FIRST AMENDMENT TO CREDIT AGREEMENT

Exhibit 10.1

FIRST AMENDMENT TO
CREDIT AGREEMENT

among

QUANTUM CORPORATION

and

KEYBANK NATIONAL ASSOCIATION
as Administrative Agent and
Letter of Credit Issuing Lender

and

THE OTHER FINANCIAL
INSTITUTIONS PARTIES HERETO

Dated as of November 28, 2006

Re:  $150,000,000 Revolving Credit Facility
$225,000,000 Term Loan Facility

KEYBANC CAPITAL MARKETS
Sole Lead Arranger and Sole Book Manager

FIRST AMENDMENT
TO
CREDIT AGREEMENT

This First Amendment To Credit Agreement (this “Amendment” ) is dated as of November 27, 2006, by and among QUANTUM CORPORATION, a Delaware corporation ( “Borrower” ), each lender from time to time a party hereto (collectively, “Lenders,” and individually, a “Lender” ), and KEYBANK NATIONAL ASSOCIATION, as Administrative Agent and Letter of Credit Issuing Lender amends that certain Credit Agreement dated as of August 22, 2006 (the “Credit Agreement” ) among Borrower, Administrative Agent and the Lenders.

RECITALS

A.     Borrower, Administrative Agent and the Requisite Lenders have agreed to amend the terms of the Credit Agreement to modify certain covenants, definitions and conditions contained therein.

B.      Each capitalized term used but not otherwise defined herein shall have the meaning ascribed thereto in the Credit Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE 1
AMENDMENTS TO CREDIT AGREEMEN T

This Amendment shall be deemed to be an amendment to the Credit Agreement and shall not be construed in any way as a replacement or substitution therefor. All of the terms and conditions of, and terms defined in, this Amendment are hereby incorporated by reference into the Credit Agreement as such terms and provisions were set forth in full therein.

1.1     Definitions.  From and after the date of this Amendment, the definitions of “Applicable Payment Date”, “Cash Equivalents” “Consolidated EBITDA”, “Ordinary Course Dispositions”, “Ordinary Course Indebtedness”, “Ordinary Course Investments” contained in Section l.01 of the Credit Agreement are each amended and restated in their entirety as follows:

“Applicable Payment Date” means, (a) as to any Offshore Rate Loan, the last day of the relevant Interest Period, but in no event more than ninety (90) days after the first day of such Interest Period and each ninety (90) days thereafter, any date that such Loan is prepaid or converted in whole or in part and the Maturity Date; and (b) as to any other Obligations, the last Business Day of each calendar quarter and the Maturity Date; provided, further, that interest accruing at the Default Rate shall be payable from time to time upon demand of Administrative Agent.

“Cash” or “Cash Equivalents” means assets which qualify as “marketable securities”, “short term investments”, “cash” or “cash equivalents” pursuant to the investment policies adopted from time to time by the Board of Directors of Borrower and are properly classified as “marketable securities”, “cash”, “cash equivalents” or “short term investments” under GAAP. 

“Consolidated EBITDA” means the sum of the following, provided that the items contained in (b) through (i) below shall be added to (a) only to the extent they have been deducted in calculating, and therefore form no portion of, Consolidated Net Income:

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(a)     Consolidated Net Income, provided that there shall be excluded from such Consolidated Net Income the following:  (i) all gains and all losses realized by Borrower and its Subsidiaries upon the sale or other disposition (including, without limitation, pursuant to sale and leaseback transactions) of property or assets that are not sold or otherwise disposed of in the ordinary course of business, or pursuant to the sale of any capital stock held by Borrower or any Subsidiary; and (ii) all items of gain or income that are properly classified as extraordinary in accordance with GAAP or are unusual or non-recurring; and

(b)     Consolidated Interest Charges; and

(c)     The amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income; and

(d)     The amount of depreciation and amortization expense deducted in determining such Consolidated Net Income, including any impairment of intangible/goodwill as defined under FAS 142 and FAS 144; and

(e)     Any non-cash stock, stock option or restricted stock based compensation charges determined in accordance with GAAP; and

(f)     Cash charges relating to the Related Transactions in an amount not to exceed $38,000,000 in the aggregate and incurred prior to June 30, 2007; and

(g)     Cash charges relating to (i) the settlement of litigation with Storage Technology Corporation (StorageTek) in an amount not to exceed $24,100,000 and (ii) the closure of the Ireland facility in an amount not to exceed $18,100,000, in each case, for the fiscal year ended March 31, 2006 and as reflected on the financial statements of Borrower and its Subsidiaries for such fiscal year; and

(h)     Cash charges related to restructuring, discontinued operations, and extraordinary items (and not relating to the Related Transactions), including, but not limited to, facilities and personnel reductions or exit of a business or products, in an amount not to exceed $12,000,000 in the aggregate for the period beginning on the Closing Date and ending on the final Maturity Date; and

(i)     Other non-cash extraordinary or non-cash non-recurring charges including, without limitation, charges arising from the Related Transactions (including research and development charges in process on the Closing Date).

For purposes of calculating Consolidated EBITDA for any period in connection with the Leverage Ratio, the Senior Leverage Ratio or in calculating compliance with Section 7.11(e) hereof, if during such period the Borrower or any Subsidiary shall have made any Permitted Acquisition, Consolidated EBITDA for such period shall be calculated after giving pro forma effect to such Permitted Acquisition as if such Permitted Acquisition occurred on the first day of such period.  In regards to ADIC, for monthly periods not included in the combined companies’ GAAP financial statements, but which would be included under this paragraph, monthly depreciation and amortization expense shall be deemed to be “$2,486,000”.

“Ordinary Course Dispositions” means:

(a)     Dispositions of surplus property, plant and equipment or damaged, obsolete or worn out property, plant and equipment, whether now owned or hereafter acquired , in the ordinary course of business;

(b)     Dispositions of inventory, Cash or Cash Equivalents or service inventory in the ordinary course of business;

(c)     Dispositions of property to the extent that such property is exchanged for credit against the purchase price of similar replacement property, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement property or where Borrower or its Subsidiary determine in good faith that the failure to replace such property will not be detrimental to the business of Borrower or such Subsidiary; provided that (i) the fair market value of all assets not replaced shall not exceed $25,000,000 during the two (2) year period commencing on the Closing Date and (ii) thereafter, the fair market value of all assets not replaced shall not exceed $10,000,000 over the remaining life of this Agreement; 

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(d)     Dispositions of assets or property by any Subsidiary of Borrower to Borrower or another Subsidiary of Borrower, or by Borrower to any Subsidiary of Borrower; provided that if (i) a Default or Event of Default shall have occurred and be continuing, or (ii) if at the time Borrower or any such Subsidiary proposes to make such Disposition the Leverage Ratio is greater than 3.50:1.00 (based upon the most recent Compliance Certificate delivered to Administrative Agent pursuant to Section 6.02), no such Disposition by Borrower or any Guarantor to any Subsidiary which is not a Guarantor may be made if the aggregate amount of Permitted Non-Guarantor Amounts, after giving pro forma effect to the making of such Disposition, would exceed $15,000,000, or (iii) if at the time Borrower or any such Subsidiary proposes to make such Disposition the Leverage Ratio is less than or equal to 3.50:1.00 (based upon the most recent Compliance Certificate delivered to Administrative Agent pursuant to Section 6.02), no such Disposition by Borrower or any Guarantor for any Subsidiary which is not a Guarantor may be made if the aggregate amount of Permitted Non-Guarantor Amounts, after giving pro forma effect to the making of such Disposition, would exceed $30,000,000; provided, further, that this clause (d) shall not restrict (1) Ordinary Course Indebtedness referred to in clause (b) of the definition thereof, (2) Ordinary Course Investments referred to in clause (c) of the definition thereof, (3) Restricted Payments permitted pursuant to Sections 7.06(a)(ii) and 7.06(f), and (4) Dispositions of inventory (and the related transfer payments) in the ordinary course of business between (i) the Borrower or any Subsidiary of the Borrower that is a Guarantor and (ii) foreign Subsidiaries;

(e)     Dispositions which constitute non-exclusive licenses or other similar arrangements for the use of the property of the Borrower or any Subsidiary, in the ordinary course of business;

(f)     Dispositions which constitute the making or liquidating of Permitted Investments, including, without limitation, in respect of any Swap Contract, provided that Borrower is in compliance with Section 6.16; and

(g)     Dispositions which constitute the incurrence (but not the enforcement) of Permitted Liens;

provided, however , that, other than with respect to Dispositions of the types described in clauses (a) and (d) of this definition (except as otherwise expressly required pursuant to clause (d)), no such Disposition shall be for less than the fair market value of the property being disposed of.

“Ordinary Course Indebtedness” means:

(a)      Indebtedness under the Loan Documents;

(b)      Guaranty Obligations of Borrower or any of its Subsidiaries guarantying Indebtedness otherwise permitted hereunder of Borrower or any Subsidiary of Borrower; provided, however, that (i) if at the time Borrower or any such Subsidiary proposes to incur such Guaranty Obligations the Leverage Ratio is greater than 3.50:1.00 (based upon the most recent Compliance Certificate delivered to Administrative Agent pursuant to Section 6.02), no such Guaranty Obligations by Borrower or any Guarantor to any Subsidiary which is not a Guarantor may be incurred if the aggregate amount of Permitted Non-Guarantor Amounts, after giving pro forma effect to the making of such Guaranty Obligations, would exceed $15,000,000, (ii) if at the time Borrower or any such Subsidiary proposes to incur such Guaranty Obligations the Leverage Ratio is less than or equal to 3.50:1.00 (based upon the most recent Compliance Certificate delivered to Administrative Agent pursuant to Section 6.02), no such Guaranty Obligations by Borrower or any Guarantor for any Subsidiary which is not a Guarantor may be incurred if the aggregate amount of Permitted Non-Guarantor Amounts, after giving pro forma effect to the making of such Investment, would exceed $30,000,000, and (iii) if a Default or Event of Default has occurred and be continuing, Guaranty Obligations under this clause (b) shall only be permitted for Subsidiaries that are Guarantors;

(c)      Indebtedness arising from the honoring of a check, draft or similar instrument against insufficient funds or from the endorsement of instruments for collection in the ordinary course of Borrower’s or any Subsidiary’s business;

(d)      Permitted Swap Obligations;

(e)      Indebtedness of Borrower or any of its Subsidiaries with respect to surety, appeal, indemnity, performance or other similar bonds in the ordinary course of business; and

(f)      Indebtedness with respect to cash deposited by customers to obtain the right to delivery of future goods or services; provided , however, that all such cash deposits are held in an account subject to a Deposit Account Control Agreement.

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“Ordinary Course Investments” means Investments consisting of:

(a)     Investments in other assets properly classified as “marketable securities” or “Cash” or “Cash Equivalents” , and which conform to the investment policies adopted by the Board of Directors of Borrower from time to time;

(b)     advances to officers, directors and employees of Borrower and its Subsidiaries for travel, entertainment, relocation and analogous ordinary business purposes;

(c)     Investments of Borrower in any of its Subsidiaries and Investments of any Subsidiary of Borrower in Borrower or another Subsidiary of Borrower; provided, however, that (i) if at the time Borrower or any such Subsidiary proposes to make such Investment the Leverage Ratio is greater than 3.50:1.00 (based upon the most recent Compliance Certificate delivered to Administrative Agent pursuant to Section 6.02), no such Investment by Borrower or any Guarantor in any Subsidiary which is not a Guarantor may be made if the aggregate amount of Permitted Non-Guarantor Amounts, after giving pro forma effect to the making of such Investment, would exceed $15,000,000, (ii) if at the time Borrower or any such Subsidiary proposes to make such Investment the Leverage Ratio is less than or equal to 3.50:1.00 (based upon the most recent Compliance Certificate delivered to Administrative Agent pursuant to Section 6.02), no such Investment by Borrower or any Guarantor in any Subsidiary which is not a Guarantor may be made if the aggregate amount of Permitted Non-Guarantor Amounts, after giving pro forma effect to the making of such Investment, would exceed $30,000,000, and (iii) if a Default or Event of Default has occurred and be continuing, Investments under this clause (c) shall only be permitted in Subsidiaries that are Guarantors; provided, further, that the foregoing proviso shall not apply to Investments consisting of transfers of inventory (and the related transfer payments) in the ordinary course of business between (i) the Borrower or any Subsidiary of the Borrower that is a Guarantor and (ii) foreign Subsidiaries;

(d)     Investments in Quantum Storage Solutions (M) Sdn. Bhd. in an amount not to exceed (i) $5,000,000 in any fiscal quarter and (ii) $30,000,000 in the aggregate;

(e)     extensions of credit to customers or suppliers of Borrower and its Subsidiaries in the ordinary course of business and any Investments received in satisfaction or partial satisfaction thereof;

(f)     Guaranty Obligations permitted by Section 7.01.

(g)     Investments received by Borrower or any of its Subsidiaries as distributions on claims in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business;

(h)     Investments of any Subsidiary existing at the time it becomes a Subsidiary of Borrower, provided that such Investments were not made in anticipation of such Person becoming a Subsidiary of Borrower; and

(i)     Investments consisting of loans to employees, the proceeds of which shall be used to purchase Equity Securities of Borrower or its Subsidiaries and other loans to employees in an aggregate amount not in excess of $1,000,000 at any time outstanding.

1.2     New Definitions.   From and after the date of this Amendment, the following definitions of are each added to Section 1.01 of the Credit Agreement as follows:

“Colla