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EXHIBIT 4.1
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LOAN RESTRUCTURE
AGREEMENT
AMONG
KOMAG, INCORPORATED,
AS BORROWER,
FLEET NATIONAL BANK,
AS RESTRUCTURE AGENT
AND
THE RESTRUCTURE LENDERS PARTY HERETO
DATED AS OF JUNE 1, 2000
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TABLE OF CONTENTS
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ARTICLE 1 RECITALS...............................................................................1
ARTICLE 2 DEFINITIONS............................................................................2
SECTION 2.1 DEFINED TERMS........................................................................2
SECTION 2.2 OTHER DEFINITIONAL PROVISIONS.......................................................10
ARTICLE 3 THE EXISTING LOANS....................................................................10
SECTION 3.1 AMENDMENT AND RESTATEMENT OF EXISTING FACILITIES....................................10
SECTION 3.2 ACKNOWLEDGMENT OF EXISTING LOANS....................................................10
SECTION 3.3 ACKNOWLEDGMENT OF EVENTS OF DEFAULT BY THE BORROWER
AND WAIVER THEREOF BY RESTRUCTURE LENDERS..............................11
(a) Net Worth................................................................................11
(b) Profitability............................................................................11
(c) Leverage Ratio...........................................................................12
(d) Debt Service.............................................................................12
(e) Quick Ratio..............................................................................12
(f) WD Asset Acquisition.....................................................................12
(g) No Other Event of Default................................................................12
(h) Waiver...................................................................................12
ARTICLE 4 THE RESTRUCTURED LOANS................................................................12
SECTION 4.1 THE RESTRUCTURED LOANS..............................................................12
(a) Restructured Notes.......................................................................12
(b) Restructure Fee..........................................................................13
SECTION 4.2 REPAYMENT...........................................................................13
(a) Mandatory Repayments.....................................................................13
(b) Amortization Payments....................................................................13
(c) Optional Payment.........................................................................14
(d) Capital Raising Events...................................................................14
(e) Asset Sales..............................................................................14
(f) Cash Balance.............................................................................14
(g) Implied Consent..........................................................................15
(h) Allocation of Payments...................................................................15
(i) Sharing of Payments......................................................................15
SECTION 4.3 INTEREST RATE AND PAYMENT DATES.....................................................16
(a) Payment of Interest......................................................................16
(b) Base Rate................................................................................16
(c) Catch-Up Interest........................................................................16
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ARTICLE 5 GENERAL PROVISIONS CONCERNING
THE RESTRUCTURED LOANS.................................................16
SECTION 5.1 DEFAULT INTEREST....................................................................16
SECTION 5.2 COMPUTATION OF INTEREST.............................................................16
(a) Calculations.............................................................................16
(b) Determination by Restructure Agent............................................. .........16
SECTION 5.3 PAYMENTS............................................................................17
SECTION 5.4 PAYMENT ON NON-BUSINESS DAYS........................................................17
SECTION 5.5 REDUCED RETURN......................................................................17
SECTION 5.6 INDEMNITIES.........................................................................17
SECTION 5.7 REQUIREMENTS OF LAW.................................................................18
SECTION 5.8 IBJ BANK GROUP II SWAP TRANSACTIONS.................................................19
(a) Breakage Costs...........................................................................29
ARTICLE 6 CONDITIONS PRECEDENT..................................................................20
SECTION 6.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT..............................20
ARTICLE 7 REPRESENTATIONS AND WARRANTIES.........................................................21
SECTION 7.1 REPRESENTATIONS AND WARRANTIES......................................................21
(a) Organization.............................................................................21
(b) Authorization............................................................................21
(c) Governmental Consents....................................................................21
(d) Validity.................................................................................22
(e) Financial Condition......................................................................22
(f) Litigation...............................................................................22
(g) Employee Benefit Plans...................................................................22
(h) Disclosure...............................................................................22
(i) Margin Stock.............................................................................23
(j) Environmental Matters....................................................................23
(k) Employee Matters.........................................................................23
(l) Status of Dastek, Inc., Dastek (M) and DHC...............................................23
(m) Year 2000 Compliance.....................................................................24
ARTICLE 8 COVENANTS.............................................................................24
SECTION 8.1 AFFIRMATIVE COVENANTS...............................................................24
(a) Financial Information....................................................................24
(b) Notices and Information..................................................................26
(c) Corporate Existence, Etc.................................................................27
(d) Payment of Taxes and Claims..............................................................27
(e) Maintenance of Properties; Insurance.....................................................27
(f) Inspection...............................................................................28
(g) Compliance with Laws, Etc................................................................28
(h) Proceeds of Assets and Capital Raising Events............................................28
(i) Notification of Debt Instrument Default..................................................28
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SECTION 8.2 NEGATIVE COVENANTS..................................................................28
(a) Adjusted Tangible Net Worth..............................................................28
(b) Minimum Cash Balance.....................................................................29
(c) Minimum Adjusted Net Working Capital.....................................................29
(d) Capital Expenditures.....................................................................29
(e) Liens, Etc...............................................................................29
(f) Dividends, Etc...........................................................................29
(g) Consolidation, Merger or Acquisition.....................................................29
(h) Loans, Investments, Secondary Liabilities................................................29
(i) Asset Sales..............................................................................31
ARTICLE 9 RESTRUCTURE EVENTS OF DEFAULT.........................................................32
SECTION 9.1 RESTRUCTURE EVENT OF DEFAULT........................................................32
ARTICLE 10 RESTRUCTURE AGENT....................................................................35
SECTION 10.1 RESTRUCTURE AGENT..................................................................35
SECTION 10.2 DELEGATION OF DUTIES, ETC..........................................................35
SECTION 10.3 INDEMNIFICATION....................................................................35
SECTION 10.4 EXCULPATORY PROVISIONS.............................................................36
SECTION 10.5 KNOWLEDGE OF DEFAULT...............................................................37
SECTION 10.6 RESTRUCTURE AGENT IN ITS INDIVIDUAL CAPACITY.......................................37
SECTION 10.7 PAYEE OF RESTRUCTURED NOTES TREATED AS OWNER.......................................37
SECTION 10.8 RESIGNATION OF RESTRUCTURE AGENT...................................................38
ARTICLE 11 CONVERSION LENDER OPTION..............................................................38
SECTION 11.1 ELECTION...........................................................................38
SECTION 11.2 CONVERSION LENDER..................................................................39
SECTION 11.3 CONVERSION DATE RIGHTS.............................................................39
ARTICLE 12 MISCELLANEOUS.........................................................................40
SECTION 12.1 AMENDMENTS, ETC....................................................................40
SECTION 12.2 NOTICES, ETC.......................................................................40
SECTION 12.3 RIGHT OF SETOFF....................................................................41
SECTION 12.4 NO WAIVER; REMEDIES................................................................41
SECTION 12.5 COSTS AND EXPENSES.................................................................41
SECTION 12.6 ASSIGNMENTS; PARTICIPATIONS........................................................43
SECTION 12.7 EFFECTIVENESS; BINDING EFFECT; GOVERNING LAW.......................................44
SECTION 12.8 CONSENT TO JURISDICTION; VENUE; AGENT FOR SERVICE OF PROCESS.......................45
SECTION 12.9 ENTIRE AGREEMENT...................................................................45
SECTION 12.10 SEVERABILITY OF PROVISIONS........................................................45
SECTION 12.11 EXECUTION IN COUNTERPARTS.........................................................45
SECTION 12.12 SURVIVAL OF CERTAIN AGREEMENTS....................................................45
SECTION 12.14 REVIVAL CLAUSE....................................................................46
SECTION 12.14 RELEASE OF ALL CLAIMS.............................................................46
SECTION 12.15 ADDITIONAL ASSURANCES.............................................................46
SECTION 12.16 CONFIDENTIALITY...................................................................47
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EXHIBIT A FORM OF RESTRUCTURED PROMISSORY NOTE
EXHIBIT B FORM OF ASSIGNMENT AGREEMENT
EXHIBIT C FORM OF NONDISCLOSURE STATEMENT
EXHIBIT D CONVERSION DOCUMENTS (SECURITIES PURCHASE AGREEMENT,
CONVERTIBLE NOTE AND REGISTRATION RIGHTS AGREEMENT)
EXHIBIT E JANUARY PROJECTED PERFORMANCE
SCHEDULE 1 SCHEDULE OF COMMITMENTS
SCHEDULE 2 SUBSIDIARIES AND CONSOLIDATED SUBSIDIARIES
SCHEDULE 3 EXISTING LIENS AND SECURITY INTERESTS
SCHEDULE 4 LITIGATION
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LOAN RESTRUCTURE AGREEMENT
This Loan Restructure Agreement (as amended, supplemented or
modified from time to time after the date hereof, the "Agreement") dated as of
June 1, 2000 is entered into among KOMAG, INCORPORATED, a Delaware corporation
(the "Borrower"), the lenders and their participants, if any, from time to time
party hereto, together with their respective successors and assigns (each a
"Restructure Lender" and collectively the "Restructure Lenders"), and FLEET
NATIONAL BANK f/k/a BANKBOSTON, N.A., a national banking association ("Fleet"),
as agent for the Restructure Lenders (in such capacity, the "Restructure
Agent").
ARTICLE 1
RECITALS
WHEREAS, the Borrower and the FNB Bank Group are parties
to that certain Amended and Restated Credit Agreement dated as of June 20, 1997
and the other agreements and documents related thereto, as amended
(collectively, the "FNB Facility"); and
WHEREAS, as of June 1, 2000 the aggregate outstanding
principal balance due from the Borrower to the FNB Bank Group under the FNB
Facility is $100,000,000.00, together with interest thereon as set forth herein;
and
WHEREAS the Borrower and DKB are parties to that certain
Credit Agreement dated as of October 7, 1996 and the other agreements and
documents related thereto, as amended (collectively, the "DKB Facility"); and
WHEREAS, as of June 1, 2000 the outstanding principal
balance due from the Borrower to DKB under the DKB Facility is $35,000,000.00,
together with interest thereon as set forth herein; and
WHEREAS, the Borrower and the IBJ Bank Group I are parties
to that certain Credit Agreement dated as of December 15, 1995 and the other
agreements and documents related thereto, as amended (collectively, the "IBJ
Facility I"); and
WHEREAS, as of June 1, 2000 the outstanding principal
balance due from the Borrower to the IBJ Bank Group I under the IBJ Facility I
is $50,000,000.00, together with interest thereon as set forth herein; and
WHEREAS, the Borrower and the IBJ Bank Group II are
parties to that certain Credit Agreement dated as of February 7, 1997 and the
other agreements and documents related thereto, as amended (collectively, the
"IBJ Facility II"); and
WHEREAS, as of June 1, 2000 the outstanding principal
balance due from the Borrower to the IBJ Bank Group II under the IBJ Facility II
is $75,000,000.00, together with interest thereon as set forth herein; and
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NOW, THEREFORE, based upon the recitals contained above,
which are expressly made a part of this Agreement, and the terms and conditions
set forth herein, the parties agree as follows:
ARTICLE 2
DEFINITIONS
SECTION 2.1 DEFINED TERMS. As used in this Agreement, the following
terms have the following meanings:
"Affiliate": As to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to vote fifty
percent or more of the securities having ordinary voting power to elect the
directors of such Person.
"Agreement": As set forth in the introductory paragraph of this
Agreement.
"Adjusted Net Working Capital": At any date of determination,
Current Assets minus Non-Cash Deferred Tax Assets included in Current Assets
plus Future Cumulative Cash Restructuring Charges minus Current Liabilities
(excluding Current Maturities of Long Term Debt).
"Adjusted Tangible Net Worth": At any date of determination,
Consolidated Total Assets plus Q3 99 Restructuring/Impairment Charges plus
Future Restructuring/Impairment Charges minus Goodwill minus Consolidated Total
Liabilities.
"Assignment Agreement": As set forth in Section 12.6(a) and
attached hereto as Exhibit B.
"Bankruptcy Code": Title 11 of the United States Code, as the same
may be amended from time to time.
"Base Rate": The higher of (a) the annual rate of interest
announced from time to time by Fleet at Fleet's Head Office in Boston,
Massachusetts, as its "base rate" and (b) one-half of one percent above the
Federal Funds Effective Rate. For the purposes of this definition, "Federal
Funds Effective Rate" shall mean for any day the rate per annum equal to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by Restructure Agent from
three (3) funds brokers of recognized standing selected by Restructure Agent.
"Borrower": As set forth in the introductory paragraph of this
Agreement.
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"Business Day": A day other than a Saturday, Sunday or a day on
which commercial banks in California or Massachusetts are authorized or required
by law to close.
"Capital Expenditures": With respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Debt) by such
Person during any measuring period for any fixed assets or improvements or for
replacements, substitutions or additions thereto, that have a useful life of at
least one year or that are required to be capitalized under GAAP, in the case of
the Borrower, as reflected in the cash flow statements required to be delivered
pursuant to Section 8.1 hereof.
"Capital Lease": As applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which would,
in accordance with GAAP, be required to be accounted for as a capital lease on
the balance sheet of that Person.
"Cash": Shall mean cash, cash equivalents or other investments of
the type permitted in Section 8.2(h)(1).
"Catch-Up Interest": As set forth in Section 4.3(c).
"Claims": As set forth in Section 3.2(b).
"Closing Costs": As set forth in Section 4.2(d).
"Closing Date": The date when this Agreement became effective
pursuant to Section 6.1.
"Closing Date Conversion Notice": As set forth in Section 11.1.
"Consolidated Subsidiary" or "Consolidated Subsidiaries": Any
corporation or other Person more than fifty percent of the outstanding voting
stock of which shall at the time be owned by the Borrower or another
Consolidated Subsidiary, excluding from this definition Asahi Komag Co., Ltd., a
Japanese corporation.
"Consolidated Total Assets": As determined in accordance with
GAAP.
"Consolidated Total Liabilities": As determined in accordance with
GAAP.
"Conversion Date": As set forth in Section 11.3.
"Conversion Documents": As set forth in Section 11.1.
"Conversion Lender": As set forth in Section 11.2.
"Crossroads": As set forth in Section 6.1(d).
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"Current Assets": Shall mean, with respect to any Person, all
current assets of such Person as of any date of determination calculated in
accordance with GAAP, but excluding debts due from Affiliates.
"Current Liabilities": Shall mean, with respect to any Person, all
liabilities which should, in accordance with GAAP, be classified as current
liabilities, and in any event shall include all Debt payable on demand or within
one year from any date of determination without any option on the part of the
obligor to extend or renew beyond such year, all accruals for federal or other
taxes based on or measured by income and payable within such year, but excluding
debts owed to Affiliates and Current Maturities of Long Term Debt.
"Current Maturities of Long Term Debt": As determined in
accordance with GAAP.
"DKB": The Dai-Ichi Kangyo Bank, Limited.
"DKB Bank Group": The Dai-Ichi Kangyo Bank, Limited and its
successor or permitted assignee.
"DKB Facility": As set forth in the Recitals to this Agreement.
"Dastek (M)": Dastek (M) SDN BHD, a Malaysian corporation.
"Debt": As applied to any Person, (a) all indebtedness for
borrowed money, (b) that portion of obligations with respect to Capital Leases
which is properly classified as a liability on a balance sheet in conformity
with GAAP, (c) notes payable and drafts accepted representing extensions of
credit whether or not representing obligations for borrowed money, (d) any
obligation owed for all or any part of the deferred purchase price of property
or services which purchase price is (i) due more than six months from the date
of incurrence of the obligation in respect thereof, or (ii) evidenced by a note
or similar written instrument, and (e) all indebtedness secured by any Lien on
any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of that Person.
"Debt Instrument": As set forth in Section 8.2(h)(11).
"Default Rate": As set forth in Section 5.1.
"DHC": Dastek Holding Company, a California corporation.
"Dollars" and "$": Dollars in lawful currency of the United States
of America.
"Employee Benefit Plan": Any Pension Plan, any employee welfare
benefit plan, or any other employee benefit plan which is described in Section
3(3) of ERISA and which is maintained for employees of the Borrower or any ERISA
Affiliate of the Borrower.
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"ERISA": The Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA Affiliate": As applied to any Person, any trade or business
(whether or not incorporated) which is a member of a group of which that Person
is a member and which is under common control within the meaning of Section
414(b) or (c) of the Internal Revenue Code, but excluding any Subsidiary or
other Person that is not a Consolidated Subsidiary.
"Existing Defaults": As set forth in Section 3.3.
"Existing Loans": Collectively, the loans respectively made by the
lenders and participants in (i) the FNB Bank Group pursuant to the FNB Facility,
(ii) the DKB Bank Group pursuant to the DKB Facility, (iii) the IBJ Bank Group I
pursuant to the IBJ Facility I and (iv) the IBJ Bank Group II pursuant to the
IBJ Facility II, and in each case, in the outstanding principal amount plus
accrued and unpaid interest specified on Schedule 1 as at the Closing Date.
"Existing Facilities": The FNB Facility, the DKB Facility, the IBJ
Facility I and the IBJ Facility II.
"Existing Notes": The separate promissory notes executed by the
Borrower to each lender of the FNB Bank Group, IBJ Bank Group I, IBJ Bank Group
II and DKB Bank Group, respectively, in connection with the Existing Facilities.
"Fleet": As set forth in the introductory paragraph of this
Agreement.
"FNB Bank Group": Fleet, Bank of Montreal, Bear, Stearns & Co.
Inc., Comerica Bank - California, Olympus Securities, Ltd., Nelson Partners
Ltd., Bank of Nova Scotia, Union Bank of California, N.A., Loeb Partners
Corporation and their respective successors or permitted assignees.
"FNB Facility": As set forth in the Recitals to this Agreement.
"Future Cumulative Cash Restructuring Charges": Any cash
restructuring charges taken in the first quarter of 2000 and beyond.
"Future Restructuring/Impairment Charges": Any
restructuring/impairment charges taken in the first quarter of 2000 and beyond.
"GAAP": Generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, as may be in effect from time to time.
"GAAP Changes": As set forth in Section 2.2(b).
"Goodwill": As determined in accordance with GAAP.
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"IBJ Bank Group I": The Industrial Bank of Japan, Limited, as
Agent and Lender; Sanwa Bank California; Bank One, N.A.; The Mitsubishi Trust
and Banking Corporation, as participants, and their respective successors or
permitted assignees.
"IBJ Bank Group II": The Industrial Bank of Japan, Limited, as
Agent and Lender; The Fuji Bank, Limited; The Mitsubishi Trust and Banking
Corporation; The Sumitomo Bank Limited, as lenders, and their respective
successors or permitted assignees.
"IBJ Facility I": As set forth in the Recitals to this Agreement.
"IBJ Facility II": As set forth in the Recitals to this Agreement.
"Indemnified Liabilities": As set forth in Section 5.6.
"Interest Payment Date": As to each Restructured Loan until
payment in full, the Restructure Maturity Date and the first Business Day of
each month commencing on the first such day to occur after the Closing Date.
"Interest Period": As set forth in Section 4.2(c).
"Internal Revenue Code": The Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Lien": Any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest).
"Majority Restructure Lenders": At any time when any Restructured
Loans remain outstanding, the Restructure Lenders having Restructured Loans with
an unpaid principal balance equal to at least fifty-one percent of the
Restructured Loans then outstanding.
"Material Adverse Effect": As set forth in Section 7.1(f).
"Multiemployer Plan": A "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is maintained for employees of the Borrower or any
ERISA Affiliate of the Borrower.
"Non-Cash Deferred Tax Assets": Shall mean, with respect to any
Person, any non-cash portion of deferred tax assets included in Current Assets.
"Nondisclosure Agreement": As set forth in Section 12.6(c) and
attached hereto as Exhibit C.
"PBGC": The Pension Benefit Guaranty Corporation, and as set forth
in Section 8.1(b)(2).
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"Pension Plan": Any employee plan which is subject to Section 412
of the Internal Revenue Code and which is maintained for employees of the
Borrower or any ERISA Affiliate of the Borrower, other than a Multiemployer
Plan.
"Permitted Liens": A lien, security interest, encumbrance or
charge (a) for taxes, assessments, charges or claims of the Borrower or a
Consolidated Subsidiary either not yet due or being contested in good faith by
appropriate proceedings, (b) arising out of judgments or awards against the
Borrower or a Consolidated Subsidiary with respect to which an appeal or other
proceeding is being prosecuted in good faith and with respect to which there
shall have been secured a stay of execution pending such appeal or proceedings
or which is vacated or discharged within thirty (30) days after the termination
of such stay, (c) materialmen's, mechanics', workers', repairmen's, employee's
or other like liens arising in the ordinary course of business for amounts
either not yet due or being contested in good faith by appropriate proceedings,
(d) granted by the Borrower to the Restructure Agent or the Restructure Lenders
pursuant to or in connection with this Agreement, (e) liens, deposits or pledges
made to secure statutory obligations, workers' compensation claims, surety or
appeal bonds, or bonds for the release of attachments or for stay of execution,
or to secure the performance of bids, tenders, contracts (other than for the
payment of borrowed money), leases or for purposes of like general nature in the
ordinary course of the Borrower's or a Consolidated Subsidiary's business, (f)
purchase money security interests incurred or assumed with respect to property
acquired, conditional sale agreements or other title retention agreements
(including Capital Leases) with respect to property acquired or leased;
provided, however, that no such security interest or agreement shall extend to
any property other than such after-acquired or leased property and proceeds, (g)
refunding, refinancing or extension of the liens or security interests permitted
in the foregoing clause not exceeding the principal amount of indebtedness so
refunded, refinanced or extended at the time of the refunding, refinancing or
extension thereof, and applying only to the same property theretofore subject to
such lien or security interest, (h) liens existing on the date hereof and
identified in Schedule 3 attached hereto and incorporated herein by reference or
incurred with any refunding, refinancing or extension of any such indebtedness
secured by such liens, provided that such refinancing, refunding or extension
shall not increase the amount, as of the date of such refinancing, refunding or
extension, secured by any such lien or security interest, (i) other liens
securing Debt or contingent liabilities the principal amount of which shall not
exceed in the aggregate $2,000,000.00, (j) liens in property of Asahi Komag Co.,
Ltd., a Japanese corporation, (k) liens taken by the Borrower on its
Subsidiaries, and (l) liens against DHC arising in conjunction with (i) loans
from Asahi Glass Co., Ltd., or any of its affiliates, (ii) that certain
Recapitalization Agreement dated as of March 1, 1993 among Asahi Glass Co.,
Ltd., Asahi Glass America, Inc., AGA Capital, Inc., the Borrower, Dastek, Inc.
and DHC and the other documents executed in connection therewith, and (iii) the
purchase of claims of third parties by the Borrower and Asahi Glass Co., Ltd.
and/or its affiliates against DHC and Dastek (M).
"Person": An individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Post-Closing Conversion Documents": As set forth in Section 11.1.
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"Post-Closing Date Conversion Notice": As set forth in Section
11.1.
"Potential Restructure Event of Default": A condition or event
which, after notice or lapse of time or both, would constitute a Restructure
Event of Default if that condition or event were not cured or removed within any
applicable grace or cure period.
"Prohibited Assignee": As set forth in Section 12.6.
"Q3 99 Restructuring/Impairment Charges": The
restructuring/impairment charges taken in the third quarter of 1999 in the
amount of $183,644,000.00.
"Regulation T, U and X": Regulations T, U and X, respectively,
promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time, and any successors thereto.
"Requirement": As set forth in Section 5.5.
"Requirements": As set forth in Section 5.7.
"Restructure Agent": As set forth in the introductory paragraph of
this Agreement.
"Restructure Lender": As set forth in the introductory paragraph
of this Agreement.
"Restructure Event of Default": As set forth in Section 9.1.
"Restructure Lender or Restructure Lenders": As set forth in the
introductory paragraph of this Agreement.
"Restructured Loan": The principal amount plus accrued and unpaid
interest of each Existing Loan of the Restructure Lenders specified in Schedule
1 being restructured pursuant to the terms of this Agreement.
"Restructure Loan Documents": This Agreement, the Restructured
Notes, the Warrant Agreement and all other documents executed in connection
therewith, including, without limitation, all amendments, waivers and consents
relating thereto.
"Restructure Maturity Date": The earliest of June 30, 2001 and the
date of termination of Restructure Lenders' obligations to permit existing
Restructured Loans to remain outstanding pursuant to Section 9.1.
"Restructured Loans Percentage": With respect to each Restructure
Lender, the percentage equivalent of the ratio which the principal amount plus
accrued and unpaid interest of such Restructure Lender's Restructured Loan bears
to the aggregate principal amount plus accrued and unpaid interest of the
Restructured Loans, as specified in Schedule 1.
"Restructured Notes": As set forth in Section 4.1(a).
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"Restructure Fee": As set forth in Section 4.1(b).
"Stock": Means all shares, options, warrants, general or limited
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended).
"Subordinated Promissory Note": Shall mean the Subordinated
Promissory Note in the principal amount of $30,077,357.00 dated as of April 8,
1999 by the Borrower in favor of Western Digital Corporation (or any other
holder thereof) .
"Subsidiary": A corporation or other Person of which at least
fifty percent of the outstanding voting stock or profit interests shall at the
time be owned by the Borrower or another Subsidiary.
"Termination Event": (a) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder (other than a "Reportable
Event" not subject to the provision for 30-day notice to the PBGC under such
regulations), or (b) the withdrawal of the Borrower or any of its ERISA
Affiliates from a Pension Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(1)(2) or 4068(f) of ERISA, or (c) the
filing of a notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA, or (d) the
institution of proceedings to terminate a Pension Plan by the PBGC, (e) any
other event or condition which might constitute grounds under ERISA for the
termination of, or the appointment by the PBGC of a trustee to administer, any
Pension Plan, or (f) the imposition of a lien pursuant to Section 412(n) of the
Internal Revenue Code.
"Transfer": As set forth in Section 8.2(i).
"Voidable Transfers": As set forth in Section 12.13.
"WD Asset Acquisition": Means that certain transaction pursuant to
which the Borrower or one of its Subsidiaries will acquire substantially all of
the assets of the Santa Clara Disk Media operations of WDC.
"WD Asset Acquisition Documents": Means the Asset Purchase
Agreement, the Volume Purchase Agreement, the Joint Development Agreement, the
Registration Rights Agreement, the License Agreement, the Transitional Services
Agreement, and the Subordinated Promissory Note, each dated as of April 8, 1999,
by and among the Borrower and WDC.
"WDC": Means Western Digital Corporation.
"Warrant Agreement": The Registration Rights Agreement and the
Warrant Agreement, each dated as of even date herewith, between the Borrower and
the Restructure
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Lenders and all documents executed in connection therewith, including but not
limited to any warrant certificate(s).
SECTION 2.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this Agreement shall have the
defined meanings when used in the Restructured Notes or any schedule,
certificate or other document made or delivered pursuant hereto.
(b) As used herein and in the Restructured Notes, and any
schedule, certificate or other document made or delivered pursuant hereto,
accounting terms not defined in Section 2.1, and accounting terms partly defined
in Section 2.1 to the extent not defined, shall have the respective meanings
given to them under GAAP, and all financial data required to be delivered
hereunder shall be prepared in accordance with GAAP, except that foreign
currency translation adjustments need not be included for purposes of
determining the Borrower's equity or net worth or related calculations. If any
changes in GAAP from those used in the preparation of the financial statements
referred to in Section 7.1(e) ("GAAP Changes") hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or any successors thereto or agencies with similar
functions) result in a change in the method of calculation of any of the
financial covenants, standards or other terms or conditions found in this
Agreement, the parties hereto agree to enter into negotiations to amend such
provisions so as to reflect equitably such GAAP Changes with the desired result
that the criteria for evaluating the financial condition and performance of the
Borrower and its Consolidated Subsidiaries shall be the same after such GAAP
Changes as if such GAAP Changes had not been made.
(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,
subsection and exhibit references are to this Agreement unless otherwise
specified.
ARTICLE 3
THE EXISTING LOANS
SECTION 3.1 AMENDMENT AND RESTATEMENT OF EXISTING FACILITIES.
This Agreement is intended to and does completely amend and restate, without
novation, the Existing Facilities subject to Section 12.13 hereof. Any financial
accommodations extended by the Restructure Lenders after the Closing Date shall
be made under the conditions set forth in, and shall be governed by, the terms
of this Agreement and the other Restructure Loan Documents.
SECTION 3.2 ACKNOWLEDGMENT OF EXISTING LOANS.
(a) The Borrower acknowledges and agrees that as of the
Closing Date it is currently indebted to each applicable Restructure Lender for
its Existing Loan.
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(b) The Borrower further acknowledges and agrees that it has
no claims, demands, damages, suits, cross complaints, counterclaims, conditions,
causes of action, debts, offsets, disgorgements or assertions of any kind or
nature whatsoever, whether known or unknown, and whenever or however arising
that can be asserted to reduce or eliminate all or any part of its liability to
repay the Existing Loans, or each of them, or to seek any affirmative relief or
damages of any kind or nature from Restructure Lenders, or each of them, that
arises out of or relates to the Existing Loans or Existing Facilities
(collectively, "Claims"). To the extent any such Claims exist, they are fully,
forever and irrevocably released as provided in Section 12.14 hereof.
(c) The Borrower acknowledges, reaffirms and ratifies the
terms of the Existing Facilities.
(d) The Borrower acknowledges and agrees that the Existing
Loans and Existing Facilities shall not be modified in accordance with the terms
set forth herein unless all conditions precedent set forth herein have been
satisfied, as determined in Restructure Agent's and Restructure Lenders' sole
discretion.
(e) The Borrower acknowledges and agrees that the execution
of this Agreement shall not be deemed or construed as a commitment on the part
of Restructure Lenders or Restructure Agent to provide any future financing,
loan extension, forbearance or any other type of financial accommodation to the
Borrower.
(f) The Borrower acknowledges and agrees that any unused loan
commitments or obligations of the Restructure Lenders to provide any financing
under the Existing Facilities is terminated and the Borrower shall have no
further right to additional advances under the Existing Facilities.
SECTION 3.3 ACKNOWLEDGMENT OF EVENTS OF DEFAULT BY THE BORROWER
AND WAIVER THEREOF BY RESTRUCTURE LENDERS. The Borrower acknowledges and agrees
that the following Events of Default under the Existing Facilities have occurred
and are continuing (the "Existing Defaults"):
(a) Net Worth. The Borrower has breached its financial
covenants regarding its Consolidated Tangible Net Worth (as defined in the
Existing Facilities) from the second fiscal quarter of 1998 through the date
hereof.
(b) Profitability. The Borrower has breached its financial
covenants regarding profitability from the second fiscal quarter of 1998 through
the date hereof.
(c) Leverage Ratio. The Borrower has breached its financial
covenants regarding the maintenance of specified leverage ratios from the second
fiscal quarter of 1998 through the date hereof.
(d) Debt Service. The Borrower has breached its financial
covenants regarding the maintenance of specified debt service coverage ratios
from the second fiscal quarter of 1998 through the date hereof.
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(e) Quick Ratio. The Borrower has breached its financial
covenants regarding its quick ratio from the second fiscal quarter of 1998
through the date hereof.
(f) WD Asset Acquisition. The Borrower may have breached
additional covenants regarding Permitted Liens and permitted consolidations,
mergers and acquisitions of assets in connection with the consummation of the WD
Asset Acquisition.
(g) No Other Event of Default. Except as set forth in this
Section 3.3 (a), (b), (c), (d), (e) and (f), and that such Events of Default
under the Existing Facilities may continue through the date of the Agreement,
and the cross-defaults arising out of the Existing Defaults, the Borrower
represents and warrants that no other Event of Default under the Existing
Facilities has occurred as of the Closing Date; provided, however, that the
covenants described above include the corresponding covenants, regardless of
definitional or other differences, as set forth in each of the Existing
Facilities.
(h) Waiver. Subject to the terms and conditions in this
Agreement and the other Restructure Loan Documents, the Restructure Lenders, and
each of them, waive the Existing Defaults effective as of the date hereof.
ARTICLE 4
THE RESTRUCTURED LOANS
SECTION 4.1 THE RESTRUCTURED LOANS.
(a) Restructured Notes. Each of the Restructure Lenders
severally agrees, on the terms and conditions set forth in this Agreement, to
restructure the Existing Facilities and Existing Notes. The Restructured Loans
shall be evidenced by promissory notes of the Borrower, substantially in the
form of Exhibit A, with appropriate insertions (the "Restructured Notes"),
payable to the order of each Restructure Lender and representing the obligation
of the Borrower to pay the aggregate unpaid principal amount of the Restructured
Loan owed by the Borrower to such Restructure Lender, with interest thereon as
prescribed in Sections 4.3, 5.1 and 5.2 hereof. Upon receipt by the Restructure
Agent of the Restructured Notes executed by the Borrower to the order of the
respective Restructure Lenders, the Existing Notes shall be canceled, subject to
Section 12.13 hereof. Each Restructure Lender is hereby authorized to record in
its respective books and records, and on any exhibit annexed to the Restructured
Notes, the date and amount of each Restructure Loan made by said Restructure
Lender, and the date and amount of each payment of principal thereof, and any
such recordation shall be prima facie evidence of the accuracy of the
information so recorded; provided, however, that failure by any Restructure
Lender to effect such recordation(s) shall not effect the Borrower's obligations
hereunder. Prior to the transfer of a Restructured Note, each Restructure Lender
shall record such information on any exhibit annexed to and forming a part of
such Restructured Note. Upon surrender of any Restructured Note at the office of
the Borrower by reason of any permitted assignment, transfer or other
disposition of any Restructured Loan portion thereof, the Borrower
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shall execute and deliver one or more new Restructured Notes of like tenor and
of a like aggregate principal amount in the name of the designated holder or
holders of such Restructured Loan or Restructured Loan or portion thereof. Any
such new Restructured Note shall thereafter be considered a Restructured Note
under this Agreement. Any such new Restructured Note shall carry the rights to
accrued and unpaid interest which were carried by the Restructured Note so
exchanged so that neither gain nor loss of interest shall result from such
event.
(b) Restructure Fee. On or before the Closing Date, the
Borrower shall pay to Restructure Agent a fee of $1,950,000.00 (the "Restructure
Fee"). Such fees shall be distributed to each agent of the Existing Facilities
pro rata in accordance with the amounts of the Existing Facilities and then
disbursed to the Restructure Lenders in a manner to be determined by the agent
of the Existing Facility applicable to each Restructure Lender.
SECTION 4.2 REPAYMENT.
(a) Mandatory Repayments. The Borrower shall repay
$15,000,000.00 of the principal amount of the Restructured Loans on the Closing
Date. The aggregate outstanding principal amount of the Restructured Loans
outstanding on the Restructure Maturity Date, together with accrued interest
thereon, shall be due and payable in full on the Restructure Maturity Date.
(b) Amortization Payments. In addition to the amortization
payment set forth in Section 4.2(a) above, the Borrower shall make minimum
mandatory principal amortization payments in the amount of $1,000,000.00 for
each fiscal quarter commencing with the fiscal quarter ending July 2, 2000. Such
minimum mandatory principal amortization payments for each fiscal quarter shall
be due and payable on the tenth calendar day of the month succeeding the end of
each applicable fiscal quarter from and after the fiscal quarter ending July 2,
2000. Such minimum mandatory principal amortization payments may be deferred by
the Borrower if and only if, as a result of such payment, the Borrower's cash
balance would be less than $35,000,000.00 after giving effect to such minimum
mandatory principal amortization payment. In the event that any such payment is
so deferred, each such deferred payment shall be made up by the Borrower in the
scheduled quarterly minimum mandatory principal amortization payments for the
following fiscal quarters to the extent that such payments would not result in a
cash balance of less than $35,000,000.00, until all such payments have been made
in full.
(c) Optional Payment. The Borrower may at its option and
without penalty repay the Restructured Loans, in whole or in part, on any
Business Day, prior to the Restructure Maturity Date, from time to time,
provided Restructure Agent shall have received from the Borrower notice of any
such payment at least one Business Day prior to the date of the proposed
payment. For Restructured Loans, each day shall be defined as and constitute an
"Interest Period." Partial payments hereunder shall be in an aggregate principal
amount of not less than $1,000,000.00 and in an integral multiple of $100,000.00
for the Restructured Loans. Restructure Agent shall promptly inform the
Restructure Lenders by telecopy of receipt of each such payment.
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(d) Capital Raising Events. If the Borrower or any
Consolidated Subsidiary issues or sells Stock (other than pursuant to employee
benefit plans consistent with past practice) or any Debt Instruments (other than
the conversion of a Restructured Loan into a convertible Debt Instrument
pursuant to Article 11 hereof) no later than the Business Day following the date
of receipt of the proceeds thereof, the Borrower shall prepay the Restructured
Loans in an amount equal to thirty-three percent of the first $50,000,000.00,
and fifty percent of the amount exceeding $50,000,000.00, of such proceeds, but
net of commissions and other reasonable and customary transactions costs, fees
and expenses properly attributable to such transaction and payable by the
Borrower or Consolidated Subsidiary in connection therewith, including, without
limitation, professionals' and consultants' fees ("Closing Costs").
(e) Asset Sales. The Borrower shall prepay the Restructured
Loans in an amount equal to fifty percent of the proceeds of any Transfer of all
or any part of the Borrower's or any of its Consolidated Subsidiary's business
property or fixed assets (including condemnation proceeds) which in the
aggregate is in excess of $2,000,000.00 in any fiscal year. Such payments shall
be made to the Restructure Agent for the ratable benefit of the Restructure
Lenders when the amount due the Restructure Lenders equals or exceeds
$500,000.00, but in no event later than the end of each fiscal quarter of the
Borrower.
(f) Cash Balance. Commencing with the Borrower's fiscal
quarter ended on July 2, 2000 and for each fiscal quarter thereafter until the
Restructure Maturity Date, the Borrower shall prepay the outstanding
Restructured Loans on the tenth day of the month following the end of the
Borrower's fiscal quarter in an amount equal to fifty percent of the Cash
balance at the quarter ended in excess of $40,000,000.00 up to a maximum payment
each quarter of $7,500,000.00; provided, however, that the amount of any
proceeds received by the Borrower in connection with a capital raising event
described in Section 4.2(d) or any sale of assets subject to the prepayment
requirement set forth in Section 4.2(e) shall be excluded from the calculation
of the Cash balance for purposes of this Section 4.2(f); and provided, further,
however, that any amounts representing minimum mandatory principal amortization
payments for the applicable quarter pursuant to Section 4.1(b) shall be included
in calculating the aforementioned $7,500,000.00 limit for each quarter. Each
such payment shall be accompanied by a certificate signed by the Borrower's
chief financial officer certifying the manner in which the Cash balance and the
resulting prepayment were calculated, which certificate shall be in form and
substance reasonably satisfactory to Restructure Agent. Notwithstanding the
foregoing, the portion of any excess cash flow payment due pursuant to this
Section 4.2(f) that, if timely paid, would be the sole cause of the Borrower
being in breach of Section 8.2(b) or 8.2(c) shall be deferred until such time as
the Borrower can pay such sum without being in breach of Section 8.2(b) or
8.2(c), and such deferral shall not constitute a Restructure Event of Default.
(g) Implied Consent. Nothing in this Section 4.2 shall be
construed to constitute either Restructure Agent's or any Restructure Lender's
consent to any transaction referred to in Sections 4.2(d) or (e) above which are
not expressly permitted by other provisions of the Restructure Loan Documents.
(h) Allocation of Payments. Prior to the occurrence of a
Restructure Event of Default, all amounts received by Restructure Agent on
account of the Restructured Loans, except
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expressly as set forth to the contrary in other Sections of this Agreement,
shall be disbursed by Restructure Agent to the Restructure Lenders pro rata in
accordance with their respective Restructured Loans Percentage in inverse order
of maturity by wire transfer on the date of receipt if received by Restructure
Agent before 1:00 p.m. (Eastern Time) or, if received later, by 1:00
p.m.(Eastern Time) on the next succeeding Business Day, without further interest
payable by Restructure Agent. Following the occurrence of a Restructure Event of
Default, all amounts received by Restructure Agent on account of the
Restructured Loans shall be disbursed by Restructure Agent as follows:
(1) first, to the payment of expenses incurred by
Restructure Agent in the performance of its duties and enforcement of the rights
under the Restructure Loan Documents, including, without limitation, all costs
and expenses of collection, attorneys' fees and court costs;
(2) then, to the payment of expenses incurred by the
agents of the Existing Facilities in the performance of their duties and
enforcement of their rights under the Restructure Loan Documents, including,
without limitation, all costs and expenses of collection, attorneys' fees and
court costs;
(3) then, to the Restructure Lenders, pro rata in
accordance with their respective Restructured Loans Percentage until all
outstanding Restructured Loans and interest accrued thereon have been paid in
full; and
(4) then, to such Persons as may be legally entitled
thereto.
(i) Sharing of Payments. Except where a provision of this
Agreement provides for non-pro rata treatment, if any Restructure Lender shall
receive and retain any payment, whether by setoff, application of the deposit
balance or security, or otherwise, in respect of the Restructured Loans in
excess of such Restructure Lender's Restructured Loans Percentage, then such
Restructure Lender shall purchase from the other Restructure Lenders for cash
and at face value and without recourse, such participation in the Restructured
Loans held by them as shall be necessary to cause such excess payment to be
shared ratably as aforesaid with each of them; provided, however, that if such
excess payment or part thereof is thereafter recovered from such purchasing
Restructure Lender, the related purchases from the other Restructure Lenders
shall be rescinded ratably and the purchase price restored as to the portion of
such excess payment so recovered, but without interest. Each Restructure Lender
agrees to exercise any and all rights of setoff, counterclaim or banker's lien
first fully against the Restructured Loans held by such Restructure Lender, and
only then to any other obligations of the Borrower to such Restructure Lender.
SECTION 4.3 INTEREST RATE AND PAYMENT DATES.
(a) Payment of Interest. Interest with respect to each
Restructured Loan shall be payable in arrears on each Interest Payment Date. In
no event shall interest on a Restructured Loan exceed the maximum rate permitted
by applicable law.
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(b) Base Rate. The Restructured Loans shall bear interest on
the unpaid principal amount thereof from the Closing Date through the
Restructure Maturity Date at a rate per annum equal to the Base Rate plus 125
basis points. The Restructure Agent shall notify the Borrower and each
Restructure Lender of the amount and the effective date of each adjustment in
the Base Rate; provided, however, that no failure or delay in giving any such
notice shall affect or delay the making of any such adjustments or the
obligation of the Borrower to pay in a timely manner the interest due on such
Restructured Loans.
(c) Catch-Up Interest. The Borrower shall, on or before the
Closing Date, pay interest ("Catch-Up Interest") to each Restructure Lender
which is a lender (or participant) under the IBJ Facility I, IBJ Facility II or
DKB Facility in an amount equal to the product of the difference between the
applicable interest rates for each applicable interest period under such
applicable facility and the FNB Facility from June 30, 1998 through the Closing
Date, multiplied by the outstanding principal amount of such Restructure
Lender's Existing Loan during each such period.
ARTICLE 5
GENERAL PROVISIONS CONCERNING THE RESTRUCTURED LOANS
SECTION 5.1 DEFAULT INTEREST. So long as a Potential Restructure
Event of Default or Restructure Event of Default shall have occurred and be
continuing under Section 9.1(f), and without the necessity of notice from
Restructure Agent or any Restructure Lender to the Borrower, or so long as any
other Potential Restructure Event of Default or Restructure Event of Default
shall have occurred and be continuing and, at the election of Restructure Agent
and Majority Restructure Lenders, confirmed by written notice from Restructure
Agent to the Borrower, the interest rate applicable to the Restructured Loans
shall be increased by 200 basis points per annum above such rate otherwise
applicable to the Restructured Loans (the "Default Rate") and each Restructure
Loan shall bear interest at the Default Rate. Interest at the Default Rate shall
accrue from the initial date of such Potential Restructure Event of Default or
Restructure Event of Default until that Potential Restructure Event of Default
or Restructure Event of Default is cured or waived and shall be payable upon
demand.
SECTION 5.2 COMPUTATION OF INTEREST.
(a) Calculations. Interest in respect of the Base Rate shall
be calculated on the basis of a 365-day year for the actual days elapsed. Any
change in the interest rate resulting from a change in the Base Rate shall
become effective as of the opening of business on the day on which such change
in the Base Rate shall become effective.
(b) Determination by Restructure Agent. Each determination of
an interest rate or fee by Restructure Agent pursuant to any provision of this
Agreement shall be conclusive and binding on the Restructure Lenders and the
Borrower in the absence of manifest error.
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SECTION 5.3 PAYMENTS. The Borrower shall make each payment of
principal, interest and fees due from it hereunder and under the Restructured
Notes, WITHOUT SETOFF OR COUNTERCLAIM AND FREE AND CLEAR OF, AND WITHOUT ANY
DEDUCTION OR WITHHOLDING FOR, ANY TAXES OR OTHER PAYMENTS, on or before 12:00
P.M. (Eastern Time) on the day when due to Restructure Agent, on behalf of the
Restructure Lenders, at the head office of Restructure Agent OR SUCH OTHER PLACE
AS IT MAY FROM TIME TO TIME SPECIFY IN WRITING in immediately available UNITED
STATES DOLLARS.
SECTION 5.4 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to
be made hereunder or under the Restructured Loans shall be stated to be due on a
day which is not a Business Day, such payment may be made on the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
SECTION 5.5 REDUCED RETURN. If any Restructure Lender shall have
determined that any new or additional applicable law, regulation, rule or
regulatory requirement (collectively, in this Section 5.5, "Requirement")
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by said Restructure Lender with any new or additional
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, in any such
case, effective after the Closing Date, has or would have the effect of reducing
the rate of return on said Restructure Lender's capital as a consequence of its
Restructured Loan and obligations hereunder to a level below that which would
have been achieved but for such Requirement, change or compliance (taking into
consideration said Restructure Lender's policies with respect to capital
adequacy) by an amount deemed by said Restructure Lender to be material (which
amount shall be determined by said Restructure Lender's reasonable allocation of
the aggregate of such reductions resulting from such events), then from time to
time, within thirty (30) Business Days after written demand by said Restructure
Lender, the Borrower shall pay to Restructure Agent on behalf of said
Restructure Lender such additional amount or amounts as will compensate said
Restructure Lender for such reduction. Notwithstanding the foregoing, no
additional compensation will be required from the Borrower under this Section
5.5 if the reason for said additional compensation was based solely on said
Restructure Lender's failure to comply with any existing or new law, treaty,
rule or regulation or requirement. In addition, said Restructure Lender shall
promptly notify the Borrower of any proposed request for compensation under this
Section 5.5 and shall provide the Borrower with reasonable support therefor. Any
request by said Restructure Lender for additional compensation shall be
structured to allocate such additional costs over the term of the credit
affected thereby. The Borrower may, at its option, replace any Restructure
Lender assessing additional charges under this Section 5.5 with a new
Restructure Lender with the prior written consent of the Restructure Agent,
which consent shall not be unreasonably withheld or delayed; provided, however,
the Borrower may not require, and this sentence shall not be deemed to be the
agreement of, any Restructure Lender to replace any other Restructure Lender.
SECTION 5.6 INDEMNITIES. Whether or not the transactions
contemplated hereby shall be consummated, the Borrower agrees to indemnify, pay
and hold Restructure Agent and
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the Restructure Lenders, and the shareholders, officers, directors, employees
and agents of same, harmless from and against any and all claims, liabilities,
losses, damages, costs and expenses (whether or not any of the foregoing Persons
is a party to any litigation), including, without limitation, reasonable
attorneys' fees and costs (including, without limitation, the reasonable
estimate of the allocated cost of in-house legal counsel and staff) and costs of
investigation, document production, attendance at a deposition, or other
discovery, with respect to or arising out of (i) any proposed acquisition by the
Borrower or any of its Consolidated Subsidiaries of any Person or any securities
(including a self-tender), (ii) this Agreement or any use of proceeds hereunder,
or (iii) any claim, demand, action or cause of action being asserted against the
Borrower or any of its Consolidated Subsidiaries (collectively, the "Indemnified
Liabilities"); provided, however, that the Borrower shall have no obligation
hereunder with respect to Indemnified Liabilities arising from the gross
negligence or willful misconduct of any such Persons or the failure of such
Person to comply with applicable law, including, without limitation, the failure
of any non-U.S. Person to file the appropriate forms required by any taxing
authority having jurisdiction over such Person or this Agreement and the
transactions contemplated hereby. If any claim is made, or any action, suit or
proceeding is brought against any Person indemnified pursuant to this Section
5.6, the indemnified Person shall notify the Borrower of such claim or of the
commencement of such action, suit or proceeding, and the Borrower will assume
the defense of such action, suit or proceeding, employing counsel selected by
the Borrower and reasonably satisfactory to the indemnified Person, and pay the
fees and expenses of such counsel. This covenant shall survive termination of
this Agreement and payment of the outstanding Restructured Loans.
SECTION 5.7 REQUIREMENTS OF LAW. In the event that any law,
regulation or directive or any change therein or in the interpretation or
application thereof or compliance by any Restructure Lender with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority, agency or instrumentality, in any case, effective
after the Closing Date:
(a) does or shall subject said Restructure Lender to any new
or additional tax of any kind whatsoever with respect to this Agreement, any
Restructured Loan made hereunder, or change the basis of taxation of payments to
said Restructure Lender of principal, restructure fee, interest or any other
amount payable hereunder (except for changes in the rate of tax on the overall
net income of said Restructure Lender);
(b) does or shall impose, modify or hold applicable any
reserve, assessment rate, special deposit, compulsory loan or other requirement
(collectively in this Section 5.7, "Requirements") against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
said Restructure Lender.
(c) does or shall impose, modify or hold applicable any of
the Requirements against the Restructure Loans Percentages; or
(d) does or shall impose on said Restructure Lender any other
new or additional condition;
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and the result of any of the foregoing is to increase the cost to said
Restructure Lender of making, renewing or maintaining its Restructured Loan or
to reduce any amount receivable thereunder by an amount determined by said
Restructure Lender, in its sole discretion, to be material (which increase or
reduction shall be determined by the Restructure Lender's reasonable allocation
of the aggregate of such cost increases or reduced amounts receivable resulting
from such events), then, in any such case, the Borrower shall pay to Restructure
Agent on behalf of said Restructure Lender, within thirty (30) Business Days of
its demand, any additional amounts necessary to compensate said Restructure
Lender for such additional cost or reduced amount receivable as determined by
said Restructure Lender with respect to this Agreement. If said Restructure
Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall notify the Borrower of the event by reason of which it has
become so entitled. A statement incorporating the calculation as to any
additional amounts payable pursuant to the foregoing sentence submitted by said
Restructure Lender to the Borrower shall be conclusive in the absence of
manifest error. Notwithstanding the foregoing, no additional compensation will
be required from the Borrower under this Section 5.7 if the reason for said
additional compensation was based solely on said Restructure Lender's failure to
comply with any existing or new law, treaty, rule or regulation or requirement.
In addition, said Restructure Lender shall promptly notify the Borrower of any
proposed request for compensation under this Section 5.7 and shall provide the
Borrower with reasonable support therefor. Any request by said Restructure
Lender for additional compensation shall be structured to allocate such
additional costs over the term of the credit affected thereby. The Borrower may,
at its option, replace any Restructure Lender assessing additional charges under
this Section 5.7 with a new Restructure Lender with the prior consent of the
Restructure Agent, which consent shall not be unreasonably withheld or delayed;
provided, however, the Borrower may not require, and this sentence shall not be
deemed to be the agreement of, any Restructure Lender to replace any other
Restructure Lender.
SECTION 5.8 IBJ BANK GROUP II SWAP TRANSACTIONS. The Borrower
acknowledges that in connection with the IBJ Facility II, the IBJ Bank Group II
entered into certain interest rate swap transactions, to which the Borrower is
not a party. As a further inducement to the Restructure lenders in the IBJ Bank
Group II to enter into the Restructure Agreement, the Borrower agrees as
follows:
(a) Breakage Costs. On the Closing Date, the Borrower shall
irrevocably authorize each Restructure Lender that is an Existing Lender under
the IBJ Facility II to terminate its interest rate swap transactions with IBJ,
and each such Restructure Lender that is an Existing Lender under the IBJ
Facility II shall immediately terminate its interest rate swap transactions with
IBJ. Subsequent to the Closing Date, the Borrower shall have no further
responsibility or obligations in connection with any interest rate swap
transactions by and between each Restructure Lender that is an Existing Lender
under the IBJ Facility II with IBJ, whether or not such interest rate swap
transactions are actually terminated. Any and all costs, fees, damages, claims
and/or proceeds resulting from such termination shall be for the account of each
Restructure Lender that is an Existing Lender under the IBJ Facility II. To the
extent that the termination of the interest rate swap transactions described
above results in payments to be due to any Restructure Lender that is
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an Existing Lender under IBJ Facility II, each such Restructure Lender shall be
entitled to retain said payments for its own account.
ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS
AGREEMENT. The effectiveness of this Agreement is subject to the conditions
precedent set forth in this Section 6.1 and the Borrower hereby agrees that the
obligation of Restructure Lenders to consummate the transactions contemplated
herein is subject to the accuracy of the representations and warranties
described herein and the fulfillment, to Restructure Agent's and Restructure
Lenders' satisfaction, on or before the Closing Date, of each of the following
conditions precedent (which are for the sole benefit of Restructure Lenders),
unless waived by Restructure Agent and Restructure Lenders in their sole
discretion:
(a) Restructure Agent (which shall promptly distribute such
information to each of the Restructure Lenders) shall have received, for and on
behalf of the Restructure Lenders and on or before the date of this Agreement,
the following, each dated such day and in form and substance satisfactory to
Restructure Agent and the agents under the Existing Facilities:
(1) The Restructured Notes executed by the Borrower to the
order of the respective Restructure Lenders;
(2) A copy of the Certificate of Incorporation of the
Borrower certified as of a recent date by the Secretary of the State of
Delaware;
(3) A copy of the bylaws of the Borrower certified by the
Secretary or Assistant Secretary of the Borrower;
(4) Copies of resolutions of the Board of Directors or
other authorizing documents of the Borrower approving the Restructure Loan
Documents;
(5) the Borrower's certificate that the copy of the
incumbency certificate, executed by the Secretary or an Assistant Secretary of
the Borrower or equivalent document, certifying the names and signatures of the
officers of the Borrower or other Persons authorized to sign the Restructure
Loan Documents and the other documents to be delivered hereunder, heretofore
provided to Restructure Agent is in full force and effect and has not been
amended and/or supplemented;
(6) Executed copies of all Restructure Loan Documents by
the Borrower, each Restructure Lender and Restructure Agent; and
(7) Executed copies of the Warrant Agreement by the
Borrower, each Restructure Lender and Restructure Agent.
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(b) All corporate and legal proceedings and all instruments
and documents in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory in content, form and substance to Restructure
Agent, Restructure Lenders and their counsel, and Restructure Agent or
Restructure Lenders and such counsel shall have received any and all further
information and documents which Restructure Agent, Restructure Lenders or their
respective counsel may reasonably have requested in connection therewith, such
documents where appropriate to be certified by proper corporate or governmental
authorities;
(c) The Borrower shall have paid the Catch-Up Interest and
Restructure Fee to Restructure Agent for the benefit of the applicable
Restructure Lenders;
(d) The Borrower shall have paid Crossroads, LLC
("Crossroads") a retainer of $10,000.00; and
(e) The Borrower shall have paid all reasonable costs, fees
(inclusive of attorneys' fees and consultants' fees) and expenses incurred by
Restructure Agent and the agents of the Existing Facilities for which the
Borrower has received copies of invoices as of the Closing Date in connection
with (i) the administration, default and collection of the Existing Loans, and
(ii) the preparation, negotiation, administration and execution of this
Agreement, and the other Restructure Loan Documents.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
SECTION 7.1 REPRESENTATIONS AND WARRANTIES. In order to induce
each Restructure Lender to enter into this Agreement, the Borrower represents
and warrants as follows:
(a) Organization. The Borrower is duly organized, validly
existing and in good standing under the laws of the state of its formation. The
Borrower is also duly authorized, qualified and licensed in all applicable
jurisdictions, and under all applicable laws, regulations, ordinances or orders
of public authorities, to carry on its business in the locations and in the
manner presently conducted, to the extent that the failure to do so would not
reasonably be expected to have a Material Adverse Effect. All of the
Subsidiaries and Consolidated Subsidiaries of the Borrower and the percentage of
the Borrower's ownership interest therein as of the date of this Agreement are
identified on Schedule 2.
(b) Authorization. The execution, delivery and performance by
the Borrower of the Restructure Loan Documents are within the Borrower's
corporate powers, have been duly authorized by all necessary corporate action
and do not contravene (i) the Borrower's certificate of incorporation, bylaws or
other organizational documents or (ii) any law or regulation (including
Regulations T, U and X) or any contractual restriction binding on or affecting
the Borrower.
(c) Governmental Consents. No authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body (except routine
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reports required pursuant to the Securities Exchange Act of 1934, as amended (if
such act is applicable to the Borrower), which reports will be made in the
ordinary course of business) is required for the due execution, delivery and
performance by the Borrower of the Restructure Loan Documents.
(d) Validity. The Restructure Loan Documents are the binding
obligations of the Borrower, enforceable in accordance with their respective
terms; except in each case as such enforceability may be limited by bankruptcy,
insolvency, reorganization, liquidation, moratorium or other similar laws of
general application and equitable principles relating to or affecting creditors'
rights.
(e) Financial Condition. The balance sheet of the Borrower
and its Consolidated Subsidiaries as at the fiscal year ended January 2, 2000,
and the related statements of income, cash flows and stockholders' equity of the
Borrower and its Consolidated Subsidiaries to that date for the fiscal year then
ended, copies of which have been furnished to Restructure Agent and to the
Restructure Lenders, fairly present the financial condition of the Borrower and
its Consolidated Subsidiaries as of such date and the results of the operations
of the Borrower and its Consolidated Subsidiaries for the respective period
ended on such date, all in accordance with GAAP, consistently applied.
(f) Litigation. Except as set forth in the financial
statements delivered on or prior to the date hereof or described on Schedule 4
to this Agreement, to the best of the Borrower's knowledge after due inquiry
there is no pending or threatened action or proceeding affecting the Borrower or
any of its Consolidated Subsidiaries before any court, governmental agency or
arbitrator, which could reasonably be expected to materially adversely affect
the consolidated financial condition or operations of the Borrower or which
could reasonably be expected to have a material adverse effect on the Borrower's
ability to perform its obligations under the Restructure Loan Documents, having
regard for its other financial obligations (a "Material Adverse Effect").
(g) Employee Benefit Plans. The Borrower and each of its
ERISA Affiliates is in compliance in all material respects with any applicable
provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans. No Termination Event has occurred or
is reasonably expected to occur with respect to any Pension Plan that would
reasonably be expected to have a Material Adverse Effect.
(h) Disclosure. No representation or warranty of the Borrower
contained in this Agreement or any other document, certificate or written
statement furnished to Restructure Agent and the Restructure Lenders by or on
behalf of the Borrower for use in connection with the transactions contemplated
by this Agreement contains any untrue statement of a material fact or omits to
state a material fact (known to the Borrower in the case of any document not
furnished by it) necessary in order to make the statements contained herein or
therein not misleading. To the best of the Borrower's knowledge, there is no
fact known to the Borrower (other than matters of a general economic nature)
which materially adversely affects the business, operations, property, assets or
condition (financial or otherwise) of the Borrower and its Consolidated
Subsidiaries, taken as a whole, which has not been disclosed herein or in such
other documents,
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certificates and statements furnished to Restructure Agent and the Restructure
Lenders for use in connection with the transactions contemplated hereby.
(i) Margin Stock. The aggregate value of all margin stock (as
defined in Regulation U) directly or indirectly owned by the Borrower and its
Consolidated Subsidiaries is less than twenty-five percent of the aggregate
value of the Borrower's assets.
(j) Environmental Matters. Except as set forth in the
financial statements delivered on or prior to the date hereof and except for
certain claims associated with Great Western Chemical, neither the Borrower nor
any Consolidated Subsidiary, nor, to the best of their knowledge, any other
person, has treated, stored, processed, discharged, spilled, or otherwise
disposed of any substance defined as hazardous or toxic by any applicable
federal, state or local rule, regulation, order or directive, or any waste or
by-product thereof, at any real property or any other facility owned, leased or
used by the Borrower or any Consolidated Subsidiary, in violation of any
applicable statutes, regulations, ordinances or directives of any governmental
authority or court, which violations may result in liability to the Borrower or
any Consolidated Subsidiary in an amount for all such violations that could
reasonably be expected to have a Material Adverse Effect; and the unresolved
violations set forth in the financial statements delivered on or prior to the
date hereof will not result in liability to the Borrower or any Consolidated
Subsidiary in an amount for all such unresolved violations that could reasonably
be expected to have a Material Adverse Effect. Except as set forth in the
financial statements delivered on or prior to the date hereof, no employee or
other person has ever made a claim or demand against the Borrower or any
Consolidated Subsidiary based on alleged damage to health caused by any such
hazardous or toxic substance or by any waste or by-product thereof in an amount
that could reasonably be expected to have a Material Adverse Effect; and the
unsatisfied claims or demands against the Borrower or any Consolidated
Subsidiary set forth in the financial statements delivered on or prior to the
date hereof will not result in uninsured liability to the Borrower or any
Consolidated Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount that could reasonably be
expected to have a Material Adverse Effect for all such unsatisfied claims or
demands. Except as set forth in the financial statements delivered on or prior
to the date hereof, neither the Borrower nor any Consolidated Subsidiary has
been charged by any governmental authority with improperly using, handling,
storing, discharging or disposing of any such hazardous or toxic substance or
waste or by-product thereof or with causing or permitting any pollution of any
body of water in an amount that could reasonably be expected to have a Material
Adverse Effect; and the outstanding charges set forth in the financial
statements delivered on or prior to the date hereof will not result in liability
to the Borrower or any Consolidated Subsidiary or any of their respective
officers, employees, representatives, agents or shareholders in an amount that
could reasonably be expected to have a Material Adverse Effect for all such
outstanding charges.
(k) Employee Matters. There is no strike or work stoppage in
existence or, to the best of the Borrower's knowledge after due inquiry,
threatened involving the Borrower or its Consolidated Subsidiaries that would
reasonably be expected to have a Material Adverse Effect.
(l) Status of Dastek, Inc., Dastek (M) and DHC. Neither
Dastek, Inc. nor Dastek (M) is an active operating business. To the best
knowledge of the Borrower after due
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inquiry, none of Dastek, Inc., Dastek (M) or DHC have any material outstanding
liabilities in favor of any Persons that are not affiliated with the DHC
joint-venture.
(m) Year 2000 Compliance. The Borrower has completed a review
and assessment of the applicable areas of its and each of its Consolidated
Subsidiaries' businesses and operations that could be materially adversely
affected by the "Year 2000" problem (that is, the risk that computer
applications used by the Borrower or any of its Consolidated Subsidiaries may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999). Based upon the
foregoing, the Borrower developed a plan and timetable to take at the
appropriate time all steps the Borrower considers reasonably necessary to ensure
that all computer applications that are necessary to its or any of its
Consolidated Subsidiaries' businesses and operations are able to perform
properly date-sensitive functions for all dates before and after January 1,
2000, except to the extent that any such Year 2000 non-compliance would not
reasonably be expected to have a Material Adverse Effect. In connection
therewith, the Borrower believes it has committed adequate resources to support
its Year 2000 plan for itself and its Consolidated Subsidiaries.
ARTICLE 8
COVENANTS
SECTION 8.1 AFFIRMATIVE COVENANTS. So long as any Restructured
Loan shall remain unpaid, the Borrower will, unless the Majority Restructure
Lenders shall otherwise consent in writing:
(a) Financial Information. Furnish to Restructure Agent and
each of the Restructure Lenders in each case as soon as available, but in any
event no later han:
(1) Annual Reporting: (A) One hundred twenty (120) days
after the end of each fiscal year of the Borrower, a copy of the Borrower's
consolidated balance sheet of itself and its Consolidated Subsidiaries as at the
end of each fiscal year and the related consolidated statements of income,
stockholders' equity and statement of cash flows for such fiscal year, setting
forth in each case in comparative form the figures for the previous year,
accompanied by a report and opinion thereon of Ernst & Young LLP or other
independent certified public accountants of recognized national standing;
(2) Quarterly Reporting: Thirty (30) days after the end of
each fiscal quarter of the Borrower (A) a variance report showing the Borrower's
actual performance to its January projected performance as set forth in the
Borrower's Business Plan for the applicable fiscal year as attached as Exhibit E
to this Agreement, including but not limited to, the Borrower's revenue with a
breakdown of sales and changes in sales on a quarter to quarter basis, cash
receipts and disbursements, an analysis of the Borrower's yield improvement
process, material and running costs and average selling prices, an analysis of
capital expenditures, general and administration expense and research and
development expenses for such quarter, and a progress report on Borrower's
"Qualification Process"; (B) on a quarterly basis, but in any event within
forty-five (45) days after the end of the applicable fiscal quarter for the
first three quarters
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of each fiscal year and within sixty (60) days following the Borrower's fiscal
year end, a compliance certificate, in form and substance satisfactory to
Restructure Agent, setting forth in such detail as Restructure Agent may request
the calculation of the ratios and amounts necessary to determine the Borrower's
compliance with Sections 8.2(a), (b), (c), and (d) hereof for the accounting
period covered by such financial statements, certified by the Borrower's chief
executive officer or chief financial officer; and (C) together with each
delivery of financial statements of the Borrower and its Consolidated
Subsidiaries pursuant to subdivisions (1) and (2) above, an officer's
certificate stating that the signers have reviewed the terms of the Restructure
Loan Documents and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of the Borrower
and its Consolidated Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of the officer's certificate, of any
existing condition or event which constitutes a Restructure Event of Default or
Potential Restructure Event of Default, or, if any such condition or event
existed or exists, specifying the nature and period of existence thereof and
what action the Borrower has taken, is taking and proposes to take with respect
thereto;
(3) Monthly Reporting: Thirty (30) days after the end of
each calendar month, the Borrower's (A) unaudited consolidated balance sheet of
itself and its Consolidated Subsidiaries as at the end of such period and the
related unaudited consolidated statements of income and stockholders' equity;
and (B) the Borrower's unaudited statements of cash flows for itself and its
Consolidated Subsidiaries for such period and year to date, setting forth in
each case in comparative form the figures as at the end of the previous fiscal
year as to the balance sheet and the figures for the previous corresponding
period as to the other statements, certified by a duly authorized officer of the
Borrower as being fairly stated in all material respects subject to year end
adjustments and the absence of footnotes; all such financial statements and
other reports to be complete and correct in all material respects and to be
prepared in reasonable detail acceptable to the Majority Restructure Lenders
and, to the extent applicable, in accordance with GAAP applied consistently
throughout the periods reflected therein (except as approved by such accountants
and disclosed therein);
(4) concurrently with the closing of the Company's books
for the preceding fiscal month, a certificate signed by the Chief Financial
Officer of the Company and in form and substance reasonably satisfactory to
Restructure Agent certifying the Borrower's cash balance measured at the end of
such preceding fiscal month;
(5) as soon as available, notice of filing or delivery of
all reports which the Borrower sends to its security holders generally, and
copies of all reports and registration statements which the Borrower or any
Subsidiary files with the SEC or any national securities exchange, including,
but not limited to: Form 8-K Current Report, Form 10-K Annual Report, Form 10-Q
Quarterly Report, Annual Report to Shareholders, Proxy Statements, and
Registration Statements, together with information sufficient to enable each
recipient of such notice to access such reports electronically; and
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(6) as soon as available, copies of the Borrower's annual
audit management letter.
(b) Notices and Information. Deliver to Restructure Agent and
each of the Restructure Lenders subject to the last sentence of Section 8.1(f):
(1) promptly upon any officer of the Borrower obtaining
knowledge (A) of any condition or event which constitutes a Restructure Event of
Default or existing Potential Restructure Event of Default, (B) that any Person
has given any notice to the Borrower or any Consolidated Subsidiary or taken any
other action with respect to a claimed default or event or condition of the type
referred to in Section 9.1(e), (C) of the institution of any litigation
involving an alleged liability (including possible forfeiture of property) of
the Borrower or any of its Consolidated Subsidiaries equal to or greater than
$4,000,000.00 or any adverse determination in any litigation involving a
potential liability of the Borrower or any of its Consolidated Subsidiaries
equal to or greater than $4,000,000.00, or (D) of a material adverse change in
the business, operations, properties, assets or condition (financial or
otherwise) of the Borrower and its Consolidated Subsidiaries, taken as a whole,
an officer's certificate specifying the nature and period of existence of any
such condition or event, or specifying the notice given or action taken by such
holder or Person and the nature of such claimed default, Restructure Event of
Default, Potential Restructure Event of Default, event or condition, and what
action the Borrower has taken, is taking and proposes to take with respect
thereto;
(2) promptly upon becoming aware of the occurrence of or
forthcoming occurrence of any (A) Termination Event, or (B) "prohibited
transaction", as such term is defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA, in connection with any Employee Benefit Plan or
any trust created thereunder, a written notice specifying the nature thereof,
what action the Borrower has taken, is taking or proposes to take with respect
thereto, and, when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor, or the Pension Benefit Guaranty Corporation
("PBGC") with respect thereto;
(3) with reasonable promptness copies of (A) all notices
received by the Borrower or any of its ERISA Affiliates of the PBGC's intent to
terminate any material Pension Plan or to have a trustee appointed to administer
any Pension Plan; (B) each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) filed by the Borrower or any of its ERISA Affiliates
with the Internal Revenue Service with respect to each material Pension Plan;
and (C) all notices received by the Borrower or any of its ERISA Affiliates from
a Multiemployer Plan sponsor concerning the material imposition or material
amount of withdrawal liability pursuant to Section 4202 of ERISA;
(4) promptly, and in any event within thirty (30) days
after receipt thereof, a copy of any notice, summons, citation, directive,
letter or other form of communication from any governmental authority or court
in any way concerning any material action or omission on the part of the
Borrower or any of its Consolidated Subsidiaries in connection with any
substance defined as toxic or hazardous by any applicable federal, state or
local law, rule, regulation, order or directive or any waste or by-product
thereof, or concerning the filing of a
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material lien upon, against or in connection with the Borrower, its Consolidated
Subsidiaries, or any of their leased or owned real or personal property, in
connection with a Hazardous Substance Superfund or a Post-Closure Liability Fund
as maintained pursuant to Section 9507 of the Internal Revenue Code; and
(5) promptly, and in any event within fifteen (15) days
after request, such other information and data with respect to the business
affairs and financial condition of the Borrower or any of its Consolidated
Subsidiaries as from time to time may be reasonably requested by Restructure
Agent or any Restructure Lender; provided, however, that such fifteen (15) day
period may be extended for a reasonable period at the request of the Borrower
and with the consent of the Restructure Agent (which consent shall not be
unreasonably withheld) if the Borrower determines that such information and data
cannot reasonably be provided within such fifteen (15) day period.
(6) promptly, and in any event within two business days
after such event, written notice on each occasion that the Borrower's cash
balance is less than the required minimum amount for such period as set forth in
Section 8.2(b) for five consecutive business days from the date that the
Borrower first has knowledge that its cash balance is less than such required
minimum cash balance.
(c) Corporate Existence, Etc. At all times preserve and keep
in full force and effect the Borrower's and its Consolidated Subsidiaries'
corporate existence and rights and franchises material to the Borrower's
business and those of each of its Consolidated Subsidiaries; provided, however,
that the corporate existence of any such Consolidated Subsidiary may be
terminated if such termination is in the best interest of the Borrower and is
not materially disadvantageous to any Restructure Lender.
(d) Payment of Taxes and Claims. Pay, and cause each of its
Consolidated Subsidiaries to pay, all taxes, assessments and other governmental
charges imposed upon it or any of its properties or assets or in respect of any
of its franchises, business, income or property before any penalty or interest
accrues thereon, and all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums which have become due and
payable and which by law have or may become a lien upon any of its properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; provided; however, that no such charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and if such reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor.
(e) Maintenance of Properties; Insurance. Maintain or cause
to be maintained in good repair, working order and condition all material
properties used or useful in the business of the Borrower and its Consolidated
Subsidiaries and from time to time will make or cause to be made all appropriate
repairs, renewals and replacements thereof. The Borrower will maintain or cause
to be maintained, with financially sound and reputable insurers, insurance with
respect to its properties and business and the properties and business of its
Consolidated Subsidiaries against loss or damage of the kinds customarily
insured against by corporations of established
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reputation engaged in the same or similar businesses and similarly situated, of
such types and in such amounts as are customarily carried under similar
circumstances by such other corporations.
(f) Inspection. Permit Crossroads or any successor designated
by the Restructure Agent (at the request of Majority Restructure Lenders), to
visit and inspect any of the properties of the Borrower or any of its
Consolidated Subsidiaries, including its and their financial and accounting
records, and to make copies and take extracts therefrom, and to discuss its and
their affairs, finances and accounts with its and their officers and independent
public accountants, all at such reasonable times during normal business hours
and under the Borrower's supervision and as often as may be reasonably
requested. Any such information received hereunder that is reasonably deemed to
be confidential by the Borrower shall be held in confidence by Crossroads and
may not be used for any purpose other than to monitor the credit worthiness of
the Borrower and its Consolidated Subsidiaries and shall (i) only be disclosed
or disseminated in summary form to the Restructure Agent and Restructure Lenders
and (ii) not be disclosed or disseminated to any other Person for any reason
without the prior written consent of the Borrower.
(g) Compliance with Laws, Etc. Exercise, and cause each of
its Consolidated Subsidiaries to exercise, all due diligence in order to comply
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority, including, without limitation, all environmental
laws, rules, regulations and orders, noncompliance with which would have a
Material Adverse Effect.
(h) Proceeds of Assets and Capital Raising Events. The
Borrower shall deposit and maintain all proceeds from any capital raising event
or asset sale described in Section 4.2(d) and 4.2(e), respectively, in a
segregated account that complies with Section 8.2(h)(1).
(i) Notification of Debt Instrument Default. The Borrower
shall promptly give written notification to Restructure Agent of any event of
any default under any Debt Instrument and specify the nature of such default
thereunder.
SECTION 8.2 NEGATIVE COVENANTS. So long as any Restructured Note
shall remain unpaid, the Borrower will not, without the prior written consent of
the Majority Restructure Lenders:
(a) Adjusted Tangible Net Worth. Permit the Borrower's
Adjusted Tangible Net Worth on a quarterly basis to be less than the following
at all times during the applicable quarter:
Q100 $169,000,000.00
Q200 $161,000,000.00
Q300 $153,000,000.00
Q400 $145,000,000.00
Q101 $142,000,000.00
Q201 $139,000,000.00
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(b) Minimum Cash Balance. Permit the Borrower's Cash balance,
on a consolidated basis, to be less than the following at all times during the
applicable quarter:
Q100 $ 35,000,000.00
Q200 $ 30,000,000.00
Q300 $ 30,000,000.00
Q400 $ 30,000,000.00
Q101 $ 30,000,000.00
Q201 $ 30,000,000.00
(c) Minimum Adjusted Net Working Capital. Permit the
Borrower's Adjusted Net Working Capital on a quarterly basis
to be less than $27,000,000.00.
(d) Capital Expenditures. Permit the Borrower's Capital
Expenditures to exceed $30,000,000.00 in any fiscal year.
(e) Liens, Etc. Create or suffer to exist, or permit any of
its Consolidated Subsidiaries to create or suffer to exist, any Lien upon or
with respect to any of its properties, whether now owned or hereafter acquired,
or assign, or permit any of its Consolidated Subsidiaries to assign, any right
to receive income, in each case to secure any Debt of any Person other than (i)
Liens in favor of the Restructure Lenders, (ii) existing Liens reflected on the
financial statements referred to in Section 7.1(e), and (iii) Permitted Liens.
(f) Dividends, Etc. Declare or pay any dividends, purchase or
otherwise acquire for value its capital stock now or hereafter outstanding, or
make any distribution of assets to its stockholders as such, or permit any of
its Consolidated Subsidiaries to purchase or otherwise acquire for value any
stock of the Borrower.
(g) Consolidation, Merger or Acquisition. Regarding the
Borrower and its Consolidated Subsidiaries, liquidate or dissolve or enter into
any consolidation, merger, acquisition, material partnership, material joint
venture, syndication or other combination, except that the Borrower may
consolidate with, merge into or acquire any other corporation or entity and that
any corporation or entity may consolidate with or merge into the Borrower;
provided, however, that the Borrower shall be the surviving entity of such
merger or consolidation, and provided further, that immediately after the
consummation of such consolidation or merger there shall exist no condition or
event which constitutes a Restructure Event of Default or a Potential
Restructure Event of Default. Notwithstanding anything to the contrary in this
Agreement, the Borrower shall not enter into any consolidation, merger,
acquisition, material partnership, material joint venture, syndication or other
combination with HMT Technology Corp., a Delaware corporation, without the prior
written consent of Majority Restructure Lenders.
(h) Loans, Debt, Investments, Secondary Liabilities. Make or
permit to remain outstanding, or permit any Consolidated Subsidiary to make or
permit to remain outstanding, any loan or advance to, or incur, assume, become
or be liable in any manner in respect of, suffer to exist, guarantee, induce or
otherwise become contingently liable, directly or indirectly, in connection with
any Debt other than as permitted by this Agreement, or with the
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obligations, stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of or any other interest in, or make any capital
contribution to, any Person, except that the Borrower and its Consolidated
Subsidiaries may:
(1) own, purchase or acquire certificates of deposit, time
deposits and bankers' acceptances issued by (A) any financial institution
organized and existing under the laws of the United States of America or any
State thereof, or (B) with respect to any Consolidated Subsidiary domiciled
outside the United States of America, any financial institution located in the
same jurisdiction of such Consolidated Subsidiary in an amount consistent with
past practices but in no event shall such deposits in all such overseas
financial institutions in the aggregate exceed 20% of the Borrower's Cash, in
each case having a combined capital and surplus of at least $100,000,000.00,
commercial paper rated Moody's P-2 or better and/or Standard & Poor's A-2 or
better, obligations or instruments issued by or guaranteed by an entity
designated as Standard & Poor's A-2 or better, or Moody's P-2 or better or the
equivalent by a nationally recognized credit agency, municipal bonds and other
governmental and corporate debt obligations rated Standard & Poor's A or better
and/or Moody's A-2 or better, direct obligations of the United States of America
or its agencies, and obligations guaranteed or insured by the United States of
America, or (C) any Restructure Lender and any funds investing in any of the
foregoing;
(2) acquire and own stock, obligations or securities
received in connection with debts created in the ordinary course of business
owing to the Borrower or a Subsidiary;
(3) continue to own the existing capital stock of the
Borrower's Subsidiaries;
(4) endorse negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(5) make loans, advances to or investments in a Subsidiary
or joint venture in connection with the normal operations of the business of
such Subsidiary or joint venture and allow the Borrower's Subsidiaries or any
joint venture to which it is a party to make or permit to remain outstanding
advances from the Borrower's Subsidiaries or such joint venture to the Borrower;
(6) make or permit to remain outstanding loans or advances
to the Borrower's Subsidiaries or any joint venture to which it is a party or
enter into or permit to remain outstanding guarantees in connection with the
obligations of the Borrower's Subsidiaries or such joint ventures;
(7) make or permit to remain outstanding (A) loans and/or
advances to the Borrower's officers, stockholders and/or employees, which, in
the aggregate, would not exceed $3,000,000.00 during the term of this Agreement,
(B) loans to the Borrower's vendors, in the ordinary course of the Borrower's
business, which, in the aggregate, do not exceed $5,000,000.00, (C) progress
payments to the Borrower's vendors made in the ordinary course of
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the Borrower's business, and (D) (i) loans and/or advances for the purpose of
purchasing the Borrower's shares of stock pursuant to its employee stock
purchase or option plans, (ii) advances for salary, travel and other expenses,
advances against commission and other similar advances made to officers or
employees in the ordinary course of the Borrower's business, and (iii) loans
and/or advances to or for the benefit of officers, directors or employees in
connection with litigation and other proceedings involving such persons by
virtue of their status as officers, directors or employees, respectively;
(8) make investments under the Borrower's deferred
compensation plans for the benefit of the employees of the Borrower and its
Subsidiaries;
(9) consummate the WD Asset Acquisition and assume Capital
Leases in connection therewith on terms and conditions set forth in the WD Asset
Acquisition Documents; provided, however, the Borrower shall not make any
payments of principal, interest, fees or expenses with respect to the
Subordinated Promissory Note or distribute any assets on account thereof (except
for the non-cash adjustments of the Subordinated Promissory Note pursuant to
Sections 2(b) and 2(c) thereof) unless and until the Restructured Loan of each
Restructure Lender together with any other fees, costs, expenses or amounts due
to Restructure Agent and each Restructure Lender pursuant to the Restructure
Loan Documents have been paid indefeasibly in full; and further provided,
however, the Borrower shall not, and shall not permit its Consolidated
Subsidiaries to, obtain letters of credit for the benefit of any lessor of any
operating leases or Capital Leases assumed by the Borrower in the WD Asset
Acquisition without the prior written consent of Majority Restructure Lenders.
For the avoidance of doubt, the transactions described in this clause (9) are
subject to all other applicable terms and conditions of this Agreement.
(10) Asahi Komag Co., Ltd. may make an initial public
offering of its common stock;
(11) subject to Section 4.2(d) issue or execute debt
securities, promissory notes or similar types of instruments related to
financing (collectively "Debt Instruments"), if and only if such Debt
Instruments are subordinated to the Restructured Loans on terms and conditions
acceptable to the Majority Restructure Lenders, which consent shall not
unreasonably be withheld, or amend, restate, supplement, replace or otherwise
modify in any manner that would be detrimental to the Restructure Lenders any
such Debt Instruments without the prior written consent of Majority Restructure
Lenders, which consent shall not unreasonably be withheld.
(12) incur Debt on account of a Permitted Lien.
(i) Asset Sales. Convey, sell, lease, transfer or otherwise
dispose of or permit any Consolidated Subsidiary to Transfer, in one transaction
or a series of transactions, all or any part of its or its Consolidated
Subsidiary's business, property or fixed assets outside the ordinary course of
business (any such transaction a "Transfer"), whether now owned or hereafter
acquired, except that subject to the provisions of Section 4.2(e) (i) the
Borrower and its Consolidated Subsidiaries may make Transfers of business,
property or fixed assets in transactions outside the
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ordinary course of business for consideration which in the aggregate does not
exceed ten percent of Net Tangible Assets in any fiscal year of the Borrower
without the prior written consent of the Majority Restructure Lenders, and (ii)
the Borrower may Transfer Dastek (M) or DHC. The Borrower shall provide
Restructure Agent and Restructure Lenders with a written summary of any Transfer
that triggers a prepayment to Restructure Lenders pursuant to Section 4.2(e) no
later than five business days before such Transfer. The Borrower shall further
provide Restructure Agent and Restructure Lenders with a written summary of all
Transfers in the applicable fiscal quarter of the Borrower no later than thirty
(30) days after the end of such fiscal quarter. The Borrower shall further
provide Restructure Agent and Restructure Lenders with any other information
reasonably requested by Restructure Agent concerning any Transfer as soon as
such information is available to the Borrower.
ARTICLE 9
RESTRUCTURE EVENTS OF DEFAULT
SECTION 9.1 RESTRUCTURE EVENTS OF DEFAULT. If any of the
following events (each, a "Restructure Event of Default") shall occur and be
continuing:
(a) The Borrower shall fail to pay any installment of the
principal of any Restructured Note outstanding hereunder when due or any
installment of interest on any Restructured Note or other amount payable
hereunder; or
(b) Any representation or warranty made by the Borrower
herein or by the Borrower (or any of its officers) in connection with the other
Restructure Loan Documents shall prove to have been incorrect in any material
respect when made; or
(c) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in this Agreement or in any and all documents
executed in conjunction with this Agreement, which failure continues uncured for
more than thirty (30) consecutive days. Notwithstanding the foregoing, any
failure of the Borrower to perform or observe Sections 8.1(c) and (f) and/or
8.2(a), (b), (c), (d), (e), (f), (g), (h) and (i) shall constitute a Restructure
Event of Default without regard to any lapse of time or cure period; or
(d) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in this Agreement other than those referred to
in Subsections 9.1(a), (b) and (c) above on its part to be performed or observed
and any such failure shall remain unremedied for thirty (30) days after the
Borrower knows of such failure; or
(e) The Borrower or any of its Consolidated Subsidiaries
shall fail to pay when due any obligation (except those specifically arising
under the Restructure Loan Documents) in excess of $1,000,000.00 in aggregate
amount, or fail to observe or perform any material term, covenant or agreement
contained in any agreement for such obligation or indebtedness by which it is
bound, in each case for such period of time as would permit (assuming the giving
of appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof; or
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(f) (i) The Borrower or any of its Consolidated 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 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 or other
similar official for it or for all or any substantial part of its assets, or the
Borrower or any of its Consolidated 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 Consolidated Subsidiaries any case, proceeding or other
action of a nature referred to in clause (i) above which (X) results in the
entry of an order for relief or any such adjudication or appointment or (Y)
remains undismissed, undischarged or unbonded for a period of thirty (30) days;
or (iii) there shall be commenced against the Borrower or any of its
Consolidated 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 which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within thirty (30) days from the entry thereof; or (iv)
the Borrower or any of its Consolidated 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) and (iii) above; or (v) the
Borrower or any of its Consolidated 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) One judgment or decree shall be entered against the
Borrower or any of its Consolidated Subsidiaries involving a liability (not paid
or at least seventy-five percent covered by insurance or the third party
indemnity of a solvent indemnitor) equal to or greater than $5,000,000.00 or one
or more judgments or decrees shall be entered against the Borrower or any of its
Consolidated Subsidiaries involving in the aggregate a liability (not paid or at
least seventy-five percent covered by insurance or the third party indemnity of
a solvent indemnitor) equal to or greater than $10,000,000.00 and all such
judgments or decrees shall not have been vacated, discharged, or stayed or
bonded pending appeal within thirty (30) days from the entry thereof; or
(h) (1) The Borrower or any of its ERISA Affiliates fails to
make full payment when due of all material amounts which, under the provisions
of any Pension Plan or Section 412 of the Internal Revenue Code, the Borrower or
any of its ERISA Affiliates is required to pay as contributions thereto;
(2) Any material accumulated funding deficiency occurs or
exists, whether or not waived, with respect to any Pension Plan;
(3) The excess of the actuarial present value of all
benefit liabilities under all material Pension Plans over the fair market value
of the assets of such Pension Plans (excluding in such computation Pension Plans
with assets greater than benefit liabilities) allocable to such benefit
liabilities are greater than five percent of Consolidated Tangible Net Worth;
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(4) The Borrower or any of its ERISA Affiliates enters
into any transaction which has as its principal purpose the evasion of liability
under Subtitle D of Title IV of ERISA;
(5) (A) Any material Pension Plan maintained by the
Borrower or any of its ERISA Affiliates shall be terminated within the meaning
of Title IV of ERISA, or (B) a trustee shall be appointed by an appropriate
United States district court to administer any material Pension Plan, or (C) the
PBGC (or any successor thereto) shall institute proceedings to terminate any
material Pension Plan or to appoint a trustee to administer any Pension Plan, or
(D) the Borrower or any of its ERISA Affiliates shall withdraw (under Section
4063 of ERISA) from any material Pension Plan, if as of the date of the event
listed in subclauses (A) through (C) of this paragraph or any subsequent date,
either the Borrower or its ERISA Affiliates has any material liability (such
liability to include, without limitation, any material liability to the PBGC, or
any successor thereto, or to any other party under Sections 4062, 4063 or 4064
of ERISA or any other provision of law) resulting from or otherwise associated
with the events listed in subclauses (A) through (C) of this paragraph;
(6) As used in this subsection 9.1(h), the term
"accumulated funding deficiency" has the meaning specified in Section 412 of the
Internal Revenue Code, and the terms "actuarial present value" and "benefit
liabilities" have the meanings specified in Section 4001 of ERISA; or
(i) There shall be instituted against the Borrower, or any of
its Consolidated Subsidiaries, any proceeding for which forfeiture (not paid or
seventy-five percent covered by insurance or the third party indemnity of a
solvent indemnitor) of any property equal to or greater than $5,000,000.00 is a
potential penalty and such proceeding shall not have been vacated or discharged
within thirty (30) days of its institution; or
(j) The Borrower shall fail to observe any term, covenant,
representation, warranty or other provision contained in the Subordinated
Promissory Note or any Debt Instrument permitted pursuant to Section 8.2(h)(11)
or Article 11 of this Agreement.
Then (i) upon the occurrence of any Restructure Event of Default described in
clause (f) above, the Restructured Loans, and each of them, with accrued
interest thereon, and all other amounts owing under this Agreement, the
Restructured Notes and the other Restructure Loan Documents shall automatically
become due and payable, and (ii) upon the occurrence and continuance of any
other Restructure Event of Default, Restructure Agent, at the instruction of the
Majority Restructure Lenders, shall, by notice to the Borrower, declare the
Restructured Loans hereunder, with accrued interest thereon, and all other
amounts owing under this Agreement, the Restructured Notes, and the other
Restructure Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable. Notwithstanding the foregoing, clause
(ii) rather than clause (i) in this paragraph shall apply in the case of a
proceeding described in clause (f)(ii) or (iii) above against a Consolidated
Subsidiary domiciled outside the United States of America, excluding however,
Komag Malaysia from the application of this sentence (in which case, for
avoidance of doubt, clause (i) shall apply), provided the laws or regulations of
the applicable jurisdiction do not prohibit the Restructure Agent or the
Restructure Lenders from
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giving to the Borrower or Consolidated Subsidiary an acceleration notice of the
type described in clause (ii) of this paragraph. Except as expressly provided
above in this Section 9.1, presentment, demand, protest and all other notices of
any kind are hereby expressly waived. Notwithstanding any other provision of
this Agreement, including Section 12.2, notices to the Borrower pursuant to this
Section 9.1 may be communicated orally (including by telephone with a written
notice to the Borrower to be subsequently provided by Restructure Agent) or in
writing (including telex or facsimile transmission). Notwithstanding any other
provision of this Agreement, each Restructure Lender hereby agrees with each
other Restructure Lender that no Restructure Lender shall take any action to
protect or enforce its rights arising out of or relating to this Agreement, any
of the Restructured Notes, or any of the other Restructure Loan Documents
(including exercising any rights of offset) without first obtaining the prior
written consent of Majority Restructure Lenders, it being the agreement of
Restructure Agent and Restructure Lenders that any such action to protect or
enforce rights under this Agreement, any of the Restructured Notes, or any of
the other Restructure Loan Documents shall be taken in concert and at the
direction or with the consent of the Majority Restructure Lenders, and not
independently by a single Restructure Lender.
ARTICLE 10
RESTRUCTURE AGENT
SECTION 10.1 RESTRUCTURE AGENT. Fleet is hereby appointed as
Restructure Agent by each of the Restructure Lenders to perform such duties on
behalf of itself and the other Restructure Lenders, and to have such powers, as
are set forth herein and as are reasonably incidental thereto. In performing its
functions and duties under this Agreement, Restructure Agent shall act solely as
agent of the Restructure Lenders and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust hereunder
with or for the Borrower. The duties of Restructure Agent shall be mechanical
and administrative in nature; Restructure Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Restructure Lender, and
nothing in this Agreement, expressed or implied, is intended to or shall be so
construed as to impose upon Restructure Agent any obligations in respect of this
Agreement, the Restructured Loans, the Restructure Loan Documents or the other
instruments and agreements referred to herein except as expressly set forth
herein or therein.
SECTION 10.2 DELEGATION OF DUTIES, ETC. Restructure Agent may
execute any of its duties and perform any of its powers hereunder by or through
agents or employees, and shall be entitled to consult with legal counsel and any
accountant or other professional selected by it. Restructure Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 10.3 INDEMNIFICATION. The Restructure Lenders agree to
indemnify Restructure Agent in its capacity as such, to the extent not
reimbursed promptly by the Borrower, pro rata according to their respective
Restructured Loans Percentage, from and against any and all claims, liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against Restructure Agent in any way relating to or
arising out of this Agreement
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or the Restructured Notes or any action taken or omitted to be taken or suffered
in good faith by Restructure Agent hereunder or thereunder; provided, however,
that no Restructure Lender shall be liable for any portion of any of the
foregoing items resulting from the gross negligence or willful misconduct of
Restructure Agent. Without limitation of the foregoing, each Restructure Lender
agrees to reimburse Restructure Agent promptly upon demand for its pro rata
share according to their respective Restructured Loans Percentage of any
out-of-pocket expenses (including reasonable counsel fees and disbursements)
incurred by Restructure Agent in connection with the preparation, execution,
administration or enforcement of, legal advice in respect of rights or
responsibilities under, or amendment, modification or waiver of any provision
of, this Agreement, the Restructured Notes, or the other Restructure Loan
Documents, to the extent that Restructure Agent is not promptly reimbursed for
such expenses by the Borrower.
SECTION 10.4 EXCULPATORY PROVISIONS.
(a) Neither Restructure Agent nor any of its predecessors,
officers, directors, employees or agents shall be liable for any action taken or
omitted to be taken or suffered in good faith by it or them hereunder or in
connection herewith, except that Restructure Agent shall be liable for its own
gross negligence or willful misconduct. Restructure Agent and its predecessors
shall not be liable in any manner for the effectiveness, enforceability,
collectibility, genuineness, perfection, validity, sufficiency or the due
execution of this Agreement, the other Restructure Loan Documents or the
Restructured Notes or for the due authorization, authenticity or accuracy of the
representations and warranties herein or in any other certificate, report,
notice, consent, opinion, statement or other document furnished or to be
furnished hereunder, and shall be entitled to rely upon any of the foregoing
believed by it to be genuine and correct and to have been signed and sent or
made by the proper Person. Restructure Agent and its predecessors shall be under
no duty or responsibility to the Restructure Lenders to ascertain or to inquire
into the performance or observance by the Borrower of any of the provisions
hereof or of any document executed and delivered in connection herewith. Each
Restructure Lender acknowledges that it has taken and will continue to take such
action and to make such investigation as it deems necessary to inform itself of
the affairs of the Borrower and each Restructure Lender acknowledges that it had
the opportunity to make, has made and will continue to make its own independent
investigation of the credit worthiness and the business and operations of the
Borrower and that, in entering into this Agreement, and in making its
Restructured Loans, it has not relied and will not rely upon any information or
representations furnished or given by Restructure Agent, its predecessors or any
other Restructure Lender. For the purposes of this Section 10, "predecessors"
shall include, without limitation, each of the agents under the Existing
Facilities.
(b) Each Restructure Lender expressly acknowledges that
Restructure Agent and its predecessors have not made any representations or
warranties to it and that no act taken by Restructure Agent or its predecessors
shall be deemed to constitute any representation or warranty by Restructure
Agent or its predecessors to the Restructure Lenders.
(c) If Restructure Agent shall request instruction from
Restructure Lenders with respect to any act or action (including the failure to
take an action) in connection with the
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Restructured Loans under this Agreement, Restructure Agent shall be entitled to
refrain from such act or taking such action unless and until Restructure Agent
shall have received instructions from all of the Restructure Lenders or the
Majority Restructure Lenders, as the case may be and as required herein. Without
prejudice to the generality of the foregoing, (i) Restructure Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper Person or Persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys, accountants, experts and other professional advisors selected by it;
and (ii) no Restructure Lender shall have any right of action whatsoever against
Restructure Agent or its predecessors as a result of Restructure Agent acting or
(where so instructed) refraining from acting under this Agreement with respect
to the Restructured Loans in accordance with the instructions of all of the
Restructure Lenders or the Majority Restructure Lenders, as the case may be.
SECTION 10.5 KNOWLEDGE OF DEFAULT. It is expressly understood and
agreed that Restructure Agent shall be entitled to assume that no Restructure
Event of Default has occurred and is continuing, unless the officers of
Restructure Agent immediately responsible for matters concerning this Agreement
shall have actual knowledge of such occurrence or shall have been notified in
writing by any Restructure Lender that such Restructure Lender considers that a
Restructure Event of Default has occurred and is continuing and specifying the
nature thereof. In the event that Restructure Agent shall have acquired actual
knowledge of any Restructure Event of Default, it shall promptly give notice
thereof to the Restructure Lenders.
SECTION 10.6 RESTRUCTURE AGENT IN ITS INDIVIDUAL CAPACITY. With
respect to this Agreement, and all Restructured Loans made by it and any
renewals, extensions or deferrals of the payment thereof and any Restructured
Note issued to or held by it, the Restructure Agent shall have the same rights
and powers hereunder as any Restructure Lender, and may exercise the same as
though it were not Restructure Agent, and the term "Restructure Lender" or
"Restructure Lenders" shall, unless the context otherwise requires, include
Restructure Agent in its individual capacity. Restructure Agent and each of the
Affiliates of a Restructure Lender may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial advisory or other
business with the Borrower or any Subsidiary or Consolidated Subsidiary as if it
were not performing the duties specified herein, and may accept fees and other
consideration from the Borrower for services in connection with this Agreement
and otherwise without having to account for the same to the Restructure Lenders.
SECTION 10.7 PAYEE OF RESTRUCTURED NOTES TREATED AS OWNER.
Restructure Agent may deem and treat the payee of any Restructured Note as the
owner thereof for all purposes hereof unless and until an Assignment Agreement
shall have been lodged with Restructure Agent as provided in Section 12.6. Any
request, authority or consent of any person or entity who, at the time of making
such request or giving such authority or consent, is the holder of any such
Restructured Note shall be conclusive and binding on any subsequent holder,
transferee or assignee of that Restructured Note or of any Restructured Note or
Restructured Notes issued in exchange therefor.
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SECTION 10.8 RESIGNATION OF RESTRUCTURE AGENT. If at any time
Restructure Agent deems it advisable, in its sole discretion, it may submit to
each of the Restructure Lenders and the Borrower a written notification of its
resignation as Restructure Agent under this Agreement, such resignation (subject
to the further provisions of this Section 10.8) to be effective on the thirtieth
day after the date of such notice. Upon any such resignation, the Majority
Restructure Lenders, subject to the prior written consent of the Borrower if no
Restructure Event of Default shall have occurred and be continuing (which
consent shall not be unreasonably withheld), shall have the right to appoint a
successor Restructure Agent. If no successor Restructure Agent shall have been
so appointed by the Majority Restructure Lenders and accepted such appointment
within thirty (30) days after the retiring Restructure Agent's giving of notice
of resignation, then the retiring Restructure Agent may, on behalf of the
Restructure Lenders, appoint a successor Restructure Agent, which successor
Restructure Agent shall be either a Restructure Lender or if none of the
Restructure Lenders is willing to serve as successor Restructure Agent, a bank
having combined capital and surplus of at least $100,000,000.00. Any such
appointment of a successor Restructure Agent shall be subject to the prior
written approval of the Borrower if no Restructure Event of Default shall have
occurred and be continuing (which approval shall not be unreasonably withheld).
Upon the acceptance of any appointment as Restructure Agent hereunder by a
successor Restructure Agent, such successor Restructure Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Restructure Agent, and the retiring Restructure Agent shall be
discharged from its duties and obligations under this Agreement. The Borrower
and the Restructure Lenders shall execute such documents as shall be necessary
to effect such appointment. After any retiring Restructure Agent's resignation
hereunder as Restructure Agent, the provisions of this Article shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Restructure Agent under this Agreement and the Restructured Notes.
Notwithstanding the foregoing provisions of this Section 10.8, if at any time
there shall not be a duly appointed and acting Restructure Agent, the Borrower
agrees to make each payment due hereunder and under the Restructured Loans
directly to the Restructure Lenders entitled thereto during such time.
ARTICLE 11
CONVERSION LENDER OPTION
SECTION 11.1 ELECTION. Notwithstanding anything to the contrary
in this Agreement or in any other Restructure Loan Document, any Restructure
Lender may convert its Restructured Loan (including, for purposes of this
Article 11 and for the avoidance of doubt, Existing Loan) into a convertible
Debt Instrument subject to the following terms and conditions: (i) for each
Restructured Loan owned by such Restructure Lender on the Closing Date, by
irrevocable written notice delivered by the Restructure Lender to the
Restructure Agent that it shall convert such Restructured Loan to a convertible
Debt Instrument on terms and conditions set forth in the Securities Purchase
Agreement, the Convertible Note and the Registration Rights Agreement
(collectively, the "Conversion Documents") annexed as Exhibit D to this
Agreement, which notice shall be delivered concurrently with such Restructure
Lender's execution of this Agreement (each, a "Closing Date Conversion Notice");
and (ii) for each Restructured Loan that
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was not the subject of a Closing Date Conversion Notice, by irrevocable written
notice delivered by the Restructure Lender to the Restructure Agent that it
shall convert, subject to the Borrower's consent, such Restructured Loan to a
convertible Debt Instrument on terms and conditions that are similar in all
material respects to those set forth in Exhibit D (collectively, the
"Post-Closing Conversion Documents"), which notice shall be delivered
concurrently with such Restructure Lender's notice to Borrower of its election
to purchase such convertible Debt Instruments (each, a "Post-Closing Conversion
Date Notice").
SECTION 11.2 CONVERSION LENDER. Each Restructure Lender, solely
with respect to its Restructured Loan for which irrevocable notice has been
delivered to Restructure Agent as provided above, shall be deemed a "Conversion
Lender" for purposes of this Article 11.
SECTION 11.3 CONVERSION DATE RIGHTS. With respect to each
Closing Date Conversion Notice or Post-Closing Date Conversion Notice, such
Conversion Lender shall, from and after the effective closing date specified in
the Conversion Documents or the Post-Closing Conversion Documents, as applicable
(the "Conversion Date"): (i) relinquish all rights and benefits under this
Agreement and any other Restructure Loan Document arising or accruing from and
after the applicable Conversion Date, and (ii) such Conversion Lender shall be
deemed released from all obligations under this Agreement and the other
Restructure Loan Documents arising or accruing from and after the applicable
Conversion Date, including, without limitation, any such obligations under
Sections 4.2(i), 9.l and 10.3 hereof.
In addition, Restructure Agent consent will not be necessary for the assignment
by any Restructure Lender of its Restructured Loan subsequent to the Closing
Date provided all of the other terms and conditions of Section 12.6 hereof have
been satisfied and further provided that the assignee of the Restructure Lender
irrevocably agrees at the time of such assignment to become a Conversion Lender
with respect to the Restructured Loan it has acquired.
For the avoidance of doubt, the rights and benefits relinquished by any
Conversion Lender in subsection (i) of this Section 11.3 shall include any
payments of principal, interest, fees, or expenses and any voting rights under
this Agreement or any other Restructure Loan Document, to the extent the same
arise or accrue after the applicable Conversion Date; provided, however, the
Restructure Fee payable under Section 4.1(b) hereof, the $15,000,000.00
mandatory repayment of the principal amount of the Restructured Loan as set
forth in the first sentence of Section 4.2(a) hereof, and all rights under the
Warrant Agreement, shall be deemed to arise on the Closing Date for the ratable
benefit of the Restructure Lenders as of the Closing Date.
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ARTICLE 12
MISCELLANEOUS
SECTION 12.1 AMENDMENTS, ETC.
(a) No amendment or waiver of any provision of the
Restructure Loan Documents, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Restructure Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that, without the written consent of all of
the Restructure Lenders, no amendment, waiver or consent shall do any of the
following:
(b) extend the Restructure Maturity Date, or subject the
Restructure Lenders to any additional obligations;
(c) reduce the principal of, or interest on, the
Restructured Loans or any fee or other amount payable to the Restructure Lenders
hereunder;
(d) postpone any date fixed for any payment in respect of
principal of, or interest on, the Restructured Loans or any fee or other amount
payable to the Restructure Lenders hereunder;
(e) change the definition of "Majority Restructure
Lenders" or any definition or provision of this Agreement requiring the approval
of Majority Restructure Lenders or some other specified amount of Restructure
Lenders;
(f) amend the provisions of Section 4.2(i); or
(g) amend the provisions of this Section 12.1; and
provided, further, however, that no amendment, waiver or consent shall, unless
in writing and signed by Restructure Agent in addition to the Restructure
Lenders required hereinabove to take such action, affect the rights, obligations
or duties of Restructure Agent under this Agreement or any other Restructure
Loan Document.
SECTION 12.2 NOTICES, ETC. Except as otherwise set forth in this
Agreement, all notices and other communications provided for hereunder shall be
in writing (including telegraphic, telex or facsimile communication) and mailed
or telegraphed or telexed or sent by facsimile or delivered, if to the Borrower,
at the Borrower's address set forth on the signature page hereof; and if to
Restructure Agent and/or the Restructure Lenders, at their respective addresses
set forth on the signature page hereof; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
parties. All such notices and communications shall be effective when deposited
in the mails, delivered to the telegraph company, sent by telex or sent by
facsimile, respectively, except that notices and communications to Restructure
Agent and the Restructure Lenders pursuant to Articles 4, 8 or 9 shall not be
effective until received by Restructure Agent and the Restructure Lenders.
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<PAGE> 46
SECTION 12.3 RIGHT OF SETOFF. Upon and after the occurrence of
any Restructure Event of Default, the Restructure Lenders are hereby authorized
by the Borrower, at any time, after having first obtained the written consent of
Restructure Agent, and from time to time, without prior notice, (a) to set off
against, and to appropriate and apply to the payment of, the obligations and
liabilities of the Borrower under the Restructure Loan Documents (whether
matured or unmatured, fixed or contingent or liquidated or unliquidated) any and
all amounts owing by the Restructure Lenders to the Borrower (whether payable in
Dollars or any other currency, whether matured or unmatured, and, in the case of
deposits, whether general or special, time or demand and however evidenced) and
(b) pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such obligations and liabilities and to return as unpaid
for insufficient funds any and all checks and other items drawn against any
deposits so held as the Restructure Lenders in their sole discretion may elect.
The Restructure Lenders agree promptly to notify the Borrower after any such
setoff and application made by the Restructure Lenders. Upon and during the
continuance of any Restructure Event of Default and after having first obtained
the written consent of Restructure Agent (which consent shall not unreasonably
be withheld), the Restructure Lenders are authorized to debit any account
maintained with them by the Borrower for any amount of principal, interest or
fees which are then due and owing to the Restructure Lenders by the Borrower.
SECTION 12.4 NO WAIVER; REMEDIES. The Restructure Lenders' waiver
of the Existing Defaults or of any of the terms and/or conditions of the
Restructure Loan Documents shall not be deemed a waiver of any such other or
future default. No failure on the part of Restructure Agent, on behalf of itself
or the Restructure Lenders, or the Restructure Lenders to exercise, and no delay
in exercising, any right under any of the Restructure Loan Documents shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under any of the Restructure Loan Documents preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 12.5 COSTS AND EXPENSES. The Borrower shall, no later
than thirty (30) days after written notice thereof, reimburse Restructure Agent
and the agents of the Existing Facilities for all reasonable fees, costs and
expenses, including the fees, costs and expenses of counsel or other advisors
(including environmental and management consultants and appraisers) for advice,
assistance, or other representation in connection with:
(a) any amendment, modification or waiver of, or consent
with respect to, any of the Restructure Loan Documents
or advice in connection with the administration of the
Restructure Loans made pursuant hereto or its rights
hereunder or thereunder;
(b) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by either the Restructure
Agent, any Restructure Lender, the Borrower or any
other Person) in any way relating to any of the
Restructure Loan Documents or any other agreement to
be executed or delivered in connection therewith or
herewith, whether as party, witness, or otherwise,
including any litigation, contest, dispute, suit,
case,
41
<PAGE> 47
proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or
against the Borrower or any other Person that may be
obligated to either the Restructure Agent or any
Restructure Lender by virtue of the Restructure Loan
Documents, including any such litigation, contest,
dispute, suit, proceeding or action arising in
connection with any work-out or restructuring of the
Restructured Loans during the pendency of one or more
Restructure Events of Default;
(c) any attempt to enforce any remedies of either the
Restructure Agent or any Restructure Lender against
the Borrower or any other Person that may be obligated
to either the Restructure Agent or any Restructure
Lender by virtue of any of the Restructure Loan
Documents, including any such attempt to enforce any
such remedies in the course of any work-out or
restructuring of the Restructured Loans during the
pendency of one or more Restructure Events of Default;
(d) any work-out or restructuring of the Restructured
Loans during the pendency of one or more Restructure
Events of Default; and
(e) efforts to (i) monitor the Restructured Loans,
(ii) evaluate, observe or assess the Borrower or its
affairs, and (iii) verify, protect, evaluate, assess,
appraise, collect, sell, liquidate or otherwise
dispose of any property of the Borrower, including, as
to each of clauses (a) through (d) of this Section
12.5, all attorneys' and other professional and
service providers' fees arising from such services,
including those in connection with any appellate
proceedings; and all expenses, costs, charges and
other fees incurred by such counsel and others in any
way or respect arising in connection with or relating
to any of the events or actions described in this
Section 12.5 shall be payable, on demand, by the
Borrower to the Restructure Agent and Restructure
Lenders.
Without limiting the generality of the foregoing Section 12.5,
such expenses, costs, charges and fees may include: fees, costs and expenses of
accountants, environmental advisors, appraisers, investment bankers, management
and other consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or telecopy charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal or other advisory
services. After the Closing Date, the Restructure Agent and the agents of the
Existing Facilities will use their best efforts to retain professional advisors
jointly rather than retaining separate counsel, consultants and other
professional advisors. Notwithstanding the foregoing Section 12.5, on the
Closing Date, and thereafter on a quarterly basis, Crossroads shall provide the
Borrower, Restructure Agent and Restructure Lenders with a written budget on a
quarterly basis. So long as (a) no Restructure Event of Default shall have
occurred and (b) the Restructure Agent, in the exercise of its reasonable
discretion, does not believe that there is a reasonable likelihood that a
Restructure Event of Default will occur, the Borrower shall not be obligated to
reimburse Crossroads for its fees and
42
<PAGE> 48
expenses for any quarter that exceed the budgeted amounts set forth in the
applicable budget by more than ten percent unless Crossroads shall have received
the written consent of the Restructure Agent and the Borrower (which consent
shall not be unreasonably withheld). In the event the Borrower does not pay
timely any expenses, fees, charges or costs due pursuant to this Section 12.5,
interest shall accrue on such unpaid amount at the rate of ten percent per annum
until paid in full.
SECTION 12.6 ASSIGNMENTS; PARTICIPATIONS.
(a) Any Restructure Lender may assign with the consent of
the Restructure Agent (which shall not unreasonably be withheld or delayed) all
or any portion of its Restructured Loan and Restructured Note to any Person
except a Person primarily employed or engaged in any aspect of the computer
hardware or peripheral business (a "Prohibited Assignee"). If the assignee of
any Restructured Loan or Restructured Note is a broker or other intermediary,
the Restructure Lender making the assignment shall be required to obtain, prior
to such assignment, a representation from such Person that the Restructured Loan
and Restructured Note will not be beneficially owned by any Prohibited Assignee.
For purposes of this Agreement, beneficial ownership shall not include an
investment in a fund which is independently managed and formed with a primary
purpose of purchasing or holding loans. The Restructure Agent and each
Restructure Lender, including the Restructure Lender making the assignment,
shall be entitled to rely upon such representation without any further
investigation or diligence. The minimum amount of any Restructured Loan which
may be assigned is the lesser of $5,000,000.00 or the Restructure Lenders'
entire Restructured Loan. Upon execution and delivery of an assignment agreement
substantially in the form of Exhibit B ("Assignment Agreement"), from and after
the effective date specified in such Assignment Agreement (X) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, have the rights and obligations of a Restructure Lender hereunder and
(Y) the Restructure Lender assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights and be released from its obligations under this
Agreement, except with respect to those obligations set forth in the
Nondisclosure Agreement which the assignor had previously executed, and, in the
case of an Assignment Agreement covering all or the remaining portion of an
assigning Restructure Lender's rights and obligations under this Agreement, such
Restructure Lender shall cease to be a party hereto. Each Restructure Lender's
Restructure Loans Percentage hereunder shall be modified to reflect the
Restructured Loan of such assignor and assignee (and Schedule 1 shall be deemed
amended and revised to reflect such modification), and, if any such assignment
occurs while any Restructured Loan is outstanding, new Restructured Notes shall,
if requested by the assignor Restructure Lender or such assignee, upon the
surrender of the assigning Restructure Lender's Restructured Notes, be issued to
such assignee and to the assigning Restructure Lender as necessary to reflect
the new Restructured Loans Percentage of the assigning Restructure Lender and of
its assignee. Any assigning Restructure Lender shall pay a $2,500.00 fee in
connection with the effectiveness of any assignment it makes to the Restructure
Agent. The Restructure Agent shall give the Borrower written notice of any
assignment disclosed to it within two business days after such disclosure.
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<PAGE> 49
For the avoidance of doubt, any Restructure Lender may assign, but is not
required to assign, its rights with respect to the Warrant Agreement to any
assignee of the Restructured Loan of such Restructure Lender.
(b) Each Restructure Lender may sell, negotiate or grant
participations to any Person in all or part of the obligations of the Borrower
outstanding under the Restructure Loan Documents, without notice to or the
approval of Restructure Agent, Restructure Lenders, or the Borrower; provided,
however, that any such sale, negotiation or participation shall be in compliance
with the applicable federal and state securities laws. No Restructure Lender
shall transfer or grant any participating interest under which the participant
shall have rights to approve any amendment to, or any consent or waiver with
respect to, this Agreement or any other Restructure Loan Document, except to the
extent such amendment, consent or waiver would require unanimous consent as
described in the first proviso to Section 12.1. No participant shall constitute
a "Restructure Lender" under any Restructure Loan Document, and the Borrower
shall continue to deal solely and directly with Restructure Agent and the
Restructure Lenders. The Restructure Agent shall give the Borrower written
notice of any participation disclosed to it in writing within two (2) business
days after receipt of such disclosure.
(c) Each Restructure Lender may disclose to any proposed
approved assignee or participant which is not a Prohibited Assignee any
information relating to the Borrower or any of its Consolidated Subsidiaries;
provided, however, that prior to such disclosure such proposed assignee or
participant shall have executed a Nondisclosure Agreement substantially in the
form of Exhibit C. The applicable Restructure Lender shall provide the Borrower
with a copy of the Nondisclosure Agreement executed by any proposed assignee or
participant within two business days after such agreement has been executed;
provided, however, the failure to so provide such Nondisclosure Agreement shall
not constitute a default under, or breach of, this Agreement.
(d) Notwithstanding the foregoing provisions of this
Section 12.6, any Restructure Lender may at any time pledge or assign all or any
portion of such Restructure Lender's rights under this Agreement or any
Restructure Loan Document to a Federal Reserve bank; provided, however, that no
such pledge or assignment shall release such Restructure Lender from its
obligations hereunder or pursuant to any Restructure Loan Document.
SECTION 12.7 EFFECTIVENESS; BINDING EFFECT; GOVERNING LAW. This
Agreement is being executed on the date hereof by the Borrower, the Restructure
Lenders and Fleet (in its capacities as Restructure Agent and Restructure
Lender) and is binding on and effective against each such party as of the date
hereof. This Agreement shall become effective when it shall have been executed
by the Borrower, Restructure Agent and the Restructure Lenders and thereafter
shall be binding upon and inure to the benefit of the Borrower, Restructure
Agent and the Restructure Lenders and their respective permitted successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of
Restructure Agent and the Restructure Lenders. THIS AGREEMENT, THE RESTRUCTURED
NOTES AND THE OTHER RESTRUCTURE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
CONSTRUED
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<PAGE> 50
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO
ITS CHOICE OF LAW DOCTRINE.
SECTION 12.8 CONSENT TO JURISDICTION; VENUE; AGENT FOR SERVICE OF
PROCESS. All judicial proceedings brought against the Borrower with respect to
this Agreement and the Restructure Loan Documents may be brought in any state or
federal court of competent jurisdiction in the County of San Francisco in the
State of California, and by execution and delivery of this Agreement, the
Borrower accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The Borrower irrevocably waives any right it may have to
assert the doctrine of forum non conveniens or to object to venue to the extent
any proceeding is brought in accordance with this Section 12.8. The Borrower
designates and appoints the Borrower's Chief Financial Officer, from time to
time, Komag Incorporated, 1710 Automation Parkway, San Jose, California,
95131-1873, and such other Persons as may hereafter be selected by the Borrower
irrevocably agreeing in writing to so serve as its agent to receive on its
behalf service of all process in any such proceedings in any such court, such
service being hereby acknowledged by the Borrower to be effective and binding
service in every respect. A copy of any such process so served shall be mailed
by registered mail to the Borrower at its address provided in the applicable
signature page hereto, except that unless otherwise provided by applicable law,
any failure to mail such copy shall not affect the validity of service of
process. If any agent appointed by the Borrower refuses to accept service, the
Borrower hereby agrees that service upon it by mail shall constitute sufficient
notice. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of Restructure Agent, on behalf
of itself and the Restructure Lenders, to bring proceedings against the Borrower
in courts of any jurisdiction.
SECTION 12.9 ENTIRE AGREEMENT. This Agreement with Exhibits and
Schedules and the other Restructure Loan Documents embody the entire agreement
and understanding between the parties hereto and supersedes all prior agreements
and understandings relating to the subject matter hereof.
SECTION 12.10 SEVERABILITY OF PROVISIONS. In case any one or more
of the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 12.11 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 12.12 SURVIVAL OF CERTAIN AGREEMENTS. Notwithstanding
anything in this Agreement or implied by law to the contrary, the agreement of
the Borrower set forth in Section 5.6 and the agreements of the Restructure
Lenders set forth in Sections 10.2, 10.3, and 10.4 (as well as any obligations
under any Nondisclosure Agreements) shall survive the payment of the Restructure
Loans and the Restructured Notes and the termination of this
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Agreement. Notwithstanding anything in this Agreement to the contrary, the
agreement of the Borrower set forth in Sections 5.5, and 5.7 of this Agreement
shall survive for one hundred and eighty (180) days from the date of the payment
of the Restructured Loans and Restructured Notes.
SECTION 12.13 REVIVAL CLAUSE. If the incurring of any debt, the
payment of money or transfer of property under the Existing Facilities or the
Restructure Loan Documents made to Restructure Agent or any Restructure Lender
by or on behalf of the Borrower should for any reason, in whole or in part,
subsequently be declared to be "fraudulent" or preferential or otherwise be
recoverable (collectively, "Voidable Transfers") within the meaning of any state
or federal law governing creditors' rights including the Bankruptcy Code, and
Restructure Agent or any Restructure Lender is required to repay or restore any
such Voidable Transfers or portion thereof or, upon the advice of its counsel is
advised to do so, then, as to any such Voidable Transfer or the amount repaid or
restored (including all reasonable costs, expenses and attorneys' fees of
Restructure Agent and Restructure Lender related thereto), the liability of the
Borrower under the applicable facility shall automatically be revived,
reinstated and restored as though such Voidable Transfer had never been made.
SECTION 12.14 RELEASE OF ALL CLAIMS.
(a) The Borrower on behalf of itself and each of its
successors and assigns hereby forever and irrevocably releases Restructure
Agent, each Restructure Lender and each of their respective officers,
representatives, agents, attorneys, employees, financial consultants,
predecessors, successors and assigns, from the Claims, whether such Claims are
known or unknown, contingent or absolute and howsoever arising.
(b) The Borrower has been advised by counsel with respect
to the release contained herein. Upon advice of such counsel, the Borrower
hereby waives and relinquishes all of the rights and benefits which it has, or
may have, with respect to the Claims released under Section 1542 of the
California Civil Code or any other similar statute.
(c) The Borrower is familiar with and waives the
provisions of Section 1542 of the California Civil Code which provide as
follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM
MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
SECTION 12.15 ADDITIONAL ASSURANCES. The Borrower agrees that it
will execute such other documents and instruments and perform such other acts as
may reasonably be required by Restructure Agent and Restructure Lenders to carry
out and effectuate the purpose and intent of this Agreement.
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SECTION 12.16 CONFIDENTIALITY. Notwithstanding any other
provision of this Agreement, each of the Borrower, the Restructure Agent, the
Restructure Lenders and Crossroads shall be bound by the provisions of the
Nondisclosure Agreement attached hereto as Exhibit C.
[Signature pages follow]
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<PAGE> 53
WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
KOMAG, INCORPORATED
By:
-------------------------------
Title:
----------------------------
Address:
1710 Automation Parkway
San Jose, California 95131-1873
Facsimile: (408) 944-9234
Attention: Chief Financial Officer
FLEET NATIONAL BANK f/k/a BANKBOSTON, N.A.,
as Restructure Agent and as a Restructure Lender
By:
------------------------------
Title:
---------------------------
Address:
100 Federal Street, Mail Stop 01-06-01
Boston, MA 02110
Facsimile: (617) 434-4775
Attention: Donald Sheehan
BANK OF MONTREAL, as a Restructure Lender
By:
------------------------------
Title:
---------------------------
Address:
115 S. LaSalle Street, 12 West
Chicago, IL 60603
Facsimile: (312) 750-6057
Attention: Jack J. Kane
S-1
<PAGE> 54
BEAR, STEARNS & CO. INC.,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
245 Park Avenue
New York, New York 10167
Facsimile: (212) 272-8102
Attention:
COMERICA BANK - CALIFORNIA,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
55 Almaden Boulevard
Mail Code: 4041
San Jose, California 95113
Facsimile: (408) 556-5855
Attention: Carol A. Palestro
OLYMPUS SECURITIES, LTD.,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
c/o Citadel Investment Group, LLC
225 West Washington Street, 9th Floor
Chicago, Illinois 60606
Facsimile: (312) 368-4650
Attention: Bradford Couri
S-2
<PAGE> 55
NELSON PARTNERS LTD.,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
c/o Citadel Investment Group, LLC
225 West Washington Street, 9th Floor
Chicago, Illinois 60606
Facsimile: (312) 368-4650
Attention: Bradford Couri
THE BANK OF NOVA SCOTIA,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
One Liberty Plaza
New York, New York 10006
Facsimile: (212) 225-5205
Attention: Norm Gillespie
UNION BANK OF CALIFORNIA, N.A.,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
350 California Street, 7th Floor
San Francisco, California 94104
Facsimile: (415) 705-7390
Attention: Christiana Creekpaum
S-3
<PAGE> 56
LOEB PARTNERS CORPORATION,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
61 Broadway, 24th Floor
New York, New York 10006
Facsimile: 212-574-2003
Attention: Robert Grubin
THE DAI-ICHI KANGYO BANK, LIMITED,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
Corporate Finance Department I
One World Trade Center, Suite 4911
New York, NY 10048
Facsimile: (212) 912-1879
Attention: Nelson Chang
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
One Market Street
Spear Tower, Suite 1610
San Francisco, California 94105
Facsimile: (415) 982-1917
Attention: Joseph A. Endoso
S-4
<PAGE> 57
THE MITSUBISHI TRUST AND BANKING CORPORATION,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
520 Madison Avenue, 26th Floor
New York, New York 10022
Facsimile: (212) 644-6825
Attention: Daniel Chang
SANWA BANK CALIFORNIA,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
444 Market Street, 22nd Floor
San Francisco, CA 94111
Facsimile: (415) 597-5491
Attention: George Vetek
BANK ONE, N.A.,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
Bank One, N.A.
Western Region Managed Assets
AZ1-1283
201 N. Central Avenue
Phoenix, AZ 85004-2267
Facsimile: (602) 221-1737
Attention: Dennis Warren
S-5
<PAGE> 58
THE FUJI BANK, LIMITED,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
333 South Hope Street, 39th Floor
Los Angeles, CA 90071
Facsimile: (213) 253-4178
Attention:
--------------------------
THE SUMITOMO BANK, LIMITED,
as a Restructure Lender
By:
---------------------------------
Title:
------------------------------
Address:
555 California Street, Suite 3350
San Francisco, California 94104
Facsimile: (415) 362-6527
Attention: Azar Shakeri
S-6
<PAGE> 59
EXHIBIT A
---------
FORM OF RESTRUCTURED PROMISSORY NOTE
------------------------------------
San Jose, California
$ June 1, 2000
--------------------
FOR VALUE RECEIVED, KOMAG, INCORPORATED (the "Borrower"),
promises to pay to the order of____________ (the "Restructure Lender"), the
principal amount of______________ Dollars ($ )_____________, or, if less, the
aggregate amount of the Restructured Loan (as defined in the Restructure
Agreement referred to below), outstanding on the Restructure Maturity Date (as
defined in the Restructure Agreement referred to below). All unpaid amounts of
principal and interest shall be due and payable in full on the Restructure
Maturity Date as defined in the Restructure Agreement referred to below.
The Borrower also promises to pay interest on the unpaid
principal amount hereof from the date hereof until paid at the rates and at the
times which shall be determined in accordance with the provisions of the
Restructure Agreement referred to below.
All payments and prepayments of principal and all payments of interest, fees and
other amounts payable in respect of this Restructured Note shall be made by the
Borrower to Fleet National Bank f/k/a BankBoston, N.A., as "Restructure Agent"
(as that term is defined in the Restructure Agreement referred to below), on
behalf of the Restructure Lender, at the head office of the Restructure Agent
located at 100 Federal Street, Boston, MA 02110, Attention: Donald Sheehan, OR
SUCH OTHER PLACE AS IT SHALL DESIGNATE IN WRITING FOR SUCH PURPOSE IN ACCORDANCE
WITH THE TERMS OF THE RESTRUCTURE AGREEMENT REFERRED TO BELOW in immediately
available UNITED STATES DOLLARS, on or before 12:00 p.m. (Eastern time) on the
due date thereof, WITHOUT COUNTERCLAIM OR SETOFF AND FREE AND CLEAR OF, AND
WITHOUT ANY DEDUCTION OR WITHHOLDING FOR, ANY TAXES OR OTHER PAYMENTS. Until
notified of the transfer of this Restructured Note, the Borrower shall be
entitled to deem the Restructure Lender or such person who has been so
identified by the transferor in writing to the Borrower as the holder of this
Restructured Note, as the owner and holder of this Restructured Note. Each of
the Restructure Lender and any subsequent holder of this Restructured Note
agrees that before disposing of this Restructured Note or any part hereof it
will make a notation hereon of all principal payments previously made hereunder
and of the date to which interest hereon has been paid on the schedule attached
hereto, if any; provided, however, that the failure to make notation of any
payment made on this Restructured Note shall not limit or otherwise affect the
obligation of the Borrower hereunder with respect to payments of principal or
interest on this Restructured Note.
This Restructured Note is referred to in, and is entitled to
the benefits of, the Loan Restructure Agreement dated as of June 1, 2000 (as
amended, the "Restructure Agreement") among the Borrower, the Restructure Agent,
the Restructure Lender and the other Restructure Lenders described therein. The
Restructure Agreement is hereby incorporated by reference. The Restructure
Agreement, among other things, (i) provides for the restructuring of outstanding
indebtedness (the "Restructured Loan") owed by the Borrower to the Restructure
Lender in an aggregate amount not to exceed at any time outstanding the U.S.
dollar amount first above mentioned, the indebtedness of the Borrower resulting
from such Restructured Loan being evidenced by this Restructured Note, and (ii)
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
The terms of this Restructured Note are subject to amendment
only in the manner provided in the Restructure Agreement.
No reference herein to the Restructure Agreement and no
provision of this Restructured Note or the Restructure Agreement shall alter or
impair the obligation of the Borrower, which is absolute and unconditional, to
pay the principal of and interest on this Restructured Note at the place, at the
respective times, and in the currency herein prescribed.
1
<PAGE> 60
The Borrower promises to pay all costs and expenses,
including reasonable attorneys' fees and costs, incurred in the collection and
enforcement of this Restructured Note. The Borrower hereby consents to renewals
and extensions of time at or after the maturity hereof, without notice, and
hereby waives diligence, presentment, protest, demand and notice of every kind
and, to the full extent permitted by law, the right to plead any statute of
limitations as a defense to any demand hereunder.
This Restructured Note amends, restates and supersedes in its
entirety any promissory notes delivered pursuant to the Existing Facilities (as
defined in the Restructure Agreement) in favor of the Restructure Lender.
IN WITNESS WHEREOF, the Borrower has caused this Restructured
Note to be executed and delivered by its duly authorized officer, as of the date
and the place first above written.
KOMAG, INCORPORATED,
a Delaware Corporation
By:
-----------------------------------------------
Name:
---------------------------------------------
Its:
----------------------------------------------
2
<PAGE> 61
EXHIBIT B
FORM OF ASSIGNMENT AGREEMENT
<PAGE> 62
EXHIBIT C
NONDISCLOSURE AGREEMENT
<PAGE> 63
EXHIBIT D
CONVERSION DOCUMENTS
Securities Purchase Agreement
Convertible Note
Registration Rights Agreement
Attached hereto as an addendum.
<PAGE> 64
EXHIBIT E
JANUARY PROJECTED PERFORMANCE
(See attached.)
<PAGE> 65
SCHEDULE 1
----------
SCHEDULE OF COMMITMENTS
-----------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Name of Existing Restructured Restructured
Restructure Lender Loan Loan Loans Percentage
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fleet National Bank f/k/a $33,714,286 $33,714,286 12.96703%
BankBoston, N.A.
Bank of Montreal $8,571,429 $8,571,429 3.29670%
Bear, Stearns & Co. Inc. $3,500,000 $3,500,000 1.34615%
Comerica Bank - California $14,285,714 $14,285,714 5.49451%
Olympus Securities, Ltd. $8,500,000 $8,500,000 3.26923%
Nelson Partners Ltd. $5,571,429 $5,571,429 2.14286%
The Bank of Nova Scotia $11,428,571 $11,428,571 4.39560%
Loeb Partners Corporation $3,000,000 $3,000,000 1.15385%
Union Bank of California, N.A. $11,428,571 $11,428,571 4.39560%
The Dai-Ichi Kangyo Bank, Limited $35,000,000 $35,000,000 13.46154%
The Industrial Bank of Japan, Limited IBJ Facility I: $15,000,000 5.76923%
$50,000,000
The Mitsubishi Trust and Banking Corporation Participant's share equals: $10,000,000 3.84615%
$10,000,000
Sanwa Bank California Participant's share equals: $10,000,000 3.84615%
$10,000,000
Bank One, N.A. Participant's share $15,000,000 5.76923%
equals:
$15,000,000
The Industrial Bank of Japan, Limited IBJ Facility II: $25,000,000 9.61539%
Existing Loan Amount:
$75,000,000
The Mitsubishi Trust and Banking Corporation Participant's share equals: $20,000,000 7.69231%
$20,000,000
The Fuji Bank, Limited Existing Loan Amount: $15,000,000 5.76923%
$15,000,000
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Name of Existing Restructured Restructured
Restructure Lender Loan Loan Loans Percentage
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Existing Loan Amount: $15,000,000 5.76923%
The Sumitomo Bank, Limited, $15,000,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL: $260,000,000
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 67
SCHEDULE 2
----------
SUBSIDIARIES AND CONSOLIDATED SUBSIDIARIES
------------------------------------------
<TABLE>
<CAPTION>
Percentage of the
Borrower's Ownership
---------------------
<S> <C>
1. Komag Material Technology, Inc. 80%
2. Komag Technology Partners 50%
3. Asahi Komag Co., Ltd. 0%*
4. Komag (Bermuda) Ltd. 100%
5. Komag USA (Malaysia) Sdn 0%**
6. Dastek Holding Company 60%
7. Dastek (M) SDN BHD 0%***
8. Asahi Komag (Thailand) Co., Ltd 0%****
9. Komag FSC (Barbados) Ltd. 100%
10. Komag Distribution Company 100%
11. Komag Netherlands Antilles N.V. 0%*****
12. Komag Technology (N) B.V. 0%******
13. Komag Asia-Pacific, Inc. 100%
</TABLE>
-------------------------------
* Borrower is a 50% partner of Komag Technology Partners, which owns 100%
of Asahi Komag Co., Ltd.
** Komag Bermuda Ltd. owns 100% of Komag USA (Malaysia) Sdn.
*** Dastek Holding Company owns 100% of Dastek (M) SDN BHD.
**** Asahi Komag Co., Ltd. owns 100% of Asahi Komag (Thailand) Co., Ltd.
***** Komag (Bermuda) Ltd. owns 100% of Komag (Netherlands Antilles) N.V.
****** Komag (Netherlands Antilles) N.V. owns 100% of Komag Technology (N) B.V.
<PAGE> 68
SCHEDULE 3
EXISTING LIENS AND SECURITY INTERESTS
1. Purchase money security interests in equipment; and
2. UCC filings evidencing leased equipment.
3. UCC filings granted by WDC against assets that were acquired by the
Borrower in the WD Asset Acquisition (other than those evidencing
leased equipment). The Borrower covenants and agrees that these UCC
filings shall be irrevocably released and terminated by no later
than June 30, 2000.
<PAGE> 69
SCHEDULE 4
LITIGATION
The company has received a letter on behalf of Magnetic Memory Development, LLC
("MMD") referencing a number of patents issued on alleged inventions by Virgil
Hedgcoth (U.S. Patent Nos. 4,735,840, 4,894,133, 5,020,747, 5,316,864, and
5,636,970). MMD is the purported owner of these patents. MMD has offered to
grant a license to the Company under the patents listed, and the Company and MMD
are currently in discussions regarding a license. However, the Company can give
no assurance regarding whether the terms of the license will be agreed upon,
whether this matter will lead to litigation, the probable outcome of any
litigation, if litigation is commenced, or the amount of damages awarded against
the Company should such litigation occur and be determined unfavorably to the
Company.
Asahi Glass Company, Ltd. ("Asahi"), has asserted that it has an
exclusive right to Komag's intellectual property relating to glass substrates
under a technical cooperation agreement between Komag and Asahi. Komag disagrees
with Asahi's position. Komag and Asahi are currently in discussions regarding
this issue.
