1
EXHIBIT 10.46
READ-RITE CORPORATION
FIRST AMENDMENT
TO TERM LOAN AGREEMENT
This FIRST AMENDMENT TO TERM LOAN AGREEMENT (this "Amendment")
is dated as of September 29, 1996 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 is made with reference to that certain Term Loan Agreement dated as of June
28, 1996 (the "Credit Agreement") among the Borrower, the Banks and the Agent.
Capitalized terms used herein without definition shall have the same meanings
herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, the Borrower and the Banks desire to amend and to add
certain covenants contained in the Credit Agreement as set forth below;
WHEREAS, the Borrower has requested that the Banks that are
"Banks" under the Credit Agreement before giving effect to this Amendment (the
"Existing Lenders") add additional lenders under the Credit Agreement (the "New
Lenders") and the Existing Lenders are willing to so agree;
WHEREAS, the Banks have agreed to reallocate their respective
commitments and in connection therewith reallocate their respective outstandings
under the Term Loan;
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
1.1 AMENDMENT TO DEFINED TERMS
A. The definition of "Interest Period" is amended to delete
the word "two" between the words "one" and "three" within clause (ii).
1.2 AMENDMENTS TO SECTION 6.02: NEGATIVE COVENANTS
A. Section 6.02(a) of the Credit Agreement is hereby amended
to read in its entirety as follows:
2
"(a) Quick Ratio. Permit the ratio of Consolidated Quick Assets to
Consolidated Quick Liabilities (i) on the last day of each of the fiscal
quarters of the Borrower ending on or about September 30, 1996, December 31,
1996, March 31, 1997, June 30, 1997, September 30, 1997, December 31, 1997,
March 31, 1998 and June 30, 1998 to be less than 0.95 to 1.00; and (ii) on the
last day of each of the fiscal quarters of the Borrower ending on or about
September 30, 1998 and thereafter to be less than 1.00 to 1.00."
B. Section 6.02(b) of the Credit Agreement is hereby amended
to read in its entirety as follows:
"(b) Consolidated Tangible Net Worth. Permit Consolidated Tangible Net
Worth at any time to be less than $400,000,000 plus (i) 80% of Consolidated Net
Income (but not loss) for each fiscal quarter of the Borrower commencing with
the quarter beginning on or about July 1, 1996 plus (ii) 100% of the net
increase in Consolidated Tangible Net Worth occurring after July 1, 1996
resulting from the issuance of equity securities of the Borrower after July 1,
1996."
C. Section 6.02(c) of the Credit Agreement is hereby amended
to read in its entirety as follows:
"(c) Leverage Ratio. Permit the Leverage Ratio on the last day of each
of the fiscal quarters of the Borrower to be greater than the correlative amount
set forth below:
Quarter Ending Ratio
-------------- -----
September 30, 1996 1.00:1.00
December 31, 1996 1.05:1.00
March 31, 1997 1.05:1.00
June 30, 1997 1.05:1.00
September 30, 1997 1.00:1.00
December 31, 1997 0.90:1.00
March 31, 1998 0.85:1.00
June 30, 1998 0.80:1.00
September 30, 1998 and thereafter 0.75:1.00"
2
3
D. Section 6.02(d) of the Credit Agreement is hereby amended
to read in its entirety as follows:
"(d) Consolidated Net Income.
(i) Permit Consolidated Net Income to be less than $0 for any
two consecutive fiscal quarters beginning on or after April 1, 1997 calculated
as of the last day of each fiscal quarter of the Borrower; and
(ii) Permit the net losses on the last day of each fiscal
quarter of the Borrower to be greater than the correlative amount below:
Amount of Loss
Quarter Ending Not to Exceed
-------------- --------------
September 30, 1996 $65,000,000
December 31, 1996 $20,000,000
March 31, 1997 $10,000,000"
E. Section 6.02(h)(i) of the Credit Agreement is hereby
amended by inserting the phrase "and current maturities of all existing Debt of
the Borrower" after the words "Revolving Loans" and before the words "by at
least One Hundred Million Dollars ($100,000,000),".
F. Section 6.02(o) of the Credit Agreement is hereby amended
to read in its entirety as follows:
"(o) Operating Performance Ratio. Commencing the fiscal quarter
beginning October 1, 1996, permit, as of the last day of each of the fiscal
quarters of the Borrower, the ratio of (i) Annualized Consolidated Cash Flow as
of such date to (ii) the sum of (A) the current portion of long term debt
(determined for the Borrower and its consolidated Subsidiaries in accordance
with GAAP) as of such date, plus (B) the aggregate Revolving Loans outstanding
on such date, plus (C) four (4) multiplied by Consolidated Interest Expense for
the fiscal quarter ending on such date, to be less than 2.50 to 1.00."
1.2 AMENDMENTS TO EXHIBITS
A. Annex 1 to the Credit Agreement is hereby amended in its
entirety and replaced with the Annex 1 attached hereto.
B. Exhibit E to the Credit Agreement is hereby amended in its
entirety and replaced with the Exhibit E attached hereto.
3
4
SECTION 2. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective as of September 29,
1996, (the First Amendment Closing Date") only upon the satisfaction of the
conditions precedent that:
(i) the Agent shall have received for each Bank counterparts
hereof duly executed on behalf of the Borrower, the Agent, and all of the Banks,
or notice of the approval of this Amendment by all of the Banks satisfactory to
the Agent;
(ii) Borrower and each of those parties to whom Borrower has
issued a Senior Note shall enter into an agreement, effective on or before the
First Amendment Closing Date, modifying each of the Senior Notes to provide for
substantially the same terms and conditions as provided in this Amendment;
(iii) Borrower and each of those parties to the Revolver shall
enter into an agreement, effective on or before the First Amendment Closing
Date, modifying the Revolver to provide for substantially the same terms and
conditions as provided in this Amendment;
(iv) Borrower shall have delivered to the Agent copies of all
amendments to its by-laws dated on or after June 28, 1996;
(v) on or before October 15, 1996, the Agent shall have
received from the Borrower executed copies of the Term Notes dated October 15,
1996, payable to each of the Banks in amounts reflecting their respective
Commitments; and
(vi) on or before October 15, 1996, each of the New Lenders
shall have paid to the Agent an amount equal to their respective pro rata share
of the Term Commitment of all Term Loans outstanding as of October 15, 1996, and
the Agent shall have paid to each of the Existing Lenders such amounts in
proportion to their respective Term Commitments, such that when all such
transfers have been completed, the outstanding Term Loans of each Lender will be
in proportion to its pro rata share of its respective Term Commitment as of
October 15, 1996. In addition, on or before October 15, 1996, the Agent shall
have paid to each New Lender any fees as separately agreed to between Agent and
each such New Lender.
SECTION 3. THE BORROWER'S REPRESENTATIONS AND
WARRANTIES
In order to induce the Banks to enter into this Amendment and
to amend the Credit Agreement in the manner provided herein, the Borrower
represents and warrants to each Bank that the following statements are true,
correct and complete:
4
5
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,
the Credit Agreement as amended by this Amendment (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 do 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 and the Amended
Agreement have been duly executed and delivered by the Borrower and are the
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, except in each case 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
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment Closing Date to the same extent as
though made on and as of that 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
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.
5
6
SECTION 4. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN AGREEMENTS.
(i) On and after the First Amendment Closing 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 Loan Agreements.
B. FEES AND EXPENSES. The Borrower acknowledges that all
costs, fees and expenses as described in Section 9.05 of the Credit Agreement
incurred by the Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of the
Borrower.
C. 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.
D. 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.
E. COUNTERPARTS. This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
6
7
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: /s/ Xxxx X. Xxxxxxxxx
-----------------------------
Title: V.P. Finance & CFO
-----------------------------
S-1
8
AGENT:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY, AS
AGENT
By: /s/ Xxxxx X. Xxxxxxxx
-----------------------------
Title: Senior Agent
-----------------------------
S-2
9
BANKS:
CIBC INC.
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------
Title: Managing Director
----------------------------
THE FIRST NATIONAL BANK OF
BOSTON
By: /s/ Xxx X. Xxxxxx
-------------------------------
Title: Vice President
----------------------------
ABN AMRO BANK N.V.
By: /s/ Xxx X. Xxxxxx
-------------------------------
Title: V.P. & Director
----------------------------
By: /s/ Xxxxxx Xxxxxxxxx
-------------------------------
Title: S.V.P. & Managing Director
----------------------------
XXXXX FARGO BANK
By: /s/ Xxxx Xxxxx
-------------------------------
Title: V.P.
----------------------------
S-3
