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EXHIBIT 10.43
READ-RITE CORPORATION
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FIRST AMENDMENT
DATED AS OF OCTOBER 15, 1996
TO
NOTE PURCHASE AGREEMENTS
DATED AS OF SEPTEMBER 29, 1995
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RE: $100,000,000 7.53% SENIOR NOTES
DUE SEPTEMBER 15, 2000
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FIRST AMENDMENT TO NOTE PURCHASE AGREEMENTS
THIS FIRST AMENDMENT dated as of October 15, 1996 (the or this "FIRST
AMENDMENT") to the Note Purchase Agreements each dated as of September 29, 1995
is between Read-Rite Corporation, a Delaware corporation (the "COMPANY"), and
each of the institutions which is a signatory to this First Amendment
(collectively, the "NOTEHOLDERS").
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into
separate and several Note Purchase Agreements each dated as of September 29,
1995 (collectively, the "NOTE AGREEMENTS"). The Company has heretofore issued
$100,000,000 aggregate principal amount of its 7.53% Senior Notes due September
15, 2000 (the "NOTES") pursuant to the Note Agreements. The Noteholders are,
collectively, the holders of at least 66 2/3% of the outstanding principal
amount of the Notes.
B. The Company and the Noteholders now desire to amend the Note
Agreements in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreements unless herein defined or the context
shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this First Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.
E. The Company is a party to (i) the Term Loan Agreement dated as of
June 28, 1996 with Canadian Imperial Bank of Commerce, New York Agency, as
agent, and the financial institutions named on the signature pages thereof as
Banks, as amended, (ii) the Third Amended and Restated Credit Agreement dated as
of December 14, 1994 with CIBC Inc, as agent, and the financial institutions
named on the signature pages thereof as Banks, as amended, and (iii) a Lease of
Land dated as of April 25, 1996 with Sumitomo Bank Leasing and Finance, Inc, as
amended (collectively, the "Bank Facilities").
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this First Amendment set forth in
SECTION 3.1 hereof, and in consideration of good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Noteholders do hereby agree as follows:
Section 1. AMENDMENTS
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1.1. Section 10.4 of the Note Agreements shall be and is hereby amended
in its entirety to read as follows:
"10.4. CONSOLIDATED TANGIBLE NET WORTH.
The Company will not 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 Company
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 Company after July 1, 1996."
1.2. Section 10.7 of the Note Agreements shall be and is hereby amended
by adding the following proviso to the end thereof:
"; provided, that compliance by the Company with this Section
10.7 is hereby waived for the period of five fiscal quarters ending on
September 30, 1997."
1.3. Section 10.9 of the Note Agreements shall be and is hereby amended
in its entirety to read as follows:
"10.9. RESTRICTED PAYMENTS.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, at any time, declare or make, or incur any liability to declare
or make, any Restricted Payment, unless immediately after giving effect to such
action:
(i) the aggregate amount of Restricted Payments of the
Company and its Restricted Subsidiaries declared, made or for which a
liability has accrued during the period commencing on July 1, 1995, and
ending on the date such Restricted Payment is declared or made,
inclusive, would not exceed the sum of
(A) $20,000,000, plus
(B) 20% of Consolidated Net Income for the period
commencing on July 1, 1995 and ending on the last day of the
most recent fiscal quarter ended prior to the date such
Restricted Payment is declared or made (or minus 100% of
Consolidated Net Income for such period if Consolidated Net
Income for such period is a loss), plus
(C) the aggregate amount of Net Proceeds of Capital
Stock for such period; and
(ii) no Default or Event of Default would exist
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; provided, that notwithstanding the foregoing, the Company shall not,
during the period commencing on September 30, 1996 and ending on March
31, 0000, xxxxxx, xxxxxxxxxx or otherwise acquire any of its capital
stock or other equity interests or warrants, rights or other options to
purchase such stock or other equity interests."
1.4. The following shall be added as a new Section 10.13 of the Note
Agreements:
"10.13. OPERATING PERFORMANCE RATIO.
Commencing the fiscal quarter beginning October 1, 1996,
the Company will not, at any time, permit, as of the last day of each
of the fiscal quarters of the Company, 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 Company and its
consolidated Subsidiaries in accordance with GAAP) as of such date,
plus (B) the aggregate Revolving Loans outstanding on such date, plus
(C) the product of four multiplied by Consolidated Interest Expense for
the fiscal quarter ending on such date, to be less than 2.50:1.00."
1.5. The following shall be added as a new Section 10.14 of the Note
Agreements:
"10.14. CONSOLIDATED NET INCOME.
The Company:
(i) shall not 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 Company; and
(ii) shall not permit the net losses on the last day of
each fiscal quarter of the Company to be greater than the correlative
amount below:
Amount of Loss
Quarter Ending Not to Exceed
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September 30, 1996 $65,000,000
December 31, 1996 $20,000,000
March 31, 1997 $10,000,000"
1.6 The definition of Consolidated Net Income set forth in Schedule B
of the Note Agreements shall be and is hereby amended by adding the following
proviso to the end thereof:
"; provided, that for purposes of Sections 10.4 and 10.14 of this
Agreement and the definition of Annualized Consolidated Cash Flow set
forth in Schedule B, Consolidated Net Income shall mean, for any
period, on a consolidated basis
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determined in accordance with GAAP, the net income (or loss) after
income taxes of the Company and its Subsidiaries for such period."
1.7. The definition of Consolidated Tangible Net Worth set forth in
Schedule B of the Note Agreements shall be and is hereby amended by adding the
following proviso to the end thereof:
"; provided, that for purposes of Section 10.4 of this Agreement,
Consolidated Tangible Net Worth shall mean, at any date of
determination, the sum of the capital stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of the
Company and its Subsidiaries minus intangible assets, on a consolidated
basis determined in conformity with GAAP, and calculated without giving
effect to any foreign currency translation adjustments."
1.8. The following shall be added as new definitions in alphabetical
order to Schedule B of the Note Agreements:
"ANNUALIZED CONSOLIDATED CASH FLOW" means the product of (A) four
multiplied by (B) the sum of the following amounts for the Company on a
consolidated basis determined in accordance with GAAP for the most
recently ended fiscal quarter: (i) Consolidated Net Income plus (ii)
provisions for income taxes plus (iii) Consolidated Interest Expense
plus (iv) depreciation and amortization plus (v) non-cash charges
(except for non-cash charges that are expected to result in cash
payments).
"CONSOLIDATED INTEREST EXPENSE" means, for any period, all
interest expense (including that portion attributable to Capital Leases
in conformity with GAAP and amortization of capitalized interest) of
the Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP with respect to all outstanding Debt of the
Company and its Subsidiaries.
"DEBT" means, as applied to any Person, (i) all indebtedness for
borrowed money, (ii) that portion of obligations with respect to
Capital Leases which is properly classified as a liability on a balance
sheet in conformity with GAAP, (iii) notes payable and drafts accepted
representing extensions of credit whether or not representing
obligations for borrowed money, (iv) any obligation owed for all or any
part of the deferred purchase price of property or services which
purchase price is (a) due more than twelve months from the date of
incurrence of the obligation in respect thereof, or (b) evidenced by a
note or similar written instrument, (v) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless
of whether the indebtedness secured thereby shall have been assumed by
that Person or is nonrecourse to the credit of that Person (but only to
the extent of the lesser of (x) the Debt so secured or (y) the fair
market value of the property or asset subject to such Lien), and (vi)
amounts outstanding under reimbursement obligations of such
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Person to the issuer of any letter of credit other than trade or
commercial letters of credit.
"REVOLVING LOANS" means all Indebtedness outstanding under the
Third Amended and Restated Credit Agreement dated as of December 14,
1994 among the Company, CIBC Inc., as agent, and the financial
institutions named therein, as amended.
Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1. To induce the Noteholders to execute and deliver this First
Amendment (which representations shall survive the execution and delivery of
this First Amendment), the Company represents and warrants to the Noteholders
that:
(a) this First Amendment has been duly authorized, executed and
delivered by it and this First Amendment constitutes the legal, valid
and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Note Agreements, as amended by this First Amendment,
constitute the legal, valid and binding obligations, contracts and
agreements of the Company enforceable against it in accordance with
their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights
generally;
(c) the execution, delivery and performance by the Company of this
First Amendment (i) has been duly authorized by all requisite corporate
action and, if required, shareholder action, (ii) does not require the
consent or approval of any governmental or regulatory body or agency,
and (iii) will not (A) violate (1) any provision of law, statute, rule
or regulation or its certificate of incorporation or bylaws,
(2) any order of any court or any rule, regulation or order of any
other agency or government binding upon it, or (3) any provision of any
material indenture, agreement or other instrument to which it is a
party or by which its properties or assets are or may be bound,
including, without limitation, the Bank Facilities, or (B) result in a
breach or constitute (alone or with due notice or lapse or both) a
default under any Indenture, agreement or other instrument referred to
in clause (iii)(A)(3) of this SECTION 2.1(C);
(d) as of the date hereof and after giving effect to this First
Amendment, no Default or Event of Default has occurred which is
continuing; and
(e) except as set forth in the disclosure letter dated as of
October 4, 1996 from the Company to the Noteholders with respect to
Section 5.3 of the Note
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Agreements, all the representations and warranties contained in
Section5 of the Note Agreements are true and correct in all material
respects with the same force and effect as if made by the Company on
and as of the date hereof.
Section 3. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
3.1. This First Amendment shall become effective as of September 29,
1996 upon the satisfaction in full of each of the following conditions:
(a) executed counterparts of this First Amendment, duly executed
by the Company and the holders of at least 66 2/3% of the outstanding
principal of the Notes, shall have been delivered to the Noteholders;
(b) the Noteholders shall have received evidence satisfactory to
them that the terms of the Bank Facilities have been amended or waived
with the effect substantially as set forth in the form annexed hereto
as Exhibit A;
(c) (i) the representations and warranties of the Company set
forth in SECTION 2 hereof shall be true, correct and complete on and
with respect to the date hereof and (ii) no Default or Event of Default
shall have occurred and be continuing on the date hereof or would
result from this First Amendment becoming effective in accordance with
the terms hereof, and the Noteholders shall have received an Officer's
Certificate certifying to the effects set forth in clauses (i) and (ii)
above;
(d) the Company shall have paid the reasonable fees and expenses
of O'Melveny & Xxxxx LLP, counsel to the Noteholders, in connection
with the negotiation, preparation, approval, execution and delivery of
this First Amendment; and
(e) each of the Noteholders shall have received a wire transfer of
immediately available funds from the Company in an amount equal to
0.05% of the aggregate principal amount of the Notes held by such
Noteholder and outstanding on the date this First Amendment becomes
effective.
Upon receipt of all of the foregoing, this First Amendment shall become
effective.
Section 4. MISCELLANEOUS
4.1. This First Amendment shall be construed in connection with and as
part of each of the Note Agreements, and except as modified and expressly
amended by this First Amendment, all terms, conditions, and covenants contained
in the Note Agreements and the Notes are hereby ratified and shall be and remain
in full force and effect.
4.2. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Note
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Agreements without making specific reference to this First Amendment but
nevertheless all such references shall include this First Amendment unless the
context otherwise requires.
4.3. The descriptive heading of the various Sections or parts of this
First Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
4.4. This First Amendment shall be governed by and construed in
accordance with California law.
4.5. The execution hereof by you shall constitute a contract between us
for the uses and purposes hereinabove set forth, and this First Amendment may be
executed in any number of counterparts, each executed counterpart constituting
an original, but all together only one agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
READ-RITE CORPORATION
By /s/ Xxxx X. Xxxxxxxxx
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Its V.P. Finance and CFO
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Accepted and Agreed to:
ALLSTATE LIFE INSURANCE
COMPANY
By /s/ Xxxxxxxx X. Xxxxxx
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Its
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By /s/ Xxxxxx X. Xxxxxx
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Its
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CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA INVESTMENTS, INC.
By /s/ Xxxxx X. Xxxxxxx, Xx.
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Its Managing Director
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CONNECTICUT GENERAL LIFE
INSURANCE COMPANY, on behalf of
one or more separate accounts
By: CIGNA INVESTMENTS, INC.
By /s/ Xxxxx X. Xxxxxxx, Xx.
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Its Managing Director
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LIFE INSURANCE COMPANY OF
NORTH AMERICA
By: CIGNA INVESTMENTS, INC.
By /s/ Xxxxx X. Xxxxxxx, Xx.
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Its Managing Director
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PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
By /s/ Xxxxx X. Xxxxxxx
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Its Counsel
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By /s/ Xxxx X. Xxxxxxxxxx
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Its Counsel
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THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By /s/ Xxxxxxx X. Xxxxxxx
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Its Vice President
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PRUCO LIFE INSURANCE COMPANY
By /s/ Xxxxxxx X. Xxxxxxx
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Its Vice President
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