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EXHIBIT 10.44
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October 15, 1996
Xx. Xxxx Xxxx
Treasurer
Read-Rite Corporation
000 Xxx Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Re: Lease of the Land (the "Lease") dated as of April 25, 1996, between
Sumitomo Bank Leasing and Finance, Inc. ("SBLF") as Landlord and
Read-Rite Corporation ("Read-Rite") as Tenant.
Dear Xx. Xxxx:
This letter confirms our understanding that SBLF, as Landlord, has agreed that
for the fiscal quarter ending on September 30, 1996, the fiscal quarter ending
on December 31, 1996, and the fiscal quarter ending on March 31,1997 and for
such fiscal quarters only:
the reference in Paragraph 16.1(h)(ii) to Consolidated Tangible Net Worth
of not less than $450,000,000 plus 80% of Consolidated Net Income plus 100%
of the proceeds from the issuance of equity securities shall be waived and
that in lieu thereof the Lessee shall not permit Consolidated Tangible Net
Worth to be less than $400,000,000 plus 80% of Consolidated Net Income plus
100% of the proceeds from the issuance of equity securities;
the reference in paragraph 16.1(h)(iii) of the Lease to a Leverage Ratio of
0.75 to 1.00 shall be waived and that in lieu thereof a leverage ratio of
1.00 to 1.00 shall be in effect;
the reference in paragraph 16.1(h)(iv) of the Lease to a Consolidated Net
Income of no less than $0.00 for any two consecutive fiscal quarters shall
be waived and that in lieu thereof the Lessee may incur a Consolidated Net
Loss (defined in accordance with GAAP) no greater than $65,000,000 for the
fiscal quarter ended on September 30, 1996; no greater than $20,000,000 for
the fiscal quarter to end December 31, 1996; and no greater than
$10,000,000 for the fiscal quarter to end on March 31, 1997; and
the reference in paragraph 16.1(h)(vi) of the Lease to a ratio of
Consolidated Cash Flow to Fixed Charges of 1.50 to 1.00 shall be waived and
that in lieu thereof a ratio of Consolidated Cash Flow to Fixed Charges of
-2.90 to 1.00 shall be in effect.
For each fiscal quarter of Read-Rite following the fiscal quarter ending on
March 31, 1997 during the Term of the Lease, paragraphs 16.1(h)(ii),
16.1(h)(iii), 16.1(h)(iv) and 16.1(h)(vi) shall be in full force and effect in
accordance with their original terms.
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Except as otherwise set forth in this letter, all defined terms used in this
letter shall have the meanings given such terms in the Lease. SBLF requests that
Read-Rite, in addition to providing an officer's certificate of no default,
provide a compliance certificate for each fiscal quarter which details
compliance or non-compliance with the financial covenants contained in Paragraph
16.1 (h). Please indicate your acceptance of these terms and conditions by
signing in the signature box provided below.
Sincerely,
SUMITOMO BANK LEASING AND FINANCE, INC.
By: /s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
President
ACKNOWLEDGED AND ACCEPTED:
READ-RITE CORPORATION
By: /s/ X. Xxxx
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Its: Treasurer
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Date: 10/15/96
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cc: Xxxxx X. Xxxxx - Xxxxxx & Xxxxx, LLP
Xxxxxxxx X'Xxxxx - Wilson, Sonsini, Xxxxxxxx & Xxxxxx
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