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EXHIBIT 10.59
READ-RITE CORPORATION
WAIVER AND THIRD AMENDMENT
TO CREDIT AGREEMENT
This WAIVER AND THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
dated as of September 27, 1999 and entered into among Read-Rite Corporation, a
Delaware corporation (the "Borrower"), the financial institutions named on the
signature pages hereof (each a "Bank" and collectively the "Banks"), Canadian
Imperial Bank of Commerce, New York Agency, as agent for the Banks (the "Agent")
and issuer of Letters of Credit (the "Designated Issuer") and is made with
reference to that certain Credit Agreement dated as of October 2, 1997 (as
amended by the First Amendment to Credit Agreement dated February 5, 1998 and
the Second Amendment to Credit Agreement dated as of August 10, 1998, the
"Credit Agreement" and the Credit Agreement, as amended by this Amendment, the
"Amended Agreement") among the Borrower, the Banks, the Designated Issuer and
the Agent. Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Amended Agreement.
RECITALS
WHEREAS, the Borrower has requested that the Banks waive certain financial
covenants and amend certain other provisions set forth in Credit Agreement.
NOW, THEREFORE, in consideration of the promises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
A. The definition of the term "Revolving Facility" in Section 1.01 of the
Credit Agreement shall be amended by deleting the figure "$100,000,000" and
substituting therefore "$75,000,000".
B. The definition of the term "Interest Period" in Section 1.01 of the
Credit Agreement shall be amended by replacing the period at the end thereof
with a semicolon and adding the following thereafter: "; provided, however, that
the Interest Periods for the Eurodollar Rate Loans commencing on October 4, 1999
and October 20, 1999 shall end no later than November 30, 1999 and in no event
shall any Interest Period commencing after October 1, 1999 end later than
December 31, 1999.
SECTION 2. WAIVERS AND CONSENTS
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A. By their execution hereof, the Banks hereby waive compliance by the
Borrower with Section 6.02(b) to (e) inclusive of the Credit Agreement for the
period from September 30, 1999 through and including December 31, 1999. Unless
extended by the Majority Banks, this waiver shall terminate on January 1, 2000,
and on January 1, 2000 an Event of Default will exist if the Borrower is not
(and has not been) in compliance with Sections 6.02(b) to (e) of the Credit
Agreement for all periods from and after September 30, 1999. This waiver shall
be limited precisely as provided for herein and shall not be deemed to be a
waiver or modification of any other term or provision of the Credit Agreement or
to be a consent to any other transaction or further action on the part of the
Borrower or any of its Subsidiaries which would require the consent of the Banks
under the Credit Agreement.
B. By their execution hereof, notwithstanding the definition of the term
"Financial Institution" or the minimum assignment requirements in Section 9.06,
the parties hereto consent to the assignment by Foothill Partners III, L.P. to
Cerberus Partners, L.P. of a portion of its Commitment in an amount less than
$5,000,000 and to the assignment by The Long-Term Credit Bank of Japan, Ltd.,
Los Angeles Agency to General Electric Capital Corporation of its entire
Commitment. From and after the effective date of this Amendment, each of
Cerberus Partners, L.P. and General Electric Capital Corporation shall be deemed
to be a Bank for all purposes of the Credit Agreement.
SECTION 3. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective as of the first date (the "Third
Amendment Date") on or before October 7, 1999 upon which the following
conditions have been satisfied:
A. The Agent shall have received for each Bank counterparts hereof duly
executed on behalf of the Borrower, the Agent, and the Majority Banks (or, in
lieu of execution by the Majority Banks, notice of the approval of this
Amendment by the Majority Banks satisfactory to the Agent); and
B. An acknowledgment and amendment in the form of Exhibit A hereto duly
executed by each party to the Guaranty.
C. The Borrower shall have reduced the aggregate outstanding principal
amount of Revolving Loans to an amount not in excess of $75,000,000.
D. The Agent shall have received a copy of a board resolution of the
Borrower, in form and substance satisfactory, to the Agent authorizing the
execution, delivery and performance of this Amendment certified by the Secretary
of the Borrower as being in full force and effect on the date hereof.
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E. The Amendment Fee referred to in Section 5.C shall have been paid, and
all other fees and expenses payable by the Borrower pursuant to the Loan
Documents shall have been paid or provided for.
F. All the representations and warranties in Section 4 shall be true and
correct as of the date of this Amendment.
G. No Potential Event of Default or Event of Default shall have occurred
and be continuing on the date of this Amendment or will result from the
consummation of this Amendment (after giving effect to this Amendment).
H. The Agent shall have received, in form and substance satisfactory to
it, a certificate dated on or before the date of this Amendment certifying that
the conditions in clauses (F) and (G) have been met.
SECTION 4. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce the Agent and the Banks to enter into this Amendment
and to amend the Credit Agreement in the manner provided herein, the Borrower
represents and warrants to the Agent and each Bank that the following statements
are true, correct and complete:
A. CORPORATE POWER AND AUTHORITY. The Borrower has all requisite corporate
power and authority to enter into this Amendment and to carry out the
transactions contemplated by, and perform its obligations under, this Amendment
and the Amended Agreement.
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of this
Amendment and the performance of the Amended Agreement have been duly authorized
by all necessary corporate action on the part of the Borrower.
C. NO CONFLICT. The execution and delivery by the Borrower of this
Amendment does not and will not contravene (i) any law or any governmental rule
or regulation applicable to the Borrower or any of its Subsidiaries, (ii) the
Certificate of Incorporation or Bylaws of the Borrower, (iii) any order,
judgment or decree of any court or other agency of government binding on the
Borrower or any of its Subsidiaries or (iv) any material agreement or instrument
binding on the Borrower or any of its Subsidiaries.
D. GOVERNMENTAL CONSENTS. The execution and delivery by the Borrower of
this Amendment and the performance by the Borrower of the Amended Agreement do
not and will not require any registration with, consent or approval of, or
notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.
E. BINDING OBLIGATION. This Amendment has been duly executed and delivered
by the Borrower and is the binding obligation of the Borrower, enforceable
against the Borrower in
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accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
F. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT AGREEMENT.
The representations and warranties contained in Article V of the Amended
Agreement are and will be true, correct and complete in all material respects on
and as of the date of this Amendment to the same extent as though made on and as
of such date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
G. ABSENCE OF DEFAULT. No event has occurred and is continuing as of the
date of this Amendment or will result from the consummation of the transactions
contemplated by this Amendment that would constitute an Event of Default or a
Potential Event of Default (as determined after giving effect to the amendments
made by this Amendment).
H. FINANCIAL CONDITION. The unaudited consolidated balance sheet of the
Borrower for the Borrower's fiscal quarter ended June 30, 1999 and the related
consolidated statements of operations and cash flow of the Borrower for the
fiscal quarter then ended, which have been previously circulated to the Banks,
fairly present in all material respects the consolidated financial condition of
the Borrower as at such date and the consolidated results of the operations of
the Borrower for the period ended on such date, all in accordance with GAAP,
consistently applied, subject to year-end adjustments and the absence of
footnotes.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER LOAN
AGREEMENTS.
(i) On and after the Third Amendment Date, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Agreements to the "Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement shall mean and be a reference to the
Amended Agreement.
(ii) Except as specifically amended by this Amendment, the Credit
Agreement and the other Loan Agreements shall remain in full force and effect
and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment shall not,
except as expressly provided herein, constitute a waiver of any provision of, or
operate as a waiver of any right, power or remedy of the Agent or any Bank
under, the Credit Agreement or any of the other
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Loan Agreements nor to create any course of dealing or otherwise obligate the
Agent or the Banks to forebear or execute similar amendments or any waiver in
similar circumstances in the future.
B. COSTS AND EXPENSES. The Company covenants to pay to or reimburse the
Agent, upon demand, for all costs and expenses (including allocated costs of
in-house counsel) incurred in connection with the development, preparation,
negotiation, execution and delivery of this Amendment, the Collateral Documents
and the documents and transactions contemplated hereby.
C. AMENDMENT FEE. The Company hereby agrees to pay to the Agent on or
before the Third Amendment Date, for the ratable benefit of those Banks who
consent to this Amendment (as evidenced by their return of a signed signature
page to Agent or Agent's counsel) by 5:00 p.m. (San Francisco time) October 6,
1999, an amendment fee (the "Amendment Fee") of 0.125% of the aggregate
Revolving Commitments and Term Commitments of such consenting Banks (after any
reduction made by this Third Amendment). The Amendment Fee shall be paid to the
Agent in immediately available funds and shall be non-refundable. The Amendment
Fee is in addition to any fees, costs, expenses or other amounts otherwise
payable pursuant to this Amendment or the Amended Agreement.
D. HEADINGS. Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not constitute a
part of this Amendment for any other purpose or be given any substantive effect.
E. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
F. COUNTERPARTS. 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 Borrower shall bind such Bank or the
Borrower, 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWER:
READ-RITE CORPORATION
By:
Title:
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AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY, as Agent
By:
Title:
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BANKS:
CIBC INC.
By:
Title:
ABN AMRO BANK N.V.
By:
Title:
By:
Title:
FLEET NATIONAL BANK
By:
Title:
KEYBANK, N.A.
By:
Title:
THE LONG TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY
By:
Title:
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MELLON BANK
By:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
By:
Title:
THE SUMITOMO BANK LIMITED,
SAN XXXXXXXXX XXXXXX
By:
Title:
THE INDUSTRIAL BANK OF JAPAN LIMITED,
SAN FRANCISCO AGENCY
By:
Title:
BANKBOSTON, N.A.
By:
Title:
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BANQUE NATIONALE DE PARIS
By:
Title:
By:
Title:
FOOTHILL PARTNERS III, L.P.
By:
Title:
XXXXX FARGO BANK, N.A.
By:
Title:
THE DESIGNATED ISSUER:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By:
Title:
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EXHIBIT A
TO WAIVER AND THIRD AMENDMENT
TO CREDIT AGREEMENT
September 27, 1999
The parties listed on the acknowledgment page hereof:
Re: Credit Agreement dated as of October 2, 1997
Ladies and Gentlemen:
Please refer to (i) the Credit Agreement dated as of October 2, 1997 (the
"Credit Agreement") by and among Read-Rite Corporation (the "Borrower"), the
financial institutions party thereto (the "Banks") and Canadian Imperial Bank of
Commerce, New York Agency, as agent (in such capacity, the "Agent") and (ii) the
Continuing Guaranty dated as of August 10, 1998 (the "Guaranty", which was
executed by you on such date. Pursuant to an amendment of even date herewith,
certain terms of the Credit Agreement were amended. We hereby request that you
(i) consent to the terms of the amendment, (ii) acknowledge and reaffirm all of
your obligations and undertakings under the Guaranty and (iii) acknowledge and
agree that the Guaranty, as amended by the following paragraph hereof, is and
shall remain in full force and effect in accordance with the terms thereof.
By this letter, we further agree that the Guaranty shall be amended by
adding the following clause immediately prior to the end of Section 3 thereof:
"The obligations of each of the Guarantors under this Guaranty shall be
limited to the maximum amount as will, as giving effect to all other liabilities
of such Guarantor (including, but limited to, contingent liabilities, but
excluding the liabilities of such Guarantor hereunder) and after giving effect
to any collections from or payments made by or on behalf of any other Guarantor
in respect of the Borrower under the Credit Agreement, result in the obligations
of such Guarantor under the Guaranty not constituting a fraudulent transfer or
conveyance."
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Except as modified hereby, we and you acknowledge and agree that the
Guaranty is ratified and confirmed in all respects.
Very truly yours,
CANADIAN IMPERIAL BANK OF COMMERCE,
NEW YORK AGENCY, as Agent
By:
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Title:
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ACKNOWLEDGED AND AGREED AS
OF THE DATE FIRST ABOVE WRITTEN:
GUARANTORS
SUNWARD TECHNOLOGIES, INC.
By:
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Title:
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SUNWARD TECHNOLOGIES, CALIFORNIA
By:
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Title:
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