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EXHIBIT 10.38.3
THIRD AMENDMENT
TO
REVOLVING CREDIT AND TERM LOAN AGREEMENT
Third Amendment dated as of June 26, 1998 to Revolving Credit and Term
Loan Agreement (the "Third Amendment"), by and among WESTERN DIGITAL
CORPORATION, a Delaware corporation (the "Borrower") and BANKBOSTON, N.A. and
the other lending institutions listed on Schedule 1 to the Credit Agreement (as
hereinafter defined) (the "Banks"), amending certain provisions of the Revolving
Credit and Term Loan Agreement dated as of January 28, 1998 (as amended and in
effect from time to time, the "Credit Agreement") by, and among the Borrower,
the Banks and BankBoston, N.A. as agent for the Banks (in such capacity, the
"Agent"). Terms not otherwise defined herein which are defined in the Credit
Agreement shall have the same respective meanings herein as therein.
WHEREAS, the Borrower and the Banks have agreed to modify certain terms
and conditions of the Credit Agreement as specifically set forth in this Third
Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
SECTION 1. AMENDMENT TO SECTION 1 OF THE CREDIT AGREEMENT. Section 1.1
of the Credit Agreement is hereby amended as follows:
(a) the definition of Applicable Margin is hereby amended by deleting
such definition in its entirety and restating it as follows:
Applicable Margin. For each period commencing on an Adjustment
Date through the date immediately preceding the next Adjustment Date
(each a "Rate Adjustment Period"), the Applicable Margin shall be the
applicable margin set forth below with respect to the Borrower's
Liabilities to Worth Ratio as determined for the fiscal quarter of the
Borrower ending on the last day of the fiscal quarter ended immediately
prior to the first day of the applicable Rate Adjustment Period.
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BASE RATE EURODOLLAR COMMITMENT LETTER OF
LIABILITIES TO WORTH LOANS RATE LOANS FEE RATE CREDIT FEES
LEVEL RATIO (BASIS POINTS) (BASIS POINTS) (BASIS POINTS) (BASIS POINTS)
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1 Less than or equal to 25 150 37.50 150
1.75:1.00
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II Greater than 1.75:1.00, 50 175 50 175
but less than or equal
to 2.00:1.00
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III Greater than 2.00:1.00, 75 200 50 200
but less than or equal
to 3.00:1.00
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IV Greater than 3.00:1.00 100 225 50 225
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Notwithstanding the foregoing, (a) for Loans outstanding, Letter of
Credit Fees payable and the Commitment Fee Rate during the period commencing on
June 26, 1998 through the date immediately preceding the first Adjustment Date
to occur after the last day of the first fiscal quarter of 1999, the Applicable
Margin shall not be lower than Level III set forth above, and (b) if the
Borrower fails to deliver any Compliance Certificate when required by Section
9.4(c) hereof then, for the period commencing on the next Adjustment Date to
occur subsequent to such failure through the date immediately following the date
on which such Compliance Certificate is delivered, the Applicable Margin shall
be the highest Applicable Margin set forth above.
(b) by inserting the following definitions in the appropriate alphabetical
order:
Quick Ratio. With respect to the Borrower and its Subsidiaries at any
time, the ratio, determined on a consolidated basis in accordance with generally
accepted accounting principles, of (a) the remainder at such time of (i) the sum
of (A) all cash of the Borrower and its Subsidiaries, (B) the current market
value of all cash equivalents of the Borrower and its Subsidiaries and (C) all
Accounts Receivable of the Borrower and its Subsidiaries (net of all reserves
therefor) minus (ii) to the extent included in the foregoing sum, the sum of all
cash, cash equivalents and Accounts Receivable of the Borrower and its
Subsidiaries that are subject to a lien, security interest or other encumbrance
or otherwise restricted, to (b) the sum of (i) all Consolidated Total
Liabilities of the Borrower and its Subsidiaries that would be classified as
current under generally accepted accounting principles at such time and (ii)
without duplication, all outstanding Revolving Credit Loans plus the Maximum
Drawing Amount of all issued and outstanding Letters of Credit plus all Unpaid
Reimbursement Obligations, whether or not so classified.
Senior Funded Indebtedness. At any time of determination, the sum of
(a) the outstanding amount of the Revolving Credit Loans plus, (b) the aggregate
amount of all Unpaid Reimbursement Obligations, plus (c) the outstanding amount
of the Term Loan, plus (d) the aggregate amount of all outstanding Capitalized
Leases and Synthetic Leases (including without limitation the Permitted
Synthetic Lease) incurred pursuant to Section 10.1(c) and (d) hereof, plus (e)
the aggregate outstanding amount of all Indebtedness incurred pursuant to
Section 10.1(e) hereof, plus (f) the aggregate amount of all outstanding
Indebtedness incurred pursuant to Section 10.1(k) hereof.
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SECTION 2. AMENDMENT TO SECTION 8 OF THE CREDIT AGREEMENT. Section 8.24
of the Credit Agreement is hereby amended by inserting immediately after the
words "other than the Obligations" which appear in Section 8.24 the words "and
the obligations of the Borrower arising under the Permitted Synthetic Lease."
SECTION 3. AMENDMENT TO SECTION 10 OF THE CREDIT AGREEMENT. Section 10
of the Credit Agreement is hereby amended as follows:
(a) Section 10.2(ix) of the Credit Agreement is hereby amended by
inserting immediately after the words "real or personal property subject to"
which appear in Section 10.2(ix) the words "or related to";
(b) Section 10.5.2. of the Credit Agreement is hereby amended by
inserting immediately after the end of the first paragraph of Section 10.5.2.
the following sentence: "For the avoidance of doubt, the groundlease of the
Property by the Borrower to Lease Plan North America, Inc. pursuant to that
certain Ground Lease Agreement dated after the date hereof shall not for
purposes of this Credit Agreement constitute a disposition by the Borrower of
its assets.";
(c) Section 10.9 of the Credit Agreement is hereby amended by inserting
immediately after the words "other than the Indebtedness arising under this
Credit Agreement and the other Loan Documents" the words "and Indebtedness of
the Borrower arising under the Permitted Synthetic Lease and the documents,
agreements and instruments to be executed in connection therewith."
SECTION 4. AMENDMENT TO SECTION 11 OF THE CREDIT AGREEMENT. Section 11
of the Credit Agreement is hereby amended by deleting Section 11 of the Credit
Agreement in its entirety and restating it as follows:
11. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan,
Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding
or any Bank has any obligation to make any Loans or the Agent has any
obligation to issue, extend or renew any Letters of Credit:
11.1. PROFITABLE OPERATIONS. The Borrower will not permit
Consolidated Net Operating Income for (a) the end of the fourth fiscal
quarter of 1998 to be less than ($155,000,000); (b) the end of the first
fiscal quarter of 1999 to be less than ($95,000,000); (c) the end of the
second fiscal quarter of 1999 to be less than ($65,000,000); (d) the end
of the third fiscal quarter of 1999 to be less than ($5,000,000); and
(e) each fiscal quarter ending thereafter to be less than $1.00.
11.2. FIXED CHARGE COVERAGE RATIO. The Borrower will not, as of
the end of any fiscal quarter ending during any period described in the
table set forth below, commencing with the fourth fiscal quarter of
1999, permit the ratio of (a) the sum of (i) EBITDA for the Reference
Period ending on such date plus (ii)
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Rental Obligations for the Reference Period ending on such date (without giving
effect to the December 1997 Charge) to (b) the sum of (i) Consolidated Total
Cash Interest Expense for the Reference Period ending on such date plus (ii)
Rental Obligations for the Reference Period ending on such date, to be less than
the ratio set forth opposite such period in such table:
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PERIOD RATIO
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Fourth Fiscal Quarter 1999 1.30:1.00
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Each fiscal quarter 3.00:1.00
thereafter
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11.3. MINIMUM QUICK RATIO. The Borrower will not at any time during any
period set forth in the table below permit the Quick Ratio to be less than the
ratio set forth opposite such period in such table:
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PERIOD RATIO
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June __, 1998 - last day of 1.00:1.00
the First Fiscal Quarter of
1999
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First day of the Second 0.90:1.00
Fiscal Quarter of 1999-
last day of the Second
Fiscal Quarter of 2000
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any time thereafter 1.00:1.00
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11.4. LEVERAGE. The Borrower will not at any time during any period set
forth in the table below permit the ratio of (a) Senior Funded Indebtedness to
(b) the sum of (i) the aggregate amount of consolidated shareholders' equity
(net of any commitments of capital to the extent not received) less (ii)
Consolidated Intangible Assets to exceed the ratio set forth opposite such
period in such table:
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PERIOD RATIO
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June __, 1998 - last day of 1.00:1.00
the Fourth Fiscal Quarter
of 1998
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First day of the First 1.25:1.00
Fiscal Quarter of 1999 -
last day of such fiscal
quarter
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First day of the Second 1.75:1.00
Fiscal Quarter of 1999 -
last day of the First Fiscal
Quarter of 2000
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First day of the Second 1.50:1.00
Fiscal Quarter of 2000 -
last day of such fiscal
quarter
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First day of the Third 1.25:1.00
Fiscal Quarter of 2000 -
last day of such fiscal
quarter
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At time thereafter 1.00:1.00
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11.5 CONSOLIDATED TANGIBLE NET WORTH. The Borrower will not
permit Consolidated Tangible Net Worth at any time (a) from June 26,
1998 through the last day of the Fourth Fiscal Quarter of 1998 to be
less than $300,000,000; (b) from the first day of the First Fiscal
Quarter of 1999 through the last day of such fiscal quarter to be less
than $207,000,000; (c) from the first day of the Second Fiscal Quarter
of 1999 to the last day of such fiscal quarter to be less than
$130,000,000; and (d) at any time thereafter to be less than the sum of
(i) $115,000,000 plus, on a cumulative basis, (b) 75% of positive
Consolidated Net Income for each fiscal quarter commencing with the
fourth fiscal quarter of 1998, plus (ii) 100% of the proceeds of any
sale by the Borrower after the fourth fiscal quarter of 1998 of (1)
equity securities issued by the Borrower or (2) warrants or subscription
rights for equity securities issued by the Borrower.
11.6. CAPITAL EXPENDITURES. The Borrower will not make, or
permit any Subsidiary of the Borrower to make, Capital Expenditures in
any fiscal year that exceed, in the aggregate, (a) $225,000,000 for the
1998 fiscal year; (b) $200,000,000 for the 1999 fiscal year; and (c)
$300,000,000 in each fiscal year thereafter.
SECTION 5. CONDITIONS TO EFFECTIVENESS. This Third Amendment shall not
become effective until the Agent receives (a) a counterpart of this Third
Amendment, executed by the Borrower, the Guarantor and the Majority Banks; and
(b) payment in cash from the Borrower of an amendment fee in the aggregate
amount of $375,000, which amendment fee shall be for the pro rata accounts of
the Banks.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby repeats,
on and as of the date hereof, each of the representations and warranties made by
it in Section 8 of the Credit Agreement, and such representations and warranties
remain true as of the date hereof (except to the extent of changes resulting
from transactions contemplated or permitted by the Credit Agreement and the
other Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse, and to the extent
that such representations and warranties relate expressly to an earlier date),
provided, that all references therein to the Credit Agreement shall refer to
such Credit Agreement as amended hereby. In addition, the Borrower hereby
represents and warrants that the execution and delivery by the Borrower of this
Third Amendment and the performance by the Borrower of all of its agreements and
obligations under the Credit Agreement as amended hereby are within the
corporate authority of each the Borrower and has been duly authorized by all
necessary corporate action on the part of the Borrower.
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SECTION 7. RATIFICATION ETC. Except as expressly amended hereby, the
Credit Agreement, the Security Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. The Credit Agreement and this Third
Amendment shall be read and construed as a single agreement. All references in
the Credit Agreement or any related agreement or instrument to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended hereby.
SECTION 8. NO WAIVER. Nothing contained herein shall constitute a waiver
of, impair or otherwise affect any Obligations, any other obligation of the
Borrower or any rights of the Bank Agents or the Banks consequent thereon.
SECTION 9. COUNTERPARTS. This Third Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.
SECTION 10. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).
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IN WITNESS WHEREOF, the parties hereto have executed this Third
Amendment as a document under seal as of the date first above written.
WESTERN DIGITAL CORPORATION
By: /s/ XXXXXX X. XXXXXX
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Title VP, Taxes & Treasurer
BANKBOSTON, N.A.
By:
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Title:
NATIONSBANK OF TEXAS, N.A.
By:
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Title:
THE BANK OF NOVA SCOTIA
By:
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Title:
ABN AMRO BANK
By:
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Title:
DEUTSCHE FINANCIAL SERVICES
By:
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Title:
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RATIFICATION OF GUARANTY
The undersigned guarantor hereby acknowledges and consents to the
foregoing Third Amendment as of June __, 1998, and agrees that the Guaranty
dated as of January 28, 1998 from the undersigned (the "Guarantor") in favor of
the Agent and each of the Banks remains in full force and effect, and the
Guarantor confirms and ratifies all of its obligations thereunder.
WESTERN DIGITAL ROCHESTER, INC.
By: /s/ WESTERN DIGITAL CORPORATION
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Title: President
