$10,000,000 Credit Agreement between Lexar Media, Inc. and Access Technology Partners, L.P. (June 30, 2000)
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This agreement is between Lexar Media, Inc. (the borrower) and Access Technology Partners, L.P. (the lender), dated June 30, 2000. It sets the terms for a $10 million credit facility provided to Lexar Media, Inc. The contract outlines the conditions for borrowing, repayment, collateral, and compliance requirements. It also includes schedules and exhibits detailing authorizations, existing debts, and forms for guarantees and certificates. The agreement is legally binding and subject to certain conditions and authorizations as specified within the document.
EX-10.26 12 0012.txt CREDIT AGREEMENT / ACCESS TECHNOLOGY EXHIBIT 10.26 CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been omitted pursuant to a request for confidential treatment and, where applicable, have been marked with an astrisk to denote where omissions have been made. The confidential material has been filed separately with the Commission. ________________________________________________________________________________ $10,000,000 CREDIT AGREEMENT between LEXAR MEDIA, INC., as Borrower, and ACCESS TECHNOLOGY PARTNERS, L.P. as Lender Dated as of June 30, 2000 SCHEDULES: - --------- 4.4 Consents, Authorizations, Filings and Notices 4.15 Subsidiaries 4.19 UCC Filing Jurisdictions 7.2(e) Existing Indebtedness 7.3(f) Existing Liens EXHIBITS: - -------- A Form of Guarantee and Collateral Agreement B Form of Compliance Certificate C Form of Closing Certificate D [Omitted] E Form of Exemption Certificate -i- CREDIT AGREEMENT, dated as of June 30, 2000, between LEXAR MEDIA, INC., a California corporation (the "Borrower"), and ACCESS TECHNOLOGY PARTNERS, L.P. -------- (the "Lender"). ------ The parties hereto hereby agree as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the terms listed in ------------- this Section 1.1 shall have the respective meanings set forth in this Section 1.1. "Affiliate": as to any Person, any other Person that, directly or --------- indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 10% or more of the securities having ordinary voting power for the election of directors (or persons performing similar functions) of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agreement": this Credit Agreement, as amended, supplemented or --------- otherwise modified from time to time. "Amendment to Investors Rights Agreement": the Amendment No. 4 to the --------------------------------------- Investors Rights Agreement, dated as of June 22, 2000, which amends that certain Investors Rights Agreement, dated as of September 28, 1999, between the Borrower and certain shareholders of the Borrower listed therein. "Board": the Board of Governors of the Federal Reserve System of the ----- United States (or any successor). "Borrower": as defined in the preamble hereto. -------- "Bridge Financing": the Note and Warrant Purchase Agreement, dated as ---------------- of May 19, 2000, among the Borrower and the Investors (as defined therein), as amended, supplemented or otherwise modified from time to time. "Business": as defined in Section 4.17(b). -------- "Business Day": a day other than a Saturday, Sunday or other day on ------------ which commercial banks in New York City are authorized or required by law to close. "Capital Expenditures": for any period, with respect to any Person, -------------------- the aggregate of all expenditures by such Person and its Subsidiaries for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) that should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries. "Capital Lease Obligations": as to any Person, the obligations of ------------------------- such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP. "Capitalized Software Expenses": for any period, with respect to any ----------------------------- Person, the aggregate of all software development expenses incurred by such Person and its Subsidiaries that should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries. -2- "Capital Stock": any and all shares, interests, participations or ------------- other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Cash Equivalents": (a) marketable direct obligations issued by, or ---------------- unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any commercial bank organized under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc. --- ("Moody's"), or carrying an equivalent rating by a nationally recognized rating ------- agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition; (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition; or (h) investments in instruments described in a corporate investment policy which has been approved in writing by the Lender. "Chase": The Chase Manhattan Bank. ----- "Closing Date": the date on which the conditions precedent set forth ------------ in Section 5.1 shall have been satisfied, or, in the Administrative Agent's discretion, waived until the Initial Funding Date, which Closing Date is June 30, 2000. "Code": the Internal Revenue Code of 1986, as amended from time to ---- time. "Collateral": all property of the Loan Parties, now owned or ---------- hereafter acquired, upon which a Lien is purported to be created by any Security Document. "Commonly Controlled Entity": an entity, whether or not incorporated, -------------------------- that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code. "Compliance Certificate": a certificate duly executed by a ---------------------- Responsible Officer substantially in the form of Exhibit B. "Consolidated Debt to Capital Ratio": at any date, the ratio of (i) ---------------------------------- Consolidated Total Debt to (ii) the sum of Consolidated Total Debt, Consolidated Net Worth and any preferred or preference stock of the Borrower. "Consolidated EBITDA": for any period, Consolidated Net Income for ------------------- such period plus, without duplication and to the extent reflected as a charge in ---- the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt -3- discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any non-recurring non-cash expenses incurred in connection with the Warrant Documents, (f) any non- recurring non-cash imputed interest charges associated with any warrants to purchase the Borrower's common stock, (g) any extraordinary, unusual or non- recurring non-cash expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the ordinary course of business), provided, that the amounts referred to in this clause (g) -------- shall not, in the aggregate, exceed $1,000,000 for any fiscal year of the Borrower, and (h) any other non-cash charges, and minus, to the extent included ----- in the statement of such Consolidated Net Income for such period, the sum of (a) interest income, (b) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of business) and (c) any other non-cash income, all as determined on a consolidated basis. "Consolidated Net Income": for any period, the consolidated net ----------------------- income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be -------- excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary. "Consolidated Net Worth": at any date, all amounts that would, in ---------------------- conformity with GAAP, be included on a consolidated balance sheet of the Borrower and its Subsidiaries under stockholders' equity at such date. "Consolidated Revenue": for any period, the consolidated revenue of -------------------- the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Consolidated Total Debt": at any date, the aggregate principal ----------------------- amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP. "Continuing Directors": the directors of the Borrower on the Closing -------------------- Date, after giving effect to the transactions contemplated hereby, and each other director, if, in each case, such other director's nomination for election to the board of directors of the Borrower is recommended by a majority of the then Continuing Directors. "Contractual Obligation": as to any Person, any provision of any ---------------------- security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Default": any of the events specified in Section 8, whether or not ------- any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "Disposition": with respect to any property, any sale, lease, sale ----------- and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings. ------- ----------- -4- "Dollars" and A$": dollars in lawful currency of the United States. ------- - "Domestic Subsidiary": any Subsidiary of the Borrower organized under ------------------- the laws of any jurisdiction within the United States. "Environmental Laws": any and all foreign, Federal, state, local or ------------------ municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as ----- amended from time to time. "Event of Default": any of the events specified in Section 8, ---------------- provided that any requirement for the giving of notice, the lapse of time, or - -------- both, has been satisfied. "Excluded Foreign Subsidiary": any Foreign Subsidiary in respect of --------------------------- which either (a) the pledge of all of the Capital Stock of such Subsidiary as Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would, in the good faith judgment of the Borrower, result in adverse tax consequences to the Borrower, which as of the Closing Date shall include Lexar Media K.K., a Japanese corporation, and Lexar Media (Europe) Limited, a company organized under the laws of England (registered #3136440 in England). "Foreign Subsidiary": any Subsidiary of the Borrower that is not a ------------------ Domestic Subsidiary. "GAAP": generally accepted accounting principles in the United States ---- as in effect from time to time, except that for purposes of Section 7.1, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements referred to in Section 4.1. In the event that any "Accounting Change" (as defined below) shall occur and such change results in a change in the method of calculation of standards or terms in this Agreement, then the Borrower and the Lender agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower and the Lender, all standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC. "Governmental Authority": any nation or government, any state or ---------------------- other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners). "Guarantee and Collateral Agreement": the Guarantee and Collateral ---------------------------------- Agreement to be executed and delivered by the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be amended, supplemented or otherwise modified from time to time. -5- "Guarantee Obligation": as to any Person (the "guaranteeing person"), -------------------- ------------------- any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") ------------------- of any other third Person (the "primary obligor") in any manner, whether --------------- directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include -------- ------- endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith. "Hedge Agreements": all interest rate swaps, caps or collar ---------------- agreements or similar arrangements dealing with interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies. "Indebtedness": of any Person at any date, without duplication, (a) ------------ all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (g) the liquidation value of all redeemable preferred Capital Stock of such Person, (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligations has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Sections 7.2 and 8(e) only, all obligations of such Person in respect of Hedge Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor. "Initial Funding Date": the date on which the conditions precedent set -------------------- forth in Section 5.2 shall have been satisfied. -6- "Insolvency": with respect to any Multiemployer Plan, the condition ---------- that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. --------- "Intellectual Property": the collective reference to all rights, --------------------- priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, domain names, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom. "Intercreditor Agreement": the Intercreditor Agreement, dated as of ----------------------- June 30, 2000, between Chase and Lender, as amended, supplemented or otherwise modified from time to time. "Investments": as defined in Section 7.7. ----------- "Kingston Notes": the secured promissory notes in the aggregate -------------- principal amount of $4,750,000 issued and sold by the Borrower pursuant to that certain Note Purchase Agreement, dated as of August 8, 1997, as amended, between the Borrower and David Sun and John Tu. "Lien": any mortgage, pledge, hypothecation, assignment, deposit ---- arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by Lender pursuant to this Agreement. ---- "Loan Documents": this Agreement, the Security Documents, and all -------------- other present and future documents, instruments and agreements relating hereto or thereto. "Loan Parties": the Borrower and each Subsidiary of the Borrower that ------------ is a party to a Loan Document. "Material Adverse Effect": a material adverse effect on (a) the ----------------------- business, property, operations, condition (financial or otherwise) or prospects of the Borrower and its Subsidiaries taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Lender hereunder or thereunder. "Materials of Environmental Concern": any gasoline or petroleum ---------------------------------- (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Maturity Date": June 30, 2003. ------------- "Multiemployer Plan": a Plan that is a multiemployer plan as defined ------------------ in Section 4001(a)(3) of ERISA. "Non-Excluded Taxes": as defined in Section 2.6. ------------------ "Obligations": the unpaid principal of and interest on (including ----------- interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or -7- not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to the Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to the Lender that are required to be paid by the Borrower pursuant hereto) or otherwise. "Other Taxes": any and all present or future stamp or documentary ----------- taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. "Participant": as defined in Section 10.6(b). ----------- "PBGC": the Pension Benefit Guaranty Corporation established pursuant ---- to Subtitle A of Title IV of ERISA (or any successor). "Person": an individual, partnership, corporation, limited liability ------ company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan that is ---- covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Projections": a detailed consolidated budget for the following ----------- fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying assumptions applicable thereto), and, as soon as available, significant revisions, if any, of such budget and projections with respect to such financial year. "Properties": as defined in Section 4.17(a). ---------- "Regulation U": Regulation U of the Board as in effect from time to ------------ time. "Reorganization": with respect to any Multiemployer Plan, the -------------- condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ---------------- ERISA, other than those events as to which the thirty day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. 4043. "Requirement of Law": as to any Person, the Certificate of ------------------ Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. -8- "Responsible Officer": the chief executive officer, president or ------------------- chief financial officer of the Borrower, but in any event, with respect to financial matters, the chief financial officer of the Borrower. "Restricted Payments": as defined in Section 7.6. ------------------- "SEC": the Securities and Exchange Commission, any successor thereto --- and any analogous Governmental Authority. "Security Documents": the collective reference to the Guarantee and ------------------ Collateral Agreement and all other security documents hereafter delivered to the Lender granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document. "Senior Loans": Loans and other extensions of credit and credit ------------ accommodations made to the Borrower pursuant to the Senior Loan Agreement. "Senior Loan Agreement": That certain Credit Agreement among --------------------- Borrower, Chase, as administrative agent, and the several lenders from time to time parties thereto, dated June 30, 2000, and all extensions, renewals and modifications thereof. "Single Employer Plan": any Plan that is covered by Title IV of -------------------- ERISA, but that is not a Multiemployer Plan. "Solvent": when used with respect to any Person, means that, as of ------- any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Sony Consent": the consent, in form and substance satisfactory to the ------------ Lender, of Sony Corporation to the granting of Liens by the Borrower and its Subsidiaries in connection with this Agreement and the other Loan Documents under the Sony Technology License Agreement and the Lexar Technology License Agreement, each dated as of March 21, 2000, between Sony Corporation and the Borrower. "Sony Debt": the promissory note in the aggregate principal amount of --------- $2,000,000 issued and sold by the Borrower pursuant to that certain Convertible Note and Warrant Purchase Agreement, dated as of March 21, 2000, between Sony Corporation and the Borrower. "Subsidiary": as to any Person, a corporation, partnership, limited ---------- liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower. -9- "Subsidiary Guarantor": each Subsidiary of the Borrower other than -------------------- any Excluded Foreign Subsidiary. "Toshiba Debt": the secured promissory note in the aggregate ------------ principal amount of $400,000 issued and sold by the Borrower to Toshiba America Electronic Components, Inc. on June 26, 1997. "United States": the United States of America. ------------- "Warrant Documents": the collective reference to (i) the Warrant ----------------- Agreement, dated as of June 30, 2000, among the Borrower, the Lender, and Chase Securities Inc., (ii) the Regulatory Agreement, dated as of June 30, 2000, among the Borrower, the Lender, and Chase Securities Inc., and (iii) the Common Stock Purchase Warrant, dated as of June 30, 2000, issued by the Borrower to the Lender. "Wholly Owned Subsidiary": as to any Person, any other Person all of ----------------------- the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries. "Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that is --------------------------------- a Wholly Owned Subsidiary of the Borrower. 1.2 Other Definitional Provisions. (a) Unless otherwise specified ----------------------------- therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto. (b) As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to the Borrower and its Subsidiaries not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation", (iii) the word "incur" shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words "incurred" and "incurrence" shall have correlative meanings), and (iv) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF LOANS. 2.1 Loans. ----- (a) Subject to the terms and conditions hereof, Lender agrees to make loans ("Loans") to the Borrower from time to time during the term hereof, in a ----- total amount not to exceed $10,000,000, provided that no Loans will be made after the first anniversary of the date hereof. Loans, when made, may not be repaid and reborrowed. (b) Loans will be disbursed in separate disbursements (each a "Disbursement") as follows: -10- (1) A Disbursement of $4,000,000 on the date the conditions in Sections 5.1, 5.2 and 5.3 have been satisfied. (2) A Disbursement of *, upon execution and delivery by Borrower of *. (3) A Disbursement of *, upon completion of an * which are the subject of the Borrower's business plan previously provided to Lender, if the following conditions are met: (i) the Borrower represents and warrants to the Lender in writing, in form satisfactory to Lender, *, and (ii) the Borrower delivers to the Lender *, and (iii) Borrower provides evidence to Lender, reasonably satisfactory to Lender, that Borrower *. (4) A Disbursement of * (as to which *. Each of the Disbursements shall be made to Borrower at such time as Lender has been provided with copies of documents (including any manufacturing, patent or other like agreements), representations and other evidence reasonably satisfactory to it and its counsel to confirm the satisfaction of the applicable condition to the Disbursement, and Lender has had a reasonable time to review the same and to confirm that the same satisfy the applicable condition to the Disbursement. Borrower shall make its counsel available to Lender's counsel to review any and all information necessary to understand how its counsel reached its conclusions. The conditions in Sections 2.1(b) (2), (3) and (4) above shall be deemed satisfied in the event the Borrower *, on terms and conditions reasonably satisfactory to Lender, pursuant to which * provided to Lender. (c) Borrower shall repay the entire unpaid principal balance of all Loans and all accrued and unpaid interest thereon, and all other Obligations on the Maturity Date. 2.2 Fees. Borrower shall pay Lender a loan fee of $200,000, as set ---- forth in Section 6.11 below. 2.3 Prepayments. The Borrower may at any time and from time to time ----------- prepay the Loans, in whole or in part, upon three Business Days prior written notice to the Lender, provided that Borrower shall, concurrently with the prepayment, pay to Lender a prepayment fee (the "Make-Whole Payment") in an amount equal to quarterly interest payments on the principal amount prepaid, at the Differential Interest Rate, for the number of full or partial calendar quarters remaining from the prepayment date to the Maturity Date, which interest payments shall be discounted to present value at the Treasury Rate. As used herein, "Differential Interest Rate" means the interest rate determined at the prepayment date, by subtracting the Treasury Rate, at the prepayment date, from the Loan Interest Rate, provided that, in no event shall the Differential Interest Rate be a negative number. The "Treasury Rate" shall mean the interest rate on United States government securities for the period, as near as practicable, from the prepayment date to the Maturity Date, as calculated by Lender in its good faith discretion, which calculation shall be conclusive and binding on Borrower absent manifest error. In the event said interest rate on United States government securities is, for any reason, not ascertainable, a comparable rate selected by Lender in its discretion shall be used in place thereof, which selection shall be conclusive and binding on Borrower. The Make- Whole Payment shall be in addition to all accrued interest and all other fees and shall be non-refundable. In the event the Loans are paid prior to the Maturity Date, for any other reason, other than at the option of the Borrower, including without limitation prepayments as a result of an Event of Default, the Borrower shall make the Make-Whole Payment to Lender with respect to the amount so prepaid, on the date of the prepayment. 2.4 Interest Rates and Payment Dates. -------------------------------- (a) Each Loan shall bear interest at the rate of 12% per annum computed on the basis of a 360-day year for the actual number of days elapsed (the "Loan Interest Rate"). * Material has been omitted and filed separately with the Commission. -11- (b) Interest accrued on the unpaid principal balance of all Loans shall be paid quarterly on the last day of March, June, September and December in each year (the "Interest Payment Dates"). (c) If all or a portion of the principal amount of any Loan shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the Loan Interest Rate plus 4% per annum. If all or a portion of any interest payable on ---- any Loan or other amount payable hereunder, other than principal, shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to the Loan Interest Rate plus 4% per annum, provided that if such payment is not paid ---- within 10 days after the date due, without limiting Lender's other rights and remedies, Borrower shall pay Lender an amount equal to the greater of (i) a late charge of 5% of the amount of such payment not paid within 10 days after the date due, or (ii) interest on the amount not paid at a rate per annum equal to the Loan Interest Rate plus 4% per annum. In all of the foregoing cases such ---- additional interest shall be paid from the date of such non-payment until such amount is paid in full (as well after as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that any additional interest or late charges accruing pursuant to -------- paragraph (c) of this Section shall be payable from time to time on demand. (e) All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York time, on the due date thereof to the Lender, at such place as the Lender shall direct, in Dollars and in immediately available funds. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. In the case of any extension of any payment of principal pursuant to the preceding sentence, interest thereon shall be payable at the then applicable rate during such extension. 2.5 Requirements of Law. (a) If the adoption of or any change in ------------------- any Requirement of Law or in the interpretation or application thereof or compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject Lender to any tax of any kind whatsoever with respect to this Agreement, or change the basis of taxation of payments to Lender in respect thereof (except for Non-Excluded Taxes covered by Section 2.6 and changes in the rate of tax on the overall net income of Lender); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of Lender; or (iii) shall impose on Lender any other condition; and the result of any of the foregoing is to increase the cost to Lender, by an amount that Lender deems to be material, of making, converting into, continuing or maintaining Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay Lender, upon its demand, any additional amounts necessary to compensate Lender for such increased cost or reduced amount receivable. (b) If Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Lender or -12- any corporation controlling Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on Lender's or such corporation's capital as a consequence of its obligations hereunder or under to a level below that which Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by Lender to be material, then from time to time, after submission by Lender to the Borrower of a written request therefor, the Borrower shall pay to Lender such additional amount or amounts as will compensate Lender for such reduction; provided that the Borrower shall not -------- be required to compensate Lender pursuant to this paragraph for any amounts incurred more than six months prior to the date that Lender notifies the Borrower of Lender's intention to claim compensation therefor; and provided -------- further that, if the circumstances giving rise to such claim have a retroactive - ------- effect, then such six-month period shall be extended to include the period of such retroactive effect. (c) A certificate as to any additional amounts payable pursuant to this Section submitted by Lender to the Borrower shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 2.6 Taxes. (a) All payments made by the Borrower under this ----- Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on the Lender as a result of a present or former connection between the Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from the Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non- --- Excluded Taxes") or Other Taxes are required to be withheld from any amounts - -------------- payable to the Lender hereunder, the amounts so payable to the Lender shall be increased to the extent necessary to yield to the Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement; provided, -------- however, that the Borrower shall not be required to increase any such amounts - ------- payable to Lender with respect to any Non-Excluded Taxes (i) that are attributable to Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to Lender at the time Lender becomes a party to this Agreement, except to the extent that Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph. (b) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Lender a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Lender the required receipts or other required documentary evidence, the Borrower shall indemnify the Lender for any incremental taxes, interest or penalties that may become payable by the Lender as a result of any such failure. -13- (d) Each Lender (or Transferee) that is not a "U.S. Person" as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Exhibit E and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver. (e) A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation. (f) The agreements in this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. SECTION 3. [Omitted] SECTION 4. REPRESENTATIONS AND WARRANTIES. To induce the Lender to enter into this Agreement and to make the Loans the Borrower hereby represents and warrants to the Lender that: 4.1 Financial Condition. The audited consolidated balance sheets of ------------------- the Borrower and its Subsidiaries as at December 31, 1999, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from PricewaterhouseCoopers LLP, present fairly the consolidated financial condition of the Borrower as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited interim consolidated balance sheet of the Borrower and the related unaudited consolidated statements of income and cash flows for the three-month period ended March 31, 2000 present fairly the consolidated financial condition of the Borrower as at such date, and the consolidated results of its operations and its consolidated cash flows for the three-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). The Borrower and its Subsidiaries do not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or -14- any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. During the period from December 31, 1999 to and including the date hereof there has been no Disposition by the Borrower of any material part of its business or property. 4.2 No Change. Since December 31, 1999, there has been no --------- development or event that has had or could reasonably be expected to have a Material Adverse Effect (other than with respect to the SanDisk Litigation as of the date hereof). 4.3 Corporate Existence; Compliance with Law. Each of the Borrower ---------------------------------------- and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its failure to so qualify and be in good standing could reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations. Each ------------------------------------------------------- Loan Party has the corporate power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has taken all necessary corporate action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 4.4, which consents, authorizations, filings and notices (other than the Sony Consent) have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 4.19. Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 4.5 No Legal Bar. The execution, delivery and performance of this ------------ Agreement and the other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of the Borrower or any of its Subsidiaries (except to the extent that such violations could not, in the aggregate, be reasonably expected to have a Material Adverse Effect) and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). No Requirement of Law or Contractual Obligation applicable to the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect. 4.6 Litigation. No litigation, investigation or proceeding of or ---------- before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or any of its Subsidiaries or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect (other than with respect to the SanDisk Litigation as of the date hereof). -15- 4.7 No Default. Neither the Borrower nor any of its Subsidiaries is ---------- in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership of Property; Liens. Each of the Borrower and its ---------------------------- Subsidiaries has title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 7.3. 4.9 Intellectual Property. The Borrower and each of its Subsidiaries --------------------- owns, or is licensed to use, or could obtain the right to use on terms not materially adverse, all Intellectual Property necessary for the conduct of its business as currently conducted. Except for the "SanDisk Litigation" as defined in the Senior Loan Agreement, no material claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does the Borrower know of any valid basis for any such claim. The use of Intellectual Property by the Borrower and its Subsidiaries does not infringe on the rights of any Person in any material respect. 4.10 Taxes. Each of the Borrower and each of its Subsidiaries has ----- filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 4.11 Federal Regulations. No part of the proceeds of any Loans, and ------------------- no other extensions of credit hereunder, will be used for "buying" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U or G as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board. If requested by the Lender, the Borrower will furnish to the Lender a statement to the foregoing effect in conformity with the requirements of Form G-3 or Form U- 1, as applicable, referred to in Regulation U. 4.12 Labor Matters. Except as, in the aggregate, could not ------------- reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against the Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all payments due from the Borrower or any of its Subsidiaries on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the Borrower or the relevant Subsidiary. 4.13 ERISA. Neither a Reportable Event nor an "accumulated funding ----- deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or -16- could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. 4.14 Investment Company Act; Other Regulations. No Loan Party is an ----------------------------------------- "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness. 4.15 Subsidiaries. Except as disclosed to the Lender by the Borrower ------------ in writing from time to time after the Closing Date, (a) Schedule 4.15 sets forth the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by any Loan Party and there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors' qualifying shares) of any nature relating to any Capital Stock of the Borrower or any Subsidiary, except as created by the Loan Documents. 4.16 Use of Proceeds. The proceeds of the Loans shall be used for --------------- working capital and general corporate purposes of the Borrower and its Subsidiaries in the ordinary course of business. 4.17 Environmental Matters. Except as, in the aggregate, could not --------------------- reasonably be expected to have a Material Adverse Effect: (a) the facilities and properties owned, leased or operated by the Borrower or any of its Subsidiaries (the "Properties") do not contain, and ---------- have not previously contained during the time of Borrower's control and use thereof, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could give rise to liability under, any Environmental Law; (b) neither the Borrower nor any of its Subsidiaries has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the business operated by the Borrower or any of its Subsidiaries (the "Business"), nor does the Borrower have knowledge or reason to believe that --------- any such notice will be received or is being threatened; (c) Materials of Environmental Concern have not been transported or disposed of by Borrower from the Properties in violation of, or in a manner or to a location that could give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could give rise to liability under, any applicable Environmental Law; (d) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business; -17- (e) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws; (f) the Properties and all operations at the Properties by Borrower are in compliance, with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Properties or the Business; and (g) neither the Borrower nor any of its Subsidiaries has assumed any liability of any other Person under Environmental Laws. 4.18 Accuracy of Information, etc. No statement or information ---------------------------- contained in this Agreement, any other Loan Document, or any other document, certificate or statement furnished by or on behalf of any Loan Party to the Lender, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished, any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading. The projections and pro forma financial information contained in the materials referenced above --- ----- are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lender that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents or in any other documents, certificates and statements furnished to the Lender for use in connection with the transactions contemplated hereby and by the other Loan Documents. 4.19 Security Documents. The Guarantee and Collateral Agreement is ------------------ effective to create in favor of the Lender, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. When financing statements and other filings specified on Schedule 4.19 in appropriate form are filed in the offices specified on Schedule 4.19, the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Liens permitted by Section 7.3), and except for Liens in favor of the lenders of the Senior Loans. 4.20 Solvency. Each Loan Party is, and after giving effect to the -------- incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent. SECTION 5. CONDITIONS PRECEDENT. 5.1 Conditions to Effectiveness. This Agreement shall become --------------------------- effective on and as of the first date, on which the following conditions precedent shall have been satisfied: (a) Credit Agreement; Guarantee and Collateral Agreement. The Lender ---------------------------------------------------- shall have received (i) this Agreement, executed and delivered by the Lender and the Borrower, (ii) the Guarantee and Collateral Agreement, executed and delivered by the Borrower and each Subsidiary -18- Guarantor, (iii) an Acknowledgment and Consent in the form attached to the Guarantee and Collateral Agreement, executed and delivered by each Issuer (as defined therein), if any, that is not a Loan Party, and (iv) the Intercreditor Agreement, executed and delivered by Chase and Lender. (b) Financial Statements. The Lender shall have received (i) audited -------------------- consolidated financial statements of the Borrower for the 1999 fiscal year and (ii) unaudited interim consolidated and consolidating (on a division- by-division basis) financial statements of the Borrower for the fiscal month of April 2000 and each quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are available, and such financial statements shall not, in the reasonable judgment of the Lender, reflect any material adverse change in the consolidated financial condition of the Borrower, as reflected in the financial statements or projections delivered to the Lender prior to the Closing Date. (c) Approvals. All governmental and third party approvals (including --------- landlords' and other consents) necessary in connection with the continuing operations of the Borrower and its Subsidiaries and the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose adverse conditions on the financing contemplated hereby. (d) Lien Searches. The Lender shall have received the results of a ------------- recent lien search in each of the jurisdictions where assets of the Loan Parties are located, and such search shall reveal no liens on any of the assets of the Borrower or its Subsidiaries except for liens permitted by Section 7.3 or discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Lender. (e) Fees. [Reserved] ---- (f) Closing Certificate. The Lender shall have received a ------------------- certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments. (g) Legal Opinions. The Lender shall have received the following -------------- executed legal opinions: (i) the legal opinion of Fenwick & West LLP, counsel to the Borrower and its Subsidiaries, in form and substance satisfactory to Lender; and (ii) the legal opinion of Winthrop, Stimson, Putnam & Roberts, special New York counsel to the Borrower and its Subsidiaries, in form and substance satisfactory to Lender. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Lender may reasonably require. (h) Pledged Stock; Stock Powers; Pledged Notes. Chase shall have ------------------------------------------ received (i) the certificates representing the shares of Capital Stock pledged to Chase, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) pledged to Chase pursuant to the Guarantee and Collateral -19- Agreement between the Loan Parties and Chase endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof. (i) Filings, Registrations and Recordings. Each document (including ------------------------------------- any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Lender to be filed, registered or recorded in order to create in favor of the Lender, a perfected Lien on the Collateral described therein, prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 7.3), shall be in proper form for filing, registration or recordation. (j) Insurance. The Lender shall have received insurance certificates --------- satisfying the requirements of Section 5.2(b) of the Guarantee and Collateral Agreement. (k) Projections. The Lender shall have received projections and a ----------- written analysis of the business and prospects of the Borrower and its Subsidiaries, for the period from the Closing Date through a date agreed to by Lender, each in form and substance satisfactory to the Lender. (l) Warrant. The Borrower shall have executed the Warrant Documents, ------- containing terms and conditions satisfactory to Lender. 5.2 Conditions to Initial Extension of Credit. The agreement of Lender ----------------------------------------- to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Initial Funding Date, of the following conditions precedent: (a) Existing Debt. Each of the Toshiba Debt and the Kingston Notes ------------- shall have been either (i) subordinated to the Obligations on terms and conditions satisfactory to Lender or (ii) terminated and all amounts thereunder shall have been paid in full and satisfactory arrangements shall have been made for the termination of all Liens, if any, granted in connection therewith. (b) Amendment to Investors Rights Agreement. Lender shall have --------------------------------------- received a copy of the Amendment to Investors Rights Agreement, executed and delivered by the parties thereto. 5.3 Amendment to Investors Rights Agreement. The agreement of Lender --------------------------------------- to make any Disbursements (including the initial Disbursement) is subject to the satisfaction of the following additional conditions precedent, in addition to the conditions set forth in Section 2: (a) Representations and Warranties. Each of the representations and ------------------------------ warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date. (b) No Default. No Default or Event of Default shall have occurred ---------- and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date. Each borrowing on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 5.3 have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS. The Borrower hereby agrees that, during the term of this Agreement and so long as any Loan or other amount is owing to the Lender hereunder, the Borrower shall and shall cause each of its Subsidiaries to: -20- 6.1 Financial Statements. Furnish to the Lender: -------------------- (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by PricewaterhouseCoopers LLP or other independent certified public accountants of nationally recognized standing; (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (c) as soon as available, but in any event not later than 15 days after the end of each month occurring during each fiscal year of the Borrower (other than the third, sixth, ninth and twelfth such month), the unaudited consolidated balance sheets of the Borrower and its Subsidiaries as at the end of such month and the related unaudited consolidated statements of income and of cash flows for such month and the portion of the fiscal year through the end of such month, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments). All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by such accountants or officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to the Lender: ------------------------------- (a) concurrently with the delivery of the financial statements referred to in Section 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of any financial statements pursuant to Section 6.1, (i) a certificate of a Responsible Officer on behalf of the Borrower stating that, to the best of each such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) in the case of monthly, quarterly or annual financial statements, (x) a Compliance Certificate containing all information and calculations necessary for determining compliance by the Borrower and its Subsidiaries with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, and (y) to the extent not previously disclosed to the Lender, a listing of any county or state within the United States where any Loan Party keeps inventory or equipment and of any Intellectual -21- Property acquired by any Loan Party since the date of the most recent list delivered pursuant to this clause (y) (or, in the case of the first such list so delivered, since the Closing Date); (c) within 45 days after the end of each fiscal quarter of the Borrower, a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the portion of the Projections covering such periods and to the comparable periods of the previous year; (d) within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports that the Borrower may make to, or file with, the SEC; (e) promptly, such additional financial and other information as Lender may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at ---------------------- or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Borrower or its Subsidiaries, as the case may be. 6.4 Maintenance of Existence; Compliance. (a)(i) Preserve, renew ------------------------------------ and keep in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 7.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.5 Maintenance of Property; Insurance. (a) Keep all property ---------------------------------- useful and necessary in its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business. 6.6 Inspection of Property; Books and Records; Discussions. (a) ------------------------------------------------------ Keep proper books of record and account in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties, subject to the Borrower's reasonable security procedures and financial and other condition of the Borrower and its Subsidiaries with officers and employees of the Borrower and its Subsidiaries and with its independent certified public accountants. 6.7 Notices. Promptly give notice to the Lender of: ------- (a) the occurrence of any Default or Event of Default; -22- (b) any (i) default or event of default under any Contractual Obligation of the Borrower or any of its Subsidiaries or (ii) litigation, investigation or proceeding that may exist at any time between the Borrower or any of its Subsidiaries and any Governmental Authority, that in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect; (c) any litigation or proceeding affecting the Borrower or any of its Subsidiaries (i) in which the amount involved is $1,000,000 or more and not covered by insurance, (ii) in which injunctive or similar relief is sought or (iii) which relates to any Loan Document; (d) the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan; and (e) any development or event that has had or could reasonably be expected to have a Material Adverse Effect. Each notice pursuant to this Section 6.7 shall be accompanied by a statement of a Responsible Officer on behalf of the Borrower setting forth details of the occurrence referred to therein and stating what action the Borrower or the relevant Subsidiary proposes to take with respect thereto. 6.8 Environmental Laws. (a) Comply in all material respects with, ------------------ and ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws. 6.9 Additional Collateral, etc. (a) With respect to any property -------------------------- acquired after the Closing Date by the Borrower or any of its Subsidiaries (other than (x) any property described in paragraph (b), (c) or (d) below, (y) any property subject to a Lien expressly permitted by Section 7.3(g) and (z) property acquired by any Excluded Foreign Subsidiary) as to which the Lender, does not have a perfected Lien, promptly (i) execute and deliver to the Lender such amendments to the Guarantee and Collateral Agreement or such other documents as the Lender deems necessary or advisable to grant to the Lender, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Lender, a perfected first priority security interest in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Lender. (b) With respect to any fee interest in any real property having a value (together with improvements thereof) of at least $250,000 acquired after the Closing Date by the Borrower or any of its Subsidiaries (other than (x) any such real property subject to a Lien expressly permitted by Section 7.3(g) and (z) real property acquired by any Excluded Foreign Subsidiary), promptly (i) execute and deliver a first -23- priority mortgage, in favor of the Lender, covering such real property, (ii) if requested by the Lender, provide the Lender with (x) title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Lender) as well as a current ALTA survey thereof, together with a surveyor's certificate and (y) any consents or estoppels reasonably deemed necessary or advisable by the Lender in connection with such mortgage or deed of trust, each of the foregoing in form and substance reasonably satisfactory to the Lender and (iii) if requested by the Lender, deliver to the Lender legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Lender. (c) With respect to any new Subsidiary (other than an Excluded Foreign Subsidiary) created or acquired after the Closing Date by the Borrower (which, for the purposes of this paragraph (c), shall include any existing Subsidiary that ceases to be an Excluded Foreign Subsidiary), the Borrower or any of its Subsidiaries, promptly (i) execute and deliver to the Lender such amendments to the Guarantee and Collateral Agreement as the Lender deems necessary or advisable to grant to the Lender, a perfected security interest in the Capital Stock of such new Subsidiary that is owned by the Borrower or any of its Subsidiaries (subject only to the Lien in favor of the lenders under the Senior Loan Agreement), (ii) deliver to the Lender the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower or such Subsidiary, as the case may be, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement, (B) to take such actions necessary or advisable to grant to the Lender a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary (subject only to the Lien in favor of the lenders under the Senior Loan Agreement), including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Lender and (C) to deliver to the Lender a certificate of such Subsidiary, substantially in the form of Exhibit C, with appropriate insertions and attachments, and (iv) if requested by the Lender, deliver to the Lender legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Lender. (d) With respect to any new Excluded Foreign Subsidiary created or acquired after the Closing Date by the Borrower or any of its Subsidiaries, promptly (i) execute and deliver to the Lender such amendments to the Guarantee and Collateral Agreement as the Lender deems necessary or advisable to grant to the Lender a perfected security interest (subject only to the Lien in favor of the lenders under the Senior Loan Agreement) in the Capital Stock of such new Subsidiary that is owned by the Borrower or any of its Subsidiaries (provided that in no event shall more than 65% of the total outstanding Capital Stock of any such new Subsidiary be required to be so pledged), (ii) take such other action as may be necessary or, in the opinion of the Lender, desirable to perfect the Lender's security interest therein, and (iii) if requested by the Lender, deliver to the Lender legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Lender. 6.10 Subordination and Consents. Within 30 days after Closing Date, -------------------------- (i) subordinate all amounts owing under the Sony Debt and the Bridge Financing to the Obligations on terms and conditions satisfactory to Lender and (ii) obtain the Sony Consent. The subordination agreement signed by the holders of the Borrower's notes included in the Bridge Financing shall prohibit any payment or prepayment of principal thereof or interest thereon, unless, at the date the payment is to be made, and after giving effect thereto, the Borrower has cash and Cash Equivalents of not less than three times the "Applicable Amount" (as defined below), and at said date the trade payables of the Borrower have not increased over the amounts thereof generally outstanding in relation to the revenues of Borrower. "Applicable Amount" as used above means $10,000,000, provided that if Borrower, at its option, signs an amendment to this Agreement, in form and substance satisfactory to Lender, permanently reducing the maximum amount Borrower may borrow from Lender under this Agreement, then the Applicable Amount shall be reduced to the maximum amount Borrower may borrow from Lender under this Agreement. 6.11 Fees and Expenses. Within the earlier of (i) 15 days after the ----------------------- Closing Date and (ii) the date on which the conditions precedent set forth in Section 5.2 shall have been satisfied, pay to the Lender a loan fee in the amount of $200,000 and all other fees, and all expenses for which invoices have been presented on or before such date (including the reasonable fees and expenses of legal counsel). SECTION 7. NEGATIVE COVENANTS. The Borrower hereby agrees that, so long as the Loan Commitments remain in effect, or any Loan or other amount is owing to Lender hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: -24- 7.1 Financial Condition Covenants. ------------------------------ (a) Consolidated Revenue. Permit the Consolidated Revenue as at the -------------------- last day of any fiscal quarter of the Borrower set forth below to be less than the amount set forth below opposite such fiscal quarter:
(b) Consolidated EBITDA. Permit the Consolidated EBITDA as at the ------------------- last day of any fiscal quarter of the Borrower set forth below to be less than the amount set forth below opposite such fiscal quarter (amounts in brackets ([]) are negative amounts):
(c) Consolidated Debt to Capital Ratio. Permit the Consolidated Debt ---------------------------------- to Capital Ratio as at the last day of any fiscal quarter of the Borrower set forth below to exceed the ratio set forth below opposite such fiscal quarter:
-25- (d) Capital Expenditures and Capitalized Software Expenses. Permit ------------------------------------------------------ the sum of (i) Capital Expenditures and (ii) Capitalized Software Expenses of the Borrower and its Subsidiaries for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to exceed the amount set forth below opposite such fiscal quarter:
7.2 Indebtedness. Create, issue, incur, assume, become liable in ------------ respect of or suffer to exist any Indebtedness, except: (a) Indebtedness of any Loan Party pursuant to any Loan Document; (b) Indebtedness incurred by the Borrower under the Senior Loan Agreement; (c) Indebtedness of the Borrower to any Subsidiary and of any Wholly Owned Subsidiary Guarantor to the Borrower or any other Subsidiary; (d) Guarantee Obligations incurred in the ordinary course of business by the Borrower or any of its Subsidiaries of obligations of any Wholly Owned Subsidiary Guarantor; (e) Indebtedness outstanding on the date hereof and listed on Schedule 7.2(e) and any refinancings, refundings, renewals or extensions thereof (without increasing, or shortening the maturity of, the principal amount thereof); (f) Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate principal amount not to exceed $5,000,000 at any one time outstanding; (g) letters of credit for the account of the Borrower or any of its Subsidiaries obtained other than pursuant to the Senior Loan Agreement, so long as the aggregate undrawn face amount thereof, together with any unreimbursed reimbursement obligations in respect thereof, does not exceed $5,000,000 at any one time; and (h) additional Indebtedness of the Borrower or any of its Subsidiaries in an aggregate principal amount (for the Borrower and all Subsidiaries) not to exceed $1,000,000 at any one time outstanding. 7.3 Liens. Create, incur, assume or suffer to exist any Lien upon ----- any of its property, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with -------- respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP and no notice of such Liens have been filed of record in any governmental office; -26- (b) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (f) Liens in existence on the date hereof listed on Schedule 7.3(f), securing Indebtedness permitted by Section 7.2(e), provided that no such -------- Lien is spread to cover any additional property after the Closing Date and that the amount of Indebtedness secured thereby is not increased; (g) Liens securing Indebtedness of the Borrower or any other Subsidiary incurred pursuant to Section 7.2(f) to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created -------- substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) the amount of Indebtedness secured thereby is not increased; (h) Liens created pursuant to the Senior Loan Agreement; (i) any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased; (j) Liens, securing obligations of the Borrower or any of its Subsidiaries under letters of credit issued pursuant to Section 7.2(g), solely on segregated cash collateral accounts or segregated bank accounts that contain cash and Cash Equivalents not to exceed 110% of the aggregate face amount of such letters of credit; and (k) Liens not otherwise permitted by this Section so long as neither (i) the aggregate outstanding principal amount of the obligations secured thereby nor (ii) the aggregate fair market value (determined as of the date such Lien is incurred) of the assets subject thereto exceeds (as to the Borrower and all Subsidiaries) $1,000,000 at any one time. 7.4 Fundamental Changes. Enter into any merger, consolidation or ------------------- amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of, all or substantially all of its property or business, except that: (a) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or -------- surviving corporation) or with or into any Wholly Owned Subsidiary Guarantor (provided that the Wholly Owned Subsidiary Guarantor shall be the -------- continuing or surviving corporation); and (b) any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Wholly Owned Subsidiary Guarantor. -27- 7.5 Disposition of Property. Dispose of any of its property, whether ----------------------- now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except: (a) the Disposition of unneeded, obsolete or worn out property in the ordinary course of business; (b) the sale of inventory in the ordinary course of business; (c) Dispositions permitted by Section 7.4(b); (d) the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any Wholly Owned Subsidiary Guarantor; (e) so long as no Default or Event of Default has occurred and is continuing, the Disposition or cancellation of promissory notes issued to the Borrower by its employees in connection with the repurchase by the Borrower of Capital Stock owned by employees of the Borrower or any Subsidiary after such employee discontinues employment with the Borrower or such Subsidiary; and (f) the Disposition of other property having a fair market value not to exceed $1,000,000 in the aggregate for any fiscal year of the Borrower. 7.6 Restricted Payments. Declare or pay any dividend (other than ------------------- dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of the Borrower or any Subsidiary (other than any payments made in connection with the repurchase or redemption of Capital Stock owned by employees of the Borrower or any Subsidiary after such employee discontinues employment with the Borrower or such Subsidiary, provided that the aggregate amount of such Restricted Payments shall not exceed $250,000 in any fiscal year of the Borrower), whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary (collectively, "Restricted Payments"), except that any Subsidiary may make Restricted Payments to the Borrower or any Wholly Owned Subsidiary Guarantor. 7.7 Investments. Make any advance, loan, extension of credit (by way ----------- of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, "Investments"), except: ----------- (a) extensions of trade credit in the ordinary course of business; (b) investments in Cash Equivalents; (c) Guarantee Obligations permitted by Section 7.2; (d) intercompany Investments by the Borrower or any of its Subsidiaries in the Borrower or any Person that, prior to such investment, is a Wholly Owned Subsidiary Guarantor; and (e) in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower or any of its Subsidiaries in an aggregate amount (valued at cost) not to exceed $1,000,000 during the term of this Agreement. 7.8 Optional Payments and Modifications of Certain Debt Instruments. --------------------------------------------------------------- Make any optional payment or prepayment on or redemption or purchase of any Indebtedness (other than the Loans, any Indebtedness permitted under Section 7.2(b) or (c), or the Bridge Financing or Sony Debt to the extent permitted under the applicable subordination agreement entered into pursuant to Section 6.10) or amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms relating to the payment or prepayment or principal of or interest on, any such Indebtedness (other than any such amendment, modification or change which would extend the maturity or -28- reduce the amount of any payment of principal thereof or which would reduce the rate or extend the date for payment of interest thereon). 7.9 Transactions with Affiliates. Enter into any transaction, ---------------------------- including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than the Borrower or any Wholly Owned Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of the Borrower or such Subsidiary, as the case may be, and (c) upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate. 7.10 Sales and Leasebacks. Enter into any arrangement with any -------------------- Person providing for the leasing by the Borrower or any Subsidiary of real or personal property that has been or is to be sold or transferred by the Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Borrower or such Subsidiary. 7.11 Changes in Fiscal Periods. Permit the fiscal year of the ------------------------- Borrower to end on a day other than December 31 or change the Borrower's method of determining fiscal quarters. 7.12 Negative Pledge Clauses. Enter into or suffer to exist or ----------------------- become effective any agreement that prohibits or limits the ability of the Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, to secure its obligations under the Loan Documents to which it is a party other than (a) this Agreement, the other Loan Documents and the Secured Term Loan and (b) any agreements governing any purchase money Liens or Capital Lease Obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby). 7.13 Lines of Business. Enter into any business, either directly or ----------------- through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto. SECTION 8. EVENTS OF DEFAULT. If any of the following events shall occur and be continuing: (a) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within three days after any such interest or other amount becomes due in accordance with the terms hereof; or (b) any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or (c) any Loan Party shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 6.4(a) (with respect to the Borrower only), Section 6.7(a) or Section 7 of this Agreement or Sections 5.4 and 5.6(b) of the Guarantee and Collateral Agreement; or -29- (d) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Lender; or (e) the Borrower or any of its Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in -------- clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $1,000,000; or (f) (i) the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or -30- appointment of a trustee is, in the reasonable opinion of the Lender, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Lender is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Lender, reasonably be expected to have a Material Adverse Effect; or (h) (i) one or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof, or (ii) any preliminary or permanent injunction(s) shall be issued in the SanDisk Litigation against the Borrower or its Subsidiaries adversely affecting the business practices of the Borrower, including, without limitation, its ability to manufacture products; or (i) any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or (j) the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or (k) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 20% of the outstanding common stock of the Borrower; or (iii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors; or (l) any Event of Default as defined in the Senior Loan Agreement, as the same is in effect on the date hereof, or as the same may hereafter be amended, shall occur (without regard to whether or not such Event of Default is waived by the lenders under the Senior Loan Agreement); then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the obligation of Lender to make Loans shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken at any time thereafter: (i) the Lender may, by notice to the Borrower declare the obligation of Lender to make Loans to be terminated forthwith, whereupon said obligation shall immediately terminate; and (ii) the Lender may, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower. SECTION 9. [Omitted] -31- SECTION 10. MISCELLANEOUS. 10.1 Amendments and Waivers. Neither this Agreement, any other Loan ---------------------- Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 10.1. The Lender and each Loan Party to the relevant Loan Document may, from time to time, (a) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lender or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Lender may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences. In the case of any waiver, the Loan Parties and the Lender shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon, whether or not similar to the Default of Event of Default so waived. 10.2 Notices. All notices, requests and demands to or upon the ------- respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Borrower and the Lender, or to such other address as may be hereafter notified by the respective parties hereto: The Borrower: Lexar Media, Inc. 47421 Bayside Parkway Fremont, CA 94538 Attention: Chief Financial Officer Telecopy: 510 ###-###-#### Telephone: 510 ###-###-#### with a copy to: Fenwick & West LLP Two Palo Alto Square Palo Alto, CA 94306 Attention: Blakeney Stafford, Esq. Telecopy: 650 ###-###-#### Telephone: 650 ###-###-#### The Lender: Access Technology Partners, L.P. One Bush St., Suite 1380 San Francisco, CA 94104 Attn: Shannon Horton Telecopy: 415 ###-###-#### Telephone: 415 ###-###-#### with a copy to: Levy, Small & Lallas 815 Morage Drive Los Angeles, CA 90049 Attention: Steven G. Small, Esq. Telecopy: 310 ###-###-#### Telephone: 310 ###-###-#### -32- provided that any notice, request or demand to or upon the Lender shall not be - -------- effective until received. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no ------------------------------ delay in exercising, on the part of the Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations ------------------------------------------ and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder. 10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay ----------------------------- or reimburse the Lender for all its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to the Lender and filing and recording fees and expenses, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as the Lender shall deem appropriate, (b) to pay or reimburse the Lender for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to Lender, (c) to pay, indemnify, and hold Lender harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, and (d) to pay, indemnify, and hold Lender and its officers, directors, employees, affiliates, agents and controlling persons (each, an "Indemnitee") harmless from ---------- and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Borrower any of its Subsidiaries or any of the Properties and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against any Loan Party under any Loan Document (all the foregoing in this clause (d), collectively, the "Indemnified Liabilities"), provided, that ----------------------- -------- the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them might have by statute or otherwise against any Indemnitee. All amounts due under this Section 10.5 shall be payable not later than 10 days after written demand therefor. Statements payable by the Borrower pursuant to this -33- Section 10.5 shall be submitted to the Chief Financial Officer of the Borrower, at the address of the Borrower set forth in Section 10.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Lender. The agreements in this Section 10.5 shall survive repayment of the Loans and all other amounts payable hereunder. 10.6 Successors and Assigns; Participations and Assignments. ------------------------------------------------------ (a) This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lender, all future holders of the Loans and their respective successors and assigns, except that the Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Lender. (b) Lender may, without the consent of the Borrower, in accordance with applicable law, at any time sell to one or more banks, financial institutions or other entities (each, a "Participant") participating interests ----------- in any Loan owing to Lender, or any other interest of Lender hereunder and under the other Loan Documents. In the event of any such sale by Lender of a participating interest to a Participant, Lender's obligations under this Agreement to the Borrower shall remain unchanged, Lender shall remain solely responsible for the performance thereof, Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Loan Documents, and the Borrower and the Lender shall continue to deal solely and directly with Lender in connection with Lender's rights and obligations under this Agreement and the other Loan Documents. In no event shall any Participant under any such participation have any right to approve any amendment or waiver of any provision of any Loan Document, or any consent to any departure by any Loan Party therefrom. The Borrower agrees that if amounts outstanding under this Agreement and the Loans are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall, to the maximum extent permitted by applicable law, be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were owing directly to it as a Lender under this Agreement. (c) Lender may, in accordance with applicable law, at any time and from time to time assign to any other person all or any part of its rights and obligations under this Agreement and the other Loan Documents. 10.7 [Omitted] --------- 10.8 Counterparts. This Agreement may be executed by one or more of ------------ the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. 10.7 Severability. Any provision of this Agreement that is ------------ prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.8 Integration. This Agreement and the other Loan Documents ----------- represent the entire agreement of the Borrower and the Lender with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents. -34- 10.9 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF ------------- THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.10 Submission To Jurisdiction; Waivers. The Borrower hereby ----------------------------------- irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 10.2 or at such other address of which the Lender shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages. 10.11 Acknowledgements. The Borrower hereby acknowledges that: ---------------- (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents; (b) the Lender does not have any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Lender, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby between the Borrower and the Lender. 10.12 Releases of Guarantees and Liens. -------------------------------- (a) [Omitted] (b) At such time as the Loans, and the other obligations under the Loan Documents shall have been paid in full and the obligation to make Loans has been terminated in a manner satisfactory to the Lender, the Collateral shall be released from the Liens created by the Security Documents, and the Security Documents and all obligations (other than those expressly stated to survive such termination) of the Lender -35- and each Loan Party under the Security Documents shall terminate, all without delivery of any instrument or performance of any act by any Person. 10.13 Confidentiality. Lender agrees to keep confidential all non- --------------- public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing -------- herein shall prevent the Lender from disclosing any such information (a) to any affiliate of the Lender, (b) to any actual or prospective transferee of any of the Loans that agrees to comply with the provisions of this Section, (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about Lender's investment portfolio in connection with ratings issued with respect to Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document. 10.14 WAIVERS OF JURY TRIAL. THE BORROWER AND THE LENDER HEREBY --------------------- IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. [Remainder of Page Intentionally Left Blank] -36- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. LEXAR MEDIA, INC. By: _________________________ Name: _________________________ Title: _________________________ ACCESS TECHNOLOGY PARTNERS, L.P. By: ACCESS TECHNOLOGY MANAGEMENT, L.L.C. Its: General Partner By: H&Q VENTURE MANAGEMENT, L.L.C. Its: Managing Member By: __________________________ Name: __________________________ Title:__________________________ -37-
