Agreement. (1) Section 7.01 shall be amended by: (A) amending subsection (j) in its entirety to read as follows: "(j) [Reserved];" (B) deleting the second proviso in subsection (k); (C) amending subsection (n) by replacing "$50,000,000.00" with "$215,000,000.00"; and (D) amending subsection (u) in its entirety to read as follows: "(u) additional Liens on its U.S. property, assets or revenue securing Indebtedness in an aggregate amount so secured at any time not exceeding $10,000,000.00; and" (E) adding a new subsection (v) as follows: "(v) additional Liens on its non-U.S. property, assets or revenue securing Indebtedness in an aggregate amount so secured at any time not exceeding $75,000,000.00;" (F) in the proviso at the end thereof, replacing "Section 7.01(u)" with "Section 7.01(v)"). (2) Section 7.03 shall be amended by: (A) amending subsection (b) by adding the following proviso at the end thereof: "provided that any Capital Raise of Debt Securities, to the extent that the proceeds of such issuance are applied within 180 days thereafter to the purchase, redemption, repayment, tender or other refinancing of any such Indebtedness then outstanding, shall be deemed to be issued in compliance with this Section 7.03(b)" (B) amending subsection (d) by replacing "$75,000,000.00" with "$215,000,000.00"; and 12. (C) amending subsection (f) in its entirety to read as follows: "(f) [Reserved];" (3) Section 7.05(f) shall be amended in its entirety to provide as follows: "(f) [Reserved];" (4) Section 7.06 shall be amended by: (A) amending subsection (f) by adding the following proviso before the word "and" at the end thereof: "and provided, further, that, notwithstanding anything to the contrary in this Section 7.06(f), the Borrower shall not make any Restricted Junior Payment of the type described in clause (ii) of the definition of Restricted Junior Payment to the extent it relates to common stock of the Borrower;" (B) deleting the last sentence thereof. (5) Section 7.10 shall be amended in its entirety to provide as follows: "7.10 CAPITAL EXPENDITURES. Make or become legally obligated to make any expenditure in respect of the purchase or other acquisition of any fixed or capital asset (excluding normal replacements and maintenance which are properly charged to current operations, Permitted Acquisitions, and acquisitions of assets as a result of the termination of Synthetic Lease Obligations), except for capital expenditures not exceeding, in the aggregate for the Borrower and its Subsidiaries for any consecutive four-quarter period beginning on September 1, 2001, and each four-quarter period beginning on each September 1 thereafter an amount equal to $300,000,000.00." (6) Section 7.11(b) shall be amended in its entirety to provide as follows: "(b) [Reserved];" (7) Section 7.13 shall be amended in its entirety to provide as follows: "7.13 FINANCIAL COVENANTS. (a) Maximum Debt to Annualized EBITDA Ratio. Permit the ratio of Consolidated Indebtedness (other than Indebtedness under the ACES and the LYONS) to Annualized EBITDA as of the end of any fiscal quarter of the Borrower to be greater than the ratio set forth opposite such fiscal quarter below: 13.

(b) Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth as of the end of any fiscal quarter of the Borrower ending on November 30, 2002, or thereafter to be less than the sum of (i) $1,660,880,000.00, (ii) an amount equal to 50% of Consolidated Net Income earned in each fiscal quarter ending after November 30, 2002 (with no deduction for a new loss in any such fiscal quarter), and (iii) an amount equal to 50% of the aggregate increases in Shareholders' Equity of the Borrower and its Subsidiaries after November 30, 2002, by reason of the issuance and sale of Capital Stock of the Borrower (including upon any conversion of debt securities of the Borrower into such Capital Stock) during any fiscal quarter of the Borrower ending subsequent to November 30, 2002. (c) Cash Interest Coverage Ratio. (i) Before the occurrence of any Capital Raise, permit the Cash Interest Coverage Ratio, as of the end of any fiscal quarter of the Borrower, to be less than the ratio set forth opposite such fiscal quarter below:

14. - ----------------------------------- August 31, 2003 2.8 to 1.0 - ----------------------------------- November 30, 2003 3.15 to 1.0 - ----------------------------------- February 29, 2004 3.15 to 1.0 - ----------------------------------- May 31, 2004 3.5 to 1.0 - ----------------------------------- August 31, 2004 3.5 to 1.0 - ----------------------------------- November 30, 2004 4.0 to 1.0 - -----------------------------------

(ii) From and after the occurrence of one or more Capital Raises, permit the Cash Interest Coverage Ratio, as of the end of any fiscal quarter of the Borrower, to be less than the ratio of: (A) the product of (1) the numerator of the ratio set forth opposite such fiscal quarter above and (2) the projected Consolidated Cash Interest Charges for such fiscal quarter contained in the Company Plan dated January 30, 2003, provided to the Lenders; to (B) the sum of (1) the projected Consolidated Cash Interest Charges for such fiscal quarter contained in such Company Plan and (2) the actual Consolidated Cash Interest Charges in connection with such Capital Raises during such fiscal quarter (as adjusted to take into account any Swap Contacts entered into on the closing date of such Capital Raises); provided, however, that under no circumstances shall the Borrower permit the Cash Interest Coverage Ratio calculated under this Section 7.13(c)(ii), as of the end of any fiscal quarter of the Borrower, to be less than the ratio set forth opposite such fiscal quarter below:
- ---------------------------------------- FISCAL QUARTER ENDING MINIMUM RATIO - ---------------------------------------- November 30, 2002 2.0 to 1.0 - --------------------------------------- February 28, 2003 2.0 to 1.0 - --------------------------------------- May 31, 2003 1.75 to 1.0 - --------------------------------------- August 31, 2003 1.75 to 1.0 - --------------------------------------- November 30, 2003, and 2.0 to 1.0 - --------------------------------------- thereafter - ---------------------------------------
15. (d) Liquidity Ratio. Permit the Liquidity Ratio (i) as of the fiscal quarters of the Borrower ending November 30, 2002, February 28, 2003, May 31, 2003, August 31, 2003, November 30, 2003, and February 28, 2004, to be less than 1.2 to 1.0 and (ii) as of the fiscal quarters of the Borrower ending May 31, 2004, and thereafter to be less than 1.0 to 1.0; provided, however, that if after November 30, 2002, the Borrower issues new senior Debt Securities in an aggregate principal amount of at least $300,000,000.00 but less than $500,000,000.00, the Borrower shall not permit the Liquidity Ratio for any fiscal quarter of the Borrower ending after such issuance to be less than 1.0 to 1.0; and provided, further, that if after November 30, 2002, the Borrower issues new senior Debt Securities in an aggregate principal amount equal to or greater than $500,000,000.00, the Borrower shall not permit the Liquidity Ratio for any fiscal quarter of the Borrower ending after such issuance to be less than 0.9 to 1.0. (e) Minimum Cash. Permit at any time, in respect of the Borrower and its U.S. Subsidiaries: (i) the sum of (A) cash-on-hand, (B) cash equivalents and (C) marketable securities, in each case not subject to a Lien (other than Liens in favor of the Collateral Agent pursuant to the Loan Documents and any nonconsensual Permitted Liens) or any other restrictions, to be less than (ii) the sum of (X) $500,000,000.00, (Y) the aggregate Outstanding Amount of Revolving Loans and L/C Obligations and (Z) the 364-Day Outstanding Amount. With respect to any period during which a Permitted Acquisition or an asset sale has occurred (each, a "Subject Transaction"), for purposes of determining compliance with the financial covenants set forth in this Section 7.13, Consolidated EBITDA and the components of Consolidated Cash Interest Charges shall be calculated with respect to such period on a pro forma basis (including pro forma adjustments arising out of events which are directly attributable to a Subject Transaction, are factually supportable and are expected to have a continuing impact, in each case determined on a basis consistent with Article 11 of Regulation S-X promulgated under the Securities Act of 1933, as amended from time to time, and any successor statute, and as interpreted by the staff of the Securities and Exchange Commission, which would include cost savings resulting from head count reduction, closure of facilities and similar restructuring charges, which pro forma adjustments shall be certified by the chief financial officer of the Borrower) using the historical audited, if available, financial statements of any business so acquired or to be acquired or sold or to be sold and the consolidated financial statements of the Borrower and its Subsidiaries which shall be reformulated as if such Subject Transaction, and any Indebtedness incurred or repaid in connection therewith, had been consummated or incurred or repaid at the beginning of such period (and assuming that such Indebtedness bears interest during any portion of the applicable measurement period prior to the relevant 16. acquisition at the weighted average of the interest rates applicable to outstanding Loans incurred during such period)." (8) Section 7.14 shall be amended in its entirety to provide as follows: "7.14 LYONs. Voluntarily redeem for cash any LYONs, or voluntarily acquire for cash any LYONs from holders thereof, in part or in whole, unless immediately before and after giving effect to such proposed actions unrestricted cash, cash equivalents and short-term Investments of the Borrower (determined on a consolidated basis) plus unused amounts under the Commitments and the commitments under the 364-Day Credit Agreement exceed $950,000,000.00, and immediately before and after giving effect to such proposed actions, no Default or Event of Default would exist. Upon the receipt by the Administrative Agent of a notice confirming the Investment Grade Ratings of the Borrower, this Section 7.14 shall be terminated and be of no further force or effect." (h) Amendment to Article VIII of the Credit Agreement. Section 8.01(b) shall be amended in its entirety to provide as follows: "(b) Specific Covenants. The Borrower fails to perform or observe any term, covenant or agreement contained in any of Sections 6.03, 6.05, 6.12 or 6.16 or Article VII;" (i) Amendments to Article IX of the Credit Agreement. Section 9.11 shall be amended by inserting the following after "encumbering" in clause (i): "any assets constituting collateral under the Security Agreement or". (j) Amendments to Annexes to the Credit Agreement. (1) Schedules 2.03, 5.09, 5.13, 7.01, 7.02, 7.03 and 7.11 to the Credit Agreement shall be amended in their entirety in the form of Annexes 5 to 11, respectively, to this Amendment. (2) Schedule 7.13 to the Credit Agreement shall be deleted. (3) Exhibit C to the Credit Agreement shall be amended by amending Schedules 2 and 3 thereto in the form of Annex 1 to this Agreement. (4) New Exhibits M and N shall be added to the Credit Agreement in the form of Annexes 2 and 3 respectively, to this Amendment. 3. Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent and the Lenders 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). 17. (b) The execution, delivery and performance by the Borrower of the Amendment Documents 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, or notice to or action by, any Person (including any Governmental Authority) in order to be effective and enforceable. (c) The Amendment Documents constitute the legal, valid and binding obligations of the Borrower, enforceable against it in accordance with their respective terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditor's rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law). (d) All representations and warranties of the Borrower contained in the Credit Agreement are true and correct (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct 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 Section 5.05 of the Credit Agreement and to take into account any amendments to the Schedules to the Credit Agreement and other disclosures made in writing by the Borrower to the Administrative Agent and the Lenders after the Closing Date and approved by the Administrative Agent and the Required Lenders). (e) There has occurred since August 31, 2002, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect. (f) The Borrower is entering into this Amendment on the basis of its own investigation and for its own reasons, without reliance upon the Administrative Agent and the Lenders or any other Person. (g) The Borrower's obligations under the Credit Agreement and under the other Loan Documents are not subject to any defense, counterclaim, set-off, right of recoupment, abatement or other claim. 4. Conditions of Effectiveness. (a) The effectiveness of Section 2 of this Amendment shall be subject to the satisfaction of each of the following conditions precedent: (1) The Administrative Agent shall have received from the Borrower and each of the Lenders a duly executed original (or, if elected by the Administrative Agent, an executed facsimile copy) of this Amendment. (2) The Administrative Agent shall have received the consent of the Subsidiaries of the Borrower party to the Pledge Agreement, the Interco Subordination Agreement or the Guaranty, in form and substance satisfactory to the Administrative Agent, in their capacities as such, to the execution and delivery hereof by the Borrower. 18. (3) The Administrative Agent shall have received from the Borrower a certificate certifying the U.S. Subsidiaries and the Excluded U.S. Subsidiaries, which certification the Borrower may update at any time prior to March 31, 2003. (4) The Administrative Agent shall have received from the Borrower and each of its U.S. Subsidiaries a duly executed original (or, if elected by the Administrative Agent, an executed facsimile copy) of the Security Agreement, substantially in the form of Annex 3. (5) The Administrative Agent shall have executed the amendment to the Intercreditor Agreement, substantially in the form of Annex 4 and shall have received from Bank of America (in its capacities as Administrative Agent under the 364-Day Credit Agreement and as Collateral Agent) a duly executed original thereof. (6) The Administrative Agent shall have received from the Borrower a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower in respect of the fiscal quarter of the Borrower ended November 30, 2002. (7) The Administrative Agent shall have received evidence of payment by the Borrower of all fees, costs and expenses due and payable as of the Effective Date hereunder and under the Credit Agreement, including any fees arising under or referenced in Section 5 of this Amendment and any costs and expenses payable under Section 6(g) of this Amendment (including the Administrative Agent's Attorney Costs, to the extent invoiced on or prior to the Effective Date). (8) The Administrative Agent shall have received from the Borrower, in form and substance satisfactory to the Administrative Agent, copies of the resolutions passed by the board of directors of the Borrower, certified as of the Effective Date by the Secretary or an Assistant Secretary of the Borrower, authorizing the execution, delivery and performance of this Amendment, the Security Agreement and each other document, agreement or instrument to be executed and delivered by it pursuant thereto, together with such incumbency certificates and/or other certificates of Responsible Officers of the Borrower, as the Administrative Agent may require to establish the identities of and verify the authority and capacity of each Responsible Officer thereof authorized to act as such in connection with this Amendment and each other Loan Document to which the Borrower is a party. (9) The Administrative Agent shall have received an opinion of counsel to the Borrower, in form and substance satisfactory to the Administrative Agent, and addressed to the Administrative Agent and the Lenders, dated the Effective Date. (10) The Administrative Agent shall have received all other documents it or the Required Lenders may reasonably request relating to any matters relevant hereto, all in form and substance satisfactory to the Administrative Agent. (11) The Effective Date shall have occurred on or before February 13, 2003. 19. (b) For purposes of determining compliance with the conditions specified in Section 4(a), each Lender 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 Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender. (c) From and after the 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. (d) The Administrative Agent will notify the Borrower and the Lenders of the occurrence of the Effective Date. 5. Fees. The Borrower shall pay (a) to the Administrative Agent for the account of each of Bank of America and Banc of America Securities LLC ("BAS") the fees set forth in that certain letter agreement dated as of January 30, 2003, by and between Bank of America, BAS and the Borrower, and (b) to each of GSCP, JPMorgan and Scotiabank such fees as are set forth in separate letter agreements by and between each such Person and the Borrower. Such fees shall be due and payable by the Borrower on the dates set forth in such letter agreements. 6. Miscellaneous. (a) The Borrower acknowledges and agrees that the execution and delivery by the Administrative Agent and the Lenders 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 parties hereto and thereto and their respective successors and assigns. (c) This Amendment shall be governed by and construed in accordance with the law of the State of New York (including Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York), provided that the Administrative Agent and the Lenders 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 Administrative Agent of a facsimile transmitted document purportedly bearing the signature of a Lender or the Borrower shall bind such Lender or the Borrower, respectively, with the same force and effect as the delivery of a hard copy original. Any failure by the Administrative Agent to receive the hard copy executed original of such document shall not diminish the binding effect of receipt of the 20. facsimile transmitted executed original of such document of the party whose hard copy page was not received by the Administrative Agent. (e) This Amendment and the other Amendment Documents contain 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. 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 Borrower agrees to pay or reimburse Bank of America (including in its capacities as Collateral Agent and as Administrative Agent), GSCP, JPMorgan and Scotiabank upon demand, for all reasonable costs and expenses (including reasonable Attorney Costs) incurred by Bank of America (including in its capacities as Collateral Agent and as Administrative Agent), GSCP, JPMorgan and Scotiabank in connection with the development, preparation, negotiation, execution and delivery of the Amendment Documents. [Signature pages follow] 21. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. SOLECTRON CORPORATION By: /s/ Perry G. Hayes -------------------------------- Title: Treasurer and Vice President of Investor Relations BANK OF AMERICA, N.A., as Administrative Agent and Lender By: /s/ James P. Johnson -------------------------------- Title: Managing Director GOLDMAN SACHS CREDIT PARTNERS L.P., AS SOLE LEAD ARRANGER, SOLE BOOK RUNNER AND CO-SYNDICATION AGENT AND A LENDER By: /s/ Stephen King -------------------------------- Authorized Signatory Name: Stephen King Title: Vice President THE BANK OF NOVA SCOTIA By: /s/ Kemp Leonard -------------------------------- Name: Kemp Leonard Title: Director BNP PARIBAS By: /s/ Jean Plassard -------------------------------- Name: Jean Plassard Title: Managing Director By: /s/ Rafael C. Lumanian -------------------------------- Name: Rafael C. Lumanian Title: Director CSAM FUNDING II By: /s/ David H. Lerner -------------------------------- Name: David H. Lerner Title: Authorized Signatory THE DEVELOPMENT BANK OF SINGAPORE LTD., LOS ANGELES AGENCY By: /s/ Charles Ong -------------------------------- Name: Charles Ong Title: General Manager DBS Bank Los Angeles FLEET NATIONAL BANK, AS L/C ISSUER AND A LENDER By: /s/ Greg Roux -------------------------------- Name: Greg Roux Title: Director JPMORGAN CHASE BANK By: /s/ William P. Rindfuss -------------------------------- Name: William P. Rindfuss Title: Vice President MORGAN STANLEY SENIOR FUNDING, INC. By: /s/ Jaap L. Tonckens -------------------------------- Name: Jaap L. Tonckens Title: Vice President Morgan Stanley Senior Funding THE ROYAL BANK OF SCOTLAND PLC By: /s/ Jonathan Barrow -------------------------------- Name: Jonathan Barrow Title: Vice President STANDARD CHARTERED BANK By: /s/ Mary Machado-Schammel -------------------------------- Name: Mary Machado-Schammel Title: Sr. Vice President By: /s/ Andrew Y. Ng -------------------------------- Name: Andrew Y. Ng Title: Vice President Standard Chartered Bank NY 22.