<PAGE>
EXHIBIT 10.26
CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been
omitted pursuant to a request for confidential treatment and, where applicable,
have been marked with an astrisk to denote where omissions have been made. The
confidential material has been filed separately with the Commission.
________________________________________________________________________________
$10,000,000
CREDIT AGREEMENT
between
LEXAR MEDIA, INC.,
as Borrower,
and
ACCESS TECHNOLOGY PARTNERS, L.P.
as Lender
Dated as of June 30, 2000
<PAGE>
SCHEDULES:
---------
4.4 Consents, Authorizations, Filings and Notices
4.15 Subsidiaries
4.19 UCC Filing Jurisdictions
7.2(e) Existing Indebtedness
7.3(f) Existing Liens
EXHIBITS:
--------
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D [Omitted]
E Form of Exemption Certificate
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<PAGE>
CREDIT AGREEMENT, dated as of June 30, 2000, between LEXAR MEDIA, INC., a
California corporation (the "Borrower"), and ACCESS TECHNOLOGY PARTNERS, L.P.
--------
(the "Lender").
------
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
-------------
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"Affiliate": as to any Person, any other Person that, directly or
---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"Agreement": this Credit Agreement, as amended, supplemented or
---------
otherwise modified from time to time.
"Amendment to Investors Rights Agreement": the Amendment No. 4 to the
---------------------------------------
Investors Rights Agreement, dated as of June 22, 2000, which amends that certain
Investors Rights Agreement, dated as of September 28, 1999, between the Borrower
and certain shareholders of the Borrower listed therein.
"Board": the Board of Governors of the Federal Reserve System of the
-----
United States (or any successor).
"Borrower": as defined in the preamble hereto.
--------
"Bridge Financing": the Note and Warrant Purchase Agreement, dated as
----------------
of May 19, 2000, among the Borrower and the Investors (as defined therein), as
amended, supplemented or otherwise modified from time to time.
"Business": as defined in Section 4.17(b).
--------
"Business Day": a day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required by law to
close.
"Capital Expenditures": for any period, with respect to any Person,
--------------------
the aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
"Capital Lease Obligations": as to any Person, the obligations of
-------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Capitalized Software Expenses": for any period, with respect to any
-----------------------------
Person, the aggregate of all software development expenses incurred by such
Person and its Subsidiaries that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.
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<PAGE>
"Capital Stock": any and all shares, interests, participations or
-------------
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Cash Equivalents": (a) marketable direct obligations issued by, or
----------------
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any commercial bank organized under the laws of the United
States or any state thereof having combined capital and surplus of not less than
$500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard &
Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc.
---
("Moody's"), or carrying an equivalent rating by a nationally recognized rating
-------
agency, if both of the two named rating agencies cease publishing ratings of
commercial paper issuers generally, and maturing within six months from the date
of acquisition; (d) repurchase obligations of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30
days, with respect to securities issued or fully guaranteed or insured by the
United States government; (e) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's; (f) securities with maturities of six
months or less from the date of acquisition backed by standby letters of credit
issued by any commercial bank satisfying the requirements of clause (b) of this
definition; (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition; or (h) investments in instruments described in a corporate
investment policy which has been approved in writing by the Lender.
"Chase": The Chase Manhattan Bank.
-----
"Closing Date": the date on which the conditions precedent set forth
------------
in Section 5.1 shall have been satisfied, or, in the Administrative Agent's
discretion, waived until the Initial Funding Date, which Closing Date is June
30, 2000.
"Code": the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral": all property of the Loan Parties, now owned or
----------
hereafter acquired, upon which a Lien is purported to be created by any Security
Document.
"Commonly Controlled Entity": an entity, whether or not incorporated,
--------------------------
that is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group that includes the Borrower and that is
treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
----------------------
Responsible Officer substantially in the form of Exhibit B.
"Consolidated Debt to Capital Ratio": at any date, the ratio of (i)
----------------------------------
Consolidated Total Debt to (ii) the sum of Consolidated Total Debt, Consolidated
Net Worth and any preferred or preference stock of the Borrower.
"Consolidated EBITDA": for any period, Consolidated Net Income for
-------------------
such period plus, without duplication and to the extent reflected as a charge in
----
the statement of such Consolidated Net Income for such period, the sum of (a)
income tax expense, (b) interest expense, amortization or writeoff of debt
-3-
<PAGE>
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any non-recurring non-cash
expenses incurred in connection with the Warrant Documents, (f) any non-
recurring non-cash imputed interest charges associated with any warrants to
purchase the Borrower's common stock, (g) any extraordinary, unusual or non-
recurring non-cash expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income
for such period, non-cash losses on sales of assets outside of the ordinary
course of business), provided, that the amounts referred to in this clause (g)
--------
shall not, in the aggregate, exceed $1,000,000 for any fiscal year of the
Borrower, and (h) any other non-cash charges, and minus, to the extent included
-----
in the statement of such Consolidated Net Income for such period, the sum of (a)
interest income, (b) any extraordinary, unusual or non-recurring income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales of
assets outside of the ordinary course of business) and (c) any other non-cash
income, all as determined on a consolidated basis.
"Consolidated Net Income": for any period, the consolidated net
-----------------------
income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
--------
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Borrower or is merged into or consolidated with the
Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.
"Consolidated Net Worth": at any date, all amounts that would, in
----------------------
conformity with GAAP, be included on a consolidated balance sheet of the
Borrower and its Subsidiaries under stockholders' equity at such date.
"Consolidated Revenue": for any period, the consolidated revenue of
--------------------
the Borrower and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Debt": at any date, the aggregate principal
-----------------------
amount of all Indebtedness of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP.
"Continuing Directors": the directors of the Borrower on the Closing
--------------------
Date, after giving effect to the transactions contemplated hereby, and each
other director, if, in each case, such other director's nomination for election
to the board of directors of the Borrower is recommended by a majority of the
then Continuing Directors.
"Contractual Obligation": as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default": any of the events specified in Section 8, whether or not
-------
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Disposition": with respect to any property, any sale, lease, sale
-----------
and leaseback, assignment, conveyance, transfer or other disposition thereof.
The terms "Dispose" and "Disposed of" shall have correlative meanings.
------- -----------
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<PAGE>
"Dollars" and A$": dollars in lawful currency of the United States.
------- -
"Domestic Subsidiary": any Subsidiary of the Borrower organized under
-------------------
the laws of any jurisdiction within the United States.
"Environmental Laws": any and all foreign, Federal, state, local or
------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Event of Default": any of the events specified in Section 8,
----------------
provided that any requirement for the giving of notice, the lapse of time, or
--------
both, has been satisfied.
"Excluded Foreign Subsidiary": any Foreign Subsidiary in respect of
---------------------------
which either (a) the pledge of all of the Capital Stock of such Subsidiary as
Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would,
in the good faith judgment of the Borrower, result in adverse tax consequences
to the Borrower, which as of the Closing Date shall include Lexar Media K.K., a
Japanese corporation, and Lexar Media (Europe) Limited, a company organized
under the laws of England (registered #3136440 in England).
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
------------------
Domestic Subsidiary.
"GAAP": generally accepted accounting principles in the United States
----
as in effect from time to time, except that for purposes of Section 7.1, GAAP
shall be determined on the basis of such principles in effect on the date hereof
and consistent with those used in the preparation of the most recent audited
financial statements referred to in Section 4.1. In the event that any
"Accounting Change" (as defined below) shall occur and such change results in a
change in the method of calculation of standards or terms in this Agreement,
then the Borrower and the Lender agree to enter into negotiations in order to
amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
Borrower's financial condition shall be the same after such Accounting Changes
as if such Accounting Changes had not been made. Until such time as such an
amendment shall have been executed and delivered by the Borrower and the Lender,
all standards and terms in this Agreement shall continue to be calculated or
construed as if such Accounting Changes had not occurred. "Accounting Changes"
refers to changes in accounting principles required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants or, if
applicable, the SEC.
"Governmental Authority": any nation or government, any state or
----------------------
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).
"Guarantee and Collateral Agreement": the Guarantee and Collateral
----------------------------------
Agreement to be executed and delivered by the Borrower and each Subsidiary
Guarantor, substantially in the form of Exhibit A, as the same may be amended,
supplemented or otherwise modified from time to time.
-5-
<PAGE>
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
-------------------- -------------------
any obligation of (a) the guaranteeing person or (b) another Person (including
any bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
-------------------
of any other third Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
-------- -------
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Hedge Agreements": all interest rate swaps, caps or collar
----------------
agreements or similar arrangements dealing with interest rates or currency
exchange rates or the exchange of nominal interest obligations, either generally
or under specific contingencies.
"Indebtedness": of any Person at any date, without duplication, (a)
------------
all indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than trade
payables incurred in the ordinary course of such Person's business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations of such Person, (f)
all obligations of such Person, contingent or otherwise, as an account party or
applicant under or in respect of acceptances, letters of credit, surety bonds or
similar arrangements, (g) the liquidation value of all redeemable preferred
Capital Stock of such Person, (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses (a) through (g) above,
(i) all obligations of the kind referred to in clauses (a) through (h) above
secured by (or for which the holder of such obligations has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including
accounts and contract rights) owned by such Person, whether or not such Person
has assumed or become liable for the payment of such obligation, and (j) for the
purposes of Sections 7.2 and 8(e) only, all obligations of such Person in
respect of Hedge Agreements. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness expressly provide that such
Person is not liable therefor.
"Initial Funding Date": the date on which the conditions precedent set
--------------------
forth in Section 5.2 shall have been satisfied.
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<PAGE>
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
---------
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, domain names, technology, know-how and processes, and all rights to
sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.
"Intercreditor Agreement": the Intercreditor Agreement, dated as of
-----------------------
June 30, 2000, between Chase and Lender, as amended, supplemented or otherwise
modified from time to time.
"Investments": as defined in Section 7.7.
-----------
"Kingston Notes": the secured promissory notes in the aggregate
--------------
principal amount of $4,750,000 issued and sold by the Borrower pursuant to that
certain Note Purchase Agreement, dated as of August 8, 1997, as amended, between
the Borrower and David Sun and John Tu.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the
same economic effect as any of the foregoing).
"Loan": any loan made by Lender pursuant to this Agreement.
----
"Loan Documents": this Agreement, the Security Documents, and all
--------------
other present and future documents, instruments and agreements relating hereto
or thereto.
"Loan Parties": the Borrower and each Subsidiary of the Borrower that
------------
is a party to a Loan Document.
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
business, property, operations, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Lender hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.
"Maturity Date": June 30, 2003.
-------------
"Multiemployer Plan": a Plan that is a multiemployer plan as defined
------------------
in Section 4001(a)(3) of ERISA.
"Non-Excluded Taxes": as defined in Section 2.6.
------------------
"Obligations": the unpaid principal of and interest on (including
-----------
interest accruing after the maturity of the Loans and interest accruing after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or
-7-
<PAGE>
not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans and all other obligations and liabilities of the Borrower
to the Lender, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document, or any other
document made, delivered or given in connection herewith or therewith, whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including all fees, charges and disbursements of counsel to the
Lender that are required to be paid by the Borrower pursuant hereto) or
otherwise.
"Other Taxes": any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
-----------
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA (or any successor).
"Person": an individual, partnership, corporation, limited liability
------
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
"Plan": at a particular time, any employee benefit plan that is
----
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Projections": a detailed consolidated budget for the following
-----------
fiscal year (including a projected consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of the following fiscal year, the related
consolidated statements of projected cash flow, projected changes in financial
position and projected income and a description of the underlying assumptions
applicable thereto), and, as soon as available, significant revisions, if any,
of such budget and projections with respect to such financial year.
"Properties": as defined in Section 4.17(a).
----------
"Regulation U": Regulation U of the Board as in effect from time to
------------
time.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.
4043.
"Requirement of Law": as to any Person, the Certificate of
------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
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<PAGE>
"Responsible Officer": the chief executive officer, president or
-------------------
chief financial officer of the Borrower, but in any event, with respect to
financial matters, the chief financial officer of the Borrower.
"Restricted Payments": as defined in Section 7.6.
-------------------
"SEC": the Securities and Exchange Commission, any successor thereto
---
and any analogous Governmental Authority.
"Security Documents": the collective reference to the Guarantee and
------------------
Collateral Agreement and all other security documents hereafter delivered to the
Lender granting a Lien on any property of any Person to secure the obligations
and liabilities of any Loan Party under any Loan Document.
"Senior Loans": Loans and other extensions of credit and credit
------------
accommodations made to the Borrower pursuant to the Senior Loan Agreement.
"Senior Loan Agreement": That certain Credit Agreement among
---------------------
Borrower, Chase, as administrative agent, and the several lenders from time to
time parties thereto, dated June 30, 2000, and all extensions, renewals and
modifications thereof.
"Single Employer Plan": any Plan that is covered by Title IV of
--------------------
ERISA, but that is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
-------
any date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.
"Sony Consent": the consent, in form and substance satisfactory to the
------------
Lender, of Sony Corporation to the granting of Liens by the Borrower and its
Subsidiaries in connection with this Agreement and the other Loan Documents
under the Sony Technology License Agreement and the Lexar Technology License
Agreement, each dated as of March 21, 2000, between Sony Corporation and the
Borrower.
"Sony Debt": the promissory note in the aggregate principal amount of
---------
$2,000,000 issued and sold by the Borrower pursuant to that certain Convertible
Note and Warrant Purchase Agreement, dated as of March 21, 2000, between Sony
Corporation and the Borrower.
"Subsidiary": as to any Person, a corporation, partnership, limited
----------
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall
refer to a Subsidiary or Subsidiaries of the Borrower.
-9-
<PAGE>
"Subsidiary Guarantor": each Subsidiary of the Borrower other than
--------------------
any Excluded Foreign Subsidiary.
"Toshiba Debt": the secured promissory note in the aggregate
------------
principal amount of $400,000 issued and sold by the Borrower to Toshiba America
Electronic Components, Inc. on June 26, 1997.
"United States": the United States of America.
-------------
"Warrant Documents": the collective reference to (i) the Warrant
-----------------
Agreement, dated as of June 30, 2000, among the Borrower, the Lender, and Chase
Securities Inc., (ii) the Regulatory Agreement, dated as of June 30, 2000, among
the Borrower, the Lender, and Chase Securities Inc., and (iii) the Common Stock
Purchase Warrant, dated as of June 30, 2000, issued by the Borrower to the
Lender.
"Wholly Owned Subsidiary": as to any Person, any other Person all of
-----------------------
the Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is
---------------------------------
a Wholly Owned Subsidiary of the Borrower.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
-----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto, (i)
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP, (ii)
the words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation", (iii) the word "incur" shall be construed to
mean incur, create, issue, assume, become liable in respect of or suffer to
exist (and the words "incurred" and "incurrence" shall have correlative
meanings), and (iv) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, Capital Stock, securities, revenues,
accounts, leasehold interests and contract rights.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
SECTION 2. AMOUNT AND TERMS OF LOANS.
2.1 Loans.
-----
(a) Subject to the terms and conditions hereof, Lender agrees to make
loans ("Loans") to the Borrower from time to time during the term hereof, in a
-----
total amount not to exceed $10,000,000, provided that no Loans will be made
after the first anniversary of the date hereof. Loans, when made, may not be
repaid and reborrowed.
(b) Loans will be disbursed in separate disbursements (each a
"Disbursement") as follows:
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<PAGE>
(1) A Disbursement of $4,000,000 on the date the conditions in
Sections 5.1, 5.2 and 5.3 have been satisfied.
(2) A Disbursement of *, upon execution and delivery by Borrower
of *. As used herein "SanDisk Litigation" means the case entitled "SanDisk
Corporation v. Lexar Media, Inc." (U.S. District Court, Northern District of
California, Case No. (C98-01115CRB and any related cases, including the case
entitled "Lexar Media, Inc. v. SanDisk Corporation" (U.S. District Court,
Northern District of California, Case No. C99-02463CRB.
(3) A Disbursement of *, upon completion of an * which are the
subject of the Borrower's business plan previously provided to Lender, if the
following conditions are met: (i) the Borrower represents and warrants to the
Lender in writing, in form satisfactory to Lender, *, and (ii) the Borrower
delivers to the Lender *, and (iii) Borrower provides evidence to Lender,
reasonably satisfactory to Lender, that Borrower *.
(4) A Disbursement of * (as to which *.
Each of the Disbursements shall be made to Borrower at such time as Lender has
been provided with copies of documents (including any manufacturing, patent or
other like agreements), representations and other evidence reasonably
satisfactory to it and its counsel to confirm the satisfaction of the applicable
condition to the Disbursement, and Lender has had a reasonable time to review
the same and to confirm that the same satisfy the applicable condition to the
Disbursement. Borrower shall make its counsel available to Lender's counsel to
review any and all information necessary to understand how its counsel reached
its conclusions. The conditions in Sections 2.1(b) (2), (3) and (4) above shall
be deemed satisfied in the event the Borrower *, on terms and conditions
reasonably satisfactory to Lender, pursuant to which * provided to Lender.
(c) Borrower shall repay the entire unpaid principal balance of all
Loans and all accrued and unpaid interest thereon, and all other Obligations on
the Maturity Date.
2.2 Fees. Borrower shall pay Lender a loan fee of $200,000, as set
----
forth in Section 6.11 below.
2.3 Prepayments. The Borrower may at any time and from time to time
-----------
prepay the Loans, in whole or in part, upon three Business Days prior written
notice to the Lender, provided that Borrower shall, concurrently with the
prepayment, pay to Lender a prepayment fee (the "Make-Whole Payment") in an
amount equal to quarterly interest payments on the principal amount prepaid, at
the Differential Interest Rate, for the number of full or partial calendar
quarters remaining from the prepayment date to the Maturity Date, which interest
payments shall be discounted to present value at the Treasury Rate. As used
herein, "Differential Interest Rate" means the interest rate determined at the
prepayment date, by subtracting the Treasury Rate, at the prepayment date, from
the Loan Interest Rate, provided that, in no event shall the Differential
Interest Rate be a negative number. The "Treasury Rate" shall mean the
interest rate on United States government securities for the period, as near as
practicable, from the prepayment date to the Maturity Date, as calculated by
Lender in its good faith discretion, which calculation shall be conclusive and
binding on Borrower absent manifest error. In the event said interest rate on
United States government securities is, for any reason, not ascertainable, a
comparable rate selected by Lender in its discretion shall be used in place
thereof, which selection shall be conclusive and binding on Borrower. The Make-
Whole Payment shall be in addition to all accrued interest and all other fees
and shall be non-refundable. In the event the Loans are paid prior to the
Maturity Date, for any other reason, other than at the option of the Borrower,
including without limitation prepayments as a result of an Event of Default, the
Borrower shall make the Make-Whole Payment to Lender with respect to the amount
so prepaid, on the date of the prepayment.
2.4 Interest Rates and Payment Dates.
--------------------------------
(a) Each Loan shall bear interest at the rate of 12% per annum
computed on the basis of a 360-day year for the actual number of days elapsed
(the "Loan Interest Rate").
* Material has been omitted and filed separately with the Commission.
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<PAGE>
(b) Interest accrued on the unpaid principal balance of all Loans
shall be paid quarterly on the last day of March, June, September and December
in each year (the "Interest Payment Dates").
(c) If all or a portion of the principal amount of any Loan shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum equal to the Loan
Interest Rate plus 4% per annum. If all or a portion of any interest payable on
----
any Loan or other amount payable hereunder, other than principal, shall not be
paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum equal to the Loan
Interest Rate plus 4% per annum, provided that if such payment is not paid
----
within 10 days after the date due, without limiting Lender's other rights and
remedies, Borrower shall pay Lender an amount equal to the greater of (i) a late
charge of 5% of the amount of such payment not paid within 10 days after the
date due, or (ii) interest on the amount not paid at a rate per annum equal to
the Loan Interest Rate plus 4% per annum. In all of the foregoing cases such
----
additional interest shall be paid from the date of such non-payment until such
amount is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that any additional interest or late charges accruing pursuant to
--------
paragraph (c) of this Section shall be payable from time to time on demand.
(e) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York time, on the due date thereof to the Lender, at such place as the
Lender shall direct, in Dollars and in immediately available funds. If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day. In the case
of any extension of any payment of principal pursuant to the preceding sentence,
interest thereon shall be payable at the then applicable rate during such
extension.
2.5 Requirements of Law. (a) If the adoption of or any change in
-------------------
any Requirement of Law or in the interpretation or application thereof or
compliance by Lender with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject Lender to any tax of any kind whatsoever with
respect to this Agreement, or change the basis of taxation of payments to
Lender in respect thereof (except for Non-Excluded Taxes covered by Section
2.6 and changes in the rate of tax on the overall net income of Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by, any
office of Lender; or
(iii) shall impose on Lender any other condition;
and the result of any of the foregoing is to increase the cost to Lender, by an
amount that Lender deems to be material, of making, converting into, continuing
or maintaining Loans or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay Lender, upon
its demand, any additional amounts necessary to compensate Lender for such
increased cost or reduced amount receivable.
(b) If Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by Lender or
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<PAGE>
any corporation controlling Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on Lender's or such corporation's capital as a consequence of
its obligations hereunder or under to a level below that which Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration Lender's or such corporation's policies with respect
to capital adequacy) by an amount deemed by Lender to be material, then from
time to time, after submission by Lender to the Borrower of a written request
therefor, the Borrower shall pay to Lender such additional amount or amounts as
will compensate Lender for such reduction; provided that the Borrower shall not
--------
be required to compensate Lender pursuant to this paragraph for any amounts
incurred more than six months prior to the date that Lender notifies the
Borrower of Lender's intention to claim compensation therefor; and provided
--------
further that, if the circumstances giving rise to such claim have a retroactive
-------
effect, then such six-month period shall be extended to include the period of
such retroactive effect.
(c) A certificate as to any additional amounts payable pursuant to
this Section submitted by Lender to the Borrower shall be conclusive in the
absence of manifest error. The obligations of the Borrower pursuant to this
Section shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.
2.6 Taxes. (a) All payments made by the Borrower under this
-----
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Lender as a result of a present or former
connection between the Lender and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing authority thereof or
therein (other than any such connection arising solely from the Lender having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other Loan Document). If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-
---
Excluded Taxes") or Other Taxes are required to be withheld from any amounts
--------------
payable to the Lender hereunder, the amounts so payable to the Lender shall be
increased to the extent necessary to yield to the Lender (after payment of all
Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement; provided,
--------
however, that the Borrower shall not be required to increase any such amounts
-------
payable to Lender with respect to any Non-Excluded Taxes (i) that are
attributable to Lender's failure to comply with the requirements of paragraph
(d) or (e) of this Section or (ii) that are United States withholding taxes
imposed on amounts payable to Lender at the time Lender becomes a party to this
Agreement, except to the extent that Lender's assignor (if any) was entitled, at
the time of assignment, to receive additional amounts from the Borrower with
respect to such Non-Excluded Taxes pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Lender a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or
Other Taxes when due to the appropriate taxing authority or fails to remit to
the Lender the required receipts or other required documentary evidence, the
Borrower shall indemnify the Lender for any incremental taxes, interest or
penalties that may become payable by the Lender as a result of any such failure.
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<PAGE>
(d) Each Lender (or Transferee) that is not a "U.S. Person" as
defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver
to the Borrower and the Administrative Agent (or, in the case of a Participant,
to the Lender from which the related participation shall have been purchased)
two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit E and a Form W-8BEN, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not
legally able to deliver.
(e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate, provided that such Lender is
legally entitled to complete, execute and deliver such documentation.
(f) The agreements in this Section shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
SECTION 3. [Omitted]
SECTION 4. REPRESENTATIONS AND WARRANTIES.
To induce the Lender to enter into this Agreement and to make the
Loans the Borrower hereby represents and warrants to the Lender that:
4.1 Financial Condition. The audited consolidated balance sheets of
-------------------
the Borrower and its Subsidiaries as at December 31, 1999, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
PricewaterhouseCoopers LLP, present fairly the consolidated financial condition
of the Borrower as at such date, and the consolidated results of its operations
and its consolidated cash flows for the respective fiscal years then ended. The
unaudited interim consolidated balance sheet of the Borrower and the related
unaudited consolidated statements of income and cash flows for the three-month
period ended March 31, 2000 present fairly the consolidated financial condition
of the Borrower as at such date, and the consolidated results of its operations
and its consolidated cash flows for the three-month period then ended (subject
to normal year-end audit adjustments). All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
the aforementioned firm of accountants and disclosed therein). The Borrower and
its Subsidiaries do not have any material Guarantee Obligations, contingent
liabilities and liabilities for taxes, or
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<PAGE>
any long-term leases or unusual forward or long-term commitments, including any
interest rate or foreign currency swap or exchange transaction or other
obligation in respect of derivatives, that are not reflected in the most recent
financial statements referred to in this paragraph. During the period from
December 31, 1999 to and including the date hereof there has been no Disposition
by the Borrower of any material part of its business or property.
4.2 No Change. Since December 31, 1999, there has been no
---------
development or event that has had or could reasonably be expected to have a
Material Adverse Effect (other than with respect to the SanDisk Litigation as of
the date hereof).
4.3 Corporate Existence; Compliance with Law. Each of the Borrower
----------------------------------------
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
failure to so qualify and be in good standing could reasonably be expected to
have a Material Adverse Effect, and (d) is in compliance with all Requirements
of Law except to the extent that the failure to comply therewith could not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 Corporate Power; Authorization; Enforceable Obligations. Each
-------------------------------------------------------
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Loan Documents to which it is a party and, in the case of the
Borrower, to authorize the extensions of credit on the terms and conditions of
this Agreement. No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the extensions of credit hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 4.4, which consents, authorizations, filings and
notices (other than the Sony Consent) have been obtained or made and are in full
force and effect and (ii) the filings referred to in Section 4.19. Each Loan
Document has been duly executed and delivered on behalf of each Loan Party party
thereto. This Agreement constitutes, and each other Loan Document upon execution
will constitute, a legal, valid and binding obligation of each Loan Party party
thereto, enforceable against each such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement and the other Loan Documents, the borrowings hereunder and the use of
the proceeds thereof will not violate any Requirement of Law or any Contractual
Obligation of the Borrower or any of its Subsidiaries (except to the extent
that such violations could not, in the aggregate, be reasonably expected to have
a Material Adverse Effect) and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents). No Requirement of Law or
Contractual Obligation applicable to the Borrower or any of its Subsidiaries
could reasonably be expected to have a Material Adverse Effect.
4.6 Litigation. No litigation, investigation or proceeding of or
----------
before any arbitrator or Governmental Authority is pending or, to the knowledge
of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) that could reasonably be expected to have a Material
Adverse Effect (other than with respect to the SanDisk Litigation as of the date
hereof).
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<PAGE>
4.7 No Default. Neither the Borrower nor any of its Subsidiaries is
----------
in default under or with respect to any of its Contractual Obligations in any
respect that could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of the Borrower and its
----------------------------
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its real property, and good title to, or a valid leasehold interest in, all its
other property, and none of such property is subject to any Lien except as
permitted by Section 7.3.
4.9 Intellectual Property. The Borrower and each of its Subsidiaries
---------------------
owns, or is licensed to use, or could obtain the right to use on terms not
materially adverse, all Intellectual Property necessary for the conduct of its
business as currently conducted. Except for the "SanDisk Litigation" as defined
in the Senior Loan Agreement, no material claim has been asserted and is pending
by any Person challenging or questioning the use of any Intellectual Property or
the validity or effectiveness of any Intellectual Property, nor does the
Borrower know of any valid basis for any such claim. The use of Intellectual
Property by the Borrower and its Subsidiaries does not infringe on the rights of
any Person in any material respect.
4.10 Taxes. Each of the Borrower and each of its Subsidiaries has
-----
filed or caused to be filed all Federal, state and other material tax returns
that are required to be filed and has paid all taxes shown to be due and payable
on said returns or on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge.
4.11 Federal Regulations. No part of the proceeds of any Loans, and
-------------------
no other extensions of credit hereunder, will be used for "buying" or "carrying"
any "margin stock" within the respective meanings of each of the quoted terms
under Regulation U or G as now and from time to time hereafter in effect or for
any purpose that violates the provisions of the Regulations of the Board. If
requested by the Lender, the Borrower will furnish to the Lender a statement to
the foregoing effect in conformity with the requirements of Form G-3 or Form U-
1, as applicable, referred to in Regulation U.
4.12 Labor Matters. Except as, in the aggregate, could not
-------------
reasonably be expected to have a Material Adverse Effect: (a) there are no
strikes or other labor disputes against the Borrower or any of its Subsidiaries
pending or, to the knowledge of the Borrower, threatened; (b) hours worked by
and payment made to employees of the Borrower and its Subsidiaries have not been
in violation of the Fair Labor Standards Act or any other applicable Requirement
of Law dealing with such matters; and (c) all payments due from the Borrower or
any of its Subsidiaries on account of employee health and welfare insurance have
been paid or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
-----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan that
has resulted or
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<PAGE>
could reasonably be expected to result in a material liability under ERISA, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any material liability under ERISA if the Borrower or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
-----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur Indebtedness.
4.15 Subsidiaries. Except as disclosed to the Lender by the Borrower
------------
in writing from time to time after the Closing Date, (a) Schedule 4.15 sets
forth the name and jurisdiction of incorporation of each Subsidiary and, as to
each such Subsidiary, the percentage of each class of Capital Stock owned by any
Loan Party and there are no outstanding subscriptions, options, warrants,
calls, rights or other agreements or commitments (other than stock options
granted to employees or directors and directors' qualifying shares) of any
nature relating to any Capital Stock of the Borrower or any Subsidiary, except
as created by the Loan Documents.
4.16 Use of Proceeds. The proceeds of the Loans shall be used for
---------------
working capital and general corporate purposes of the Borrower and its
Subsidiaries in the ordinary course of business.
4.17 Environmental Matters. Except as, in the aggregate, could not
---------------------
reasonably be expected to have a Material Adverse Effect:
(a) the facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "Properties") do not contain, and
----------
have not previously contained during the time of Borrower's control and use
thereof, any Materials of Environmental Concern in amounts or
concentrations or under circumstances that constitute or constituted a
violation of, or could give rise to liability under, any Environmental Law;
(b) neither the Borrower nor any of its Subsidiaries has received or
is aware of any notice of violation, alleged violation, non-compliance,
liability or potential liability regarding environmental matters or
compliance with Environmental Laws with regard to any of the Properties or
the business operated by the Borrower or any of its Subsidiaries (the
"Business"), nor does the Borrower have knowledge or reason to believe that
---------
any such notice will be received or is being threatened;
(c) Materials of Environmental Concern have not been transported or
disposed of by Borrower from the Properties in violation of, or in a manner
or to a location that could give rise to liability under, any Environmental
Law, nor have any Materials of Environmental Concern been generated,
treated, stored or disposed of at, on or under any of the Properties in
violation of, or in a manner that could give rise to liability under, any
applicable Environmental Law;
(d) no judicial proceeding or governmental or administrative action
is pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be
named as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Properties or
the Business;
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<PAGE>
(e) there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related
to the operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could give rise to liability under
Environmental Laws;
(f) the Properties and all operations at the Properties by Borrower
are in compliance, with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the Business; and
(g) neither the Borrower nor any of its Subsidiaries has assumed any
liability of any other Person under Environmental Laws.
4.18 Accuracy of Information, etc. No statement or information
----------------------------
contained in this Agreement, any other Loan Document, or any other document,
certificate or statement furnished by or on behalf of any Loan Party to the
Lender, or any of them, for use in connection with the transactions contemplated
by this Agreement or the other Loan Documents, contained as of the date such
statement, information, document or certificate was so furnished, any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein not misleading. The projections
and pro forma financial information contained in the materials referenced above
--- -----
are based upon good faith estimates and assumptions believed by management of
the Borrower to be reasonable at the time made, it being recognized by the
Lender that such financial information as it relates to future events is not to
be viewed as fact and that actual results during the period or periods covered
by such financial information may differ from the projected results set forth
therein by a material amount. There is no fact known to any Loan Party that
could reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Lender for use in
connection with the transactions contemplated hereby and by the other Loan
Documents.
4.19 Security Documents. The Guarantee and Collateral Agreement is
------------------
effective to create in favor of the Lender, a legal, valid and enforceable
security interest in the Collateral described therein and proceeds thereof.
When financing statements and other filings specified on Schedule 4.19 in
appropriate form are filed in the offices specified on Schedule 4.19, the
Guarantee and Collateral Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
such Collateral and the proceeds thereof, as security for the Obligations (as
defined in the Guarantee and Collateral Agreement), in each case prior and
superior in right to any other Person (except, in the case of Collateral other
than Pledged Stock, Liens permitted by Section 7.3), and except for Liens in
favor of the lenders of the Senior Loans.
4.20 Solvency. Each Loan Party is, and after giving effect to the
--------
incurrence of all Indebtedness and obligations being incurred in connection
herewith and therewith will be and will continue to be, Solvent.
SECTION 5. CONDITIONS PRECEDENT.
5.1 Conditions to Effectiveness. This Agreement shall become
---------------------------
effective on and as of the first date, on which the following conditions
precedent shall have been satisfied:
(a) Credit Agreement; Guarantee and Collateral Agreement. The Lender
----------------------------------------------------
shall have received (i) this Agreement, executed and delivered by the
Lender and the Borrower, (ii) the Guarantee and Collateral Agreement,
executed and delivered by the Borrower and each Subsidiary
-18-
<PAGE>
Guarantor, (iii) an Acknowledgment and Consent in the form attached to the
Guarantee and Collateral Agreement, executed and delivered by each Issuer
(as defined therein), if any, that is not a Loan Party, and (iv) the
Intercreditor Agreement, executed and delivered by Chase and Lender.
(b) Financial Statements. The Lender shall have received (i) audited
--------------------
consolidated financial statements of the Borrower for the 1999 fiscal year
and (ii) unaudited interim consolidated and consolidating (on a division-
by-division basis) financial statements of the Borrower for the fiscal
month of April 2000 and each quarterly period ended subsequent to the date
of the latest applicable financial statements delivered pursuant to clause
(i) of this paragraph as to which such financial statements are available,
and such financial statements shall not, in the reasonable judgment of the
Lender, reflect any material adverse change in the consolidated financial
condition of the Borrower, as reflected in the financial statements or
projections delivered to the Lender prior to the Closing Date.
(c) Approvals. All governmental and third party approvals (including
---------
landlords' and other consents) necessary in connection with the continuing
operations of the Borrower and its Subsidiaries and the transactions
contemplated hereby shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority that would
restrain, prevent or otherwise impose adverse conditions on the financing
contemplated hereby.
(d) Lien Searches. The Lender shall have received the results of a
-------------
recent lien search in each of the jurisdictions where assets of the Loan
Parties are located, and such search shall reveal no liens on any of the
assets of the Borrower or its Subsidiaries except for liens permitted by
Section 7.3 or discharged on or prior to the Closing Date pursuant to
documentation satisfactory to the Lender.
(e) Fees. [Reserved]
----
(f) Closing Certificate. The Lender shall have received a
-------------------
certificate of each Loan Party, dated the Closing Date, substantially in
the form of Exhibit C, with appropriate insertions and attachments.
(g) Legal Opinions. The Lender shall have received the following
--------------
executed legal opinions:
(i) the legal opinion of Fenwick & West LLP, counsel to the
Borrower and its Subsidiaries, in form and substance satisfactory to
Lender; and
(ii) the legal opinion of Winthrop, Stimson, Putnam & Roberts,
special New York counsel to the Borrower and its Subsidiaries, in form
and substance satisfactory to Lender.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Lender may reasonably
require.
(h) Pledged Stock; Stock Powers; Pledged Notes. Chase shall have
------------------------------------------
received (i) the certificates representing the shares of Capital Stock
pledged to Chase, together with an undated stock power for each such
certificate executed in blank by a duly authorized officer of the pledgor
thereof and (ii) each promissory note (if any) pledged to Chase pursuant to
the Guarantee and Collateral
-19-
<PAGE>
Agreement between the Loan Parties and Chase endorsed (without recourse) in
blank (or accompanied by an executed transfer form in blank) by the pledgor
thereof.
(i) Filings, Registrations and Recordings. Each document (including
-------------------------------------
any Uniform Commercial Code financing statement) required by the Security
Documents or under law or reasonably requested by the Lender to be filed,
registered or recorded in order to create in favor of the Lender, a
perfected Lien on the Collateral described therein, prior and superior in
right to any other Person (other than with respect to Liens expressly
permitted by Section 7.3), shall be in proper form for filing, registration
or recordation.
(j) Insurance. The Lender shall have received insurance certificates
---------
satisfying the requirements of Section 5.2(b) of the Guarantee and
Collateral Agreement.
(k) Projections. The Lender shall have received projections and a
-----------
written analysis of the business and prospects of the Borrower and its
Subsidiaries, for the period from the Closing Date through a date agreed to
by Lender, each in form and substance satisfactory to the Lender.
(l) Warrant. The Borrower shall have executed the Warrant Documents,
-------
containing terms and conditions satisfactory to Lender.
5.2 Conditions to Initial Extension of Credit. The agreement of Lender
-----------------------------------------
to make the initial extension of credit requested to be made by it is subject to
the satisfaction, prior to or concurrently with the making of such extension of
credit on the Initial Funding Date, of the following conditions precedent:
(a) Existing Debt. Each of the Toshiba Debt and the Kingston Notes
-------------
shall have been either (i) subordinated to the Obligations on terms and
conditions satisfactory to Lender or (ii) terminated and all amounts
thereunder shall have been paid in full and satisfactory arrangements shall
have been made for the termination of all Liens, if any, granted in
connection therewith.
(b) Amendment to Investors Rights Agreement. Lender shall have
---------------------------------------
received a copy of the Amendment to Investors Rights Agreement, executed
and delivered by the parties thereto.
5.3 Amendment to Investors Rights Agreement. The agreement of Lender
---------------------------------------
to make any Disbursements (including the initial Disbursement) is subject to the
satisfaction of the following additional conditions precedent, in addition to
the conditions set forth in Section 2:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct on and as of such date as if made on and as of
such date.
(b) No Default. No Default or Event of Default shall have occurred
----------
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
Each borrowing on behalf of the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such extension of
credit that the conditions contained in this Section 5.3 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS.
The Borrower hereby agrees that, during the term of this Agreement and
so long as any Loan or other amount is owing to the Lender hereunder, the
Borrower shall and shall cause each of its Subsidiaries to:
-20-
<PAGE>
6.1 Financial Statements. Furnish to the Lender:
--------------------
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the
end of such year and the related audited consolidated statements of income
and of cash flows for such year, setting forth in each case in comparative
form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or qualification arising out
of the scope of the audit, by PricewaterhouseCoopers LLP or other
independent certified public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated statements of income and of cash
flows for such quarter and the portion of the fiscal year through the end
of such quarter, setting forth in each case in comparative form the figures
for the previous year, certified by a Responsible Officer as being fairly
stated in all material respects (subject to normal year-end audit
adjustments); and
(c) as soon as available, but in any event not later than 15 days
after the end of each month occurring during each fiscal year of the
Borrower (other than the third, sixth, ninth and twelfth such month), the
unaudited consolidated balance sheets of the Borrower and its Subsidiaries
as at the end of such month and the related unaudited consolidated
statements of income and of cash flows for such month and the portion of
the fiscal year through the end of such month, setting forth in each case
in comparative form the figures for the previous year, certified by a
Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).
6.2 Certificates; Other Information. Furnish to the Lender:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer on
behalf of the Borrower stating that, to the best of each such Responsible
Officer's knowledge, each Loan Party during such period has observed or
performed all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to
which it is a party to be observed, performed or satisfied by it, and that
such Responsible Officer has obtained no knowledge of any Default or Event
of Default except as specified in such certificate and (ii) in the case of
monthly, quarterly or annual financial statements, (x) a Compliance
Certificate containing all information and calculations necessary for
determining compliance by the Borrower and its Subsidiaries with the
provisions of this Agreement referred to therein as of the last day of the
fiscal quarter or fiscal year of the Borrower, as the case may be, and (y)
to the extent not previously disclosed to the Lender, a listing of any
county or state within the United States where any Loan Party keeps
inventory or equipment and of any Intellectual
-21-
<PAGE>
Property acquired by any Loan Party since the date of the most recent list
delivered pursuant to this clause (y) (or, in the case of the first such
list so delivered, since the Closing Date);
(c) within 45 days after the end of each fiscal quarter of the
Borrower, a narrative discussion and analysis of the financial condition
and results of operations of the Borrower and its Subsidiaries for such
fiscal quarter and for the period from the beginning of the then current
fiscal year to the end of such fiscal quarter, as compared to the portion
of the Projections covering such periods and to the comparable periods of
the previous year;
(d) within five days after the same are sent, copies of all financial
statements and reports that the Borrower sends to the holders of any class
of its debt securities or public equity securities and, within five days
after the same are filed, copies of all financial statements and reports
that the Borrower may make to, or file with, the SEC;
(e) promptly, such additional financial and other information as
Lender may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
----------------------
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be.
6.4 Maintenance of Existence; Compliance. (a)(i) Preserve, renew
------------------------------------
and keep in full force and effect its corporate existence and (ii) take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business, except, in each case, as
otherwise permitted by Section 7.4 and except, in the case of clause (ii) above,
to the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (b) comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all property
----------------------------------
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted and (b) maintain with financially sound and
reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business.
6.6 Inspection of Property; Books and Records; Discussions. (a)
------------------------------------------------------
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and (b)
permit representatives of Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties, subject to the Borrower's reasonable security procedures
and financial and other condition of the Borrower and its Subsidiaries with
officers and employees of the Borrower and its Subsidiaries and with its
independent certified public accountants.
6.7 Notices. Promptly give notice to the Lender of:
-------
(a) the occurrence of any Default or Event of Default;
-22-
<PAGE>
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding that may exist at any time between the Borrower
or any of its Subsidiaries and any Governmental Authority, that in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries (i) in which the amount involved is $1,000,000 or more and not
covered by insurance, (ii) in which injunctive or similar relief is sought
or (iii) which relates to any Loan Document;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, a failure to
make any required contribution to a Plan, the creation of any Lien in favor
of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC or
the Borrower or any Commonly Controlled Entity or any Multiemployer Plan
with respect to the withdrawal from, or the termination, Reorganization or
Insolvency of, any Plan; and
(e) any development or event that has had or could reasonably be
expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer on behalf of the Borrower setting forth details of the
occurrence referred to therein and stating what action the Borrower or the
relevant Subsidiary proposes to take with respect thereto.
6.8 Environmental Laws. (a) Comply in all material respects with,
------------------
and ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws, and obtain and comply in all
material respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.
6.9 Additional Collateral, etc. (a) With respect to any property
--------------------------
acquired after the Closing Date by the Borrower or any of its Subsidiaries
(other than (x) any property described in paragraph (b), (c) or (d) below, (y)
any property subject to a Lien expressly permitted by Section 7.3(g) and (z)
property acquired by any Excluded Foreign Subsidiary) as to which the Lender,
does not have a perfected Lien, promptly (i) execute and deliver to the Lender
such amendments to the Guarantee and Collateral Agreement or such other
documents as the Lender deems necessary or advisable to grant to the Lender, a
security interest in such property and (ii) take all actions necessary or
advisable to grant to the Lender, a perfected first priority security interest
in such property, including the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Guarantee and
Collateral Agreement or by law or as may be requested by the Lender.
(b) With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $250,000 acquired after
the Closing Date by the Borrower or any of its Subsidiaries (other than (x) any
such real property subject to a Lien expressly permitted by Section 7.3(g) and
(z) real property acquired by any Excluded Foreign Subsidiary), promptly (i)
execute and deliver a first
-23-
<PAGE>
priority mortgage, in favor of the Lender, covering such real property, (ii) if
requested by the Lender, provide the Lender with (x) title and extended coverage
insurance covering such real property in an amount at least equal to the
purchase price of such real property (or such other amount as shall be
reasonably specified by the Lender) as well as a current ALTA survey thereof,
together with a surveyor's certificate and (y) any consents or estoppels
reasonably deemed necessary or advisable by the Lender in connection with such
mortgage or deed of trust, each of the foregoing in form and substance
reasonably satisfactory to the Lender and (iii) if requested by the Lender,
deliver to the Lender legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Lender.
(c) With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date by the Borrower
(which, for the purposes of this paragraph (c), shall include any existing
Subsidiary that ceases to be an Excluded Foreign Subsidiary), the Borrower or
any of its Subsidiaries, promptly (i) execute and deliver to the Lender such
amendments to the Guarantee and Collateral Agreement as the Lender deems
necessary or advisable to grant to the Lender, a perfected security interest in
the Capital Stock of such new Subsidiary that is owned by the Borrower or any of
its Subsidiaries (subject only to the Lien in favor of the lenders under the
Senior Loan Agreement), (ii) deliver to the Lender the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, (iii) cause such new Subsidiary (A) to become a party to the
Guarantee and Collateral Agreement, (B) to take such actions necessary or
advisable to grant to the Lender a perfected first priority security interest in
the Collateral described in the Guarantee and Collateral Agreement with respect
to such new Subsidiary (subject only to the Lien in favor of the lenders under
the Senior Loan Agreement), including the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the Guarantee
and Collateral Agreement or by law or as may be requested by the Lender and (C)
to deliver to the Lender a certificate of such Subsidiary, substantially in the
form of Exhibit C, with appropriate insertions and attachments, and (iv) if
requested by the Lender, deliver to the Lender legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Lender.
(d) With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by the Borrower or any of its Subsidiaries,
promptly (i) execute and deliver to the Lender such amendments to the Guarantee
and Collateral Agreement as the Lender deems necessary or advisable to grant to
the Lender a perfected security interest (subject only to the Lien in favor of
the lenders under the Senior Loan Agreement) in the Capital Stock of such new
Subsidiary that is owned by the Borrower or any of its Subsidiaries (provided
that in no event shall more than 65% of the total outstanding Capital Stock of
any such new Subsidiary be required to be so pledged), (ii) take such other
action as may be necessary or, in the opinion of the Lender, desirable to
perfect the Lender's security interest therein, and (iii) if requested by the
Lender, deliver to the Lender legal opinions relating to the matters described
above, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Lender.
6.10 Subordination and Consents. Within 30 days after Closing Date,
--------------------------
(i) subordinate all amounts owing under the Sony Debt and the Bridge Financing
to the Obligations on terms and conditions satisfactory to Lender and (ii)
obtain the Sony Consent. The subordination agreement signed by the holders of
the Borrower's notes included in the Bridge Financing shall prohibit any payment
or prepayment of principal thereof or interest thereon, unless, at the date the
payment is to be made, and after giving effect thereto, the Borrower has cash
and Cash Equivalents of not less than three times the "Applicable Amount" (as
defined below), and at said date the trade payables of the Borrower have not
increased over the amounts thereof generally outstanding in relation to the
revenues of Borrower. "Applicable Amount" as used above means $10,000,000,
provided that if Borrower, at its option, signs an amendment to this Agreement,
in form and substance satisfactory to Lender, permanently reducing the maximum
amount Borrower may borrow from Lender under this Agreement, then the Applicable
Amount shall be reduced to the maximum amount Borrower may borrow from Lender
under this Agreement.
6.11 Fees and Expenses. Within the earlier of (i) 15 days after the
-----------------------
Closing Date and (ii) the date on which the conditions precedent set forth in
Section 5.2 shall have been satisfied, pay to the Lender a loan fee in the
amount of $200,000 and all other fees, and all expenses for which invoices have
been presented on or before such date (including the reasonable fees and
expenses of legal counsel).
SECTION 7. NEGATIVE COVENANTS.
The Borrower hereby agrees that, so long as the Loan Commitments
remain in effect, or any Loan or other amount is owing to Lender hereunder, the
Borrower shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:
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<PAGE>
7.1 Financial Condition Covenants.
------------------------------
(a) Consolidated Revenue. Permit the Consolidated Revenue as at the
--------------------
last day of any fiscal quarter of the Borrower set forth below to be less than
the amount set forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Consolidated Revenue
-------------- --------------------
<S> <C>
06/30/2000 $22,000,000
09/30/2000 $24,000,000
12/31/2000 $26,000,000
03/31/2001 and each fiscal quarter $28,000,000
thereafter
</TABLE>
(b) Consolidated EBITDA. Permit the Consolidated EBITDA as at the
-------------------
last day of any fiscal quarter of the Borrower set forth below to be less than
the amount set forth below opposite such fiscal quarter (amounts in brackets
([]) are negative amounts):
<TABLE>
<CAPTION>
Fiscal Quarter Consolidated EBITDA
-------------- --------------------
<S> <C>
06/30/2000 [$6,000,000]
09/30/2000 [$8,000,000]
12/31/2000 [$8,000,000]
03/31/2001 and each fiscal quarter [$6,000,000]
thereafter
</TABLE>
(c) Consolidated Debt to Capital Ratio. Permit the Consolidated Debt
----------------------------------
to Capital Ratio as at the last day of any fiscal quarter of the Borrower set
forth below to exceed the ratio set forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Consolidated Debt to Capital Ratio
-------------- ----------------------------------
<S> <C>
06/30/2000 0.50 to 1.00
09/30/2000 0.75 to 1.00
12/31/2000 1.00 to 1.00
03/31/2001 and each fiscal quarter 1.25 to 1.00
thereafter
</TABLE>
-25-
<PAGE>
(d) Capital Expenditures and Capitalized Software Expenses. Permit
------------------------------------------------------
the sum of (i) Capital Expenditures and (ii) Capitalized Software Expenses of
the Borrower and its Subsidiaries for any period of four consecutive fiscal
quarters of the Borrower ending with any fiscal quarter set forth below to
exceed the amount set forth below opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Amount
-------------- ------
<S> <C>
12/31/2000 $6,000,000
03/31/2001 and each fiscal quarter $8,000,000
thereafter
</TABLE>
7.2 Indebtedness. Create, issue, incur, assume, become liable in
------------
respect of or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness incurred by the Borrower under the Senior Loan
Agreement;
(c) Indebtedness of the Borrower to any Subsidiary and of any Wholly
Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;
(d) Guarantee Obligations incurred in the ordinary course of business
by the Borrower or any of its Subsidiaries of obligations of any Wholly
Owned Subsidiary Guarantor;
(e) Indebtedness outstanding on the date hereof and listed on
Schedule 7.2(e) and any refinancings, refundings, renewals or extensions
thereof (without increasing, or shortening the maturity of, the principal
amount thereof);
(f) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate
principal amount not to exceed $5,000,000 at any one time outstanding;
(g) letters of credit for the account of the Borrower or any of its
Subsidiaries obtained other than pursuant to the Senior Loan Agreement, so
long as the aggregate undrawn face amount thereof, together with any
unreimbursed reimbursement obligations in respect thereof, does not exceed
$5,000,000 at any one time; and
(h) additional Indebtedness of the Borrower or any of its
Subsidiaries in an aggregate principal amount (for the Borrower and all
Subsidiaries) not to exceed $1,000,000 at any one time outstanding.
7.3 Liens. Create, incur, assume or suffer to exist any Lien upon
-----
any of its property, whether now owned or hereafter acquired, except for:
(a) Liens for taxes not yet due or that are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
--------
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP and no notice of
such Liens have been filed of record in any governmental office;
-26-
<PAGE>
(b) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
that are not overdue for a period of more than 30 days or that are being
contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business that, in the
aggregate, are not substantial in amount and that do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(f) Liens in existence on the date hereof listed on Schedule 7.3(f),
securing Indebtedness permitted by Section 7.2(e), provided that no such
--------
Lien is spread to cover any additional property after the Closing Date and
that the amount of Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Borrower or any other
Subsidiary incurred pursuant to Section 7.2(f) to finance the acquisition
of fixed or capital assets, provided that (i) such Liens shall be created
--------
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness and (iii) the amount of
Indebtedness secured thereby is not increased;
(h) Liens created pursuant to the Senior Loan Agreement;
(i) any interest or title of a lessor under any lease entered into by
the Borrower or any other Subsidiary in the ordinary course of its business
and covering only the assets so leased;
(j) Liens, securing obligations of the Borrower or any of its
Subsidiaries under letters of credit issued pursuant to Section 7.2(g),
solely on segregated cash collateral accounts or segregated bank accounts
that contain cash and Cash Equivalents not to exceed 110% of the aggregate
face amount of such letters of credit; and
(k) Liens not otherwise permitted by this Section so long as neither
(i) the aggregate outstanding principal amount of the obligations secured
thereby nor (ii) the aggregate fair market value (determined as of the date
such Lien is incurred) of the assets subject thereto exceeds (as to the
Borrower and all Subsidiaries) $1,000,000 at any one time.
7.4 Fundamental Changes. Enter into any merger, consolidation or
-------------------
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except that:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into the Borrower (provided that the Borrower shall be the continuing or
--------
surviving corporation) or with or into any Wholly Owned Subsidiary
Guarantor (provided that the Wholly Owned Subsidiary Guarantor shall be the
--------
continuing or surviving corporation); and
(b) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the Borrower or any
Wholly Owned Subsidiary Guarantor.
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7.5 Disposition of Property. Dispose of any of its property, whether
-----------------------
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person, except:
(a) the Disposition of unneeded, obsolete or worn out property in the
ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions permitted by Section 7.4(b);
(d) the sale or issuance of any Subsidiary's Capital Stock to the
Borrower or any Wholly Owned Subsidiary Guarantor;
(e) so long as no Default or Event of Default has occurred and is
continuing, the Disposition or cancellation of promissory notes issued to
the Borrower by its employees in connection with the repurchase by the
Borrower of Capital Stock owned by employees of the Borrower or any
Subsidiary after such employee discontinues employment with the Borrower or
such Subsidiary; and
(f) the Disposition of other property having a fair market value not
to exceed $1,000,000 in the aggregate for any fiscal year of the Borrower.
7.6 Restricted Payments. Declare or pay any dividend (other than
-------------------
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Capital Stock of the Borrower or any Subsidiary (other than
any payments made in connection with the repurchase or redemption of Capital
Stock owned by employees of the Borrower or any Subsidiary after such employee
discontinues employment with the Borrower or such Subsidiary, provided that the
aggregate amount of such Restricted Payments shall not exceed $250,000 in any
fiscal year of the Borrower), whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of the Borrower or any Subsidiary
(collectively, "Restricted Payments"), except that any Subsidiary may make
Restricted Payments to the Borrower or any Wholly Owned Subsidiary Guarantor.
7.7 Investments. Make any advance, loan, extension of credit (by way
-----------
of guaranty or otherwise) or capital contribution to, or purchase any Capital
Stock, bonds, notes, debentures or other debt securities of, or any assets
constituting a business unit of, or make any other investment in, any Person
(all of the foregoing, "Investments"), except:
-----------
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) intercompany Investments by the Borrower or any of its
Subsidiaries in the Borrower or any Person that, prior to such investment,
is a Wholly Owned Subsidiary Guarantor; and
(e) in addition to Investments otherwise expressly permitted by this
Section, Investments by the Borrower or any of its Subsidiaries in an
aggregate amount (valued at cost) not to exceed $1,000,000 during the term
of this Agreement.
7.8 Optional Payments and Modifications of Certain Debt Instruments.
---------------------------------------------------------------
Make any optional payment or prepayment on or redemption or purchase of any
Indebtedness (other than the Loans, any Indebtedness permitted under Section
7.2(b) or (c), or the Bridge Financing or Sony Debt to the extent permitted
under the applicable subordination agreement entered into pursuant to Section
6.10) or amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms relating to the payment or prepayment
or principal of or interest on, any such Indebtedness (other than any such
amendment, modification or change which would extend the maturity or
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<PAGE>
reduce the amount of any payment of principal thereof or which would reduce the
rate or extend the date for payment of interest thereon).
7.9 Transactions with Affiliates. Enter into any transaction,
----------------------------
including any purchase, sale, lease or exchange of property, the rendering of
any service or the payment of any management, advisory or similar fees, with any
Affiliate (other than the Borrower or any Wholly Owned Subsidiary Guarantor)
unless such transaction is (a) otherwise permitted under this Agreement, (b) in
the ordinary course of business of the Borrower or such Subsidiary, as the case
may be, and (c) upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary, as the case may be, than it would obtain in a comparable
arm's length transaction with a Person that is not an Affiliate.
7.10 Sales and Leasebacks. Enter into any arrangement with any
--------------------
Person providing for the leasing by the Borrower or any Subsidiary of real or
personal property that has been or is to be sold or transferred by the Borrower
or such Subsidiary to such Person or to any other Person to whom funds have been
or are to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Subsidiary.
7.11 Changes in Fiscal Periods. Permit the fiscal year of the
-------------------------
Borrower to end on a day other than December 31 or change the Borrower's method
of determining fiscal quarters.
7.12 Negative Pledge Clauses. Enter into or suffer to exist or
-----------------------
become effective any agreement that prohibits or limits the ability of the
Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist
any Lien upon any of its property or revenues, whether now owned or hereafter
acquired, to secure its obligations under the Loan Documents to which it is a
party other than (a) this Agreement, the other Loan Documents and the Secured
Term Loan and (b) any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby).
7.13 Lines of Business. Enter into any business, either directly or
-----------------
through any Subsidiary, except for those businesses in which the Borrower and
its Subsidiaries are engaged on the date of this Agreement or that are
reasonably related thereto.
SECTION 8. EVENTS OF DEFAULT.
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan when due
in accordance with the terms hereof; or the Borrower shall fail to pay any
interest on any Loan, or any other amount payable hereunder or under any
other Loan Document, within three days after any such interest or other
amount becomes due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) any Loan Party shall default in the observance or performance of
any agreement contained in clause (i) or (ii) of Section 6.4(a) (with
respect to the Borrower only), Section 6.7(a) or Section 7 of this
Agreement or Sections 5.4 and 5.6(b) of the Guarantee and Collateral
Agreement; or
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(d) any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a period of 30 days after notice
to the Borrower from the Lender; or
(e) the Borrower or any of its Subsidiaries shall (i) default in
making any payment of any principal of any Indebtedness (including any
Guarantee Obligation, but excluding the Loans) on the scheduled or original
due date with respect thereto; or (ii) default in making any payment of any
interest on any such Indebtedness beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness was
created; or (iii) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto, or
any other event shall occur or condition exist, the effect of which default
or other event or condition is to cause, or to permit the holder or
beneficiary of such Indebtedness (or a trustee or agent on behalf of such
holder or beneficiary) to cause, with the giving of notice if required,
such Indebtedness to become due prior to its stated maturity or (in the
case of any such Indebtedness constituting a Guarantee Obligation) to
become payable; provided, that a default, event or condition described in
--------
clause (i), (ii) or (iii) of this paragraph (e) shall not at any time
constitute an Event of Default unless, at such time, one or more defaults,
events or conditions of the type described in clauses (i), (ii) and (iii)
of this paragraph (e) shall have occurred and be continuing with respect to
Indebtedness the outstanding principal amount of which exceeds in the
aggregate $1,000,000; or
(f) (i) the Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Borrower or any of its Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above that
(A) results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced against the Borrower
or any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets that results in
the entry of an order for any such relief that shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 days from the
entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or any of its Subsidiaries shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) (i) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or
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<PAGE>
appointment of a trustee is, in the reasonable opinion of the Lender,
likely to result in the termination of such Plan for purposes of Title IV
of ERISA, (iv) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity
shall, or in the reasonable opinion of the Lender is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist with respect to a Plan; and in each case in
clauses (i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could, in the sole judgment of the
Lender, reasonably be expected to have a Material Adverse Effect; or
(h) (i) one or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance as to which the relevant insurance
company has acknowledged coverage) of $1,000,000 or more, and all such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 60 days from the entry thereof, or (ii) any
preliminary or permanent injunction(s) shall be issued in the SanDisk
Litigation against the Borrower or its Subsidiaries adversely affecting the
business practices of the Borrower, including, without limitation, its
ability to manufacture products; or
(i) any of the Security Documents shall cease, for any reason, to be
in full force and effect, or any Loan Party or any Affiliate of any Loan
Party shall so assert, or any Lien created by any of the Security Documents
shall cease to be enforceable and of the same effect and priority purported
to be created thereby; or
(j) the guarantee contained in Section 2 of the Guarantee and
Collateral Agreement shall cease, for any reason, to be in full force and
effect or any Loan Party or any Affiliate of any Loan Party shall so
assert; or
(k) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), shall become, or obtain rights (whether by means or warrants,
options or otherwise) to become, the "beneficial owner" (as defined in
Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly,
of more than 20% of the outstanding common stock of the Borrower; or (iii)
the board of directors of the Borrower shall cease to consist of a majority
of Continuing Directors; or
(l) any Event of Default as defined in the Senior Loan Agreement, as
the same is in effect on the date hereof, or as the same may hereafter be
amended, shall occur (without regard to whether or not such Event of
Default is waived by the lenders under the Senior Loan Agreement);
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the obligation of Lender to make Loans shall immediately terminate
and the Loans hereunder (with accrued interest thereon) and all other amounts
owing under this Agreement and the other Loan Documents shall immediately become
due and payable, and (B) if such event is any other Event of Default, either or
both of the following actions may be taken at any time thereafter: (i) the
Lender may, by notice to the Borrower declare the obligation of Lender to make
Loans to be terminated forthwith, whereupon said obligation shall immediately
terminate; and (ii) the Lender may, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents to be due and payable forthwith,
whereupon the same shall immediately become due and payable. Except as expressly
provided above in this Section, presentment, demand, protest and all other
notices of any kind are hereby expressly waived by the Borrower.
SECTION 9. [Omitted]
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SECTION 10. MISCELLANEOUS.
10.1 Amendments and Waivers. Neither this Agreement, any other Loan
----------------------
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Lender and each Loan Party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lender or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Lender may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences. In the case of any waiver, the Loan
Parties and the Lender shall be restored to their former position and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon, whether or not similar to the Default of
Event of Default so waived.
10.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Borrower and the Lender, or to
such other address as may be hereafter notified by the respective parties
hereto:
The Borrower: Lexar Media, Inc.
47421 Bayside Parkway
Fremont, CA 94538
Attention: Chief Financial Officer
Telecopy: 510.440.3499
Telephone: 510.413.1200
with a copy to: Fenwick & West LLP
Two Palo Alto Square
Palo Alto, CA 94306
Attention: Blakeney Stafford, Esq.
Telecopy: 650.494.1417
Telephone: 650.494.0600
The Lender: Access Technology Partners, L.P.
One Bush St., Suite 1380
San Francisco, CA 94104
Attn: Shannon Horton
Telecopy: 415.371.3818
Telephone: 415.371.4281
with a copy to: Levy, Small & Lallas
815 Morage Drive
Los Angeles, CA 90049
Attention: Steven G. Small, Esq.
Telecopy: 310.471.7990
Telephone: 310.471.3000
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<PAGE>
provided that any notice, request or demand to or upon the Lender shall not be
--------
effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder or under the other Loan Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
-----------------------------
or reimburse the Lender for all its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including the reasonable fees and disbursements of counsel to the
Lender and filing and recording fees and expenses, with statements with respect
to the foregoing to be submitted to the Borrower prior to the Closing Date (in
the case of amounts to be paid on the Closing Date) and from time to time
thereafter on a quarterly basis or such other periodic basis as the Lender shall
deem appropriate, (b) to pay or reimburse the Lender for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to Lender, (c) to pay,
indemnify, and hold Lender harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, that may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
or administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold Lender and its officers, directors, employees,
affiliates, agents and controlling persons (each, an "Indemnitee") harmless from
----------
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including any of the foregoing relating to the use of
proceeds of the Loans or the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of the Borrower any of
its Subsidiaries or any of the Properties and the reasonable fees and expenses
of legal counsel in connection with claims, actions or proceedings by any
Indemnitee against any Loan Party under any Loan Document (all the foregoing in
this clause (d), collectively, the "Indemnified Liabilities"), provided, that
----------------------- --------
the Borrower shall have no obligation hereunder to any Indemnitee with respect
to Indemnified Liabilities to the extent such Indemnified Liabilities are found
by a final and nonappealable decision of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of such
Indemnitee. Without limiting the foregoing, and to the extent permitted by
applicable law, the Borrower agrees not to assert and to cause its Subsidiaries
not to assert, and hereby waives and agrees to cause its Subsidiaries to waive,
all rights for contribution or any other rights of recovery with respect to all
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee. All
amounts due under this Section 10.5 shall be payable not later than 10 days
after written demand therefor. Statements payable by the Borrower pursuant to
this
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Section 10.5 shall be submitted to the Chief Financial Officer of the Borrower,
at the address of the Borrower set forth in Section 10.2, or to such other
Person or address as may be hereafter designated by the Borrower in a written
notice to the Lender. The agreements in this Section 10.5 shall survive
repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments.
------------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lender, all future holders of the Loans and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of Lender.
(b) Lender may, without the consent of the Borrower, in accordance
with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
-----------
in any Loan owing to Lender, or any other interest of Lender hereunder and under
the other Loan Documents. In the event of any such sale by Lender of a
participating interest to a Participant, Lender's obligations under this
Agreement to the Borrower shall remain unchanged, Lender shall remain solely
responsible for the performance thereof, Lender shall remain the holder of any
such Loan for all purposes under this Agreement and the other Loan Documents,
and the Borrower and the Lender shall continue to deal solely and directly with
Lender in connection with Lender's rights and obligations under this Agreement
and the other Loan Documents. In no event shall any Participant under any such
participation have any right to approve any amendment or waiver of any provision
of any Loan Document, or any consent to any departure by any Loan Party
therefrom. The Borrower agrees that if amounts outstanding under this Agreement
and the Loans are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
(c) Lender may, in accordance with applicable law, at any time and
from time to time assign to any other person all or any part of its rights and
obligations under this Agreement and the other Loan Documents.
10.7 [Omitted]
---------
10.8 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.
10.7 Severability. Any provision of this Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.8 Integration. This Agreement and the other Loan Documents
-----------
represent the entire agreement of the Borrower and the Lender with respect to
the subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Lender relative to subject matter hereof
not expressly set forth or referred to herein or in the other Loan Documents.
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10.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
-------------
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.10 Submission To Jurisdiction; Waivers. The Borrower hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States for the Southern
District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Section 10.2 or at such other address
of which the Lender shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
10.11 Acknowledgements. The Borrower hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) the Lender does not have any fiduciary relationship with or duty
to the Borrower arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between Lender, on one
hand, and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby
between the Borrower and the Lender.
10.12 Releases of Guarantees and Liens.
--------------------------------
(a) [Omitted]
(b) At such time as the Loans, and the other obligations under the
Loan Documents shall have been paid in full and the obligation to make Loans has
been terminated in a manner satisfactory to the Lender, the Collateral shall be
released from the Liens created by the Security Documents, and the Security
Documents and all obligations (other than those expressly stated to survive such
termination) of the Lender
-35-
<PAGE>
and each Loan Party under the Security Documents shall terminate, all without
delivery of any instrument or performance of any act by any Person.
10.13 Confidentiality. Lender agrees to keep confidential all non-
---------------
public information provided to it by any Loan Party pursuant to this Agreement
that is designated by such Loan Party as confidential; provided that nothing
--------
herein shall prevent the Lender from disclosing any such information (a) to any
affiliate of the Lender, (b) to any actual or prospective transferee of any of
the Loans that agrees to comply with the provisions of this Section, (c) to its
employees, directors, agents, attorneys, accountants and other professional
advisors or those of any of its affiliates, (d) upon the request or demand of
any Governmental Authority, (e) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection with any
litigation or similar proceeding, (g) that has been publicly disclosed, (h) to
the National Association of Insurance Commissioners or any similar organization
or any nationally recognized rating agency that requires access to information
about Lender's investment portfolio in connection with ratings issued with
respect to Lender, or (i) in connection with the exercise of any remedy
hereunder or under any other Loan Document.
10.14 WAIVERS OF JURY TRIAL. THE BORROWER AND THE LENDER HEREBY
---------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.
[Remainder of Page Intentionally Left Blank]
-36-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
LEXAR MEDIA, INC.
By: _________________________
Name: _________________________
Title: _________________________
ACCESS TECHNOLOGY PARTNERS, L.P.
By: ACCESS TECHNOLOGY MANAGEMENT, L.L.C.
Its: General Partner
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: Managing Member
By: __________________________
Name: __________________________
Title:__________________________
-37-
<PAGE>
SCHEDULE 4.4
------------
CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES
The following material agreements contain rights that are required to be
assigned in connection with the execution, delivery, and performance of the
Agreement and/or the Loan Documents and prohibit any assignment of these rights
under such agreements without the prior written consent of the other party:
1. SONY Technology License Agreement between SONY Corporation and the
Company dated March 21, 2000.
2. Lexar Technology License Agreement between SONY Corporation and the
Company dated March 21, 2000.
The following agreements to which the Company is a party prohibit the
incurrence of additional indebtedness without the prior written consent of the
other party:
1. Series E Stock Purchase Agreement dated September 28, 1999 requires the
consent of the holders of at least seventy-five percent (75%) of the Company's
outstanding Series E Preferred Stock to incur additional indebtedness.
2. Note Purchase Agreement between the Company and John Tu and David Sun
dated August 8, 1997, as amended by that certain Amendment to the Note Purchase
Agreement dated February 23, 1998.
<PAGE>
SCHEDULE 4.15
-------------
SUBSIDIARIES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
Name Jurisdiction Ownership
---- ------------ ---------
------------------------------------------------------------------------------------------
<S> <C> <C>
Lexar Media K.K. Japan Wholly-owned subsidiary of
Lexar Media, Inc.
------------------------------------------------------------------------------------------
PrintRoom.com California Wholly-owned subsidiary of
Lexar Media, Inc.
------------------------------------------------------------------------------------------
Lexar Media (Europe) Limited United Kingdom Wholly-owned subsidiary of
Lexar Media, Inc.
------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
SCHEDULE 4.19
-------------
UCC FILING JURISDICTIONS
California Secretary of State
U.S. Patent and Trademark Office
-3-
<PAGE>
SCHEDULE 7.2(E)
---------------
EXISTING INDEBTEDNESS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Lendor Principal Amount Total Outstanding
------ ---------------- -----------------
-------------------------------------------------------------------------------------------
<S> <C> <C>
SONY Corporation $2,000,000 $2,000,000
-------------------------------------------------------------------------------------------
John Tu and David Sun $4,750,000 $4,750,000
-------------------------------------------------------------------------------------------
Toshiba America Electronic $ 400,000 $ 400,000
Components, Inc.
-------------------------------------------------------------------------------------------
APV Technologies Partners II, $ 300,000* $ 300,000
L.P.
-------------------------------------------------------------------------------------------
St. Paul Venture Capital $1,575,000* $1,575,000
Partners V, LLC
-------------------------------------------------------------------------------------------
GE Capital Equity $ 500,000* $ 500,000
Investments, Inc.
-------------------------------------------------------------------------------------------
SunAmerica Inc. $5,000,000* $5,000,000
-------------------------------------------------------------------------------------------
Mellon Ventures, L.P. $3,000,000* $3,000,000
-------------------------------------------------------------------------------------------
Thomvest Ventures, Inc. $1,399,545* $1,399,545
-------------------------------------------------------------------------------------------
</TABLE>
* Each of these Notes was issued by Lexar pursuant to a Note and Warrant
Purchase Agreement dated as of May 19, 2000 which allows the Company to issue up
to a total of $16 million dollars under this facility for a period of 90 days
after closing, the full amount of which will be deemed to be existing
indebtedness of Lexar.
-4-
<PAGE>
SCHEDULE 7.3(F)
---------------
EXISTING LIENS
In addition to security interests held in certain personal property of Lexar
pursuant to various equipment leases, certain tangible and intangible property
of Lexar is encumbered as follows:
1. The Company entered into a Note Purchase Agreement (the "Note Agreement") on
August 8, 1997 with John Tu and David Sun. Pursuant to the Note Agreement, John
Tu and David Sun made a loan to the Company in an aggregate principal amount of
$4,750,000. The loan is secured by all of the assets of the Company including
its intellectual property.
2. In June and July 1997, the Company received a cash advance for working
capital in the amount of $400,000 from Toshiba America Electronics Components,
Inc. This advance is secured by all of the assets of the Company including its
intellectual property.
-5-
<PAGE>
EXHIBIT A
---------
-------------------------------------------------------------------------------
GUARANTEE AND COLLATERAL AGREEMENT
made by
LEXAR MEDIA, INC.,
as Borrower,
and certain of its Subsidiaries
in favor of
ACCESS TECHNOLOGY PARTNERS, L.P.
Dated as of June 30, 2000
--------------------------------------------------------------------------------
-6-
<PAGE>
GUARANTEE AND COLLATERAL AGREEMENT
GUARANTEE AND COLLATERAL AGREEMENT, dated as of June 30, 2000, made by
each of the signatories hereto (together with any other entity that may become a
party hereto as provided herein, the "Grantors"), in favor of ACCESS TECHNOLOGY
PARTNERS, L.P. (the "Lender").
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to the Credit Agreement, dated as of June 30, 2000
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), between Lender and LEXAR MEDIA, INC., a California corporation (the
"Borrower"), the Lender has agreed to make extensions of credit to the Borrower
upon the terms and subject to the conditions set forth therein;
WHEREAS, the Borrower is a member of an affiliated group of companies
that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to enable the Borrower to make valuable transfers
to one or more of the other Grantors in connection with the operation of their
respective businesses;
WHEREAS, the Borrower and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lender
to make extensions of credit to the Borrower under the Credit Agreement that the
Grantors shall have executed and delivered this Agreement to the Lender;
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to enter into the Credit Agreement and to induce the Lender to make
extensions of credit to the Borrower thereunder, each Grantor hereby agrees with
the Lender as follows:
SECTION 1. DEFINED TERMS; CONSTRUCTION
1.1 Definitions. (a) Unless otherwise defined herein, terms defined
-----------
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms are used herein as defined in the
New York UCC: Accounts, Certificated Security, Chattel Paper, Documents,
Equipment, Farm Products, Instruments and Inventory.
(b) The following terms shall have the following meanings:
"Agreement": this Guarantee and Collateral Agreement, as the same may
---------
be amended, supplemented or otherwise modified from time to time.
"Borrower Obligations": the collective reference to the unpaid
--------------------
principal of and interest on the Loans and all other obligations and liabilities
of the Borrower (including, without limitation, interest accruing at the then
applicable rate provided in the Credit Agreement after the maturity of the Loans
and interest accruing at the then applicable rate provided in the Credit
Agreement after the filing of any petition in bankruptcy, or the commencement of
any insolvency, reorganization or like proceeding, relating to the Borrower,
whether or not a claim for post-filing or post-petition interest is allowed in
such
-7-
<PAGE>
proceeding) to the Lender (or, in the case of any Lender Hedge Agreement, any
Affiliate of Lender), whether direct or indirect, absolute or contingent, due or
to become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, the Credit Agreement, this Agreement, the other Loan
Documents, any Lender Hedge Agreement or any other document made, delivered or
given in connection with any of the foregoing, in each case whether on account
of principal, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Lender that are required to be paid by the Borrower pursuant
to the terms of any of the foregoing agreements).
"Collateral": as defined in Section 3.
----------
"Collateral Account": any collateral account established by the
------------------
Lender as provided in Section 6.1 or 6.4.
"Contracts": the contracts and agreements listed in Schedule 7, as the
--------- ----------
same may be amended, supplemented or otherwise modified from time to time,
including, without limitation, (i) all rights of any Grantor to receive moneys
due and to become due to it thereunder or in connection therewith, (ii) all
rights of any Grantor to damages arising thereunder and (iii) all rights of any
Grantor to perform and to exercise all remedies thereunder.
"Copyrights": (i) all copyrights arising under the laws of the United
----------
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
----------
recordings thereof, and all applications in connection therewith, including,
without limitation, all registrations, recordings and applications in the United
States Copyright Office, and (ii) the right to obtain all renewals thereof.
"Copyright Licenses": any written agreement naming any Grantor as
------------------
licensor or licensee (including, without limitation, those listed in Schedule
--------
6), granting any right under any Copyright, including, without limitation, the
grant of rights to manufacture, distribute, exploit and sell materials derived
from any Copyright.
"Deposit Account": as defined in the Uniform Commercial Code of any
---------------
applicable jurisdiction and, in any event, including, without limitation, any
demand, time, savings, passbook or like account maintained with a depositary
institution.
"Foreign Subsidiary": any Subsidiary organized under the laws of any
------------------
jurisdiction outside the United States of America.
"Foreign Subsidiary Voting Stock": the voting Capital Stock of any
-------------------------------
Foreign Subsidiary.
"General Intangibles": all "general intangibles" as such term is
-------------------
defined in Section 9-106 of the New York UCC and, in any event, including,
without limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
Grantor is a party or under which such Grantor has any right, title or interest
or to which such Grantor or any property of such Grantor is subject, as the same
may from time to time be amended, supplemented or otherwise modified, including,
without limitation, (i) all rights of such Grantor to receive moneys due and to
become due to it thereunder or in connection therewith, (ii) all rights of such
Grantor to damages arising thereunder and (iii) all rights of such Grantor to
perform and to exercise all remedies thereunder, in each case to the extent the
terms thereof (after giving effect to any consent that has been obtained, it
being understood that such Grantor is not obligated to obtain any such consent)
do not prohibit the grant
-8-
<PAGE>
by such Grantor of a security interest pursuant to this Agreement in its right,
title and interest therein without the consent of any other party thereto and do
not give any other party thereto the right to terminate its obligations
thereunder; provided, that the foregoing limitation shall not affect, limit,
--------
restrict or impair the grant by such Grantor of a security interest pursuant to
this Agreement in any Receivable or Intellectual Property or any money or other
amounts due or to become due or other right to payment under any such contract,
agreement, instrument or indenture.
"Guarantor Obligations": with respect to any Guarantor, all
---------------------
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement (including, without limitation, Section 2) or any
other Loan Document to which such Guarantor is a party, in each case whether on
account of guarantee obligations, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Lender that are required to be paid by such
Guarantor pursuant to the terms of this Agreement or any other Loan Document).
"Guarantors": the collective reference to each Grantor other than the
----------
Borrower.
"Intellectual Property": the collective reference to all rights,
---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, the Copyrights, the Copyright Licenses, the Patents, the
Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to
sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.
"Intercompany Note": any promissory note evidencing loans made by any
-----------------
Grantor to the Borrower or any of its Subsidiaries.
"Investment Property": the collective reference to (i) all
-------------------
"investment property" as such term is defined in Section 9-115 of the New York
UCC (other than any Foreign Subsidiary Voting Stock excluded from the definition
of "Pledged Stock") and (ii) whether or not constituting "investment property"
as so defined, all Pledged Notes and all Pledged Stock.
"Issuers": the collective reference to each issuer of any Investment
-------
Property.
"Lender Hedge Agreements": all Hedge Agreements (if any) entered into
-----------------------
by the Borrower with Lender (or any Affiliate of Lender).
"New York UCC": the Uniform Commercial Code as from time to time in
------------
effect in the State of New York.
"Obligations": (i) in the case of the Borrower, the Borrower
-----------
Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.
"Patents": (i) all letters patent of the United States, any other
-------
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without limitation,
any of the foregoing referred to in Schedule 6, (ii) all applications for
----------
letters patent of the United States or any other country and all divisions,
continuations and continuations-in-part thereof, including, without limitation,
any of the foregoing referred to in Schedule 6, and (iii) all rights to obtain
----------
any reissues or extensions of the foregoing.
-9-
<PAGE>
"Patent License": all agreements, whether written or oral, providing
--------------
for the grant by or to any Grantor of any right to manufacture, use or sell any
invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in Schedule 6.
----------
"Pledged Notes": all promissory notes listed on Schedule 2, all
------------- ----------
Intercompany Notes at any time issued to any Grantor and all other promissory
notes issued to or held by any Grantor (other than promissory notes issued in
connection with extensions of trade credit by any Grantor in the ordinary course
of business).
"Pledged Stock": the shares of Capital Stock listed on Schedule 2,
------------- ----------
together with any other shares, stock certificates, options, interests or rights
of any nature whatsoever in respect of the Capital Stock of any Person that may
be issued or granted to, or held by, any Grantor while this Agreement is in
effect; provided that in no event shall more than 66% of the total outstanding
--------
Foreign Subsidiary Voting Stock of any Foreign Subsidiary be required to be
pledged hereunder.
"Proceeds": all "proceeds" as such term is defined in Section 9-
--------
306(1) of the New York UCC and, in any event, shall include, without limitation,
all dividends or other income from the Investment Property, collections thereon
or distributions or payments with respect thereto.
"Receivable": any right to payment for goods sold or leased or for
----------
services rendered, whether or not such right is evidenced by an Instrument or
Chattel Paper and whether or not it has been earned by performance (including,
without limitation, any Account).
"Securities Act": the Securities Act of 1933, as amended.
--------------
"Trademarks": (i) all trademarks, trade names, corporate names,
----------
company names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, or otherwise, and all common-law
rights related thereto, including, without limitation, any of the foregoing
referred to in Schedule 6, and (ii) the right to obtain all renewals thereof.
----------
"Trademark License": any agreement, whether written or oral,
-----------------
providing for the grant by or to any Grantor of any right to use any Trademark,
including, without limitation, any of the foregoing referred to in Schedule 6.
----------
1.2 Other Definitional Provisions. (a) The words "hereof," "herein",
-----------------------------
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Except as the context otherwise requires, terms relating to the
Collateral or any part thereof, when used in relation to a Grantor, shall refer
to such Grantor's Collateral or the relevant part thereof.
-10-
<PAGE>
1.3 Construction. Reference is made to: (1) that certain other
------------
Guarantee and Collateral Agreement, dated as of even date herewith, made by each
of the Grantors in favor of the Chase Manhattan Bank, as Administrative Agent
(the `Senior Agent") for the "Lenders" identified therein (the "Senior Lenders")
(such other Guarantee and Collateral Agreement, the "Senior G&C Agreement"); and
(2) that certain Intercreditor Agreement, dated as of even date herewith, among
the Lender hereunder, the Senior Agent, and the Senior Lenders. So long as the
Intercreditor Agreement remains in full force and effect, the applicable rights
and remedies of the Lender hereunder are subject to the superior applicable
rights and remedies of the Senior Agent and the Senior Lenders under the Senior
G&C Agreement in accordance with the Intercreditor Agreement, and the applicable
duties and obligations of the Grantors hereunder owing in favor of the Lender
hereunder are subject to the superior applicable duties and obligations of the
Grantors under the Senior G&C Agreement owing in favor of the Senior Agent and
the Senior Lenders under the Senior G&C Agreement in accordance with the
Intercreditor Agreement.
SECTION 2. GUARANTEE
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and
---------
severally, unconditionally and irrevocably, guarantees to the Lender and its
successors, indorsees, transferees and assigns, the prompt and complete payment
and performance by the Borrower when due (whether at the stated maturity, by
acceleration or otherwise) of the Borrower Obligations.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
(c) Each Guarantor agrees that the Borrower Obligations may at any
time and from time to time exceed the amount of the liability of such Guarantor
hereunder without impairing the guarantee contained in this Section 2 or
affecting the rights and remedies of the Lender hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of the Credit Agreement
the Borrower may be free from any Borrower Obligations.
(e) No payment made by the Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Lender from the
Borrower, any of the Guarantors, any other guarantor or any other Person by
virtue of any action or proceeding or any set-off or appropriation or
application at any time or from time to time in reduction of or in payment of
the Borrower Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of any Guarantor hereunder which shall, notwithstanding any
such payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor in
respect of the Borrower Obligations), remain liable for the Borrower Obligations
up to the maximum liability of such Guarantor hereunder until the Borrower
Obligations are paid in full and the Commitments are terminated.
2.2 Right of Contribution. Each Guarantor hereby agrees that to the
---------------------
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such
-11-
<PAGE>
Guarantor shall be entitled to seek and receive contribution from and against
any other Guarantor hereunder which has not paid its proportionate share of such
payment. Each Guarantor's right of contribution shall be subject to the terms
and conditions of Section 2.3. The provisions of this Section 2.2 shall in no
respect limit the obligations and liabilities of any Guarantor to the Lender,
and each Guarantor shall remain liable to the Lender for the full amount
guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any
--------------
Guarantor hereunder or any set-off or application of funds of any Guarantor by
the Lender, no Guarantor shall be entitled to be subrogated to any of the rights
of the Lender against the Borrower or any other Guarantor or any collateral
security or guarantee or right of offset held by the Lender for the payment of
the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek
any contribution or reimbursement from the Borrower or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing to
the Lender by the Borrower on account of the Borrower Obligations are paid in
full and the Commitments are terminated. If any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of the
Borrower Obligations shall not have been paid in full, such amount shall be held
by such Guarantor in trust for the Lender, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Lender in the exact form received by such Guarantor (duly indorsed by
such Guarantor to the Lender, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Lender may
determine.
2.4 Amendments, etc. with respect to the Borrower Obligations. Each
---------------------------------------------------------
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Lender may be rescinded by the Lender and any of the
Borrower Obligations continued, and the Borrower Obligations, or the liability
of any other Person upon or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered or released by the Lender, and the Credit
Agreement and the other Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Lender may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held
by the Lender for the payment of the Borrower Obligations may be sold,
exchanged, waived, surrendered or released. The Lender shall not have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Borrower Obligations or for the guarantee contained in this
Section 2 or any property subject thereto.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives any
------------------------------------
and all notice of the creation, renewal, extension or accrual of any of the
Borrower Obligations and notice of or proof of reliance by the Lender upon the
guarantee contained in this Section 2 or acceptance of the guarantee contained
in this Section 2; the Borrower Obligations, and any of them, shall conclusively
be deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon the guarantee contained in this Section 2;
and all dealings between the Borrower and any of the Guarantors, on the one
hand, and the Lender, on the other hand, likewise shall be conclusively presumed
to have been had or consummated in reliance upon the guarantee contained in this
Section 2. Each Guarantor waives diligence, presentment, protest, demand for
payment and notice of default or nonpayment to or upon the Borrower or any of
the Guarantors with respect to the Borrower Obligations. Each Guarantor
understands and agrees that the guarantee contained in this Section 2 shall be
construed as a continuing, absolute and unconditional guarantee of payment
without regard to (a) the validity or enforceability of the Credit Agreement or
any other Loan Document, any of the Borrower Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or
-12-
<PAGE>
from time to time held by the Lender, (b) any defense, set-off or counterclaim
(other than a defense of payment or performance) which may at any time be
available to or be asserted by the Borrower or any other Person against the
Lender, or (c) any other circumstance whatsoever (with or without notice to or
knowledge of the Borrower or such Guarantor) which constitutes, or might be
construed to constitute, an equitable or legal discharge of the Borrower for the
Borrower Obligations, or of such Guarantor under the guarantee contained in this
Section 2, in bankruptcy or in any other instance. When making any demand
hereunder or otherwise pursuing its rights and remedies hereunder against any
Guarantor, the Lender may, but shall be under no obligation to, make a similar
demand on or otherwise pursue such rights and remedies as it may have against
the Borrower, any other Guarantor or any other Person or against any collateral
security or guarantee for the Borrower Obligations or any right of offset with
respect thereto, and any failure by the Lender to make any such demand, to
pursue such other rights or remedies or to collect any payments from the
Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of the Borrower, any other Guarantor or any other Person or any such
collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Lender against any Guarantor. For the purposes hereof
"demand" shall include the commencement and continuance of any legal
proceedings.
2.6 Reinstatement. The guarantee contained in this Section 2 shall
-------------
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Lender upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Borrower or any
Guarantor, or upon or as a result of the appointment of a receiver, intervenor
or conservator of, or trustee or similar officer for, the Borrower or any
Guarantor or any substantial part of its property, or otherwise, all as though
such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments
--------
hereunder will be paid to the Lender without set-off or counterclaim in Dollars
at the office of the Lender located at One Bush St., Suite 1380, San Francisco,
CA 94104.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby grants, assigns, and transfers to the Lender a
security interest in all of the following property now owned or at any time
hereafter acquired by such Grantor or in which such Grantor now has or at any
time in the future may acquire any right, title or interest (collectively, the
"Collateral"), as collateral security for the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of such Grantor's Obligations,:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Contracts;
(d) all Deposit Accounts;
(e) all Documents;
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(f) all Equipment;
(g) all General Intangibles;
(h) all Instruments;
(i) all Intellectual Property;
(j) all Inventory;
(k) all Investment Property;
(l) all other property not otherwise described above;
(m) all books and records pertaining to the Collateral; and
(n) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing and all collateral security and guarantees given
by any Person with respect to any of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into the Credit Agreement and to induce
the Lender to make extensions of credit to the Borrower thereunder, each Grantor
hereby represents and warrants to the Lender that:
4.1 Title; No Other Liens. Except for the security interest granted
---------------------
to the Lender pursuant to this Agreement and the other Liens permitted to exist
on the Collateral by the Credit Agreement, such Grantor owns each item of the
Collateral free and clear of any and all Liens or claims of others. No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of the Lender, pursuant to this Agreement or as are
permitted by the Credit Agreement.
4.2 Perfected First Priority Liens. The security interests granted
------------------------------
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
----------
referred to on said Schedule, have been delivered to the Lender in completed and
duly executed form) will constitute valid perfected security interests in all of
the Collateral in favor of the Lender, as collateral security for such Grantor's
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and (b) are prior to all other Liens on the Collateral in
existence on the date hereof except for Liens permitted by the Credit Agreement.
4.3 Jurisdiction of Organization; Chief Executive Office. On the
----------------------------------------------------
date hereof, such Grantor's jurisdiction of organization and the location of
such Grantor's chief executive office or sole place of business are specified on
Schedule 4.
----------
4.4 Inventory and Equipment. On the date hereof, the Inventory and
-----------------------
the Equipment (other than mobile goods) are kept at the locations listed on
Schedule 5.
----------
4.5 Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
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4.6 Investment Property. (a) The shares of Pledged Stock pledged by
-------------------
such Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor or, in the
case of Foreign Subsidiary Voting Stock, if less, 66% of the outstanding Foreign
Subsidiary Voting Stock of each relevant Issuer.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Investment Property pledged by it hereunder, free
of any and all Liens or options in favor of, or claims of, any other Person,
except the security interest created by this Agreement.
4.7 Receivables. (a) No amount payable to such Grantor under or in
-----------
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Lender.
(b) None of the obligors on any Receivable is a Governmental
Authority.
(c) The amounts represented by such Grantor to the Lender from time to
time as owing to such Grantor in respect of the Receivables will at such times
be accurate.
4.8 Contracts. (a) No consent of any party (other than such Grantor)
---------
to any Contract is required, or purports to be required, in connection with the
execution, delivery and performance of this Agreement.
(b) Each Contract is in full force and effect and constitutes a valid
and legally enforceable obligation of the parties thereto, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or in
respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly obtained,
made or performed, are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.
(d) Neither such Grantor nor (to the best of such Grantor's knowledge)
any of the other parties to the Contracts is in default in the performance or
observance of any of the terms thereof in any manner that, in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(e) The right, title and interest of such Grantor in, to and under the
Contracts are not subject to any defenses, offsets, counterclaims or claims
that, in the aggregate, could reasonably be expected to have a Material Adverse
Effect.
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<PAGE>
(f) Such Grantor has delivered to the Lender a complete and correct
copy of each Contract, including all amendments, supplements and other
modifications thereto.
(g) No amount payable to such Grantor under or in connection with any
Contract is evidenced by any Instrument or Chattel Paper which has not been
delivered to the Lender.
(h) None of the parties to any Contract is a Governmental Authority.
4.9 Intellectual Property. (a) Schedule 6 lists all Intellectual
--------------------- ----------
Property owned by such Grantor in its own name on the date hereof.
(b) On the date hereof, all material Intellectual Property is valid,
subsisting, unexpired and enforceable, has not been abandoned and does not
infringe the intellectual property rights of any other Person.
(c) Except as set forth in Schedule 6, on the date hereof, none of the
----------
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, would have a material adverse
effect on the value of any Intellectual Property.
SECTION 5 COVENANTS
Each Grantor covenants and agrees with the Lender that, from and after
the date of this Agreement until the Obligations shall have been paid in full,
no Letter of Credit shall be outstanding and the Commitments shall have
terminated:
5.1 Delivery of Instruments, Certificated Securities and Chattel
------------------------------------------------------------
Paper. If any amount payable under or in connection with any of the Collateral
-----
shall be or become evidenced by any Instrument, Certificated Security or Chattel
Paper, such Instrument, Certificated Security or Chattel Paper shall be
immediately delivered to the Lender, duly indorsed in a manner satisfactory to
the Lender, to be held as Collateral pursuant to this Agreement.
5.2 Maintenance of Insurance. (a) Such Grantor will maintain, with
------------------------
financially sound and reputable companies, insurance policies (i) insuring the
Inventory and Equipment against loss by fire, explosion, theft and such other
casualties as may be reasonably satisfactory to the Lender and (ii) to the
extent requested by the , insuring such Grantor and the Lender against liability
for personal injury and property damage relating to such Inventory and
Equipment, such policies to be in such form and amounts and having such coverage
as may be reasonably satisfactory to the Lender.
(b) All such insurance shall (i) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Lender of written notice
thereof, (ii) name the Lender as insured party or loss payee, (iii) if
reasonably
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<PAGE>
requested by the Lender, include a breach of warranty clause and (iv) be
reasonably satisfactory in all other respects to the Lender.
(c) The Borrower shall deliver to the Lender a report of a reputable
insurance broker with respect to such insurance substantially concurrently with
each delivery of the Borrower's audited annual financial statements and such
supplemental reports with respect thereto as the Lender may from time to time
reasonably request.
5.3 Payment of Obligations. Such Grantor will pay and discharge or
----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
5.4 Maintenance of Perfected Security Interest; Further
---------------------------------------------------
Documentation. (a) Such Grantor shall maintain the security interest created by
this Agreement as a perfected security interest having at least the priority
described in Section 4.2 and shall defend such security interest against the
claims and demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Lender from time to time
statements and schedules further identifying and describing the assets and
property of such Grantor and such other reports in connection therewith as the
Lender may reasonably request, all in reasonable detail.
(c) At any time and from time to time, upon the written request of
the Lender, and at the sole expense of such Grantor, such Grantor
will promptly and duly execute and deliver, and have recorded,
such further instruments and documents and take such further
actions as the Lender may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and
of the rights and powers herein granted, including, without
limitation, (i) filing any financing or continuation statements
under the Uniform Commercial Code (or other similar laws) in
effect in any jurisdiction with respect to the security interests
created hereby and (ii) in the case of Investment Property,
Deposit Accounts and any other relevant Collateral, taking any
actions necessary to enable the Lender to obtain "control"
(within the meaning of the applicable Uniform Commercial Code)
with respect thereto.
(d) Without limiting the generality of the foregoing, as soon as
reasonably possible, but in any event within 30 days after the
date hereof, each Grantor shall (i) duly file applications for
copyright registration with the United States Copyright Office of
all computer software and firmware now owned by such Grantor and
incorporated in, or utilized in connection with, such Grantor's
products, (ii) provide copies of all such copyright applications
to the Lender, and (iii) execute and deliver to the Lender
documentation, in form suitable for filing in the United States
Copyright Office, confirming the grant of a security interest
therein to the Lender and containing other customary terms
consistent with this Agreement. Hereafter, each Grantor shall
perform the foregoing actions with respect to all computer
software and firmware hereafter developed, created or acquired by
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such Grantor and incorporated in, or utilized in connection with,
such Grantor's products, promptly after the development, creation
or acquisition of the same, but not more frequently than every
four months.
5.5 Changes in Locations, Name, etc. Such Grantor will not, except
--------------------------------
upon 15 days' prior written notice to the Lender and delivery to the Lender of
(a) all additional executed financing statements and other documents reasonably
requested by the Lender to maintain the validity, perfection and priority of the
security interests provided for herein and (b) if applicable, a written
supplement to Schedule 5 showing any additional location at which Inventory or
Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a
location other than those listed on Schedule 5;
(ii) change its jurisdiction of organization or the location of its
chief executive office or sole place of business from that referred to in
Section 4.3; or
(iii) change its name, identity or corporate or other organizational
structure to such an extent that any financing statement filed by the Lender in
connection with this Agreement would become misleading.
5.6 Notices. Such Grantor will advise the Lender promptly, in
-------
reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Lender to exercise any of its remedies
hereunder; and
(b) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.7 Investment Property. (a) If such Grantor shall become entitled
-------------------
to receive or shall receive any certificate (including, without limitation, any
certificate representing a dividend or a distribution in connection with any
reclassification, increase or reduction of capital or any certificate issued in
connection with any reorganization), option or rights in respect of the Capital
Stock of any Issuer, whether in addition to, in substitution of, as a conversion
of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect
thereof, such Grantor shall accept the same as the agent of the Lender, hold the
same in trust for the Lender and deliver the same forthwith to the Lender in the
exact form received, duly indorsed by such Grantor to the Lender, if required,
together with an undated stock power covering such certificate duly executed in
blank by such Grantor and with, if the Lender so requests, signature guaranteed,
to be held by the Lender, subject to the terms hereof, as additional collateral
security for the Obligations. Any sums paid upon or in respect of the
Investment Property upon the liquidation or dissolution of any Issuer shall be
paid over to the Lender to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Investment Property or any property shall be
distributed upon or with respect to the Investment Property pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Lender, be delivered to
the Lender to be held by it hereunder as additional collateral security for the
Obligations. If any sums of money or property so paid or distributed in respect
of the Investment Property shall be received by such Grantor, such Grantor
shall, until such money or property is paid or delivered to the Lender, hold
such money or property in trust for the Lender, segregated from other funds of
such Grantor, as additional collateral security for the Obligations.
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<PAGE>
(b) Without the prior written consent of the Lender, such Grantor
will not (i) vote to enable, or take any other action to permit, any Issuer to
issue any Capital Stock of any nature or to issue any other securities
convertible into or granting the right to purchase or exchange for any Capital
Stock of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or
otherwise dispose of, or grant any option with respect to, the Investment
Property or Proceeds thereof (except pursuant to a transaction expressly
permitted by the Credit Agreement), (iii) create, incur or permit to exist any
Lien or option in favor of, or any claim of any Person with respect to, any of
the Investment Property or Proceeds thereof, or any interest therein, except for
the security interests created by this Agreement or (iv) enter into any
agreement or undertaking restricting the right or ability of such Grantor or the
Lender to sell, assign or transfer any of the Investment Property or Proceeds
thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating to the
Investment Property issued by it and will comply with such terms insofar as such
terms are applicable to it, (ii) it will notify the Lender promptly in writing
of the occurrence of any of the events described in Section 5.7(a) with respect
to the Investment Property issued by it and (iii) the terms of Sections 6.3(c)
and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that
------- --------
may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the
Investment Property issued by it.
5.8 Receivables. (a) Other than in the ordinary course of business
-----------
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Lender a copy of each material
demand, notice or document received by it that questions or calls into doubt the
validity or enforceability of more than 5% of the aggregate amount of the then
outstanding Receivables.
5.9 Contracts. (a) Such Grantor will perform and comply in all
---------
material respects with all its obligations under the Contracts.
(b) Such Grantor will not amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be expected to
materially adversely affect the value of such Contract as Collateral.
(c) Such Grantor will exercise promptly and diligently each and every
material right which it may have under each Contract (other than any right of
termination).
(d) Such Grantor will deliver to the Lender a copy of each material
demand, notice or document received by it relating in any way to any Contract
that questions the validity or enforceability of such Contract.
5.10 Intellectual Property. (a) Such Grantor (either itself or
---------------------
through licensees) will (i) continue to use each material Trademark on each and
every trademark class of goods applicable to its current line as reflected in
its current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (ii)
maintain as in the past the quality of products and services offered under such
Trademark, (iii) use such Trademark with the appropriate notice of registration
and all other notices and legends required by applicable Requirements of Law,
(iv) not adopt or use any mark which is confusingly similar or a colorable
imitation of such
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<PAGE>
Trademark unless the Lender shall obtain a perfected security interest in such
mark pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby such
Trademark may become invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of the Copyrights may become invalidated or otherwise impaired.
Such Grantor will not (either itself or through licensees) do any act whereby
any material portion of the Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Lender immediately if it knows, or
has reason to know, that any application or registration relating to any
material Intellectual Property may become forfeited, abandoned or dedicated to
the public, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, the United States
Copyright Office or any court or tribunal in any country) regarding such
Grantor's ownership of, or the validity of, any material Intellectual Property
or such Grantor's right to register the same or to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any other
country or any political subdivision thereof, such Grantor shall report such
filing to the Lender within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the Lender, such Grantor
shall execute and deliver, and have recorded, any and all agreements,
instruments, documents, and papers as the Lender may request to evidence the
Lender's security interest in any Copyright, Patent or Trademark and the
goodwill and general intangibles of such Grantor relating thereto or represented
thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each application (and to obtain the relevant registration) and to
maintain each registration of the material Intellectual Property, including,
without limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the Lender
after it learns thereof and sue for infringement, misappropriation or dilution,
to seek injunctive relief where appropriate and to recover any and all damages
for such infringement, misappropriation or dilution.
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SECTION 6. REMEDIAL PROVISIONS
6.1 Certain Matters Relating to Receivables. (a) The Lender shall
---------------------------------------
have the right to make test verifications of the Receivables in any manner and
through any medium that it reasonably considers advisable, and each Grantor
shall furnish all such assistance and information as the Lender may require in
connection with such test verifications. At any time and from time to time,
upon the Lender's request and at the expense of the relevant Grantor, such
Grantor shall cause independent public accountants or others satisfactory to the
Lender to furnish to the Lender reports showing reconciliations, aging and test
verifications of, and trial balances for, the Receivables.
(b) The Lender hereby authorizes each Grantor to collect such
Grantor's Receivables, subject to the Lender's direction and control, and the
Lender may curtail or terminate said authority at any time after the occurrence
and during the continuance of an Event of Default. If required by the Lender at
any time after the occurrence and during the continuance of an Event of Default,
any payments of Receivables, when collected by any Grantor, (i) shall be
forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the Lender,
if required, in a Collateral Account maintained under the sole dominion and
control of the Lender, subject to withdrawal by the Lender only as provided in
Section 6.5, and (ii) until so turned over, shall be held by such Grantor in
trust for the Lender, segregated from other funds of such Grantor. Each such
deposit of Proceeds of Receivables shall be accompanied by a report identifying
in reasonable detail the nature and source of the payments included in the
deposit.
(c) At the Lender's request, each Grantor shall deliver to the Lender
all original and other documents evidencing, and relating to, the agreements and
transactions which gave rise to the Receivables, including, without limitation,
all original orders, invoices and shipping receipts.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The
----------------------------------------------------
Lender in its own name or in the name of others may at any time after the
occurrence and during the continuance of an Event of Default communicate with
obligors under the Receivables and parties to the Contracts to verify with them
to the Lender's satisfaction the existence, amount and terms of any Receivables
or Contracts.
(b) Upon the request of the Lender at any time after the occurrence
and during the continuance of an Event of Default, each Grantor shall notify
obligors on the Receivables and parties to the Contracts that the Receivables
and the Contracts have been assigned to the Lender and that payments in respect
thereof shall be made directly to the Lender.
(c) Anything herein to the contrary notwithstanding, each Grantor
shall remain liable under each of the Receivables and Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise
thereto. The Lender shall not have any obligation or liability under any
Receivable (or any agreement giving rise thereto) or Contract by reason of or
arising out of this Agreement or the receipt by the Lender of any payment
relating thereto, nor shall the Lender be obligated in any manner to perform any
of the obligations of any Grantor under or pursuant to any Receivable (or any
agreement giving rise thereto) or Contract, to make any payment, to make any
inquiry as to the nature or the sufficiency of any payment received by it or as
to the sufficiency of any performance by any party thereunder, to present or
file any claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have
-------------
occurred and be continuing and the Lender shall have given notice to the
relevant Grantor of the Lender's intent to exercise its corresponding rights
pursuant to Section 6.3(b), each Grantor shall be permitted to receive all
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cash dividends paid in respect of the Pledged Stock and all payments made in
respect of the Pledged Notes, in each case paid in the normal course of
business of the relevant Issuer and consistent with past practice, to the
extent permitted in the Credit Agreement, and to exercise all voting and
corporate or other organizational rights with respect to the Investment
Property; provided , however, that no vote shall be cast or corporate or other
-------- -------
organizational right exercised or other action taken which, in the Lender's
reasonable judgment, would impair the Collateral or which would be
inconsistent with or result in any violation of any provision of the Credit
Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Lender shall give notice of its intent to exercise such rights to the relevant
Grantor or Grantors, (i) the Lender shall have the right to receive any and all
cash dividends, payments or other Proceeds paid in respect of the Investment
Property and make application thereof to the Obligations in such order as the
Lender may determine, and (ii) any or all of the Investment Property shall be
registered in the name of the Lender or its nominee, and the Lender or its
nominee may thereafter exercise (x) all voting, corporate and other rights
pertaining to such Investment Property at any meeting of shareholders of the
relevant Issuer or Issuers or otherwise and (y) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Investment Property as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Investment Property upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate or
other organizational structure of any Issuer, or upon the exercise by any
Grantor or the Lender of any right, privilege or option pertaining to such
Investment Property, and in connection therewith, the right to deposit and
deliver any and all of the Investment Property with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as the Lender may determine), all without liability except to account
for property actually received by it, but the Lender shall have no duty to any
Grantor to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
Investment Property pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Lender in writing that (x) states that an
Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from such Grantor, and each Grantor agrees that each Issuer shall
be fully protected in so complying, and (ii) unless otherwise expressly
permitted hereby, pay any dividends or other payments with respect to the
Investment Property directly to the Lender.
6.4 Proceeds to be Turned Over To Lender. In addition to the rights
------------------------------------
of the Lender specified in Section 6.1 with respect to payments of Receivables,
if an Event of Default shall occur and be continuing, all Proceeds received by
any Grantor consisting of cash, checks and other near-cash items shall be held
by such Grantor in trust for the Lender, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Lender in the exact form received by such Grantor (duly indorsed by such
Grantor to the Lender, if required). All Proceeds received by the Lender
hereunder shall be held by the Lender in a Collateral Account maintained under
its sole dominion and control. All Proceeds while held by the Lender in a
Collateral Account (or by such Grantor in trust for the Lender) shall continue
to be held as collateral security for all the Obligations and shall not
constitute payment thereof until applied as provided in Section 6.5.
6.5 Application of Proceeds. At such intervals as may be agreed upon
-----------------------
by the Borrower and the Lender, or, if an Event of Default shall have occurred
and be continuing, at any time at the Lender's election, the Lender may apply
all or any part of Proceeds constituting Collateral, whether or not held in
any Collateral Account, in payment of the Obligations in such order as the
Lender may elect, and any part of such funds which the Lender elects not so to
apply and deems not required as collateral
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<PAGE>
security for the Obligations shall be paid over from time to time by the
Lender to the Borrower or to whomsoever may be lawfully entitled to receive
the same. Any balance of such Proceeds remaining after the Obligations shall
have been paid in full, no Letters of Credit shall be outstanding and the
Commitments shall have terminated shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive the same.
6.6 Code and Other Remedies. If an Event of Default shall occur and
-----------------------
be continuing, the Lender may exercise, in addition to all other rights and
remedies granted to the Lender in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of a secured party under the New York UCC or any other applicable law.
Without limiting the generality of the foregoing, the Lender, without demand of
performance or other demand, presentment, protest, advertisement or notice of
any kind (except any notice required by law referred to below) to or upon any
Grantor or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options
to purchase, or otherwise dispose of and deliver the Collateral or any part
thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Lender or elsewhere upon such terms and conditions as it may deem advisable
and at such prices as it may deem best, for cash or on credit or for future
delivery without assumption of any credit risk. The Lender shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in any Grantor,
which right or equity is hereby waived and released. Each Grantor further
agrees, at the Lender's request, to assemble the Collateral and make it
available to the Lender at places which the Lender shall reasonably select,
whether at such Grantor's premises or elsewhere. The Lender shall apply the net
proceeds of any action taken by it pursuant to this Section 6.6, after deducting
all reasonable costs and expenses of every kind incurred in connection therewith
or incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Lender hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in whole or in part of the Obligations, in such order as the Lender may elect,
and only after such application and after the payment by the Lender of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the New York UCC, need the Lender account for the surplus, if
any, to any Grantor. To the extent permitted by applicable law, each Grantor
waives all claims, damages and demands it may acquire against the Lender arising
out of the exercise by them of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law, such
notice shall be deemed reasonable and proper if given at least 10 days before
such sale or other disposition.
6.7 Registration Rights. (a) If the Lender shall determine to
-------------------
exercise its right to sell any or all of the Pledged Stock pursuant to Section
6.6, and if in the opinion of the Lender it is necessary or advisable to have
the Pledged Stock, or that portion thereof to be sold, registered under the
provisions of the Securities Act, the relevant Grantor will cause the Issuer
thereof to (i) execute and deliver, and cause the directors and officers of such
Issuer to execute and deliver, all such instruments and documents, and do or
cause to be done all such other acts as may be, in the opinion of the Lender,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of one year from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and (iii)
make all amendments thereto and/or to the related prospectus which, in the
opinion of the Lender, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. Each Grantor agrees to
cause such Issuer to comply with the provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Lender shall designate and to
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<PAGE>
make available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) Each Grantor recognizes that the Lender may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Grantor acknowledges
and agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Lender shall be under no
obligation to delay a sale of any of the Pledged Stock for the period of time
necessary to permit the Issuer thereof to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if such Issuer would agree to do so.
(c) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Lender, that the Lender
has no adequate remedy at law in respect of such breach and, as a consequence,
that each and every covenant contained in this Section 6.7 shall be specifically
enforceable against such Grantor, and such Grantor hereby waives and agrees not
to assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred under the
Credit Agreement.
6.8 Waiver; Deficiency. Each Grantor waives and agrees not to assert
------------------
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Lender to collect such deficiency.
SECTION 7. THE LENDER
7.1 Lender's Appointment as Attorney-in-Fact, etc. (a) Each Grantor
---------------------------------------------
hereby irrevocably constitutes and appoints the Lender and any officer or agent
thereof, with full power of substitution, as its true and lawful attorney-in-
fact with full irrevocable power and authority in the place and stead of such
Grantor and in the name of such Grantor or in its own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, each Grantor hereby gives the Lender the power
and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise,
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or Contract or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Lender for the purpose of collecting any
and all such moneys due under any Receivable or Contract or with respect to
any other Collateral whenever payable;
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<PAGE>
(ii) in the case of any Intellectual Property, execute and
deliver, and have recorded, any and all agreements, instruments, documents and
papers as the Lender may request to evidence the Lender's security interest in
such Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance called
for by the terms of this Agreement and pay all or any part of the premiums
therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in
Section 6.6 or 6.7, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral; and
(v) (1) direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (2) ask or
demand for, collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in respect
of or arising out of any Collateral; (3) sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices and other
documents in connection with any of the Collateral; (4) commence and prosecute
any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any portion thereof and to
enforce any other right in respect of any Collateral; (5) defend any suit,
action or proceeding brought against such Grantor with respect to any
Collateral; (6) settle, compromise or adjust any such suit, action or
proceeding and, in connection therewith, give such discharges or releases as
the Lender may deem appropriate; (7) assign any Copyright, Patent or Trademark
(along with the goodwill of the business to which any such Copyright, Patent
or Trademark pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Lender shall in its sole discretion
determine; and (8) generally, sell, transfer, pledge and make any agreement
with respect to or otherwise deal with any of the Collateral as fully and
completely as though the Lender were the absolute owner thereof for all
purposes, and do, at the Lender's option and such Grantor's expense, at any
time, or from time to time, all acts and things which the Lender deems
necessary to protect, preserve or realize upon the Collateral and the Lender's
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Lender agrees that it will not exercise any rights under the power of attorney
provided for in this Section 7.1(a) unless an Event of Default shall have
occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Lender, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
(c) The expenses of the Lender incurred in connection with actions
undertaken as provided in this Section 7.1, together with interest thereon at a
rate per annum equal to the highest rate per annum at which interest would then
be payable on any category of past due Loans under the Credit Agreement, from
the date of payment by the Lender to the date reimbursed by the relevant
Grantor, shall be payable by such Grantor to the Lender on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations
and agencies contained in this Agreement are
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<PAGE>
coupled with an interest and are irrevocable until this Agreement is
terminated and the security interests created hereby are released.
7.2 Duty of Lender. The Lender's sole duty with respect to the
--------------
custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the New York UCC or otherwise, shall be to
deal with it in the same manner as the Lender deals with similar property for
its own account. Neither the Lender nor any of its officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
any Grantor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on the
Lender hereunder are solely to protect the Lender's interests in the Collateral
and shall not impose any duty upon the Lender or any Lender to exercise any such
powers. The Lender shall be accountable only for amounts that they actually
receive as a result of the exercise of such powers, and neither they nor any of
their officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.
7.3 Execution of Financing Statements. Pursuant to Section 9-402 of
---------------------------------
the New York UCC and any other applicable law, each Grantor authorizes the
Lender to file or record financing statements and other filing or recording
documents or instruments with respect to the Collateral without the signature of
such Grantor in such form and in such offices as the Lender determines
appropriate to perfect the security interests of the Lender under this
Agreement. A photographic or other reproduction of this Agreement shall be
sufficient as a financing statement or other filing or recording document or
instrument for filing or recording in any jurisdiction.
7.4 [Intentionally Omitted]
SECTION . MISCELLANEOUS
8.1 Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except in
accordance with Section 10.1 of the Credit Agreement.
8.2 Notices. All notices, requests and demands to or upon the Lender
-------
or any Grantor hereunder shall be effected in the manner provided for in Section
10.2 of the Credit Agreement; provided that any such notice, request or demand
--------
to or upon any Guarantor shall be addressed to such Guarantor at its notice
address set forth on Schedule 1.
----------
8.3 No Waiver by Course of Conduct; Cumulative Remedies. The Lender
---------------------------------------------------
shall not by any act (except by a written instrument pursuant to Section 8.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default. No
failure to exercise, nor any delay in exercising, on the part of the Lender, any
right, power or privilege hereunder shall operate as a waiver thereof. No
single or partial exercise of any right, power or privilege hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. A waiver by the Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Lender would otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by
law.
8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees
-------------------------------------
to pay or reimburse the Lender for all its costs and expenses incurred in
collecting against such Guarantor under the guarantee contained in Section 2 or
otherwise enforcing or preserving any rights under this Agreement
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<PAGE>
and the other Loan Documents to which such Guarantor is a party, including,
without limitation, the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to the Lender and of counsel
to the Lender.
(b) Each Guarantor agrees to pay, and to save the Lender harmless
from, any and all liabilities with respect to, or resulting from any delay in
paying, any and all stamp, excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Agreement.
(c) Each Guarantor agrees to pay, and to save the Lender harmless
from, any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to the execution, delivery, enforcement, performance and
administration of this Agreement to the extent the Borrower would be required to
do so pursuant to Section 10.5 of the Credit Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 Successors and Assigns. This Agreement shall be binding upon the
----------------------
successors and assigns of each Grantor and shall inure to the benefit of the
Lender and its successors and assigns; provided that no Grantor may assign,
--------
transfer or delegate any of its rights or obligations under this Agreement
without the prior written consent of the Lender.
8.6 Set-Off. Each Grantor hereby irrevocably authorizes the Lender
-------
at any time and from time to time while an Event of Default shall have occurred
and be continuing, without notice to such Grantor or any other Grantor, any such
notice being expressly waived by each Grantor, to set-off and appropriate and
apply any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by the Lender to or for the
credit or the account of such Grantor, or any part thereof in such amounts as
the Lender may elect, against and on account of the obligations and liabilities
of such Grantor to the Lender hereunder and claims of every nature and
description of the Lender against such Grantor, in any currency, whether arising
hereunder, under the Credit Agreement, any other Loan Document or otherwise, as
the Lender may elect, whether or not the Lender has made any demand for payment
and although such obligations, liabilities and claims may be contingent or
unmatured. The Lender shall notify such Grantor promptly of any such set-off
and the application made by the Lender of the proceeds thereof, provided that
--------
the failure to give such notice shall not affect the validity of such set-off
and application. The rights of the Lender under this Section 8.6 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Lender may have.
8.7 Counterparts. This Agreement may be executed by one or more of
------------
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.8 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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<PAGE>
8.9 Section Headings. The Section headings used in this Agreement
----------------
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
8.10 Integration. This Agreement and the other Loan Documents
-----------
represent the agreement of the Grantors and the Lender with respect to the
subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Lender relative to subject matter hereof
and thereof not expressly set forth or referred to herein or in the other Loan
Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 Submission To Jurisdiction; Waivers. Each Grantor hereby
-----------------------------------
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States of America for the Southern District
of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action
or proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 8.2 or at such other address of which the Lender
shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
8.13 Acknowledgements. Each Grantor hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party;
(b) the Lender has no fiduciary relationship with or duty to any
Grantor arising out of or in connection with this Agreement or any of the other
Loan Documents, and the relationship between the Grantors, on the one hand, and
the Lender, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Grantors and the Lender.
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<PAGE>
8.14 Additional Grantors. Each Subsidiary of the Borrower that is
-------------------
required to become a party to this Agreement pursuant to Section 6.9 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.15 Releases. (a) At such time as the Loans and the other
--------
Obligations (other than Obligations in respect of Lender Hedge Agreements) shall
have been paid in full and the Commitments have been terminated, the Collateral
shall be released from the Liens created hereby, and this Agreement and all
obligations (other than those expressly stated to survive such termination) of
the Lender and each Grantor hereunder shall terminate, all without delivery of
any instrument or performance of any act by any party, and all rights to the
Collateral shall revert to the Grantors. At the request and sole expense of any
Grantor following any such termination, the Lender shall deliver to such Grantor
any Collateral held by the Lender hereunder, and execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence such
termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Lender, at the request and sole expense of such Grantor, shall execute
and deliver to such Grantor all releases or other documents reasonably necessary
or desirable for the release of the Liens created hereby on such Collateral. At
the request and sole expense of the Borrower, a Subsidiary Guarantor shall be
released from its obligations hereunder in the event that all the Capital Stock
of such Subsidiary Guarantor shall be sold, transferred or otherwise disposed of
in a transaction permitted by the Credit Agreement; provided that the Borrower
--------
shall have delivered to the Lender, at least ten Business Days prior to the date
of the proposed release, a written request for release identifying the relevant
Subsidiary Guarantor and the terms of the sale or other disposition in
reasonable detail, including the price thereof and any expenses in connection
therewith, together with a certification by the Borrower stating that such
transaction is in compliance with the Credit Agreement and the other Loan
Documents.
8.16 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
--------------------
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee and Collateral Agreement to be duly executed and delivered as of the
date first above written.
LEXAR MEDIA, INC.
By:_____________________________________
Name:
Title:
PRINTROOM.COM
By:_____________________________________
Name:
Title:
-2
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Guarantee
and Collateral Agreement, dated as of June 30, 2000 (the "Agreement"), made by
---------
the Grantors parties thereto for the benefit of ACCESS TECHNOLOGY PARTNERS,
L.P., as Lender. The undersigned agrees for the benefit of the Lender as
follows:
1. The undersigned will be bound by the terms of the Agreement and
will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Lender promptly in writing of the
occurrence of any of the events described in Section 5.7(a) of the Agreement.
3. The terms of Sections 6.3(c) and 6.7 of the Agreement shall apply
to it, mutatis mutandis, with respect to all actions that may be required of it
------- --------
pursuant to Section 6.3(c) or 6.7 of the Agreement.
[NAME OF ISSUER]
By_______________________________________
Name:
Title:
Address for Notices:
_________________________________________
_________________________________________
_________________________________________
Fax:
<PAGE>
Annex 1 to
Guarantee and Collateral Agreement
----------------------------------
ASSUMPTION AGREEMENT, dated as of ________________, 200_, made by
______________________________, a ______________ corporation (the "Additional
----------
Grantor"), in favor of ACCESS TECHNOLOGY PARTNERS, L.P., as lender (the
-------
"Lender"). All capitalized terms not defined herein shall have the meaning
------
ascribed to them in such Credit Agreement referred to below.
W I T N E S S E T H :
---------------------
WHEREAS, LEXAR MEDIA, INC. (the "Borrower") and the Lender have
--------
entered into a Credit Agreement, dated as of June 30, 2000 (as amended,
supplemented or otherwise modified from time to time, the "Credit Agreement");
----------------
WHEREAS, in connection with the Credit Agreement, the Borrower and
certain of its Affiliates (other than the Additional Grantor) have entered into
the Guarantee and Collateral Agreement, dated as of June 30, 2000 (as amended,
supplemented or otherwise modified from time to time, the "Guarantee and
-------------
Collateral Agreement") in favor of the Lender;
--------------------
WHEREAS, the Credit Agreement requires the Additional Grantor to
become a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering
----------------------------------
this Assumption Agreement, the Additional Grantor, as provided in Section 8.14
of the Guarantee and Collateral Agreement, hereby becomes a party to the
Guarantee and Collateral Agreement as a Grantor thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting the
generality of the foregoing, hereby expressly assumes all obligations and
liabilities of a Grantor thereunder. The information set forth in Annex 1-A
hereto is hereby added to the information set forth in the Schedules to the
Guarantee and Collateral Agreement. The Additional Grantor hereby represents
and warrants that each of the representations and warranties contained in
Section 4 of the Guarantee and Collateral Agreement is true and correct on and
as the date hereof (after giving effect to this Assumption Agreement) as if made
on and as of such date.
2. Governing Law. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:_________________________________
Name:
Title:
<PAGE>
Annex 1-A to
Assumption Agreement
--------------------
Supplement to Schedule 1
------------------------
Supplement to Schedule 2
------------------------
Supplement to Schedule 3
------------------------
Supplement to Schedule 4
------------------------
Supplement to Schedule 5
------------------------
Supplement to Schedule 6
------------------------
Supplement to Schedule 7
------------------------
<PAGE>
EXHIBIT B
---------
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is delivered pursuant to Section 6.2(b) of the
Credit Agreement, dated as of June 30, 2000, as amended, supplemented or
otherwise modified from time to time (the "Credit Agreement"), among LEXAR
MEDIA, INC., a California corporation (the "Borrower"), and Access Technology
Partners, L.P. (the "Lender"). Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.
1. I am the duly elected, qualified and acting Chief Financial Officer of
the Borrower.
2. I have reviewed and am familiar with the contents of this Certificate.
3. I have reviewed the terms of the Credit Agreement and the Loan Documents
and have made or caused to be made under my supervision, a review in reasonable
detail of the transactions and condition of the Borrower during the accounting
period covered by the financial statements attached hereto as Attachment 1 (the
"Financial Statements"). Such review did not disclose the existence during or at
the end of the accounting period covered by the Financial Statements, and I have
no knowledge of the existence, as of the date of this Certificate, of any
condition or event which constitutes a Default or Event of Default[, except as
set forth below].
4. Attached hereto as Attachment 2 are the computations showing compliance
with the covenants set forth in Sections 7.1, 7.2, 7.3, 7.5, 7.6 and 7.7 of the
Credit Agreement.
IN WITNESS WHEREOF, I have executed this Certificate this _____ day of ,
200_.
LEXAR MEDIA, INC.
By:
Name:
Title:
<PAGE>
Attachment 1 to
Exhibit B
Financial Statements
<PAGE>
Attachment 2
to Exhibit B
The information described herein is as of , 200_, and pertains to the
period from
_________, __ 200_ to ________________ __, 200_.
[Set forth Covenant Calculations]
<PAGE>
Exhibit C
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FORM OF CLOSING CERTIFICATE
Pursuant to Section 5.1(f) of the Credit Agreement, dated as of June __,
2000 (the "Credit Agreement"; terms defined therein being used herein as therein
defined), among LEXAR MEDIA, INC., a California corporation (the "Borrower"),
and Access Technology Partners, L.P. (the "Lender"), the undersigned [INSERT
TITLE OF OFFICER] of [INSERT NAME OF COMPANY] (the "Company") hereby certifies
as follows:
1. The representations and warranties of the Company set forth in each of
the Loan Documents to which it is a party or which are contained in any
certificate furnished by or on behalf of the Company pursuant to any of the Loan
Documents to which it is a party are true and correct in all material respects
on and as of the date hereof with the same effect as if made on the date hereof,
except for representations and warranties expressly stated to relate to a
specific earlier date, in which case such representations and warranties were
true and correct in all material respects as of such earlier date.
2. [_____________] is the duly elected and qualified Corporate Secretary of
the Company and the signature set forth for such officer below is such officer's
true and genuine signature.
3. No Default or Event of Default has occurred and is continuing as of the
date hereof or after giving effect to the Loans to be made on the date hereof
and the use of the proceeds thereof. [Borrower only].
4. The conditions precedent set forth in Section 5.1 of the Credit
Agreement were satisfied as of the Closing Date. [Borrower only].
The undersigned Corporate Secretary of the Company certifies as follows:
1. There are no liquidation or dissolution proceedings pending or to my
knowledge threatened against the Company, nor has any other event occurred
adversely affecting or threatening the continued corporate existence of the
Company.
2. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its organization.
3. Attached hereto as Annex 1 is a true and complete copy of resolutions
duly adopted by the Board of Directors of the Company as of the date set forth
on such resolutions; such resolutions have not in any way been amended,
modified, revoked or rescinded, have been in full force and effect since their
adoption to and including the date hereof and are now in full force and effect
and are the only corporate proceedings of the Company now in force relating to
or affecting the matters referred to therein.
<PAGE>
4. Attached hereto as Annex 2 is a true and complete copy of the By-Laws of
the Company as in effect on the date hereof.
5. Attached hereto as Annex 3 is a true and complete copy of the
Certificate of Incorporation of the Company as in effect on the date hereof, and
such certificate has not been amended, repealed, modified or restated.
6. The following persons are now duly elected and qualified officers of the
Company holding the offices indicated next to their respective names below, and
such officers have held such offices with the Company at all times since the
date indicated next to their respective titles to and including the date hereof,
and the signatures appearing opposite their respective names below are the true
and genuine signatures of such officers, and each of such officers is duly
authorized to execute and deliver on behalf of the Company each of the Loan
Documents to which it is a party and any certificate or other document to be
delivered by the Company pursuant to the Loan Documents to which it is a party:
Name Office Date Signature
----- ------ ---- ---------
IN WITNESS WHEREOF, the undersigned have hereunto set our names as of the
date set forth below.
_______________________________ ____________________________________
Name: Name:
Title: Title:
Date: _______________, 200_
<PAGE>
Annex 1 to
Exhibit C
Board Resolutions
<PAGE>
Annex 2 to
Exhibit C
By-Laws
<PAGE>
Annex 3 to
Exhibit C
Articles of Incorporation
<PAGE>
EXHIBIT E
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FORM OF EXEMPTION CERTIFICATE
Reference is made to the Credit Agreement, dated as of June 30, 2000 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among LEXAR MEDIA, INC., a California corporation (the
"Borrower"), Access Technology Partners, L.P. (the "Lenders"). Capitalized
terms used herein that are not defined herein shall have the meanings given to
them in the Credit Agreement. ______________________ (the "Non-U.S. Lender")
is providing this certificate pursuant to Section 2.16(d) of the Credit
Agreement. The Non-U.S. Lender hereby represents and warrants that:
1. The Non-U.S. Lender is the sole record and beneficial owner of the Loans
in respect of which it is providing this certificate.
2. The Non-U.S. Lender is not a "bank" for purposes of Section 881(c)(3)(A)
of the Internal Revenue Code of 1986, as amended (the "Code"). In this regard,
the Non-U.S. Lender further represents and warrants that:
(a) the Non-U.S. Lender is not subject to regulatory or other legal requirements
as a bank in any jurisdiction; and (b) the Non-U.S. Lender has not been treated
as a bank for purposes of any tax, securities law or other filing or submission
made to any Governmental Authority, any application made to a rating agency or
qualification for any exemption from tax, securities law or other legal
requirements.
3. The Non-U.S. Lender is not a 10-percent shareholder of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code.
4. The Non-U.S. Lender is not a controlled foreign corporation receiving
interest from a related person within the meaning of Section 881(c)(3)(C) of the
Code.
IN WITNESS WHEREOF, the undersigned has duly executed this certificate.
[NAME OF NON-U.S. LENDER]
By:_______________________________
Name:
Title:
Date: ___________________
