-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Be7SxlLqvs7FJdYCjjH09sgIQVWRo5DazAUE+P88jJGa97eSU2jw0SWkF0VRrAse wdkwPTGWDWSMJ23oNwfijQ== /in/edgar/work/20000706/0000950149-00-001445/0000950149-00-001445.txt : 20000920 0000950149-00-001445.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950149-00-001445 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000601 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000706 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOMAG INC /DE/ CENTRAL INDEX KEY: 0000813347 STANDARD INDUSTRIAL CLASSIFICATION: [3695 ] IRS NUMBER: 942914864 STATE OF INCORPORATION: DE FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-16852 FILM NUMBER: 668301 BUSINESS ADDRESS: STREET 1: 1710 AUTOMATION PWY CITY: SAN JOSE STATE: CA ZIP: 95131 BUSINESS PHONE: 4085762000 MAIL ADDRESS: STREET 1: 1710 AUTOMATION PWY CITY: SAN JOSE STATE: CA ZIP: 95131 8-K/A 1 e8-ka.txt CURRENT REPORT DATED JUNE 1, 2000 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) June 1, 2000 ------------------------------- KOMAG, INCORPORATED ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) Delaware 0-16852 94-2914864 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1710 Automation Parkway, San Jose, California 95131 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 408-576-2000 - -------------------------------------------------------------------------------- NOT APPLICABLE - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) 1. ITEM 5. OTHER EVENTS 2 On June 1, 2000, Komag Incorporated ("Komag") announced that Komag and its senior lenders executed a Loan Restructure Agreement. A copy of the press release with respect to the Loan Restructure Agreement is included herein as Exhibit 99.1. Such press release is incorporated by reference in to this item 5. 2. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) EXHIBITS 4.1 Loan Restructure Agreement by and among Komag and the Restructure Lenders named therein, dated as of June 1, 2000. 4.2 Warrant Agreement by and between Komag and the Banks named therein, dated as of June 1, 2000, with attached form of Warrant. 4.3 Registration Rights Agreement by and between Komag and the Banks named therein, dated as of June 1, 2000. 99.1 Press Release dated June 1, 2000 -2- 3 SIGNATURE Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KOMAG, INCORPORATED Date: July 6, 2000 /s/ Edward. H. Siegler ------------------------------------ Name: Edward H. Siegler Title: Chief Financial Officer -3- 4 EXHIBIT INDEX 4.1 Loan Restructure Agreement by and among Komag and the Restructure Lenders named therein, dated as of June 1, 2000. 4.2 Warrant Agreement by and between Komag and the Banks named therein, dated as of June 1, 2000, with attached form of Warrant. 4.3 Registration Rights Agreement by and between Komag and the Banks named therein, dated as of June 1, 2000. 99.1 Press release dated June 1, 2000. -4- EX-4.1 2 ex4-1.txt LOAN RESTRUCTURE AGREEMENT 1 EXHIBIT 4.1 - -------------------------------------------------------------------------------- LOAN RESTRUCTURE AGREEMENT AMONG KOMAG, INCORPORATED, AS BORROWER, FLEET NATIONAL BANK, AS RESTRUCTURE AGENT AND THE RESTRUCTURE LENDERS PARTY HERETO DATED AS OF JUNE 1, 2000 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS -----------------
Page ---- ARTICLE 1 RECITALS...............................................................................1 ARTICLE 2 DEFINITIONS............................................................................2 SECTION 2.1 DEFINED TERMS........................................................................2 SECTION 2.2 OTHER DEFINITIONAL PROVISIONS.......................................................10 ARTICLE 3 THE EXISTING LOANS....................................................................10 SECTION 3.1 AMENDMENT AND RESTATEMENT OF EXISTING FACILITIES....................................10 SECTION 3.2 ACKNOWLEDGMENT OF EXISTING LOANS....................................................10 SECTION 3.3 ACKNOWLEDGMENT OF EVENTS OF DEFAULT BY THE BORROWER AND WAIVER THEREOF BY RESTRUCTURE LENDERS..............................11 (a) Net Worth................................................................................11 (b) Profitability............................................................................11 (c) Leverage Ratio...........................................................................12 (d) Debt Service.............................................................................12 (e) Quick Ratio..............................................................................12 (f) WD Asset Acquisition.....................................................................12 (g) No Other Event of Default................................................................12 (h) Waiver...................................................................................12 ARTICLE 4 THE RESTRUCTURED LOANS................................................................12 SECTION 4.1 THE RESTRUCTURED LOANS..............................................................12 (a) Restructured Notes.......................................................................12 (b) Restructure Fee..........................................................................13 SECTION 4.2 REPAYMENT...........................................................................13 (a) Mandatory Repayments.....................................................................13 (b) Amortization Payments....................................................................13 (c) Optional Payment.........................................................................14 (d) Capital Raising Events...................................................................14 (e) Asset Sales..............................................................................14 (f) Cash Balance.............................................................................14 (g) Implied Consent..........................................................................15 (h) Allocation of Payments...................................................................15 (i) Sharing of Payments......................................................................15 SECTION 4.3 INTEREST RATE AND PAYMENT DATES.....................................................16 (a) Payment of Interest......................................................................16 (b) Base Rate................................................................................16 (c) Catch-Up Interest........................................................................16
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Page ---- ARTICLE 5 GENERAL PROVISIONS CONCERNING THE RESTRUCTURED LOANS.................................................16 SECTION 5.1 DEFAULT INTEREST....................................................................16 SECTION 5.2 COMPUTATION OF INTEREST.............................................................16 (a) Calculations.............................................................................16 (b) Determination by Restructure Agent............................................. .........16 SECTION 5.3 PAYMENTS............................................................................17 SECTION 5.4 PAYMENT ON NON-BUSINESS DAYS........................................................17 SECTION 5.5 REDUCED RETURN......................................................................17 SECTION 5.6 INDEMNITIES.........................................................................17 SECTION 5.7 REQUIREMENTS OF LAW.................................................................18 SECTION 5.8 IBJ BANK GROUP II SWAP TRANSACTIONS.................................................19 (a) Breakage Costs...........................................................................29 ARTICLE 6 CONDITIONS PRECEDENT..................................................................20 SECTION 6.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT..............................20 ARTICLE 7 REPRESENTATIONS AND WARRANTIES.........................................................21 SECTION 7.1 REPRESENTATIONS AND WARRANTIES......................................................21 (a) Organization.............................................................................21 (b) Authorization............................................................................21 (c) Governmental Consents....................................................................21 (d) Validity.................................................................................22 (e) Financial Condition......................................................................22 (f) Litigation...............................................................................22 (g) Employee Benefit Plans...................................................................22 (h) Disclosure...............................................................................22 (i) Margin Stock.............................................................................23 (j) Environmental Matters....................................................................23 (k) Employee Matters.........................................................................23 (l) Status of Dastek, Inc., Dastek (M) and DHC...............................................23 (m) Year 2000 Compliance.....................................................................24 ARTICLE 8 COVENANTS.............................................................................24 SECTION 8.1 AFFIRMATIVE COVENANTS...............................................................24 (a) Financial Information....................................................................24 (b) Notices and Information..................................................................26 (c) Corporate Existence, Etc.................................................................27 (d) Payment of Taxes and Claims..............................................................27 (e) Maintenance of Properties; Insurance.....................................................27 (f) Inspection...............................................................................28 (g) Compliance with Laws, Etc................................................................28 (h) Proceeds of Assets and Capital Raising Events............................................28 (i) Notification of Debt Instrument Default..................................................28
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Page ---- SECTION 8.2 NEGATIVE COVENANTS..................................................................28 (a) Adjusted Tangible Net Worth..............................................................28 (b) Minimum Cash Balance.....................................................................29 (c) Minimum Adjusted Net Working Capital.....................................................29 (d) Capital Expenditures.....................................................................29 (e) Liens, Etc...............................................................................29 (f) Dividends, Etc...........................................................................29 (g) Consolidation, Merger or Acquisition.....................................................29 (h) Loans, Investments, Secondary Liabilities................................................29 (i) Asset Sales..............................................................................31 ARTICLE 9 RESTRUCTURE EVENTS OF DEFAULT.........................................................32 SECTION 9.1 RESTRUCTURE EVENT OF DEFAULT........................................................32 ARTICLE 10 RESTRUCTURE AGENT....................................................................35 SECTION 10.1 RESTRUCTURE AGENT..................................................................35 SECTION 10.2 DELEGATION OF DUTIES, ETC..........................................................35 SECTION 10.3 INDEMNIFICATION....................................................................35 SECTION 10.4 EXCULPATORY PROVISIONS.............................................................36 SECTION 10.5 KNOWLEDGE OF DEFAULT...............................................................37 SECTION 10.6 RESTRUCTURE AGENT IN ITS INDIVIDUAL CAPACITY.......................................37 SECTION 10.7 PAYEE OF RESTRUCTURED NOTES TREATED AS OWNER.......................................37 SECTION 10.8 RESIGNATION OF RESTRUCTURE AGENT...................................................38 ARTICLE 11 CONVERSION LENDER OPTION..............................................................38 SECTION 11.1 ELECTION...........................................................................38 SECTION 11.2 CONVERSION LENDER..................................................................39 SECTION 11.3 CONVERSION DATE RIGHTS.............................................................39 ARTICLE 12 MISCELLANEOUS.........................................................................40 SECTION 12.1 AMENDMENTS, ETC....................................................................40 SECTION 12.2 NOTICES, ETC.......................................................................40 SECTION 12.3 RIGHT OF SETOFF....................................................................41 SECTION 12.4 NO WAIVER; REMEDIES................................................................41 SECTION 12.5 COSTS AND EXPENSES.................................................................41 SECTION 12.6 ASSIGNMENTS; PARTICIPATIONS........................................................43 SECTION 12.7 EFFECTIVENESS; BINDING EFFECT; GOVERNING LAW.......................................44 SECTION 12.8 CONSENT TO JURISDICTION; VENUE; AGENT FOR SERVICE OF PROCESS.......................45 SECTION 12.9 ENTIRE AGREEMENT...................................................................45 SECTION 12.10 SEVERABILITY OF PROVISIONS........................................................45 SECTION 12.11 EXECUTION IN COUNTERPARTS.........................................................45 SECTION 12.12 SURVIVAL OF CERTAIN AGREEMENTS....................................................45 SECTION 12.14 REVIVAL CLAUSE....................................................................46 SECTION 12.14 RELEASE OF ALL CLAIMS.............................................................46 SECTION 12.15 ADDITIONAL ASSURANCES.............................................................46 SECTION 12.16 CONFIDENTIALITY...................................................................47
iii 5 EXHIBIT A FORM OF RESTRUCTURED PROMISSORY NOTE EXHIBIT B FORM OF ASSIGNMENT AGREEMENT EXHIBIT C FORM OF NONDISCLOSURE STATEMENT EXHIBIT D CONVERSION DOCUMENTS (SECURITIES PURCHASE AGREEMENT, CONVERTIBLE NOTE AND REGISTRATION RIGHTS AGREEMENT) EXHIBIT E JANUARY PROJECTED PERFORMANCE SCHEDULE 1 SCHEDULE OF COMMITMENTS SCHEDULE 2 SUBSIDIARIES AND CONSOLIDATED SUBSIDIARIES SCHEDULE 3 EXISTING LIENS AND SECURITY INTERESTS SCHEDULE 4 LITIGATION iv 6 LOAN RESTRUCTURE AGREEMENT This Loan Restructure Agreement (as amended, supplemented or modified from time to time after the date hereof, the "Agreement") dated as of June 1, 2000 is entered into among KOMAG, INCORPORATED, a Delaware corporation (the "Borrower"), the lenders and their participants, if any, from time to time party hereto, together with their respective successors and assigns (each a "Restructure Lender" and collectively the "Restructure Lenders"), and FLEET NATIONAL BANK f/k/a BANKBOSTON, N.A., a national banking association ("Fleet"), as agent for the Restructure Lenders (in such capacity, the "Restructure Agent"). ARTICLE 1 RECITALS WHEREAS, the Borrower and the FNB Bank Group are parties to that certain Amended and Restated Credit Agreement dated as of June 20, 1997 and the other agreements and documents related thereto, as amended (collectively, the "FNB Facility"); and WHEREAS, as of June 1, 2000 the aggregate outstanding principal balance due from the Borrower to the FNB Bank Group under the FNB Facility is $100,000,000.00, together with interest thereon as set forth herein; and WHEREAS the Borrower and DKB are parties to that certain Credit Agreement dated as of October 7, 1996 and the other agreements and documents related thereto, as amended (collectively, the "DKB Facility"); and WHEREAS, as of June 1, 2000 the outstanding principal balance due from the Borrower to DKB under the DKB Facility is $35,000,000.00, together with interest thereon as set forth herein; and WHEREAS, the Borrower and the IBJ Bank Group I are parties to that certain Credit Agreement dated as of December 15, 1995 and the other agreements and documents related thereto, as amended (collectively, the "IBJ Facility I"); and WHEREAS, as of June 1, 2000 the outstanding principal balance due from the Borrower to the IBJ Bank Group I under the IBJ Facility I is $50,000,000.00, together with interest thereon as set forth herein; and WHEREAS, the Borrower and the IBJ Bank Group II are parties to that certain Credit Agreement dated as of February 7, 1997 and the other agreements and documents related thereto, as amended (collectively, the "IBJ Facility II"); and WHEREAS, as of June 1, 2000 the outstanding principal balance due from the Borrower to the IBJ Bank Group II under the IBJ Facility II is $75,000,000.00, together with interest thereon as set forth herein; and 1 7 NOW, THEREFORE, based upon the recitals contained above, which are expressly made a part of this Agreement, and the terms and conditions set forth herein, the parties agree as follows: ARTICLE 2 DEFINITIONS SECTION 2.1 DEFINED TERMS. As used in this Agreement, the following terms have the following meanings: "Affiliate": As to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to vote fifty percent or more of the securities having ordinary voting power to elect the directors of such Person. "Agreement": As set forth in the introductory paragraph of this Agreement. "Adjusted Net Working Capital": At any date of determination, Current Assets minus Non-Cash Deferred Tax Assets included in Current Assets plus Future Cumulative Cash Restructuring Charges minus Current Liabilities (excluding Current Maturities of Long Term Debt). "Adjusted Tangible Net Worth": At any date of determination, Consolidated Total Assets plus Q3 99 Restructuring/Impairment Charges plus Future Restructuring/Impairment Charges minus Goodwill minus Consolidated Total Liabilities. "Assignment Agreement": As set forth in Section 12.6(a) and attached hereto as Exhibit B. "Bankruptcy Code": Title 11 of the United States Code, as the same may be amended from time to time. "Base Rate": The higher of (a) the annual rate of interest announced from time to time by Fleet at Fleet's Head Office in Boston, Massachusetts, as its "base rate" and (b) one-half of one percent above the Federal Funds Effective Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall mean for any day the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by Restructure Agent from three (3) funds brokers of recognized standing selected by Restructure Agent. "Borrower": As set forth in the introductory paragraph of this Agreement. 2 8 "Business Day": A day other than a Saturday, Sunday or a day on which commercial banks in California or Massachusetts are authorized or required by law to close. "Capital Expenditures": With respect to any Person, all expenditures (by the expenditure of cash or the incurrence of Debt) by such Person during any measuring period for any fixed assets or improvements or for replacements, substitutions or additions thereto, that have a useful life of at least one year or that are required to be capitalized under GAAP, in the case of the Borrower, as reflected in the cash flow statements required to be delivered pursuant to Section 8.1 hereof. "Capital Lease": As applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee which would, in accordance with GAAP, be required to be accounted for as a capital lease on the balance sheet of that Person. "Cash": Shall mean cash, cash equivalents or other investments of the type permitted in Section 8.2(h)(1). "Catch-Up Interest": As set forth in Section 4.3(c). "Claims": As set forth in Section 3.2(b). "Closing Costs": As set forth in Section 4.2(d). "Closing Date": The date when this Agreement became effective pursuant to Section 6.1. "Closing Date Conversion Notice": As set forth in Section 11.1. "Consolidated Subsidiary" or "Consolidated Subsidiaries": Any corporation or other Person more than fifty percent of the outstanding voting stock of which shall at the time be owned by the Borrower or another Consolidated Subsidiary, excluding from this definition Asahi Komag Co., Ltd., a Japanese corporation. "Consolidated Total Assets": As determined in accordance with GAAP. "Consolidated Total Liabilities": As determined in accordance with GAAP. "Conversion Date": As set forth in Section 11.3. "Conversion Documents": As set forth in Section 11.1. "Conversion Lender": As set forth in Section 11.2. "Crossroads": As set forth in Section 6.1(d). 3 9 "Current Assets": Shall mean, with respect to any Person, all current assets of such Person as of any date of determination calculated in accordance with GAAP, but excluding debts due from Affiliates. "Current Liabilities": Shall mean, with respect to any Person, all liabilities which should, in accordance with GAAP, be classified as current liabilities, and in any event shall include all Debt payable on demand or within one year from any date of determination without any option on the part of the obligor to extend or renew beyond such year, all accruals for federal or other taxes based on or measured by income and payable within such year, but excluding debts owed to Affiliates and Current Maturities of Long Term Debt. "Current Maturities of Long Term Debt": As determined in accordance with GAAP. "DKB": The Dai-Ichi Kangyo Bank, Limited. "DKB Bank Group": The Dai-Ichi Kangyo Bank, Limited and its successor or permitted assignee. "DKB Facility": As set forth in the Recitals to this Agreement. "Dastek (M)": Dastek (M) SDN BHD, a Malaysian corporation. "Debt": As applied to any Person, (a) all indebtedness for borrowed money, (b) that portion of obligations with respect to Capital Leases which is properly classified as a liability on a balance sheet in conformity with GAAP, (c) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (d) any obligation owed for all or any part of the deferred purchase price of property or services which purchase price is (i) due more than six months from the date of incurrence of the obligation in respect thereof, or (ii) evidenced by a note or similar written instrument, and (e) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether the indebtedness secured thereby shall have been assumed by that Person or is non-recourse to the credit of that Person. "Debt Instrument": As set forth in Section 8.2(h)(11). "Default Rate": As set forth in Section 5.1. "DHC": Dastek Holding Company, a California corporation. "Dollars" and "$": Dollars in lawful currency of the United States of America. "Employee Benefit Plan": Any Pension Plan, any employee welfare benefit plan, or any other employee benefit plan which is described in Section 3(3) of ERISA and which is maintained for employees of the Borrower or any ERISA Affiliate of the Borrower. 4 10 "ERISA": The Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute. "ERISA Affiliate": As applied to any Person, any trade or business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of Section 414(b) or (c) of the Internal Revenue Code, but excluding any Subsidiary or other Person that is not a Consolidated Subsidiary. "Existing Defaults": As set forth in Section 3.3. "Existing Loans": Collectively, the loans respectively made by the lenders and participants in (i) the FNB Bank Group pursuant to the FNB Facility, (ii) the DKB Bank Group pursuant to the DKB Facility, (iii) the IBJ Bank Group I pursuant to the IBJ Facility I and (iv) the IBJ Bank Group II pursuant to the IBJ Facility II, and in each case, in the outstanding principal amount plus accrued and unpaid interest specified on Schedule 1 as at the Closing Date. "Existing Facilities": The FNB Facility, the DKB Facility, the IBJ Facility I and the IBJ Facility II. "Existing Notes": The separate promissory notes executed by the Borrower to each lender of the FNB Bank Group, IBJ Bank Group I, IBJ Bank Group II and DKB Bank Group, respectively, in connection with the Existing Facilities. "Fleet": As set forth in the introductory paragraph of this Agreement. "FNB Bank Group": Fleet, Bank of Montreal, Bear, Stearns & Co. Inc., Comerica Bank - California, Olympus Securities, Ltd., Nelson Partners Ltd., Bank of Nova Scotia, Union Bank of California, N.A., Loeb Partners Corporation and their respective successors or permitted assignees. "FNB Facility": As set forth in the Recitals to this Agreement. "Future Cumulative Cash Restructuring Charges": Any cash restructuring charges taken in the first quarter of 2000 and beyond. "Future Restructuring/Impairment Charges": Any restructuring/impairment charges taken in the first quarter of 2000 and beyond. "GAAP": Generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, as may be in effect from time to time. "GAAP Changes": As set forth in Section 2.2(b). "Goodwill": As determined in accordance with GAAP. 5 11 "IBJ Bank Group I": The Industrial Bank of Japan, Limited, as Agent and Lender; Sanwa Bank California; Bank One, N.A.; The Mitsubishi Trust and Banking Corporation, as participants, and their respective successors or permitted assignees. "IBJ Bank Group II": The Industrial Bank of Japan, Limited, as Agent and Lender; The Fuji Bank, Limited; The Mitsubishi Trust and Banking Corporation; The Sumitomo Bank Limited, as lenders, and their respective successors or permitted assignees. "IBJ Facility I": As set forth in the Recitals to this Agreement. "IBJ Facility II": As set forth in the Recitals to this Agreement. "Indemnified Liabilities": As set forth in Section 5.6. "Interest Payment Date": As to each Restructured Loan until payment in full, the Restructure Maturity Date and the first Business Day of each month commencing on the first such day to occur after the Closing Date. "Interest Period": As set forth in Section 4.2(c). "Internal Revenue Code": The Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter. "Lien": Any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "Majority Restructure Lenders": At any time when any Restructured Loans remain outstanding, the Restructure Lenders having Restructured Loans with an unpaid principal balance equal to at least fifty-one percent of the Restructured Loans then outstanding. "Material Adverse Effect": As set forth in Section 7.1(f). "Multiemployer Plan": A "multiemployer plan" as defined in Section 4001(a)(3) of ERISA which is maintained for employees of the Borrower or any ERISA Affiliate of the Borrower. "Non-Cash Deferred Tax Assets": Shall mean, with respect to any Person, any non-cash portion of deferred tax assets included in Current Assets. "Nondisclosure Agreement": As set forth in Section 12.6(c) and attached hereto as Exhibit C. "PBGC": The Pension Benefit Guaranty Corporation, and as set forth in Section 8.1(b)(2). 6 12 "Pension Plan": Any employee plan which is subject to Section 412 of the Internal Revenue Code and which is maintained for employees of the Borrower or any ERISA Affiliate of the Borrower, other than a Multiemployer Plan. "Permitted Liens": A lien, security interest, encumbrance or charge (a) for taxes, assessments, charges or claims of the Borrower or a Consolidated Subsidiary either not yet due or being contested in good faith by appropriate proceedings, (b) arising out of judgments or awards against the Borrower or a Consolidated Subsidiary with respect to which an appeal or other proceeding is being prosecuted in good faith and with respect to which there shall have been secured a stay of execution pending such appeal or proceedings or which is vacated or discharged within thirty (30) days after the termination of such stay, (c) materialmen's, mechanics', workers', repairmen's, employee's or other like liens arising in the ordinary course of business for amounts either not yet due or being contested in good faith by appropriate proceedings, (d) granted by the Borrower to the Restructure Agent or the Restructure Lenders pursuant to or in connection with this Agreement, (e) liens, deposits or pledges made to secure statutory obligations, workers' compensation claims, surety or appeal bonds, or bonds for the release of attachments or for stay of execution, or to secure the performance of bids, tenders, contracts (other than for the payment of borrowed money), leases or for purposes of like general nature in the ordinary course of the Borrower's or a Consolidated Subsidiary's business, (f) purchase money security interests incurred or assumed with respect to property acquired, conditional sale agreements or other title retention agreements (including Capital Leases) with respect to property acquired or leased; provided, however, that no such security interest or agreement shall extend to any property other than such after-acquired or leased property and proceeds, (g) refunding, refinancing or extension of the liens or security interests permitted in the foregoing clause not exceeding the principal amount of indebtedness so refunded, refinanced or extended at the time of the refunding, refinancing or extension thereof, and applying only to the same property theretofore subject to such lien or security interest, (h) liens existing on the date hereof and identified in Schedule 3 attached hereto and incorporated herein by reference or incurred with any refunding, refinancing or extension of any such indebtedness secured by such liens, provided that such refinancing, refunding or extension shall not increase the amount, as of the date of such refinancing, refunding or extension, secured by any such lien or security interest, (i) other liens securing Debt or contingent liabilities the principal amount of which shall not exceed in the aggregate $2,000,000.00, (j) liens in property of Asahi Komag Co., Ltd., a Japanese corporation, (k) liens taken by the Borrower on its Subsidiaries, and (l) liens against DHC arising in conjunction with (i) loans from Asahi Glass Co., Ltd., or any of its affiliates, (ii) that certain Recapitalization Agreement dated as of March 1, 1993 among Asahi Glass Co., Ltd., Asahi Glass America, Inc., AGA Capital, Inc., the Borrower, Dastek, Inc. and DHC and the other documents executed in connection therewith, and (iii) the purchase of claims of third parties by the Borrower and Asahi Glass Co., Ltd. and/or its affiliates against DHC and Dastek (M). "Person": An individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Post-Closing Conversion Documents": As set forth in Section 11.1. 7 13 "Post-Closing Date Conversion Notice": As set forth in Section 11.1. "Potential Restructure Event of Default": A condition or event which, after notice or lapse of time or both, would constitute a Restructure Event of Default if that condition or event were not cured or removed within any applicable grace or cure period. "Prohibited Assignee": As set forth in Section 12.6. "Q3 99 Restructuring/Impairment Charges": The restructuring/impairment charges taken in the third quarter of 1999 in the amount of $183,644,000.00. "Regulation T, U and X": Regulations T, U and X, respectively, promulgated by the Board of Governors of the Federal Reserve System, as amended from time to time, and any successors thereto. "Requirement": As set forth in Section 5.5. "Requirements": As set forth in Section 5.7. "Restructure Agent": As set forth in the introductory paragraph of this Agreement. "Restructure Lender": As set forth in the introductory paragraph of this Agreement. "Restructure Event of Default": As set forth in Section 9.1. "Restructure Lender or Restructure Lenders": As set forth in the introductory paragraph of this Agreement. "Restructured Loan": The principal amount plus accrued and unpaid interest of each Existing Loan of the Restructure Lenders specified in Schedule 1 being restructured pursuant to the terms of this Agreement. "Restructure Loan Documents": This Agreement, the Restructured Notes, the Warrant Agreement and all other documents executed in connection therewith, including, without limitation, all amendments, waivers and consents relating thereto. "Restructure Maturity Date": The earliest of June 30, 2001 and the date of termination of Restructure Lenders' obligations to permit existing Restructured Loans to remain outstanding pursuant to Section 9.1. "Restructured Loans Percentage": With respect to each Restructure Lender, the percentage equivalent of the ratio which the principal amount plus accrued and unpaid interest of such Restructure Lender's Restructured Loan bears to the aggregate principal amount plus accrued and unpaid interest of the Restructured Loans, as specified in Schedule 1. "Restructured Notes": As set forth in Section 4.1(a). 8 14 "Restructure Fee": As set forth in Section 4.1(b). "Stock": Means all shares, options, warrants, general or limited partnership interests or other equivalents (regardless of how designated) of or in a corporation, partnership or equivalent entity whether voting or nonvoting, including common stock, preferred stock or any other "equity security" (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended). "Subordinated Promissory Note": Shall mean the Subordinated Promissory Note in the principal amount of $30,077,357.00 dated as of April 8, 1999 by the Borrower in favor of Western Digital Corporation (or any other holder thereof) . "Subsidiary": A corporation or other Person of which at least fifty percent of the outstanding voting stock or profit interests shall at the time be owned by the Borrower or another Subsidiary. "Termination Event": (a) a "Reportable Event" described in Section 4043 of ERISA and the regulations issued thereunder (other than a "Reportable Event" not subject to the provision for 30-day notice to the PBGC under such regulations), or (b) the withdrawal of the Borrower or any of its ERISA Affiliates from a Pension Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(1)(2) or 4068(f) of ERISA, or (c) the filing of a notice of intent to terminate a Pension Plan or the treatment of a Pension Plan amendment as a termination under Section 4041 of ERISA, or (d) the institution of proceedings to terminate a Pension Plan by the PBGC, (e) any other event or condition which might constitute grounds under ERISA for the termination of, or the appointment by the PBGC of a trustee to administer, any Pension Plan, or (f) the imposition of a lien pursuant to Section 412(n) of the Internal Revenue Code. "Transfer": As set forth in Section 8.2(i). "Voidable Transfers": As set forth in Section 12.13. "WD Asset Acquisition": Means that certain transaction pursuant to which the Borrower or one of its Subsidiaries will acquire substantially all of the assets of the Santa Clara Disk Media operations of WDC. "WD Asset Acquisition Documents": Means the Asset Purchase Agreement, the Volume Purchase Agreement, the Joint Development Agreement, the Registration Rights Agreement, the License Agreement, the Transitional Services Agreement, and the Subordinated Promissory Note, each dated as of April 8, 1999, by and among the Borrower and WDC. "WDC": Means Western Digital Corporation. "Warrant Agreement": The Registration Rights Agreement and the Warrant Agreement, each dated as of even date herewith, between the Borrower and the Restructure 9 15 Lenders and all documents executed in connection therewith, including but not limited to any warrant certificate(s). SECTION 2.2 OTHER DEFINITIONAL PROVISIONS. (a) All terms defined in this Agreement shall have the defined meanings when used in the Restructured Notes or any schedule, certificate or other document made or delivered pursuant hereto. (b) As used herein and in the Restructured Notes, and any schedule, certificate or other document made or delivered pursuant hereto, accounting terms not defined in Section 2.1, and accounting terms partly defined in Section 2.1 to the extent not defined, shall have the respective meanings given to them under GAAP, and all financial data required to be delivered hereunder shall be prepared in accordance with GAAP, except that foreign currency translation adjustments need not be included for purposes of determining the Borrower's equity or net worth or related calculations. If any changes in GAAP from those used in the preparation of the financial statements referred to in Section 7.1(e) ("GAAP Changes") hereafter occasioned by the promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or any successors thereto or agencies with similar functions) result in a change in the method of calculation of any of the financial covenants, standards or other terms or conditions found in this Agreement, the parties hereto agree to enter into negotiations to amend such provisions so as to reflect equitably such GAAP Changes with the desired result that the criteria for evaluating the financial condition and performance of the Borrower and its Consolidated Subsidiaries shall be the same after such GAAP Changes as if such GAAP Changes had not been made. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection and exhibit references are to this Agreement unless otherwise specified. ARTICLE 3 THE EXISTING LOANS SECTION 3.1 AMENDMENT AND RESTATEMENT OF EXISTING FACILITIES. This Agreement is intended to and does completely amend and restate, without novation, the Existing Facilities subject to Section 12.13 hereof. Any financial accommodations extended by the Restructure Lenders after the Closing Date shall be made under the conditions set forth in, and shall be governed by, the terms of this Agreement and the other Restructure Loan Documents. SECTION 3.2 ACKNOWLEDGMENT OF EXISTING LOANS. (a) The Borrower acknowledges and agrees that as of the Closing Date it is currently indebted to each applicable Restructure Lender for its Existing Loan. 10 16 (b) The Borrower further acknowledges and agrees that it has no claims, demands, damages, suits, cross complaints, counterclaims, conditions, causes of action, debts, offsets, disgorgements or assertions of any kind or nature whatsoever, whether known or unknown, and whenever or however arising that can be asserted to reduce or eliminate all or any part of its liability to repay the Existing Loans, or each of them, or to seek any affirmative relief or damages of any kind or nature from Restructure Lenders, or each of them, that arises out of or relates to the Existing Loans or Existing Facilities (collectively, "Claims"). To the extent any such Claims exist, they are fully, forever and irrevocably released as provided in Section 12.14 hereof. (c) The Borrower acknowledges, reaffirms and ratifies the terms of the Existing Facilities. (d) The Borrower acknowledges and agrees that the Existing Loans and Existing Facilities shall not be modified in accordance with the terms set forth herein unless all conditions precedent set forth herein have been satisfied, as determined in Restructure Agent's and Restructure Lenders' sole discretion. (e) The Borrower acknowledges and agrees that the execution of this Agreement shall not be deemed or construed as a commitment on the part of Restructure Lenders or Restructure Agent to provide any future financing, loan extension, forbearance or any other type of financial accommodation to the Borrower. (f) The Borrower acknowledges and agrees that any unused loan commitments or obligations of the Restructure Lenders to provide any financing under the Existing Facilities is terminated and the Borrower shall have no further right to additional advances under the Existing Facilities. SECTION 3.3 ACKNOWLEDGMENT OF EVENTS OF DEFAULT BY THE BORROWER AND WAIVER THEREOF BY RESTRUCTURE LENDERS. The Borrower acknowledges and agrees that the following Events of Default under the Existing Facilities have occurred and are continuing (the "Existing Defaults"): (a) Net Worth. The Borrower has breached its financial covenants regarding its Consolidated Tangible Net Worth (as defined in the Existing Facilities) from the second fiscal quarter of 1998 through the date hereof. (b) Profitability. The Borrower has breached its financial covenants regarding profitability from the second fiscal quarter of 1998 through the date hereof. (c) Leverage Ratio. The Borrower has breached its financial covenants regarding the maintenance of specified leverage ratios from the second fiscal quarter of 1998 through the date hereof. (d) Debt Service. The Borrower has breached its financial covenants regarding the maintenance of specified debt service coverage ratios from the second fiscal quarter of 1998 through the date hereof. 11 17 (e) Quick Ratio. The Borrower has breached its financial covenants regarding its quick ratio from the second fiscal quarter of 1998 through the date hereof. (f) WD Asset Acquisition. The Borrower may have breached additional covenants regarding Permitted Liens and permitted consolidations, mergers and acquisitions of assets in connection with the consummation of the WD Asset Acquisition. (g) No Other Event of Default. Except as set forth in this Section 3.3 (a), (b), (c), (d), (e) and (f), and that such Events of Default under the Existing Facilities may continue through the date of the Agreement, and the cross-defaults arising out of the Existing Defaults, the Borrower represents and warrants that no other Event of Default under the Existing Facilities has occurred as of the Closing Date; provided, however, that the covenants described above include the corresponding covenants, regardless of definitional or other differences, as set forth in each of the Existing Facilities. (h) Waiver. Subject to the terms and conditions in this Agreement and the other Restructure Loan Documents, the Restructure Lenders, and each of them, waive the Existing Defaults effective as of the date hereof. ARTICLE 4 THE RESTRUCTURED LOANS SECTION 4.1 THE RESTRUCTURED LOANS. (a) Restructured Notes. Each of the Restructure Lenders severally agrees, on the terms and conditions set forth in this Agreement, to restructure the Existing Facilities and Existing Notes. The Restructured Loans shall be evidenced by promissory notes of the Borrower, substantially in the form of Exhibit A, with appropriate insertions (the "Restructured Notes"), payable to the order of each Restructure Lender and representing the obligation of the Borrower to pay the aggregate unpaid principal amount of the Restructured Loan owed by the Borrower to such Restructure Lender, with interest thereon as prescribed in Sections 4.3, 5.1 and 5.2 hereof. Upon receipt by the Restructure Agent of the Restructured Notes executed by the Borrower to the order of the respective Restructure Lenders, the Existing Notes shall be canceled, subject to Section 12.13 hereof. Each Restructure Lender is hereby authorized to record in its respective books and records, and on any exhibit annexed to the Restructured Notes, the date and amount of each Restructure Loan made by said Restructure Lender, and the date and amount of each payment of principal thereof, and any such recordation shall be prima facie evidence of the accuracy of the information so recorded; provided, however, that failure by any Restructure Lender to effect such recordation(s) shall not effect the Borrower's obligations hereunder. Prior to the transfer of a Restructured Note, each Restructure Lender shall record such information on any exhibit annexed to and forming a part of such Restructured Note. Upon surrender of any Restructured Note at the office of the Borrower by reason of any permitted assignment, transfer or other disposition of any Restructured Loan portion thereof, the Borrower 12 18 shall execute and deliver one or more new Restructured Notes of like tenor and of a like aggregate principal amount in the name of the designated holder or holders of such Restructured Loan or Restructured Loan or portion thereof. Any such new Restructured Note shall thereafter be considered a Restructured Note under this Agreement. Any such new Restructured Note shall carry the rights to accrued and unpaid interest which were carried by the Restructured Note so exchanged so that neither gain nor loss of interest shall result from such event. (b) Restructure Fee. On or before the Closing Date, the Borrower shall pay to Restructure Agent a fee of $1,950,000.00 (the "Restructure Fee"). Such fees shall be distributed to each agent of the Existing Facilities pro rata in accordance with the amounts of the Existing Facilities and then disbursed to the Restructure Lenders in a manner to be determined by the agent of the Existing Facility applicable to each Restructure Lender. SECTION 4.2 REPAYMENT. (a) Mandatory Repayments. The Borrower shall repay $15,000,000.00 of the principal amount of the Restructured Loans on the Closing Date. The aggregate outstanding principal amount of the Restructured Loans outstanding on the Restructure Maturity Date, together with accrued interest thereon, shall be due and payable in full on the Restructure Maturity Date. (b) Amortization Payments. In addition to the amortization payment set forth in Section 4.2(a) above, the Borrower shall make minimum mandatory principal amortization payments in the amount of $1,000,000.00 for each fiscal quarter commencing with the fiscal quarter ending July 2, 2000. Such minimum mandatory principal amortization payments for each fiscal quarter shall be due and payable on the tenth calendar day of the month succeeding the end of each applicable fiscal quarter from and after the fiscal quarter ending July 2, 2000. Such minimum mandatory principal amortization payments may be deferred by the Borrower if and only if, as a result of such payment, the Borrower's cash balance would be less than $35,000,000.00 after giving effect to such minimum mandatory principal amortization payment. In the event that any such payment is so deferred, each such deferred payment shall be made up by the Borrower in the scheduled quarterly minimum mandatory principal amortization payments for the following fiscal quarters to the extent that such payments would not result in a cash balance of less than $35,000,000.00, until all such payments have been made in full. (c) Optional Payment. The Borrower may at its option and without penalty repay the Restructured Loans, in whole or in part, on any Business Day, prior to the Restructure Maturity Date, from time to time, provided Restructure Agent shall have received from the Borrower notice of any such payment at least one Business Day prior to the date of the proposed payment. For Restructured Loans, each day shall be defined as and constitute an "Interest Period." Partial payments hereunder shall be in an aggregate principal amount of not less than $1,000,000.00 and in an integral multiple of $100,000.00 for the Restructured Loans. Restructure Agent shall promptly inform the Restructure Lenders by telecopy of receipt of each such payment. 13 19 (d) Capital Raising Events. If the Borrower or any Consolidated Subsidiary issues or sells Stock (other than pursuant to employee benefit plans consistent with past practice) or any Debt Instruments (other than the conversion of a Restructured Loan into a convertible Debt Instrument pursuant to Article 11 hereof) no later than the Business Day following the date of receipt of the proceeds thereof, the Borrower shall prepay the Restructured Loans in an amount equal to thirty-three percent of the first $50,000,000.00, and fifty percent of the amount exceeding $50,000,000.00, of such proceeds, but net of commissions and other reasonable and customary transactions costs, fees and expenses properly attributable to such transaction and payable by the Borrower or Consolidated Subsidiary in connection therewith, including, without limitation, professionals' and consultants' fees ("Closing Costs"). (e) Asset Sales. The Borrower shall prepay the Restructured Loans in an amount equal to fifty percent of the proceeds of any Transfer of all or any part of the Borrower's or any of its Consolidated Subsidiary's business property or fixed assets (including condemnation proceeds) which in the aggregate is in excess of $2,000,000.00 in any fiscal year. Such payments shall be made to the Restructure Agent for the ratable benefit of the Restructure Lenders when the amount due the Restructure Lenders equals or exceeds $500,000.00, but in no event later than the end of each fiscal quarter of the Borrower. (f) Cash Balance. Commencing with the Borrower's fiscal quarter ended on July 2, 2000 and for each fiscal quarter thereafter until the Restructure Maturity Date, the Borrower shall prepay the outstanding Restructured Loans on the tenth day of the month following the end of the Borrower's fiscal quarter in an amount equal to fifty percent of the Cash balance at the quarter ended in excess of $40,000,000.00 up to a maximum payment each quarter of $7,500,000.00; provided, however, that the amount of any proceeds received by the Borrower in connection with a capital raising event described in Section 4.2(d) or any sale of assets subject to the prepayment requirement set forth in Section 4.2(e) shall be excluded from the calculation of the Cash balance for purposes of this Section 4.2(f); and provided, further, however, that any amounts representing minimum mandatory principal amortization payments for the applicable quarter pursuant to Section 4.1(b) shall be included in calculating the aforementioned $7,500,000.00 limit for each quarter. Each such payment shall be accompanied by a certificate signed by the Borrower's chief financial officer certifying the manner in which the Cash balance and the resulting prepayment were calculated, which certificate shall be in form and substance reasonably satisfactory to Restructure Agent. Notwithstanding the foregoing, the portion of any excess cash flow payment due pursuant to this Section 4.2(f) that, if timely paid, would be the sole cause of the Borrower being in breach of Section 8.2(b) or 8.2(c) shall be deferred until such time as the Borrower can pay such sum without being in breach of Section 8.2(b) or 8.2(c), and such deferral shall not constitute a Restructure Event of Default. (g) Implied Consent. Nothing in this Section 4.2 shall be construed to constitute either Restructure Agent's or any Restructure Lender's consent to any transaction referred to in Sections 4.2(d) or (e) above which are not expressly permitted by other provisions of the Restructure Loan Documents. (h) Allocation of Payments. Prior to the occurrence of a Restructure Event of Default, all amounts received by Restructure Agent on account of the Restructured Loans, except 14 20 expressly as set forth to the contrary in other Sections of this Agreement, shall be disbursed by Restructure Agent to the Restructure Lenders pro rata in accordance with their respective Restructured Loans Percentage in inverse order of maturity by wire transfer on the date of receipt if received by Restructure Agent before 1:00 p.m. (Eastern Time) or, if received later, by 1:00 p.m.(Eastern Time) on the next succeeding Business Day, without further interest payable by Restructure Agent. Following the occurrence of a Restructure Event of Default, all amounts received by Restructure Agent on account of the Restructured Loans shall be disbursed by Restructure Agent as follows: (1) first, to the payment of expenses incurred by Restructure Agent in the performance of its duties and enforcement of the rights under the Restructure Loan Documents, including, without limitation, all costs and expenses of collection, attorneys' fees and court costs; (2) then, to the payment of expenses incurred by the agents of the Existing Facilities in the performance of their duties and enforcement of their rights under the Restructure Loan Documents, including, without limitation, all costs and expenses of collection, attorneys' fees and court costs; (3) then, to the Restructure Lenders, pro rata in accordance with their respective Restructured Loans Percentage until all outstanding Restructured Loans and interest accrued thereon have been paid in full; and (4) then, to such Persons as may be legally entitled thereto. (i) Sharing of Payments. Except where a provision of this Agreement provides for non-pro rata treatment, if any Restructure Lender shall receive and retain any payment, whether by setoff, application of the deposit balance or security, or otherwise, in respect of the Restructured Loans in excess of such Restructure Lender's Restructured Loans Percentage, then such Restructure Lender shall purchase from the other Restructure Lenders for cash and at face value and without recourse, such participation in the Restructured Loans held by them as shall be necessary to cause such excess payment to be shared ratably as aforesaid with each of them; provided, however, that if such excess payment or part thereof is thereafter recovered from such purchasing Restructure Lender, the related purchases from the other Restructure Lenders shall be rescinded ratably and the purchase price restored as to the portion of such excess payment so recovered, but without interest. Each Restructure Lender agrees to exercise any and all rights of setoff, counterclaim or banker's lien first fully against the Restructured Loans held by such Restructure Lender, and only then to any other obligations of the Borrower to such Restructure Lender. SECTION 4.3 INTEREST RATE AND PAYMENT DATES. (a) Payment of Interest. Interest with respect to each Restructured Loan shall be payable in arrears on each Interest Payment Date. In no event shall interest on a Restructured Loan exceed the maximum rate permitted by applicable law. 15 21 (b) Base Rate. The Restructured Loans shall bear interest on the unpaid principal amount thereof from the Closing Date through the Restructure Maturity Date at a rate per annum equal to the Base Rate plus 125 basis points. The Restructure Agent shall notify the Borrower and each Restructure Lender of the amount and the effective date of each adjustment in the Base Rate; provided, however, that no failure or delay in giving any such notice shall affect or delay the making of any such adjustments or the obligation of the Borrower to pay in a timely manner the interest due on such Restructured Loans. (c) Catch-Up Interest. The Borrower shall, on or before the Closing Date, pay interest ("Catch-Up Interest") to each Restructure Lender which is a lender (or participant) under the IBJ Facility I, IBJ Facility II or DKB Facility in an amount equal to the product of the difference between the applicable interest rates for each applicable interest period under such applicable facility and the FNB Facility from June 30, 1998 through the Closing Date, multiplied by the outstanding principal amount of such Restructure Lender's Existing Loan during each such period. ARTICLE 5 GENERAL PROVISIONS CONCERNING THE RESTRUCTURED LOANS SECTION 5.1 DEFAULT INTEREST. So long as a Potential Restructure Event of Default or Restructure Event of Default shall have occurred and be continuing under Section 9.1(f), and without the necessity of notice from Restructure Agent or any Restructure Lender to the Borrower, or so long as any other Potential Restructure Event of Default or Restructure Event of Default shall have occurred and be continuing and, at the election of Restructure Agent and Majority Restructure Lenders, confirmed by written notice from Restructure Agent to the Borrower, the interest rate applicable to the Restructured Loans shall be increased by 200 basis points per annum above such rate otherwise applicable to the Restructured Loans (the "Default Rate") and each Restructure Loan shall bear interest at the Default Rate. Interest at the Default Rate shall accrue from the initial date of such Potential Restructure Event of Default or Restructure Event of Default until that Potential Restructure Event of Default or Restructure Event of Default is cured or waived and shall be payable upon demand. SECTION 5.2 COMPUTATION OF INTEREST. (a) Calculations. Interest in respect of the Base Rate shall be calculated on the basis of a 365-day year for the actual days elapsed. Any change in the interest rate resulting from a change in the Base Rate shall become effective as of the opening of business on the day on which such change in the Base Rate shall become effective. (b) Determination by Restructure Agent. Each determination of an interest rate or fee by Restructure Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Restructure Lenders and the Borrower in the absence of manifest error. 16 22 SECTION 5.3 PAYMENTS. The Borrower shall make each payment of principal, interest and fees due from it hereunder and under the Restructured Notes, WITHOUT SETOFF OR COUNTERCLAIM AND FREE AND CLEAR OF, AND WITHOUT ANY DEDUCTION OR WITHHOLDING FOR, ANY TAXES OR OTHER PAYMENTS, on or before 12:00 P.M. (Eastern Time) on the day when due to Restructure Agent, on behalf of the Restructure Lenders, at the head office of Restructure Agent OR SUCH OTHER PLACE AS IT MAY FROM TIME TO TIME SPECIFY IN WRITING in immediately available UNITED STATES DOLLARS. SECTION 5.4 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made hereunder or under the Restructured Loans shall be stated to be due on a day which is not a Business Day, such payment may be made on the next succeeding Business Day, and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. SECTION 5.5 REDUCED RETURN. If any Restructure Lender shall have determined that any new or additional applicable law, regulation, rule or regulatory requirement (collectively, in this Section 5.5, "Requirement") regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by said Restructure Lender with any new or additional request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, in any such case, effective after the Closing Date, has or would have the effect of reducing the rate of return on said Restructure Lender's capital as a consequence of its Restructured Loan and obligations hereunder to a level below that which would have been achieved but for such Requirement, change or compliance (taking into consideration said Restructure Lender's policies with respect to capital adequacy) by an amount deemed by said Restructure Lender to be material (which amount shall be determined by said Restructure Lender's reasonable allocation of the aggregate of such reductions resulting from such events), then from time to time, within thirty (30) Business Days after written demand by said Restructure Lender, the Borrower shall pay to Restructure Agent on behalf of said Restructure Lender such additional amount or amounts as will compensate said Restructure Lender for such reduction. Notwithstanding the foregoing, no additional compensation will be required from the Borrower under this Section 5.5 if the reason for said additional compensation was based solely on said Restructure Lender's failure to comply with any existing or new law, treaty, rule or regulation or requirement. In addition, said Restructure Lender shall promptly notify the Borrower of any proposed request for compensation under this Section 5.5 and shall provide the Borrower with reasonable support therefor. Any request by said Restructure Lender for additional compensation shall be structured to allocate such additional costs over the term of the credit affected thereby. The Borrower may, at its option, replace any Restructure Lender assessing additional charges under this Section 5.5 with a new Restructure Lender with the prior written consent of the Restructure Agent, which consent shall not be unreasonably withheld or delayed; provided, however, the Borrower may not require, and this sentence shall not be deemed to be the agreement of, any Restructure Lender to replace any other Restructure Lender. SECTION 5.6 INDEMNITIES. Whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to indemnify, pay and hold Restructure Agent and 17 23 the Restructure Lenders, and the shareholders, officers, directors, employees and agents of same, harmless from and against any and all claims, liabilities, losses, damages, costs and expenses (whether or not any of the foregoing Persons is a party to any litigation), including, without limitation, reasonable attorneys' fees and costs (including, without limitation, the reasonable estimate of the allocated cost of in-house legal counsel and staff) and costs of investigation, document production, attendance at a deposition, or other discovery, with respect to or arising out of (i) any proposed acquisition by the Borrower or any of its Consolidated Subsidiaries of any Person or any securities (including a self-tender), (ii) this Agreement or any use of proceeds hereunder, or (iii) any claim, demand, action or cause of action being asserted against the Borrower or any of its Consolidated Subsidiaries (collectively, the "Indemnified Liabilities"); provided, however, that the Borrower shall have no obligation hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of any such Persons or the failure of such Person to comply with applicable law, including, without limitation, the failure of any non-U.S. Person to file the appropriate forms required by any taxing authority having jurisdiction over such Person or this Agreement and the transactions contemplated hereby. If any claim is made, or any action, suit or proceeding is brought against any Person indemnified pursuant to this Section 5.6, the indemnified Person shall notify the Borrower of such claim or of the commencement of such action, suit or proceeding, and the Borrower will assume the defense of such action, suit or proceeding, employing counsel selected by the Borrower and reasonably satisfactory to the indemnified Person, and pay the fees and expenses of such counsel. This covenant shall survive termination of this Agreement and payment of the outstanding Restructured Loans. SECTION 5.7 REQUIREMENTS OF LAW. In the event that any law, regulation or directive or any change therein or in the interpretation or application thereof or compliance by any Restructure Lender with any request or directive (whether or not having the force of law) from any central bank or other governmental authority, agency or instrumentality, in any case, effective after the Closing Date: (a) does or shall subject said Restructure Lender to any new or additional tax of any kind whatsoever with respect to this Agreement, any Restructured Loan made hereunder, or change the basis of taxation of payments to said Restructure Lender of principal, restructure fee, interest or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of said Restructure Lender); (b) does or shall impose, modify or hold applicable any reserve, assessment rate, special deposit, compulsory loan or other requirement (collectively in this Section 5.7, "Requirements") against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of said Restructure Lender. (c) does or shall impose, modify or hold applicable any of the Requirements against the Restructure Loans Percentages; or (d) does or shall impose on said Restructure Lender any other new or additional condition; 18 24 and the result of any of the foregoing is to increase the cost to said Restructure Lender of making, renewing or maintaining its Restructured Loan or to reduce any amount receivable thereunder by an amount determined by said Restructure Lender, in its sole discretion, to be material (which increase or reduction shall be determined by the Restructure Lender's reasonable allocation of the aggregate of such cost increases or reduced amounts receivable resulting from such events), then, in any such case, the Borrower shall pay to Restructure Agent on behalf of said Restructure Lender, within thirty (30) Business Days of its demand, any additional amounts necessary to compensate said Restructure Lender for such additional cost or reduced amount receivable as determined by said Restructure Lender with respect to this Agreement. If said Restructure Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall notify the Borrower of the event by reason of which it has become so entitled. A statement incorporating the calculation as to any additional amounts payable pursuant to the foregoing sentence submitted by said Restructure Lender to the Borrower shall be conclusive in the absence of manifest error. Notwithstanding the foregoing, no additional compensation will be required from the Borrower under this Section 5.7 if the reason for said additional compensation was based solely on said Restructure Lender's failure to comply with any existing or new law, treaty, rule or regulation or requirement. In addition, said Restructure Lender shall promptly notify the Borrower of any proposed request for compensation under this Section 5.7 and shall provide the Borrower with reasonable support therefor. Any request by said Restructure Lender for additional compensation shall be structured to allocate such additional costs over the term of the credit affected thereby. The Borrower may, at its option, replace any Restructure Lender assessing additional charges under this Section 5.7 with a new Restructure Lender with the prior consent of the Restructure Agent, which consent shall not be unreasonably withheld or delayed; provided, however, the Borrower may not require, and this sentence shall not be deemed to be the agreement of, any Restructure Lender to replace any other Restructure Lender. SECTION 5.8 IBJ BANK GROUP II SWAP TRANSACTIONS. The Borrower acknowledges that in connection with the IBJ Facility II, the IBJ Bank Group II entered into certain interest rate swap transactions, to which the Borrower is not a party. As a further inducement to the Restructure lenders in the IBJ Bank Group II to enter into the Restructure Agreement, the Borrower agrees as follows: (a) Breakage Costs. On the Closing Date, the Borrower shall irrevocably authorize each Restructure Lender that is an Existing Lender under the IBJ Facility II to terminate its interest rate swap transactions with IBJ, and each such Restructure Lender that is an Existing Lender under the IBJ Facility II shall immediately terminate its interest rate swap transactions with IBJ. Subsequent to the Closing Date, the Borrower shall have no further responsibility or obligations in connection with any interest rate swap transactions by and between each Restructure Lender that is an Existing Lender under the IBJ Facility II with IBJ, whether or not such interest rate swap transactions are actually terminated. Any and all costs, fees, damages, claims and/or proceeds resulting from such termination shall be for the account of each Restructure Lender that is an Existing Lender under the IBJ Facility II. To the extent that the termination of the interest rate swap transactions described above results in payments to be due to any Restructure Lender that is 19 25 an Existing Lender under IBJ Facility II, each such Restructure Lender shall be entitled to retain said payments for its own account. ARTICLE 6 CONDITIONS PRECEDENT SECTION 6.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT. The effectiveness of this Agreement is subject to the conditions precedent set forth in this Section 6.1 and the Borrower hereby agrees that the obligation of Restructure Lenders to consummate the transactions contemplated herein is subject to the accuracy of the representations and warranties described herein and the fulfillment, to Restructure Agent's and Restructure Lenders' satisfaction, on or before the Closing Date, of each of the following conditions precedent (which are for the sole benefit of Restructure Lenders), unless waived by Restructure Agent and Restructure Lenders in their sole discretion: (a) Restructure Agent (which shall promptly distribute such information to each of the Restructure Lenders) shall have received, for and on behalf of the Restructure Lenders and on or before the date of this Agreement, the following, each dated such day and in form and substance satisfactory to Restructure Agent and the agents under the Existing Facilities: (1) The Restructured Notes executed by the Borrower to the order of the respective Restructure Lenders; (2) A copy of the Certificate of Incorporation of the Borrower certified as of a recent date by the Secretary of the State of Delaware; (3) A copy of the bylaws of the Borrower certified by the Secretary or Assistant Secretary of the Borrower; (4) Copies of resolutions of the Board of Directors or other authorizing documents of the Borrower approving the Restructure Loan Documents; (5) the Borrower's certificate that the copy of the incumbency certificate, executed by the Secretary or an Assistant Secretary of the Borrower or equivalent document, certifying the names and signatures of the officers of the Borrower or other Persons authorized to sign the Restructure Loan Documents and the other documents to be delivered hereunder, heretofore provided to Restructure Agent is in full force and effect and has not been amended and/or supplemented; (6) Executed copies of all Restructure Loan Documents by the Borrower, each Restructure Lender and Restructure Agent; and (7) Executed copies of the Warrant Agreement by the Borrower, each Restructure Lender and Restructure Agent. 20 26 (b) All corporate and legal proceedings and all instruments and documents in connection with the transactions contemplated by this Agreement shall be reasonably satisfactory in content, form and substance to Restructure Agent, Restructure Lenders and their counsel, and Restructure Agent or Restructure Lenders and such counsel shall have received any and all further information and documents which Restructure Agent, Restructure Lenders or their respective counsel may reasonably have requested in connection therewith, such documents where appropriate to be certified by proper corporate or governmental authorities; (c) The Borrower shall have paid the Catch-Up Interest and Restructure Fee to Restructure Agent for the benefit of the applicable Restructure Lenders; (d) The Borrower shall have paid Crossroads, LLC ("Crossroads") a retainer of $10,000.00; and (e) The Borrower shall have paid all reasonable costs, fees (inclusive of attorneys' fees and consultants' fees) and expenses incurred by Restructure Agent and the agents of the Existing Facilities for which the Borrower has received copies of invoices as of the Closing Date in connection with (i) the administration, default and collection of the Existing Loans, and (ii) the preparation, negotiation, administration and execution of this Agreement, and the other Restructure Loan Documents. ARTICLE 7 REPRESENTATIONS AND WARRANTIES SECTION 7.1 REPRESENTATIONS AND WARRANTIES. In order to induce each Restructure Lender to enter into this Agreement, the Borrower represents and warrants as follows: (a) Organization. The Borrower is duly organized, validly existing and in good standing under the laws of the state of its formation. The Borrower is also duly authorized, qualified and licensed in all applicable jurisdictions, and under all applicable laws, regulations, ordinances or orders of public authorities, to carry on its business in the locations and in the manner presently conducted, to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect. All of the Subsidiaries and Consolidated Subsidiaries of the Borrower and the percentage of the Borrower's ownership interest therein as of the date of this Agreement are identified on Schedule 2. (b) Authorization. The execution, delivery and performance by the Borrower of the Restructure Loan Documents are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) the Borrower's certificate of incorporation, bylaws or other organizational documents or (ii) any law or regulation (including Regulations T, U and X) or any contractual restriction binding on or affecting the Borrower. (c) Governmental Consents. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (except routine 21 27 reports required pursuant to the Securities Exchange Act of 1934, as amended (if such act is applicable to the Borrower), which reports will be made in the ordinary course of business) is required for the due execution, delivery and performance by the Borrower of the Restructure Loan Documents. (d) Validity. The Restructure Loan Documents are the binding obligations of the Borrower, enforceable in accordance with their respective terms; except in each case as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. (e) Financial Condition. The balance sheet of the Borrower and its Consolidated Subsidiaries as at the fiscal year ended January 2, 2000, and the related statements of income, cash flows and stockholders' equity of the Borrower and its Consolidated Subsidiaries to that date for the fiscal year then ended, copies of which have been furnished to Restructure Agent and to the Restructure Lenders, fairly present the financial condition of the Borrower and its Consolidated Subsidiaries as of such date and the results of the operations of the Borrower and its Consolidated Subsidiaries for the respective period ended on such date, all in accordance with GAAP, consistently applied. (f) Litigation. Except as set forth in the financial statements delivered on or prior to the date hereof or described on Schedule 4 to this Agreement, to the best of the Borrower's knowledge after due inquiry there is no pending or threatened action or proceeding affecting the Borrower or any of its Consolidated Subsidiaries before any court, governmental agency or arbitrator, which could reasonably be expected to materially adversely affect the consolidated financial condition or operations of the Borrower or which could reasonably be expected to have a material adverse effect on the Borrower's ability to perform its obligations under the Restructure Loan Documents, having regard for its other financial obligations (a "Material Adverse Effect"). (g) Employee Benefit Plans. The Borrower and each of its ERISA Affiliates is in compliance in all material respects with any applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to all Employee Benefit Plans. No Termination Event has occurred or is reasonably expected to occur with respect to any Pension Plan that would reasonably be expected to have a Material Adverse Effect. (h) Disclosure. No representation or warranty of the Borrower contained in this Agreement or any other document, certificate or written statement furnished to Restructure Agent and the Restructure Lenders by or on behalf of the Borrower for use in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact (known to the Borrower in the case of any document not furnished by it) necessary in order to make the statements contained herein or therein not misleading. To the best of the Borrower's knowledge, there is no fact known to the Borrower (other than matters of a general economic nature) which materially adversely affects the business, operations, property, assets or condition (financial or otherwise) of the Borrower and its Consolidated Subsidiaries, taken as a whole, which has not been disclosed herein or in such other documents, 22 28 certificates and statements furnished to Restructure Agent and the Restructure Lenders for use in connection with the transactions contemplated hereby. (i) Margin Stock. The aggregate value of all margin stock (as defined in Regulation U) directly or indirectly owned by the Borrower and its Consolidated Subsidiaries is less than twenty-five percent of the aggregate value of the Borrower's assets. (j) Environmental Matters. Except as set forth in the financial statements delivered on or prior to the date hereof and except for certain claims associated with Great Western Chemical, neither the Borrower nor any Consolidated Subsidiary, nor, to the best of their knowledge, any other person, has treated, stored, processed, discharged, spilled, or otherwise disposed of any substance defined as hazardous or toxic by any applicable federal, state or local rule, regulation, order or directive, or any waste or by-product thereof, at any real property or any other facility owned, leased or used by the Borrower or any Consolidated Subsidiary, in violation of any applicable statutes, regulations, ordinances or directives of any governmental authority or court, which violations may result in liability to the Borrower or any Consolidated Subsidiary in an amount for all such violations that could reasonably be expected to have a Material Adverse Effect; and the unresolved violations set forth in the financial statements delivered on or prior to the date hereof will not result in liability to the Borrower or any Consolidated Subsidiary in an amount for all such unresolved violations that could reasonably be expected to have a Material Adverse Effect. Except as set forth in the financial statements delivered on or prior to the date hereof, no employee or other person has ever made a claim or demand against the Borrower or any Consolidated Subsidiary based on alleged damage to health caused by any such hazardous or toxic substance or by any waste or by-product thereof in an amount that could reasonably be expected to have a Material Adverse Effect; and the unsatisfied claims or demands against the Borrower or any Consolidated Subsidiary set forth in the financial statements delivered on or prior to the date hereof will not result in uninsured liability to the Borrower or any Consolidated Subsidiary or any of their respective officers, employees, representatives, agents or shareholders in an amount that could reasonably be expected to have a Material Adverse Effect for all such unsatisfied claims or demands. Except as set forth in the financial statements delivered on or prior to the date hereof, neither the Borrower nor any Consolidated Subsidiary has been charged by any governmental authority with improperly using, handling, storing, discharging or disposing of any such hazardous or toxic substance or waste or by-product thereof or with causing or permitting any pollution of any body of water in an amount that could reasonably be expected to have a Material Adverse Effect; and the outstanding charges set forth in the financial statements delivered on or prior to the date hereof will not result in liability to the Borrower or any Consolidated Subsidiary or any of their respective officers, employees, representatives, agents or shareholders in an amount that could reasonably be expected to have a Material Adverse Effect for all such outstanding charges. (k) Employee Matters. There is no strike or work stoppage in existence or, to the best of the Borrower's knowledge after due inquiry, threatened involving the Borrower or its Consolidated Subsidiaries that would reasonably be expected to have a Material Adverse Effect. (l) Status of Dastek, Inc., Dastek (M) and DHC. Neither Dastek, Inc. nor Dastek (M) is an active operating business. To the best knowledge of the Borrower after due 23 29 inquiry, none of Dastek, Inc., Dastek (M) or DHC have any material outstanding liabilities in favor of any Persons that are not affiliated with the DHC joint-venture. (m) Year 2000 Compliance. The Borrower has completed a review and assessment of the applicable areas of its and each of its Consolidated Subsidiaries' businesses and operations that could be materially adversely affected by the "Year 2000" problem (that is, the risk that computer applications used by the Borrower or any of its Consolidated Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based upon the foregoing, the Borrower developed a plan and timetable to take at the appropriate time all steps the Borrower considers reasonably necessary to ensure that all computer applications that are necessary to its or any of its Consolidated Subsidiaries' businesses and operations are able to perform properly date-sensitive functions for all dates before and after January 1, 2000, except to the extent that any such Year 2000 non-compliance would not reasonably be expected to have a Material Adverse Effect. In connection therewith, the Borrower believes it has committed adequate resources to support its Year 2000 plan for itself and its Consolidated Subsidiaries. ARTICLE 8 COVENANTS SECTION 8.1 AFFIRMATIVE COVENANTS. So long as any Restructured Loan shall remain unpaid, the Borrower will, unless the Majority Restructure Lenders shall otherwise consent in writing: (a) Financial Information. Furnish to Restructure Agent and each of the Restructure Lenders in each case as soon as available, but in any event no later han: (1) Annual Reporting: (A) One hundred twenty (120) days after the end of each fiscal year of the Borrower, a copy of the Borrower's consolidated balance sheet of itself and its Consolidated Subsidiaries as at the end of each fiscal year and the related consolidated statements of income, stockholders' equity and statement of cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous year, accompanied by a report and opinion thereon of Ernst & Young LLP or other independent certified public accountants of recognized national standing; (2) Quarterly Reporting: Thirty (30) days after the end of each fiscal quarter of the Borrower (A) a variance report showing the Borrower's actual performance to its January projected performance as set forth in the Borrower's Business Plan for the applicable fiscal year as attached as Exhibit E to this Agreement, including but not limited to, the Borrower's revenue with a breakdown of sales and changes in sales on a quarter to quarter basis, cash receipts and disbursements, an analysis of the Borrower's yield improvement process, material and running costs and average selling prices, an analysis of capital expenditures, general and administration expense and research and development expenses for such quarter, and a progress report on Borrower's "Qualification Process"; (B) on a quarterly basis, but in any event within forty-five (45) days after the end of the applicable fiscal quarter for the first three quarters 24 30 of each fiscal year and within sixty (60) days following the Borrower's fiscal year end, a compliance certificate, in form and substance satisfactory to Restructure Agent, setting forth in such detail as Restructure Agent may request the calculation of the ratios and amounts necessary to determine the Borrower's compliance with Sections 8.2(a), (b), (c), and (d) hereof for the accounting period covered by such financial statements, certified by the Borrower's chief executive officer or chief financial officer; and (C) together with each delivery of financial statements of the Borrower and its Consolidated Subsidiaries pursuant to subdivisions (1) and (2) above, an officer's certificate stating that the signers have reviewed the terms of the Restructure Loan Documents and have made, or caused to be made under their supervision, a review in reasonable detail of the transactions and condition of the Borrower and its Consolidated Subsidiaries during the accounting period covered by such financial statements and that such review has not disclosed the existence during or at the end of such accounting period, and that the signers do not have knowledge of the existence as at the date of the officer's certificate, of any existing condition or event which constitutes a Restructure Event of Default or Potential Restructure Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action the Borrower has taken, is taking and proposes to take with respect thereto; (3) Monthly Reporting: Thirty (30) days after the end of each calendar month, the Borrower's (A) unaudited consolidated balance sheet of itself and its Consolidated Subsidiaries as at the end of such period and the related unaudited consolidated statements of income and stockholders' equity; and (B) the Borrower's unaudited statements of cash flows for itself and its Consolidated Subsidiaries for such period and year to date, setting forth in each case in comparative form the figures as at the end of the previous fiscal year as to the balance sheet and the figures for the previous corresponding period as to the other statements, certified by a duly authorized officer of the Borrower as being fairly stated in all material respects subject to year end adjustments and the absence of footnotes; all such financial statements and other reports to be complete and correct in all material respects and to be prepared in reasonable detail acceptable to the Majority Restructure Lenders and, to the extent applicable, in accordance with GAAP applied consistently throughout the periods reflected therein (except as approved by such accountants and disclosed therein); (4) concurrently with the closing of the Company's books for the preceding fiscal month, a certificate signed by the Chief Financial Officer of the Company and in form and substance reasonably satisfactory to Restructure Agent certifying the Borrower's cash balance measured at the end of such preceding fiscal month; (5) as soon as available, notice of filing or delivery of all reports which the Borrower sends to its security holders generally, and copies of all reports and registration statements which the Borrower or any Subsidiary files with the SEC or any national securities exchange, including, but not limited to: Form 8-K Current Report, Form 10-K Annual Report, Form 10-Q Quarterly Report, Annual Report to Shareholders, Proxy Statements, and Registration Statements, together with information sufficient to enable each recipient of such notice to access such reports electronically; and 25 31 (6) as soon as available, copies of the Borrower's annual audit management letter. (b) Notices and Information. Deliver to Restructure Agent and each of the Restructure Lenders subject to the last sentence of Section 8.1(f): (1) promptly upon any officer of the Borrower obtaining knowledge (A) of any condition or event which constitutes a Restructure Event of Default or existing Potential Restructure Event of Default, (B) that any Person has given any notice to the Borrower or any Consolidated Subsidiary or taken any other action with respect to a claimed default or event or condition of the type referred to in Section 9.1(e), (C) of the institution of any litigation involving an alleged liability (including possible forfeiture of property) of the Borrower or any of its Consolidated Subsidiaries equal to or greater than $4,000,000.00 or any adverse determination in any litigation involving a potential liability of the Borrower or any of its Consolidated Subsidiaries equal to or greater than $4,000,000.00, or (D) of a material adverse change in the business, operations, properties, assets or condition (financial or otherwise) of the Borrower and its Consolidated Subsidiaries, taken as a whole, an officer's certificate specifying the nature and period of existence of any such condition or event, or specifying the notice given or action taken by such holder or Person and the nature of such claimed default, Restructure Event of Default, Potential Restructure Event of Default, event or condition, and what action the Borrower has taken, is taking and proposes to take with respect thereto; (2) promptly upon becoming aware of the occurrence of or forthcoming occurrence of any (A) Termination Event, or (B) "prohibited transaction", as such term is defined in Section 4975 of the Internal Revenue Code or Section 406 of ERISA, in connection with any Employee Benefit Plan or any trust created thereunder, a written notice specifying the nature thereof, what action the Borrower has taken, is taking or proposes to take with respect thereto, and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor, or the Pension Benefit Guaranty Corporation ("PBGC") with respect thereto; (3) with reasonable promptness copies of (A) all notices received by the Borrower or any of its ERISA Affiliates of the PBGC's intent to terminate any material Pension Plan or to have a trustee appointed to administer any Pension Plan; (B) each Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed by the Borrower or any of its ERISA Affiliates with the Internal Revenue Service with respect to each material Pension Plan; and (C) all notices received by the Borrower or any of its ERISA Affiliates from a Multiemployer Plan sponsor concerning the material imposition or material amount of withdrawal liability pursuant to Section 4202 of ERISA; (4) promptly, and in any event within thirty (30) days after receipt thereof, a copy of any notice, summons, citation, directive, letter or other form of communication from any governmental authority or court in any way concerning any material action or omission on the part of the Borrower or any of its Consolidated Subsidiaries in connection with any substance defined as toxic or hazardous by any applicable federal, state or local law, rule, regulation, order or directive or any waste or by-product thereof, or concerning the filing of a 26 32 material lien upon, against or in connection with the Borrower, its Consolidated Subsidiaries, or any of their leased or owned real or personal property, in connection with a Hazardous Substance Superfund or a Post-Closure Liability Fund as maintained pursuant to Section 9507 of the Internal Revenue Code; and (5) promptly, and in any event within fifteen (15) days after request, such other information and data with respect to the business affairs and financial condition of the Borrower or any of its Consolidated Subsidiaries as from time to time may be reasonably requested by Restructure Agent or any Restructure Lender; provided, however, that such fifteen (15) day period may be extended for a reasonable period at the request of the Borrower and with the consent of the Restructure Agent (which consent shall not be unreasonably withheld) if the Borrower determines that such information and data cannot reasonably be provided within such fifteen (15) day period. (6) promptly, and in any event within two business days after such event, written notice on each occasion that the Borrower's cash balance is less than the required minimum amount for such period as set forth in Section 8.2(b) for five consecutive business days from the date that the Borrower first has knowledge that its cash balance is less than such required minimum cash balance. (c) Corporate Existence, Etc. At all times preserve and keep in full force and effect the Borrower's and its Consolidated Subsidiaries' corporate existence and rights and franchises material to the Borrower's business and those of each of its Consolidated Subsidiaries; provided, however, that the corporate existence of any such Consolidated Subsidiary may be terminated if such termination is in the best interest of the Borrower and is not materially disadvantageous to any Restructure Lender. (d) Payment of Taxes and Claims. Pay, and cause each of its Consolidated Subsidiaries to pay, all taxes, assessments and other governmental charges imposed upon it or any of its properties or assets or in respect of any of its franchises, business, income or property before any penalty or interest accrues thereon, and all claims (including, without limitation, claims for labor, services, materials and supplies) for sums which have become due and payable and which by law have or may become a lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided; however, that no such charge or claim need be paid if being contested in good faith by appropriate proceedings promptly instituted and diligently conducted and if such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor. (e) Maintenance of Properties; Insurance. Maintain or cause to be maintained in good repair, working order and condition all material properties used or useful in the business of the Borrower and its Consolidated Subsidiaries and from time to time will make or cause to be made all appropriate repairs, renewals and replacements thereof. The Borrower will maintain or cause to be maintained, with financially sound and reputable insurers, insurance with respect to its properties and business and the properties and business of its Consolidated Subsidiaries against loss or damage of the kinds customarily insured against by corporations of established 27 33 reputation engaged in the same or similar businesses and similarly situated, of such types and in such amounts as are customarily carried under similar circumstances by such other corporations. (f) Inspection. Permit Crossroads or any successor designated by the Restructure Agent (at the request of Majority Restructure Lenders), to visit and inspect any of the properties of the Borrower or any of its Consolidated Subsidiaries, including its and their financial and accounting records, and to make copies and take extracts therefrom, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants, all at such reasonable times during normal business hours and under the Borrower's supervision and as often as may be reasonably requested. Any such information received hereunder that is reasonably deemed to be confidential by the Borrower shall be held in confidence by Crossroads and may not be used for any purpose other than to monitor the credit worthiness of the Borrower and its Consolidated Subsidiaries and shall (i) only be disclosed or disseminated in summary form to the Restructure Agent and Restructure Lenders and (ii) not be disclosed or disseminated to any other Person for any reason without the prior written consent of the Borrower. (g) Compliance with Laws, Etc. Exercise, and cause each of its Consolidated Subsidiaries to exercise, all due diligence in order to comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, including, without limitation, all environmental laws, rules, regulations and orders, noncompliance with which would have a Material Adverse Effect. (h) Proceeds of Assets and Capital Raising Events. The Borrower shall deposit and maintain all proceeds from any capital raising event or asset sale described in Section 4.2(d) and 4.2(e), respectively, in a segregated account that complies with Section 8.2(h)(1). (i) Notification of Debt Instrument Default. The Borrower shall promptly give written notification to Restructure Agent of any event of any default under any Debt Instrument and specify the nature of such default thereunder. SECTION 8.2 NEGATIVE COVENANTS. So long as any Restructured Note shall remain unpaid, the Borrower will not, without the prior written consent of the Majority Restructure Lenders: (a) Adjusted Tangible Net Worth. Permit the Borrower's Adjusted Tangible Net Worth on a quarterly basis to be less than the following at all times during the applicable quarter: Q100 $169,000,000.00 Q200 $161,000,000.00 Q300 $153,000,000.00 Q400 $145,000,000.00 Q101 $142,000,000.00 Q201 $139,000,000.00 28 34 (b) Minimum Cash Balance. Permit the Borrower's Cash balance, on a consolidated basis, to be less than the following at all times during the applicable quarter: Q100 $ 35,000,000.00 Q200 $ 30,000,000.00 Q300 $ 30,000,000.00 Q400 $ 30,000,000.00 Q101 $ 30,000,000.00 Q201 $ 30,000,000.00 (c) Minimum Adjusted Net Working Capital. Permit the Borrower's Adjusted Net Working Capital on a quarterly basis to be less than $27,000,000.00. (d) Capital Expenditures. Permit the Borrower's Capital Expenditures to exceed $30,000,000.00 in any fiscal year. (e) Liens, Etc. Create or suffer to exist, or permit any of its Consolidated Subsidiaries to create or suffer to exist, any Lien upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Consolidated Subsidiaries to assign, any right to receive income, in each case to secure any Debt of any Person other than (i) Liens in favor of the Restructure Lenders, (ii) existing Liens reflected on the financial statements referred to in Section 7.1(e), and (iii) Permitted Liens. (f) Dividends, Etc. Declare or pay any dividends, purchase or otherwise acquire for value its capital stock now or hereafter outstanding, or make any distribution of assets to its stockholders as such, or permit any of its Consolidated Subsidiaries to purchase or otherwise acquire for value any stock of the Borrower. (g) Consolidation, Merger or Acquisition. Regarding the Borrower and its Consolidated Subsidiaries, liquidate or dissolve or enter into any consolidation, merger, acquisition, material partnership, material joint venture, syndication or other combination, except that the Borrower may consolidate with, merge into or acquire any other corporation or entity and that any corporation or entity may consolidate with or merge into the Borrower; provided, however, that the Borrower shall be the surviving entity of such merger or consolidation, and provided further, that immediately after the consummation of such consolidation or merger there shall exist no condition or event which constitutes a Restructure Event of Default or a Potential Restructure Event of Default. Notwithstanding anything to the contrary in this Agreement, the Borrower shall not enter into any consolidation, merger, acquisition, material partnership, material joint venture, syndication or other combination with HMT Technology Corp., a Delaware corporation, without the prior written consent of Majority Restructure Lenders. (h) Loans, Debt, Investments, Secondary Liabilities. Make or permit to remain outstanding, or permit any Consolidated Subsidiary to make or permit to remain outstanding, any loan or advance to, or incur, assume, become or be liable in any manner in respect of, suffer to exist, guarantee, induce or otherwise become contingently liable, directly or indirectly, in connection with any Debt other than as permitted by this Agreement, or with the 29 35 obligations, stock or dividends of, or own, purchase or acquire any stock, obligations or securities of or any other interest in, or make any capital contribution to, any Person, except that the Borrower and its Consolidated Subsidiaries may: (1) own, purchase or acquire certificates of deposit, time deposits and bankers' acceptances issued by (A) any financial institution organized and existing under the laws of the United States of America or any State thereof, or (B) with respect to any Consolidated Subsidiary domiciled outside the United States of America, any financial institution located in the same jurisdiction of such Consolidated Subsidiary in an amount consistent with past practices but in no event shall such deposits in all such overseas financial institutions in the aggregate exceed 20% of the Borrower's Cash, in each case having a combined capital and surplus of at least $100,000,000.00, commercial paper rated Moody's P-2 or better and/or Standard & Poor's A-2 or better, obligations or instruments issued by or guaranteed by an entity designated as Standard & Poor's A-2 or better, or Moody's P-2 or better or the equivalent by a nationally recognized credit agency, municipal bonds and other governmental and corporate debt obligations rated Standard & Poor's A or better and/or Moody's A-2 or better, direct obligations of the United States of America or its agencies, and obligations guaranteed or insured by the United States of America, or (C) any Restructure Lender and any funds investing in any of the foregoing; (2) acquire and own stock, obligations or securities received in connection with debts created in the ordinary course of business owing to the Borrower or a Subsidiary; (3) continue to own the existing capital stock of the Borrower's Subsidiaries; (4) endorse negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (5) make loans, advances to or investments in a Subsidiary or joint venture in connection with the normal operations of the business of such Subsidiary or joint venture and allow the Borrower's Subsidiaries or any joint venture to which it is a party to make or permit to remain outstanding advances from the Borrower's Subsidiaries or such joint venture to the Borrower; (6) make or permit to remain outstanding loans or advances to the Borrower's Subsidiaries or any joint venture to which it is a party or enter into or permit to remain outstanding guarantees in connection with the obligations of the Borrower's Subsidiaries or such joint ventures; (7) make or permit to remain outstanding (A) loans and/or advances to the Borrower's officers, stockholders and/or employees, which, in the aggregate, would not exceed $3,000,000.00 during the term of this Agreement, (B) loans to the Borrower's vendors, in the ordinary course of the Borrower's business, which, in the aggregate, do not exceed $5,000,000.00, (C) progress payments to the Borrower's vendors made in the ordinary course of 30 36 the Borrower's business, and (D) (i) loans and/or advances for the purpose of purchasing the Borrower's shares of stock pursuant to its employee stock purchase or option plans, (ii) advances for salary, travel and other expenses, advances against commission and other similar advances made to officers or employees in the ordinary course of the Borrower's business, and (iii) loans and/or advances to or for the benefit of officers, directors or employees in connection with litigation and other proceedings involving such persons by virtue of their status as officers, directors or employees, respectively; (8) make investments under the Borrower's deferred compensation plans for the benefit of the employees of the Borrower and its Subsidiaries; (9) consummate the WD Asset Acquisition and assume Capital Leases in connection therewith on terms and conditions set forth in the WD Asset Acquisition Documents; provided, however, the Borrower shall not make any payments of principal, interest, fees or expenses with respect to the Subordinated Promissory Note or distribute any assets on account thereof (except for the non-cash adjustments of the Subordinated Promissory Note pursuant to Sections 2(b) and 2(c) thereof) unless and until the Restructured Loan of each Restructure Lender together with any other fees, costs, expenses or amounts due to Restructure Agent and each Restructure Lender pursuant to the Restructure Loan Documents have been paid indefeasibly in full; and further provided, however, the Borrower shall not, and shall not permit its Consolidated Subsidiaries to, obtain letters of credit for the benefit of any lessor of any operating leases or Capital Leases assumed by the Borrower in the WD Asset Acquisition without the prior written consent of Majority Restructure Lenders. For the avoidance of doubt, the transactions described in this clause (9) are subject to all other applicable terms and conditions of this Agreement. (10) Asahi Komag Co., Ltd. may make an initial public offering of its common stock; (11) subject to Section 4.2(d) issue or execute debt securities, promissory notes or similar types of instruments related to financing (collectively "Debt Instruments"), if and only if such Debt Instruments are subordinated to the Restructured Loans on terms and conditions acceptable to the Majority Restructure Lenders, which consent shall not unreasonably be withheld, or amend, restate, supplement, replace or otherwise modify in any manner that would be detrimental to the Restructure Lenders any such Debt Instruments without the prior written consent of Majority Restructure Lenders, which consent shall not unreasonably be withheld. (12) incur Debt on account of a Permitted Lien. (i) Asset Sales. Convey, sell, lease, transfer or otherwise dispose of or permit any Consolidated Subsidiary to Transfer, in one transaction or a series of transactions, all or any part of its or its Consolidated Subsidiary's business, property or fixed assets outside the ordinary course of business (any such transaction a "Transfer"), whether now owned or hereafter acquired, except that subject to the provisions of Section 4.2(e) (i) the Borrower and its Consolidated Subsidiaries may make Transfers of business, property or fixed assets in transactions outside the 31 37 ordinary course of business for consideration which in the aggregate does not exceed ten percent of Net Tangible Assets in any fiscal year of the Borrower without the prior written consent of the Majority Restructure Lenders, and (ii) the Borrower may Transfer Dastek (M) or DHC. The Borrower shall provide Restructure Agent and Restructure Lenders with a written summary of any Transfer that triggers a prepayment to Restructure Lenders pursuant to Section 4.2(e) no later than five business days before such Transfer. The Borrower shall further provide Restructure Agent and Restructure Lenders with a written summary of all Transfers in the applicable fiscal quarter of the Borrower no later than thirty (30) days after the end of such fiscal quarter. The Borrower shall further provide Restructure Agent and Restructure Lenders with any other information reasonably requested by Restructure Agent concerning any Transfer as soon as such information is available to the Borrower. ARTICLE 9 RESTRUCTURE EVENTS OF DEFAULT SECTION 9.1 RESTRUCTURE EVENTS OF DEFAULT. If any of the following events (each, a "Restructure Event of Default") shall occur and be continuing: (a) The Borrower shall fail to pay any installment of the principal of any Restructured Note outstanding hereunder when due or any installment of interest on any Restructured Note or other amount payable hereunder; or (b) Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in connection with the other Restructure Loan Documents shall prove to have been incorrect in any material respect when made; or (c) The Borrower shall fail to perform or observe any term, covenant or agreement contained in this Agreement or in any and all documents executed in conjunction with this Agreement, which failure continues uncured for more than thirty (30) consecutive days. Notwithstanding the foregoing, any failure of the Borrower to perform or observe Sections 8.1(c) and (f) and/or 8.2(a), (b), (c), (d), (e), (f), (g), (h) and (i) shall constitute a Restructure Event of Default without regard to any lapse of time or cure period; or (d) The Borrower shall fail to perform or observe any term, covenant or agreement contained in this Agreement other than those referred to in Subsections 9.1(a), (b) and (c) above on its part to be performed or observed and any such failure shall remain unremedied for thirty (30) days after the Borrower knows of such failure; or (e) The Borrower or any of its Consolidated Subsidiaries shall fail to pay when due any obligation (except those specifically arising under the Restructure Loan Documents) in excess of $1,000,000.00 in aggregate amount, or fail to observe or perform any material term, covenant or agreement contained in any agreement for such obligation or indebtedness by which it is bound, in each case for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; or 32 38 (f) (i) The Borrower or any of its Consolidated Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Consolidated Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Consolidated Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (X) results in the entry of an order for relief or any such adjudication or appointment or (Y) remains undismissed, undischarged or unbonded for a period of thirty (30) days; or (iii) there shall be commenced against the Borrower or any of its Consolidated Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within thirty (30) days from the entry thereof; or (iv) the Borrower or any of its Consolidated Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) and (iii) above; or (v) the Borrower or any of its Consolidated Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or (g) One judgment or decree shall be entered against the Borrower or any of its Consolidated Subsidiaries involving a liability (not paid or at least seventy-five percent covered by insurance or the third party indemnity of a solvent indemnitor) equal to or greater than $5,000,000.00 or one or more judgments or decrees shall be entered against the Borrower or any of its Consolidated Subsidiaries involving in the aggregate a liability (not paid or at least seventy-five percent covered by insurance or the third party indemnity of a solvent indemnitor) equal to or greater than $10,000,000.00 and all such judgments or decrees shall not have been vacated, discharged, or stayed or bonded pending appeal within thirty (30) days from the entry thereof; or (h) (1) The Borrower or any of its ERISA Affiliates fails to make full payment when due of all material amounts which, under the provisions of any Pension Plan or Section 412 of the Internal Revenue Code, the Borrower or any of its ERISA Affiliates is required to pay as contributions thereto; (2) Any material accumulated funding deficiency occurs or exists, whether or not waived, with respect to any Pension Plan; (3) The excess of the actuarial present value of all benefit liabilities under all material Pension Plans over the fair market value of the assets of such Pension Plans (excluding in such computation Pension Plans with assets greater than benefit liabilities) allocable to such benefit liabilities are greater than five percent of Consolidated Tangible Net Worth; 33 39 (4) The Borrower or any of its ERISA Affiliates enters into any transaction which has as its principal purpose the evasion of liability under Subtitle D of Title IV of ERISA; (5) (A) Any material Pension Plan maintained by the Borrower or any of its ERISA Affiliates shall be terminated within the meaning of Title IV of ERISA, or (B) a trustee shall be appointed by an appropriate United States district court to administer any material Pension Plan, or (C) the PBGC (or any successor thereto) shall institute proceedings to terminate any material Pension Plan or to appoint a trustee to administer any Pension Plan, or (D) the Borrower or any of its ERISA Affiliates shall withdraw (under Section 4063 of ERISA) from any material Pension Plan, if as of the date of the event listed in subclauses (A) through (C) of this paragraph or any subsequent date, either the Borrower or its ERISA Affiliates has any material liability (such liability to include, without limitation, any material liability to the PBGC, or any successor thereto, or to any other party under Sections 4062, 4063 or 4064 of ERISA or any other provision of law) resulting from or otherwise associated with the events listed in subclauses (A) through (C) of this paragraph; (6) As used in this subsection 9.1(h), the term "accumulated funding deficiency" has the meaning specified in Section 412 of the Internal Revenue Code, and the terms "actuarial present value" and "benefit liabilities" have the meanings specified in Section 4001 of ERISA; or (i) There shall be instituted against the Borrower, or any of its Consolidated Subsidiaries, any proceeding for which forfeiture (not paid or seventy-five percent covered by insurance or the third party indemnity of a solvent indemnitor) of any property equal to or greater than $5,000,000.00 is a potential penalty and such proceeding shall not have been vacated or discharged within thirty (30) days of its institution; or (j) The Borrower shall fail to observe any term, covenant, representation, warranty or other provision contained in the Subordinated Promissory Note or any Debt Instrument permitted pursuant to Section 8.2(h)(11) or Article 11 of this Agreement. Then (i) upon the occurrence of any Restructure Event of Default described in clause (f) above, the Restructured Loans, and each of them, with accrued interest thereon, and all other amounts owing under this Agreement, the Restructured Notes and the other Restructure Loan Documents shall automatically become due and payable, and (ii) upon the occurrence and continuance of any other Restructure Event of Default, Restructure Agent, at the instruction of the Majority Restructure Lenders, shall, by notice to the Borrower, declare the Restructured Loans hereunder, with accrued interest thereon, and all other amounts owing under this Agreement, the Restructured Notes, and the other Restructure Loan Documents to be due and payable forthwith, whereupon the same shall immediately become due and payable. Notwithstanding the foregoing, clause (ii) rather than clause (i) in this paragraph shall apply in the case of a proceeding described in clause (f)(ii) or (iii) above against a Consolidated Subsidiary domiciled outside the United States of America, excluding however, Komag Malaysia from the application of this sentence (in which case, for avoidance of doubt, clause (i) shall apply), provided the laws or regulations of the applicable jurisdiction do not prohibit the Restructure Agent or the Restructure Lenders from 34 40 giving to the Borrower or Consolidated Subsidiary an acceleration notice of the type described in clause (ii) of this paragraph. Except as expressly provided above in this Section 9.1, presentment, demand, protest and all other notices of any kind are hereby expressly waived. Notwithstanding any other provision of this Agreement, including Section 12.2, notices to the Borrower pursuant to this Section 9.1 may be communicated orally (including by telephone with a written notice to the Borrower to be subsequently provided by Restructure Agent) or in writing (including telex or facsimile transmission). Notwithstanding any other provision of this Agreement, each Restructure Lender hereby agrees with each other Restructure Lender that no Restructure Lender shall take any action to protect or enforce its rights arising out of or relating to this Agreement, any of the Restructured Notes, or any of the other Restructure Loan Documents (including exercising any rights of offset) without first obtaining the prior written consent of Majority Restructure Lenders, it being the agreement of Restructure Agent and Restructure Lenders that any such action to protect or enforce rights under this Agreement, any of the Restructured Notes, or any of the other Restructure Loan Documents shall be taken in concert and at the direction or with the consent of the Majority Restructure Lenders, and not independently by a single Restructure Lender. ARTICLE 10 RESTRUCTURE AGENT SECTION 10.1 RESTRUCTURE AGENT. Fleet is hereby appointed as Restructure Agent by each of the Restructure Lenders to perform such duties on behalf of itself and the other Restructure Lenders, and to have such powers, as are set forth herein and as are reasonably incidental thereto. In performing its functions and duties under this Agreement, Restructure Agent shall act solely as agent of the Restructure Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust hereunder with or for the Borrower. The duties of Restructure Agent shall be mechanical and administrative in nature; Restructure Agent shall not have by reason of this Agreement a fiduciary relationship in respect of any Restructure Lender, and nothing in this Agreement, expressed or implied, is intended to or shall be so construed as to impose upon Restructure Agent any obligations in respect of this Agreement, the Restructured Loans, the Restructure Loan Documents or the other instruments and agreements referred to herein except as expressly set forth herein or therein. SECTION 10.2 DELEGATION OF DUTIES, ETC. Restructure Agent may execute any of its duties and perform any of its powers hereunder by or through agents or employees, and shall be entitled to consult with legal counsel and any accountant or other professional selected by it. Restructure Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 10.3 INDEMNIFICATION. The Restructure Lenders agree to indemnify Restructure Agent in its capacity as such, to the extent not reimbursed promptly by the Borrower, pro rata according to their respective Restructured Loans Percentage, from and against any and all claims, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against Restructure Agent in any way relating to or arising out of this Agreement 35 41 or the Restructured Notes or any action taken or omitted to be taken or suffered in good faith by Restructure Agent hereunder or thereunder; provided, however, that no Restructure Lender shall be liable for any portion of any of the foregoing items resulting from the gross negligence or willful misconduct of Restructure Agent. Without limitation of the foregoing, each Restructure Lender agrees to reimburse Restructure Agent promptly upon demand for its pro rata share according to their respective Restructured Loans Percentage of any out-of-pocket expenses (including reasonable counsel fees and disbursements) incurred by Restructure Agent in connection with the preparation, execution, administration or enforcement of, legal advice in respect of rights or responsibilities under, or amendment, modification or waiver of any provision of, this Agreement, the Restructured Notes, or the other Restructure Loan Documents, to the extent that Restructure Agent is not promptly reimbursed for such expenses by the Borrower. SECTION 10.4 EXCULPATORY PROVISIONS. (a) Neither Restructure Agent nor any of its predecessors, officers, directors, employees or agents shall be liable for any action taken or omitted to be taken or suffered in good faith by it or them hereunder or in connection herewith, except that Restructure Agent shall be liable for its own gross negligence or willful misconduct. Restructure Agent and its predecessors shall not be liable in any manner for the effectiveness, enforceability, collectibility, genuineness, perfection, validity, sufficiency or the due execution of this Agreement, the other Restructure Loan Documents or the Restructured Notes or for the due authorization, authenticity or accuracy of the representations and warranties herein or in any other certificate, report, notice, consent, opinion, statement or other document furnished or to be furnished hereunder, and shall be entitled to rely upon any of the foregoing believed by it to be genuine and correct and to have been signed and sent or made by the proper Person. Restructure Agent and its predecessors shall be under no duty or responsibility to the Restructure Lenders to ascertain or to inquire into the performance or observance by the Borrower of any of the provisions hereof or of any document executed and delivered in connection herewith. Each Restructure Lender acknowledges that it has taken and will continue to take such action and to make such investigation as it deems necessary to inform itself of the affairs of the Borrower and each Restructure Lender acknowledges that it had the opportunity to make, has made and will continue to make its own independent investigation of the credit worthiness and the business and operations of the Borrower and that, in entering into this Agreement, and in making its Restructured Loans, it has not relied and will not rely upon any information or representations furnished or given by Restructure Agent, its predecessors or any other Restructure Lender. For the purposes of this Section 10, "predecessors" shall include, without limitation, each of the agents under the Existing Facilities. (b) Each Restructure Lender expressly acknowledges that Restructure Agent and its predecessors have not made any representations or warranties to it and that no act taken by Restructure Agent or its predecessors shall be deemed to constitute any representation or warranty by Restructure Agent or its predecessors to the Restructure Lenders. (c) If Restructure Agent shall request instruction from Restructure Lenders with respect to any act or action (including the failure to take an action) in connection with the 36 42 Restructured Loans under this Agreement, Restructure Agent shall be entitled to refrain from such act or taking such action unless and until Restructure Agent shall have received instructions from all of the Restructure Lenders or the Majority Restructure Lenders, as the case may be and as required herein. Without prejudice to the generality of the foregoing, (i) Restructure Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person or Persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys, accountants, experts and other professional advisors selected by it; and (ii) no Restructure Lender shall have any right of action whatsoever against Restructure Agent or its predecessors as a result of Restructure Agent acting or (where so instructed) refraining from acting under this Agreement with respect to the Restructured Loans in accordance with the instructions of all of the Restructure Lenders or the Majority Restructure Lenders, as the case may be. SECTION 10.5 KNOWLEDGE OF DEFAULT. It is expressly understood and agreed that Restructure Agent shall be entitled to assume that no Restructure Event of Default has occurred and is continuing, unless the officers of Restructure Agent immediately responsible for matters concerning this Agreement shall have actual knowledge of such occurrence or shall have been notified in writing by any Restructure Lender that such Restructure Lender considers that a Restructure Event of Default has occurred and is continuing and specifying the nature thereof. In the event that Restructure Agent shall have acquired actual knowledge of any Restructure Event of Default, it shall promptly give notice thereof to the Restructure Lenders. SECTION 10.6 RESTRUCTURE AGENT IN ITS INDIVIDUAL CAPACITY. With respect to this Agreement, and all Restructured Loans made by it and any renewals, extensions or deferrals of the payment thereof and any Restructured Note issued to or held by it, the Restructure Agent shall have the same rights and powers hereunder as any Restructure Lender, and may exercise the same as though it were not Restructure Agent, and the term "Restructure Lender" or "Restructure Lenders" shall, unless the context otherwise requires, include Restructure Agent in its individual capacity. Restructure Agent and each of the Affiliates of a Restructure Lender may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with the Borrower or any Subsidiary or Consolidated Subsidiary as if it were not performing the duties specified herein, and may accept fees and other consideration from the Borrower for services in connection with this Agreement and otherwise without having to account for the same to the Restructure Lenders. SECTION 10.7 PAYEE OF RESTRUCTURED NOTES TREATED AS OWNER. Restructure Agent may deem and treat the payee of any Restructured Note as the owner thereof for all purposes hereof unless and until an Assignment Agreement shall have been lodged with Restructure Agent as provided in Section 12.6. Any request, authority or consent of any person or entity who, at the time of making such request or giving such authority or consent, is the holder of any such Restructured Note shall be conclusive and binding on any subsequent holder, transferee or assignee of that Restructured Note or of any Restructured Note or Restructured Notes issued in exchange therefor. 37 43 SECTION 10.8 RESIGNATION OF RESTRUCTURE AGENT. If at any time Restructure Agent deems it advisable, in its sole discretion, it may submit to each of the Restructure Lenders and the Borrower a written notification of its resignation as Restructure Agent under this Agreement, such resignation (subject to the further provisions of this Section 10.8) to be effective on the thirtieth day after the date of such notice. Upon any such resignation, the Majority Restructure Lenders, subject to the prior written consent of the Borrower if no Restructure Event of Default shall have occurred and be continuing (which consent shall not be unreasonably withheld), shall have the right to appoint a successor Restructure Agent. If no successor Restructure Agent shall have been so appointed by the Majority Restructure Lenders and accepted such appointment within thirty (30) days after the retiring Restructure Agent's giving of notice of resignation, then the retiring Restructure Agent may, on behalf of the Restructure Lenders, appoint a successor Restructure Agent, which successor Restructure Agent shall be either a Restructure Lender or if none of the Restructure Lenders is willing to serve as successor Restructure Agent, a bank having combined capital and surplus of at least $100,000,000.00. Any such appointment of a successor Restructure Agent shall be subject to the prior written approval of the Borrower if no Restructure Event of Default shall have occurred and be continuing (which approval shall not be unreasonably withheld). Upon the acceptance of any appointment as Restructure Agent hereunder by a successor Restructure Agent, such successor Restructure Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Restructure Agent, and the retiring Restructure Agent shall be discharged from its duties and obligations under this Agreement. The Borrower and the Restructure Lenders shall execute such documents as shall be necessary to effect such appointment. After any retiring Restructure Agent's resignation hereunder as Restructure Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Restructure Agent under this Agreement and the Restructured Notes. Notwithstanding the foregoing provisions of this Section 10.8, if at any time there shall not be a duly appointed and acting Restructure Agent, the Borrower agrees to make each payment due hereunder and under the Restructured Loans directly to the Restructure Lenders entitled thereto during such time. ARTICLE 11 CONVERSION LENDER OPTION SECTION 11.1 ELECTION. Notwithstanding anything to the contrary in this Agreement or in any other Restructure Loan Document, any Restructure Lender may convert its Restructured Loan (including, for purposes of this Article 11 and for the avoidance of doubt, Existing Loan) into a convertible Debt Instrument subject to the following terms and conditions: (i) for each Restructured Loan owned by such Restructure Lender on the Closing Date, by irrevocable written notice delivered by the Restructure Lender to the Restructure Agent that it shall convert such Restructured Loan to a convertible Debt Instrument on terms and conditions set forth in the Securities Purchase Agreement, the Convertible Note and the Registration Rights Agreement (collectively, the "Conversion Documents") annexed as Exhibit D to this Agreement, which notice shall be delivered concurrently with such Restructure Lender's execution of this Agreement (each, a "Closing Date Conversion Notice"); and (ii) for each Restructured Loan that 38 44 was not the subject of a Closing Date Conversion Notice, by irrevocable written notice delivered by the Restructure Lender to the Restructure Agent that it shall convert, subject to the Borrower's consent, such Restructured Loan to a convertible Debt Instrument on terms and conditions that are similar in all material respects to those set forth in Exhibit D (collectively, the "Post-Closing Conversion Documents"), which notice shall be delivered concurrently with such Restructure Lender's notice to Borrower of its election to purchase such convertible Debt Instruments (each, a "Post-Closing Conversion Date Notice"). SECTION 11.2 CONVERSION LENDER. Each Restructure Lender, solely with respect to its Restructured Loan for which irrevocable notice has been delivered to Restructure Agent as provided above, shall be deemed a "Conversion Lender" for purposes of this Article 11. SECTION 11.3 CONVERSION DATE RIGHTS. With respect to each Closing Date Conversion Notice or Post-Closing Date Conversion Notice, such Conversion Lender shall, from and after the effective closing date specified in the Conversion Documents or the Post-Closing Conversion Documents, as applicable (the "Conversion Date"): (i) relinquish all rights and benefits under this Agreement and any other Restructure Loan Document arising or accruing from and after the applicable Conversion Date, and (ii) such Conversion Lender shall be deemed released from all obligations under this Agreement and the other Restructure Loan Documents arising or accruing from and after the applicable Conversion Date, including, without limitation, any such obligations under Sections 4.2(i), 9.l and 10.3 hereof. In addition, Restructure Agent consent will not be necessary for the assignment by any Restructure Lender of its Restructured Loan subsequent to the Closing Date provided all of the other terms and conditions of Section 12.6 hereof have been satisfied and further provided that the assignee of the Restructure Lender irrevocably agrees at the time of such assignment to become a Conversion Lender with respect to the Restructured Loan it has acquired. For the avoidance of doubt, the rights and benefits relinquished by any Conversion Lender in subsection (i) of this Section 11.3 shall include any payments of principal, interest, fees, or expenses and any voting rights under this Agreement or any other Restructure Loan Document, to the extent the same arise or accrue after the applicable Conversion Date; provided, however, the Restructure Fee payable under Section 4.1(b) hereof, the $15,000,000.00 mandatory repayment of the principal amount of the Restructured Loan as set forth in the first sentence of Section 4.2(a) hereof, and all rights under the Warrant Agreement, shall be deemed to arise on the Closing Date for the ratable benefit of the Restructure Lenders as of the Closing Date. 39 45 ARTICLE 12 MISCELLANEOUS SECTION 12.1 AMENDMENTS, ETC. (a) No amendment or waiver of any provision of the Restructure Loan Documents, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Majority Restructure Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that, without the written consent of all of the Restructure Lenders, no amendment, waiver or consent shall do any of the following: (b) extend the Restructure Maturity Date, or subject the Restructure Lenders to any additional obligations; (c) reduce the principal of, or interest on, the Restructured Loans or any fee or other amount payable to the Restructure Lenders hereunder; (d) postpone any date fixed for any payment in respect of principal of, or interest on, the Restructured Loans or any fee or other amount payable to the Restructure Lenders hereunder; (e) change the definition of "Majority Restructure Lenders" or any definition or provision of this Agreement requiring the approval of Majority Restructure Lenders or some other specified amount of Restructure Lenders; (f) amend the provisions of Section 4.2(i); or (g) amend the provisions of this Section 12.1; and provided, further, however, that no amendment, waiver or consent shall, unless in writing and signed by Restructure Agent in addition to the Restructure Lenders required hereinabove to take such action, affect the rights, obligations or duties of Restructure Agent under this Agreement or any other Restructure Loan Document. SECTION 12.2 NOTICES, ETC. Except as otherwise set forth in this Agreement, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex or facsimile communication) and mailed or telegraphed or telexed or sent by facsimile or delivered, if to the Borrower, at the Borrower's address set forth on the signature page hereof; and if to Restructure Agent and/or the Restructure Lenders, at their respective addresses set forth on the signature page hereof; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall be effective when deposited in the mails, delivered to the telegraph company, sent by telex or sent by facsimile, respectively, except that notices and communications to Restructure Agent and the Restructure Lenders pursuant to Articles 4, 8 or 9 shall not be effective until received by Restructure Agent and the Restructure Lenders. 40 46 SECTION 12.3 RIGHT OF SETOFF. Upon and after the occurrence of any Restructure Event of Default, the Restructure Lenders are hereby authorized by the Borrower, at any time, after having first obtained the written consent of Restructure Agent, and from time to time, without prior notice, (a) to set off against, and to appropriate and apply to the payment of, the obligations and liabilities of the Borrower under the Restructure Loan Documents (whether matured or unmatured, fixed or contingent or liquidated or unliquidated) any and all amounts owing by the Restructure Lenders to the Borrower (whether payable in Dollars or any other currency, whether matured or unmatured, and, in the case of deposits, whether general or special, time or demand and however evidenced) and (b) pending any such action, to the extent necessary, to hold such amounts as collateral to secure such obligations and liabilities and to return as unpaid for insufficient funds any and all checks and other items drawn against any deposits so held as the Restructure Lenders in their sole discretion may elect. The Restructure Lenders agree promptly to notify the Borrower after any such setoff and application made by the Restructure Lenders. Upon and during the continuance of any Restructure Event of Default and after having first obtained the written consent of Restructure Agent (which consent shall not unreasonably be withheld), the Restructure Lenders are authorized to debit any account maintained with them by the Borrower for any amount of principal, interest or fees which are then due and owing to the Restructure Lenders by the Borrower. SECTION 12.4 NO WAIVER; REMEDIES. The Restructure Lenders' waiver of the Existing Defaults or of any of the terms and/or conditions of the Restructure Loan Documents shall not be deemed a waiver of any such other or future default. No failure on the part of Restructure Agent, on behalf of itself or the Restructure Lenders, or the Restructure Lenders to exercise, and no delay in exercising, any right under any of the Restructure Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any of the Restructure Loan Documents preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 12.5 COSTS AND EXPENSES. The Borrower shall, no later than thirty (30) days after written notice thereof, reimburse Restructure Agent and the agents of the Existing Facilities for all reasonable fees, costs and expenses, including the fees, costs and expenses of counsel or other advisors (including environmental and management consultants and appraisers) for advice, assistance, or other representation in connection with: (a) any amendment, modification or waiver of, or consent with respect to, any of the Restructure Loan Documents or advice in connection with the administration of the Restructure Loans made pursuant hereto or its rights hereunder or thereunder; (b) any litigation, contest, dispute, suit, proceeding or action (whether instituted by either the Restructure Agent, any Restructure Lender, the Borrower or any other Person) in any way relating to any of the Restructure Loan Documents or any other agreement to be executed or delivered in connection therewith or herewith, whether as party, witness, or otherwise, including any litigation, contest, dispute, suit, case, 41 47 proceeding or action, and any appeal or review thereof, in connection with a case commenced by or against the Borrower or any other Person that may be obligated to either the Restructure Agent or any Restructure Lender by virtue of the Restructure Loan Documents, including any such litigation, contest, dispute, suit, proceeding or action arising in connection with any work-out or restructuring of the Restructured Loans during the pendency of one or more Restructure Events of Default; (c) any attempt to enforce any remedies of either the Restructure Agent or any Restructure Lender against the Borrower or any other Person that may be obligated to either the Restructure Agent or any Restructure Lender by virtue of any of the Restructure Loan Documents, including any such attempt to enforce any such remedies in the course of any work-out or restructuring of the Restructured Loans during the pendency of one or more Restructure Events of Default; (d) any work-out or restructuring of the Restructured Loans during the pendency of one or more Restructure Events of Default; and (e) efforts to (i) monitor the Restructured Loans, (ii) evaluate, observe or assess the Borrower or its affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of any property of the Borrower, including, as to each of clauses (a) through (d) of this Section 12.5, all attorneys' and other professional and service providers' fees arising from such services, including those in connection with any appellate proceedings; and all expenses, costs, charges and other fees incurred by such counsel and others in any way or respect arising in connection with or relating to any of the events or actions described in this Section 12.5 shall be payable, on demand, by the Borrower to the Restructure Agent and Restructure Lenders. Without limiting the generality of the foregoing Section 12.5, such expenses, costs, charges and fees may include: fees, costs and expenses of accountants, environmental advisors, appraisers, investment bankers, management and other consultants and paralegals; court costs and expenses; photocopying and duplication expenses; court reporter fees, costs and expenses; long distance telephone charges; air express charges; telegram or telecopy charges; secretarial overtime charges; and expenses for travel, lodging and food paid or incurred in connection with the performance of such legal or other advisory services. After the Closing Date, the Restructure Agent and the agents of the Existing Facilities will use their best efforts to retain professional advisors jointly rather than retaining separate counsel, consultants and other professional advisors. Notwithstanding the foregoing Section 12.5, on the Closing Date, and thereafter on a quarterly basis, Crossroads shall provide the Borrower, Restructure Agent and Restructure Lenders with a written budget on a quarterly basis. So long as (a) no Restructure Event of Default shall have occurred and (b) the Restructure Agent, in the exercise of its reasonable discretion, does not believe that there is a reasonable likelihood that a Restructure Event of Default will occur, the Borrower shall not be obligated to reimburse Crossroads for its fees and 42 48 expenses for any quarter that exceed the budgeted amounts set forth in the applicable budget by more than ten percent unless Crossroads shall have received the written consent of the Restructure Agent and the Borrower (which consent shall not be unreasonably withheld). In the event the Borrower does not pay timely any expenses, fees, charges or costs due pursuant to this Section 12.5, interest shall accrue on such unpaid amount at the rate of ten percent per annum until paid in full. SECTION 12.6 ASSIGNMENTS; PARTICIPATIONS. (a) Any Restructure Lender may assign with the consent of the Restructure Agent (which shall not unreasonably be withheld or delayed) all or any portion of its Restructured Loan and Restructured Note to any Person except a Person primarily employed or engaged in any aspect of the computer hardware or peripheral business (a "Prohibited Assignee"). If the assignee of any Restructured Loan or Restructured Note is a broker or other intermediary, the Restructure Lender making the assignment shall be required to obtain, prior to such assignment, a representation from such Person that the Restructured Loan and Restructured Note will not be beneficially owned by any Prohibited Assignee. For purposes of this Agreement, beneficial ownership shall not include an investment in a fund which is independently managed and formed with a primary purpose of purchasing or holding loans. The Restructure Agent and each Restructure Lender, including the Restructure Lender making the assignment, shall be entitled to rely upon such representation without any further investigation or diligence. The minimum amount of any Restructured Loan which may be assigned is the lesser of $5,000,000.00 or the Restructure Lenders' entire Restructured Loan. Upon execution and delivery of an assignment agreement substantially in the form of Exhibit B ("Assignment Agreement"), from and after the effective date specified in such Assignment Agreement (X) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, have the rights and obligations of a Restructure Lender hereunder and (Y) the Restructure Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights and be released from its obligations under this Agreement, except with respect to those obligations set forth in the Nondisclosure Agreement which the assignor had previously executed, and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Restructure Lender's rights and obligations under this Agreement, such Restructure Lender shall cease to be a party hereto. Each Restructure Lender's Restructure Loans Percentage hereunder shall be modified to reflect the Restructured Loan of such assignor and assignee (and Schedule 1 shall be deemed amended and revised to reflect such modification), and, if any such assignment occurs while any Restructured Loan is outstanding, new Restructured Notes shall, if requested by the assignor Restructure Lender or such assignee, upon the surrender of the assigning Restructure Lender's Restructured Notes, be issued to such assignee and to the assigning Restructure Lender as necessary to reflect the new Restructured Loans Percentage of the assigning Restructure Lender and of its assignee. Any assigning Restructure Lender shall pay a $2,500.00 fee in connection with the effectiveness of any assignment it makes to the Restructure Agent. The Restructure Agent shall give the Borrower written notice of any assignment disclosed to it within two business days after such disclosure. 43 49 For the avoidance of doubt, any Restructure Lender may assign, but is not required to assign, its rights with respect to the Warrant Agreement to any assignee of the Restructured Loan of such Restructure Lender. (b) Each Restructure Lender may sell, negotiate or grant participations to any Person in all or part of the obligations of the Borrower outstanding under the Restructure Loan Documents, without notice to or the approval of Restructure Agent, Restructure Lenders, or the Borrower; provided, however, that any such sale, negotiation or participation shall be in compliance with the applicable federal and state securities laws. No Restructure Lender shall transfer or grant any participating interest under which the participant shall have rights to approve any amendment to, or any consent or waiver with respect to, this Agreement or any other Restructure Loan Document, except to the extent such amendment, consent or waiver would require unanimous consent as described in the first proviso to Section 12.1. No participant shall constitute a "Restructure Lender" under any Restructure Loan Document, and the Borrower shall continue to deal solely and directly with Restructure Agent and the Restructure Lenders. The Restructure Agent shall give the Borrower written notice of any participation disclosed to it in writing within two (2) business days after receipt of such disclosure. (c) Each Restructure Lender may disclose to any proposed approved assignee or participant which is not a Prohibited Assignee any information relating to the Borrower or any of its Consolidated Subsidiaries; provided, however, that prior to such disclosure such proposed assignee or participant shall have executed a Nondisclosure Agreement substantially in the form of Exhibit C. The applicable Restructure Lender shall provide the Borrower with a copy of the Nondisclosure Agreement executed by any proposed assignee or participant within two business days after such agreement has been executed; provided, however, the failure to so provide such Nondisclosure Agreement shall not constitute a default under, or breach of, this Agreement. (d) Notwithstanding the foregoing provisions of this Section 12.6, any Restructure Lender may at any time pledge or assign all or any portion of such Restructure Lender's rights under this Agreement or any Restructure Loan Document to a Federal Reserve bank; provided, however, that no such pledge or assignment shall release such Restructure Lender from its obligations hereunder or pursuant to any Restructure Loan Document. SECTION 12.7 EFFECTIVENESS; BINDING EFFECT; GOVERNING LAW. This Agreement is being executed on the date hereof by the Borrower, the Restructure Lenders and Fleet (in its capacities as Restructure Agent and Restructure Lender) and is binding on and effective against each such party as of the date hereof. This Agreement shall become effective when it shall have been executed by the Borrower, Restructure Agent and the Restructure Lenders and thereafter shall be binding upon and inure to the benefit of the Borrower, Restructure Agent and the Restructure Lenders and their respective permitted successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Restructure Agent and the Restructure Lenders. THIS AGREEMENT, THE RESTRUCTURED NOTES AND THE OTHER RESTRUCTURE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED 44 50 IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ITS CHOICE OF LAW DOCTRINE. SECTION 12.8 CONSENT TO JURISDICTION; VENUE; AGENT FOR SERVICE OF PROCESS. All judicial proceedings brought against the Borrower with respect to this Agreement and the Restructure Loan Documents may be brought in any state or federal court of competent jurisdiction in the County of San Francisco in the State of California, and by execution and delivery of this Agreement, the Borrower accepts for itself and in connection with its properties, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. The Borrower irrevocably waives any right it may have to assert the doctrine of forum non conveniens or to object to venue to the extent any proceeding is brought in accordance with this Section 12.8. The Borrower designates and appoints the Borrower's Chief Financial Officer, from time to time, Komag Incorporated, 1710 Automation Parkway, San Jose, California, 95131-1873, and such other Persons as may hereafter be selected by the Borrower irrevocably agreeing in writing to so serve as its agent to receive on its behalf service of all process in any such proceedings in any such court, such service being hereby acknowledged by the Borrower to be effective and binding service in every respect. A copy of any such process so served shall be mailed by registered mail to the Borrower at its address provided in the applicable signature page hereto, except that unless otherwise provided by applicable law, any failure to mail such copy shall not affect the validity of service of process. If any agent appointed by the Borrower refuses to accept service, the Borrower hereby agrees that service upon it by mail shall constitute sufficient notice. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of Restructure Agent, on behalf of itself and the Restructure Lenders, to bring proceedings against the Borrower in courts of any jurisdiction. SECTION 12.9 ENTIRE AGREEMENT. This Agreement with Exhibits and Schedules and the other Restructure Loan Documents embody the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof. SECTION 12.10 SEVERABILITY OF PROVISIONS. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. SECTION 12.11 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 12.12 SURVIVAL OF CERTAIN AGREEMENTS. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreement of the Borrower set forth in Section 5.6 and the agreements of the Restructure Lenders set forth in Sections 10.2, 10.3, and 10.4 (as well as any obligations under any Nondisclosure Agreements) shall survive the payment of the Restructure Loans and the Restructured Notes and the termination of this 45 51 Agreement. Notwithstanding anything in this Agreement to the contrary, the agreement of the Borrower set forth in Sections 5.5, and 5.7 of this Agreement shall survive for one hundred and eighty (180) days from the date of the payment of the Restructured Loans and Restructured Notes. SECTION 12.13 REVIVAL CLAUSE. If the incurring of any debt, the payment of money or transfer of property under the Existing Facilities or the Restructure Loan Documents made to Restructure Agent or any Restructure Lender by or on behalf of the Borrower should for any reason, in whole or in part, subsequently be declared to be "fraudulent" or preferential or otherwise be recoverable (collectively, "Voidable Transfers") within the meaning of any state or federal law governing creditors' rights including the Bankruptcy Code, and Restructure Agent or any Restructure Lender is required to repay or restore any such Voidable Transfers or portion thereof or, upon the advice of its counsel is advised to do so, then, as to any such Voidable Transfer or the amount repaid or restored (including all reasonable costs, expenses and attorneys' fees of Restructure Agent and Restructure Lender related thereto), the liability of the Borrower under the applicable facility shall automatically be revived, reinstated and restored as though such Voidable Transfer had never been made. SECTION 12.14 RELEASE OF ALL CLAIMS. (a) The Borrower on behalf of itself and each of its successors and assigns hereby forever and irrevocably releases Restructure Agent, each Restructure Lender and each of their respective officers, representatives, agents, attorneys, employees, financial consultants, predecessors, successors and assigns, from the Claims, whether such Claims are known or unknown, contingent or absolute and howsoever arising. (b) The Borrower has been advised by counsel with respect to the release contained herein. Upon advice of such counsel, the Borrower hereby waives and relinquishes all of the rights and benefits which it has, or may have, with respect to the Claims released under Section 1542 of the California Civil Code or any other similar statute. (c) The Borrower is familiar with and waives the provisions of Section 1542 of the California Civil Code which provide as follows: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. SECTION 12.15 ADDITIONAL ASSURANCES. The Borrower agrees that it will execute such other documents and instruments and perform such other acts as may reasonably be required by Restructure Agent and Restructure Lenders to carry out and effectuate the purpose and intent of this Agreement. 46 52 SECTION 12.16 CONFIDENTIALITY. Notwithstanding any other provision of this Agreement, each of the Borrower, the Restructure Agent, the Restructure Lenders and Crossroads shall be bound by the provisions of the Nondisclosure Agreement attached hereto as Exhibit C. [Signature pages follow] 47 53 WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. KOMAG, INCORPORATED By: ------------------------------- Title: ---------------------------- Address: 1710 Automation Parkway San Jose, California 95131-1873 Facsimile: (408) 944-9234 Attention: Chief Financial Officer FLEET NATIONAL BANK f/k/a BANKBOSTON, N.A., as Restructure Agent and as a Restructure Lender By: ------------------------------ Title: --------------------------- Address: 100 Federal Street, Mail Stop 01-06-01 Boston, MA 02110 Facsimile: (617) 434-4775 Attention: Donald Sheehan BANK OF MONTREAL, as a Restructure Lender By: ------------------------------ Title: --------------------------- Address: 115 S. LaSalle Street, 12 West Chicago, IL 60603 Facsimile: (312) 750-6057 Attention: Jack J. Kane S-1 54 BEAR, STEARNS & CO. INC., as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: 245 Park Avenue New York, New York 10167 Facsimile: (212) 272-8102 Attention: COMERICA BANK - CALIFORNIA, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: 55 Almaden Boulevard Mail Code: 4041 San Jose, California 95113 Facsimile: (408) 556-5855 Attention: Carol A. Palestro OLYMPUS SECURITIES, LTD., as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: c/o Citadel Investment Group, LLC 225 West Washington Street, 9th Floor Chicago, Illinois 60606 Facsimile: (312) 368-4650 Attention: Bradford Couri S-2 55 NELSON PARTNERS LTD., as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: c/o Citadel Investment Group, LLC 225 West Washington Street, 9th Floor Chicago, Illinois 60606 Facsimile: (312) 368-4650 Attention: Bradford Couri THE BANK OF NOVA SCOTIA, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: One Liberty Plaza New York, New York 10006 Facsimile: (212) 225-5205 Attention: Norm Gillespie UNION BANK OF CALIFORNIA, N.A., as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: 350 California Street, 7th Floor San Francisco, California 94104 Facsimile: (415) 705-7390 Attention: Christiana Creekpaum S-3 56 LOEB PARTNERS CORPORATION, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: 61 Broadway, 24th Floor New York, New York 10006 Facsimile: 212-574-2003 Attention: Robert Grubin THE DAI-ICHI KANGYO BANK, LIMITED, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: Corporate Finance Department I One World Trade Center, Suite 4911 New York, NY 10048 Facsimile: (212) 912-1879 Attention: Nelson Chang THE INDUSTRIAL BANK OF JAPAN, LIMITED, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: One Market Street Spear Tower, Suite 1610 San Francisco, California 94105 Facsimile: (415) 982-1917 Attention: Joseph A. Endoso S-4 57 THE MITSUBISHI TRUST AND BANKING CORPORATION, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: 520 Madison Avenue, 26th Floor New York, New York 10022 Facsimile: (212) 644-6825 Attention: Daniel Chang SANWA BANK CALIFORNIA, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: 444 Market Street, 22nd Floor San Francisco, CA 94111 Facsimile: (415) 597-5491 Attention: George Vetek BANK ONE, N.A., as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: Bank One, N.A. Western Region Managed Assets AZ1-1283 201 N. Central Avenue Phoenix, AZ 85004-2267 Facsimile: (602) 221-1737 Attention: Dennis Warren S-5 58 THE FUJI BANK, LIMITED, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: 333 South Hope Street, 39th Floor Los Angeles, CA 90071 Facsimile: (213) 253-4178 Attention: -------------------------- THE SUMITOMO BANK, LIMITED, as a Restructure Lender By: --------------------------------- Title: ------------------------------ Address: 555 California Street, Suite 3350 San Francisco, California 94104 Facsimile: (415) 362-6527 Attention: Azar Shakeri S-6 59 EXHIBIT A --------- FORM OF RESTRUCTURED PROMISSORY NOTE ------------------------------------ San Jose, California $ June 1, 2000 -------------------- FOR VALUE RECEIVED, KOMAG, INCORPORATED (the "Borrower"), promises to pay to the order of____________ (the "Restructure Lender"), the principal amount of______________ Dollars ($ )_____________, or, if less, the aggregate amount of the Restructured Loan (as defined in the Restructure Agreement referred to below), outstanding on the Restructure Maturity Date (as defined in the Restructure Agreement referred to below). All unpaid amounts of principal and interest shall be due and payable in full on the Restructure Maturity Date as defined in the Restructure Agreement referred to below. The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until paid at the rates and at the times which shall be determined in accordance with the provisions of the Restructure Agreement referred to below. All payments and prepayments of principal and all payments of interest, fees and other amounts payable in respect of this Restructured Note shall be made by the Borrower to Fleet National Bank f/k/a BankBoston, N.A., as "Restructure Agent" (as that term is defined in the Restructure Agreement referred to below), on behalf of the Restructure Lender, at the head office of the Restructure Agent located at 100 Federal Street, Boston, MA 02110, Attention: Donald Sheehan, OR SUCH OTHER PLACE AS IT SHALL DESIGNATE IN WRITING FOR SUCH PURPOSE IN ACCORDANCE WITH THE TERMS OF THE RESTRUCTURE AGREEMENT REFERRED TO BELOW in immediately available UNITED STATES DOLLARS, on or before 12:00 p.m. (Eastern time) on the due date thereof, WITHOUT COUNTERCLAIM OR SETOFF AND FREE AND CLEAR OF, AND WITHOUT ANY DEDUCTION OR WITHHOLDING FOR, ANY TAXES OR OTHER PAYMENTS. Until notified of the transfer of this Restructured Note, the Borrower shall be entitled to deem the Restructure Lender or such person who has been so identified by the transferor in writing to the Borrower as the holder of this Restructured Note, as the owner and holder of this Restructured Note. Each of the Restructure Lender and any subsequent holder of this Restructured Note agrees that before disposing of this Restructured Note or any part hereof it will make a notation hereon of all principal payments previously made hereunder and of the date to which interest hereon has been paid on the schedule attached hereto, if any; provided, however, that the failure to make notation of any payment made on this Restructured Note shall not limit or otherwise affect the obligation of the Borrower hereunder with respect to payments of principal or interest on this Restructured Note. This Restructured Note is referred to in, and is entitled to the benefits of, the Loan Restructure Agreement dated as of June 1, 2000 (as amended, the "Restructure Agreement") among the Borrower, the Restructure Agent, the Restructure Lender and the other Restructure Lenders described therein. The Restructure Agreement is hereby incorporated by reference. The Restructure Agreement, among other things, (i) provides for the restructuring of outstanding indebtedness (the "Restructured Loan") owed by the Borrower to the Restructure Lender in an aggregate amount not to exceed at any time outstanding the U.S. dollar amount first above mentioned, the indebtedness of the Borrower resulting from such Restructured Loan being evidenced by this Restructured Note, and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified. The terms of this Restructured Note are subject to amendment only in the manner provided in the Restructure Agreement. No reference herein to the Restructure Agreement and no provision of this Restructured Note or the Restructure Agreement shall alter or impair the obligation of the Borrower, which is absolute and unconditional, to pay the principal of and interest on this Restructured Note at the place, at the respective times, and in the currency herein prescribed. 1 60 The Borrower promises to pay all costs and expenses, including reasonable attorneys' fees and costs, incurred in the collection and enforcement of this Restructured Note. The Borrower hereby consents to renewals and extensions of time at or after the maturity hereof, without notice, and hereby waives diligence, presentment, protest, demand and notice of every kind and, to the full extent permitted by law, the right to plead any statute of limitations as a defense to any demand hereunder. This Restructured Note amends, restates and supersedes in its entirety any promissory notes delivered pursuant to the Existing Facilities (as defined in the Restructure Agreement) in favor of the Restructure Lender. IN WITNESS WHEREOF, the Borrower has caused this Restructured Note to be executed and delivered by its duly authorized officer, as of the date and the place first above written. KOMAG, INCORPORATED, a Delaware Corporation By: ----------------------------------------------- Name: --------------------------------------------- Its: ---------------------------------------------- 2 61 EXHIBIT B FORM OF ASSIGNMENT AGREEMENT 62 EXHIBIT C NONDISCLOSURE AGREEMENT 63 EXHIBIT D CONVERSION DOCUMENTS Securities Purchase Agreement Convertible Note Registration Rights Agreement Attached hereto as an addendum. 64 EXHIBIT E JANUARY PROJECTED PERFORMANCE (See attached.) 65 SCHEDULE 1 ---------- SCHEDULE OF COMMITMENTS -----------------------
- ------------------------------------------------------------------------------------------------------------------------------------ Name of Existing Restructured Restructured Restructure Lender Loan Loan Loans Percentage - ------------------------------------------------------------------------------------------------------------------------------------ Fleet National Bank f/k/a $33,714,286 $33,714,286 12.96703% BankBoston, N.A. Bank of Montreal $8,571,429 $8,571,429 3.29670% Bear, Stearns & Co. Inc. $3,500,000 $3,500,000 1.34615% Comerica Bank - California $14,285,714 $14,285,714 5.49451% Olympus Securities, Ltd. $8,500,000 $8,500,000 3.26923% Nelson Partners Ltd. $5,571,429 $5,571,429 2.14286% The Bank of Nova Scotia $11,428,571 $11,428,571 4.39560% Loeb Partners Corporation $3,000,000 $3,000,000 1.15385% Union Bank of California, N.A. $11,428,571 $11,428,571 4.39560% The Dai-Ichi Kangyo Bank, Limited $35,000,000 $35,000,000 13.46154% The Industrial Bank of Japan, Limited IBJ Facility I: $15,000,000 5.76923% $50,000,000 The Mitsubishi Trust and Banking Corporation Participant's share equals: $10,000,000 3.84615% $10,000,000 Sanwa Bank California Participant's share equals: $10,000,000 3.84615% $10,000,000 Bank One, N.A. Participant's share $15,000,000 5.76923% equals: $15,000,000 The Industrial Bank of Japan, Limited IBJ Facility II: $25,000,000 9.61539% Existing Loan Amount: $75,000,000 The Mitsubishi Trust and Banking Corporation Participant's share equals: $20,000,000 7.69231% $20,000,000 The Fuji Bank, Limited Existing Loan Amount: $15,000,000 5.76923% $15,000,000
66
- ------------------------------------------------------------------------------------------------------------------------------------ Name of Existing Restructured Restructured Restructure Lender Loan Loan Loans Percentage - ------------------------------------------------------------------------------------------------------------------------------------ Existing Loan Amount: $15,000,000 5.76923% The Sumitomo Bank, Limited, $15,000,000 - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL: $260,000,000 - ------------------------------------------------------------------------------------------------------------------------------------
67 SCHEDULE 2 ---------- SUBSIDIARIES AND CONSOLIDATED SUBSIDIARIES ------------------------------------------
Percentage of the Borrower's Ownership --------------------- 1. Komag Material Technology, Inc. 80% 2. Komag Technology Partners 50% 3. Asahi Komag Co., Ltd. 0%* 4. Komag (Bermuda) Ltd. 100% 5. Komag USA (Malaysia) Sdn 0%** 6. Dastek Holding Company 60% 7. Dastek (M) SDN BHD 0%*** 8. Asahi Komag (Thailand) Co., Ltd 0%**** 9. Komag FSC (Barbados) Ltd. 100% 10. Komag Distribution Company 100% 11. Komag Netherlands Antilles N.V. 0%***** 12. Komag Technology (N) B.V. 0%****** 13. Komag Asia-Pacific, Inc. 100%
- ------------------------------- * Borrower is a 50% partner of Komag Technology Partners, which owns 100% of Asahi Komag Co., Ltd. ** Komag Bermuda Ltd. owns 100% of Komag USA (Malaysia) Sdn. *** Dastek Holding Company owns 100% of Dastek (M) SDN BHD. **** Asahi Komag Co., Ltd. owns 100% of Asahi Komag (Thailand) Co., Ltd. ***** Komag (Bermuda) Ltd. owns 100% of Komag (Netherlands Antilles) N.V. ****** Komag (Netherlands Antilles) N.V. owns 100% of Komag Technology (N) B.V. 68 SCHEDULE 3 EXISTING LIENS AND SECURITY INTERESTS 1. Purchase money security interests in equipment; and 2. UCC filings evidencing leased equipment. 3. UCC filings granted by WDC against assets that were acquired by the Borrower in the WD Asset Acquisition (other than those evidencing leased equipment). The Borrower covenants and agrees that these UCC filings shall be irrevocably released and terminated by no later than June 30, 2000. 69 SCHEDULE 4 LITIGATION The company has received a letter on behalf of Magnetic Memory Development, LLC ("MMD") referencing a number of patents issued on alleged inventions by Virgil Hedgcoth (U.S. Patent Nos. 4,735,840, 4,894,133, 5,020,747, 5,316,864, and 5,636,970). MMD is the purported owner of these patents. MMD has offered to grant a license to the Company under the patents listed, and the Company and MMD are currently in discussions regarding a license. However, the Company can give no assurance regarding whether the terms of the license will be agreed upon, whether this matter will lead to litigation, the probable outcome of any litigation, if litigation is commenced, or the amount of damages awarded against the Company should such litigation occur and be determined unfavorably to the Company. Asahi Glass Company, Ltd. ("Asahi"), has asserted that it has an exclusive right to Komag's intellectual property relating to glass substrates under a technical cooperation agreement between Komag and Asahi. Komag disagrees with Asahi's position. Komag and Asahi are currently in discussions regarding this issue. EX-4.2 3 ex4-2.txt WARRANT AGREEMENT 1 EXHIBIT 4.2 - -------------------------------------------------------------------------------- WARRANT AGREEMENT BY AND BETWEEN KOMAG, INCORPORATED AND FLEET NATIONAL BANK F/K/A BANKBOSTON, N.A. BANK OF MONTREAL BEAR, STEARNS & CO. INC. COMERICA BANK - CALIFORNIA OLYMPUS SECURITIES, LTD. NELSON PARTNERS LTD. THE BANK OF NOVA SCOTIA UNION BANK OF CALIFORNIA, N.A. LOEB PARTNERS CORPORATION THE DAI-ICHI KANGYO BANK, LIMITED THE INDUSTRIAL BANK OF JAPAN, LIMITED THE MITSUBISHI TRUST AND BANKING CORPORATION SANWA BANK CALIFORNIA BANK ONE, N.A. THE FUJI BANK, LIMITED THE SUMITOMO BANK, LIMITED DATED AS OF JUNE 1, 2000 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS* -----------------
Page SECTION 1. Warrant Certificates; Issuance of Warrants................................................................1 SECTION 2. Execution of Warrant Certificates.........................................................................2 SECTION 3. Registration..............................................................................................2 SECTION 4. Registration of Transfers and Exchanges...................................................................2 SECTION 5. Warrants; Exercise of Warrants............................................................................3 SECTION 6. Payment of Taxes..........................................................................................5 SECTION 7. Mutilated or Missing Warrant Certificates.................................................................5 SECTION 8. Reservation of Warrant Shares; Rights.....................................................................5 SECTION 9. Obtaining Stock Exchange Listings.........................................................................6 SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable.......................................6 (a) Adjustment for Change in Capital Stock...............................................................6 (b) Adjustment for Rights Issue..........................................................................7 (c) Adjustment for Other Distributions...................................................................8 (d) Adjustment for Common Stock Issue....................................................................8 (e) Adjustment for Convertible Securities Issue.........................................................10 (f) Current Market Price................................................................................11 (1) Current Market Price..........................................................................11 (2) Fair Market Value.............................................................................11 (3) Independent Expert............................................................................11 (g) Consideration Received..............................................................................12 (h) When De Minimis Adjustment May Be Deferred..........................................................12 (i) When No Adjustment Required.........................................................................12 (j) Notice of Adjustment................................................................................13 (k) Voluntary Reduction.................................................................................13 (l) Reorganization of Company...........................................................................13 (m) When Issuance or Payment May Be Deferred............................................................14 (n) Adjustment in Number of Shares......................................................................14 (o) Form of Warrants....................................................................................15 SECTION 11. Fractional Interests....................................................................................15
- -------------- * This Table of Contents does not constitute a part of this Agreement or have any bearing upon the interpretation of any of its terms or provisions. i 3
Page SECTION 12. Representations and Warranties to the Company...........................................................15 (a) Corporate Organization..............................................................................15 (b) Authorization.......................................................................................15 (c) Governmental Consents...............................................................................16 (d) Validity............................................................................................16 (e) Not an Investment Company...........................................................................16 (f) Reports.............................................................................................16 (g) Authorized Shares...................................................................................17 (h) Status of the Warrants and the Warrant Shares.......................................................17 SECTION 13. Purchase for Investment; Authority; Binding Agreement...................................................17 SECTION 14. Notices to Warrant Holders..............................................................................18 SECTION 15. Notices to Company and Warrant Holder...................................................................19 SECTION 16. Supplements and Amendments..............................................................................20 SECTION 17. Successors..............................................................................................20 SECTION 18. Governing Law...........................................................................................20 SECTION 19. Benefits of This Agreement..............................................................................20 SECTION 20. Counterparts............................................................................................20 SCHEDULE 1............................................................................................................. EXHIBIT A.............................................................................................................. EXHIBIt B..............................................................................................................
ii 4 THIS WARRANT AGREEMENT (the "Agreement") is dated as of June 1, 2000, and entered into by and among Komag, Incorporated, a Delaware corporation (the "Company"), and Fleet National Bank f/k/a BankBoston, N.A., Bank of Montreal, Bear, Stearns & Co. Inc., Comerica Bank - California, Olympus Securities, Ltd., Nelson Partners Ltd., The Bank of Nova Scotia, Union Bank of California, N.A., Loeb Partners Corporation, The Dai-Ichi Kangyo Bank, Limited, The Industrial Bank of Japan, Limited, The Mitsubishi Trust and Banking Corporation, Sanwa Bank California, Bank One, N.A., The Fuji Bank, Limited, and The Sumitomo Bank, Limited (collectively, "Banks"). WHEREAS, the Banks have made loans and otherwise extended credit in the aggregate outstanding principal amount of $260,000,000 to the Company pursuant to certain existing credit facilities; WHEREAS, pursuant to a Loan Restructure Agreement dated as of the date hereof (the "Loan Restructure Agreement"), Banks propose to restructure such existing credit facilities (as so restructured, the "Credit Facilities"); and WHEREAS, to induce Banks to enter into the Loan Restructure Agreement and to restructure such existing credit facilities, pursuant thereto the Company proposes to issue to Banks, or their respective designees, Common Stock Purchase Warrants as hereinafter described (the "Warrants"), to collectively purchase common stock of the Company, $0.01 par value (the "Common Stock") equal to, in the aggregate, 3.5% of the issued and outstanding Common Stock (the Common Stock issuable on exercise of the Warrants being referred to herein as the "Warrant Shares"), pursuant to this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereto agree as follows: SECTION 1. Warrant Certificates; Issuance of Warrants. The certificates evidencing the Warrants (the "Warrant Certificates") to be delivered to the Banks or their respective designees permitted as assignees under the Loan Restructure Agreement, in the respective amounts set forth in Schedule 1 hereto, pursuant to this Agreement shall be in registered form only and shall be substantially in the respective forms set forth in Exhibits A and B attached hereto. The Warrants shall be issuable as follows: (a) Series A Warrants: The Series A Warrants shall be exercisable into a number of shares of Common Stock equal to, in the aggregate, 2.5% of the issued and outstanding Common Stock as of the date of issuance of the Warrants. (b) Series B Warrants: The Series B Warrants shall be exercisable into a number of shares of Common Stock equal to, in the aggregate, 1.0% of the issued and outstanding Common Stock as of the date of issuance of the Warrants. 1 5 SECTION 2. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board of Directors of the Company (the "Board") or its President or a Vice President and by its Secretary or an Assistant Secretary under its corporate seal. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that, at the time the Warrant Certificates shall be delivered or disposed of, he shall have ceased to hold such office. The seal of the Company may be in the form of a facsimile thereof and may be impressed, affixed, imprinted or otherwise reproduced on the Warrant Certificates. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been disposed of by the Company, such Warrant Certificates nevertheless may be delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. SECTION 3. Registration. The Company shall number and register the Warrant Certificates in a register as they are issued. SECTION 4. Registration of Transfers and Exchanges. The Company shall from time to time register the transfer of any outstanding Warrant Certificates in a Warrant register to be maintained by the Company upon surrender of such Warrant Certificates accompanied by a written instrument or instruments of transfer in form satisfactory to the Company, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be canceled and disposed of by the Company. The Warrant holders agree that each certificate representing Warrant Shares will bear the following legend: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS. SUCH 2 6 SALE OR OTHER DISPOSITION MUST ALSO BE IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE WARRANT AGREEMENT DATED AS OF JUNE 1 2000, AS MODIFIED OR SUPPLEMENTED FROM TIME TO TIME, A COPY OF WHICH MAY BE OBTAINED FROM KOMAG, INCORPORATED AT ITS PRINCIPAL EXECUTIVE OFFICE. Warrant Certificates may be exchanged at the option of the holder(s) thereof, when surrendered to the Company at its office for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants, and such holder(s) shall pay all reasonable out-of-pocket expenses actually incurred by Company in connection with such exchange. Warrant Certificates surrendered for exchange shall be canceled and disposed of by the Company. SECTION 5. Warrants; Exercise of Warrants. Subject to the terms of this Agreement, each holder of Series A Warrants shall have the right, which may be exercised commencing as of the date hereof until 5:00 p.m., Los Angeles time on June 1, 2010, to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment to the Company of the Exercise Price (as defined below) then in effect for such Warrant Shares. Each Series A Warrant not exercised prior to 5:00 p.m., Los Angeles time, on June 1, 2010 shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. The Company shall notify each holder of Series A Warrants in writing 90 days prior to the expiration of all unexercised Series A Warrants, of the upcoming expiration of all such unexercised Warrants. Subject to the terms of this Agreement, each holder of Series B Warrants shall have the right, which may be exercised commencing at the opening of business on June 1, 2001 and until 5:00 p.m., Los Angeles time on June 1, 2011, to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment to the Company of the Exercise Price then in effect for such Warrant Shares. Each Series B Warrant not exercised prior to 5:00 p.m., Los Angeles time on June 1, 2011, shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time. The Company shall notify each holder of Series B Warrants in writing 90 days prior to the expiration of all unexercised Series B Warrants, of the upcoming expiration of all such unexercised Warrants. Notwithstanding anything to the contrary in this Agreement, the Series B Warrants shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease if the unpaid loan balances on the notes issued pursuant to the Credit Facilities, in the aggregate, does not exceed $160,000,000. A Warrant may be exercised upon surrender to the Company at its office designated for such purpose (the address of which is set forth in Section 14 hereof) of the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase duly filled in and signed, which signature shall be guaranteed by a bank or trust company having an 3 7 office or correspondent in the United States or a broker or dealer which is a member of a registered securities exchange or the National Association of Securities Dealers, Inc., and upon payment to the Company of the exercise price (the "Exercise Price") which is set forth in the applicable form of Warrant Certificate attached here as Exhibit A or B, respectively, subject to adjustment pursuant to Section 10, for the number of Warrant Shares in respect of which such Warrants are then exercised. For Warrants exercised within two years of their date of issuance, payment of the aggregate Exercise Price shall be made, in lieu of any cash payment, by surrendering such Warrants in exchange for a number of Warrant Shares equal to the product of (x) the number of Warrant Shares issuable upon exercise of the Warrants being surrendered multiplied by (y) a fraction, the numerator of which is the Current Market Price (determined in accordance with Section 10(f) hereof) of the Warrant Shares less the Exercise Price, and the denominator of which is such Current Market Price (the surrender of Warrants in lieu of any cash payment is hereinafter referred to as a "Cashless Exercise"). For Warrants exercised after two years from their date of issuance, payment of the aggregate Exercise Price shall be made (i) in cash or by immediately available funds payable to the order of the Company or (ii) by a Cashless Exercise. Upon such surrender of Warrants and payment of the Exercise Price, the Company shall, at its sole cost and expense, issue and cause to be delivered with all reasonable dispatch to or upon the written order of the holder and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants together with cash as provided in Section 11; provided, however, that if any reclassifications, consolidation, merger or lease or sale of assets is proposed to be effected by the Company as described in subsection (1) of Section 10 hereof, or a tender offer or an exchange offer for shares of Common Stock of the Company shall be made, upon such surrender of Warrants and payment of the Exercise Price as aforesaid, the Company shall, as soon as possible, but in any event not later than five business days thereafter, issue and cause to be delivered the full number of Warrant Shares issuable upon the exercise of such Warrants in the manner described in this sentence together with cash as provided in Section 11. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants and payment of the Exercise Price. The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part; provided, however, that no partial exercise shall be for an amount less than 2,000 Warrant Shares or, if less, the total number of Warrant Shares purchasable by the exercising holder. In the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued and delivered pursuant to the provisions of this Section and Section 2 hereof. All Warrant Certificates surrendered upon exercise of Warrants shall be canceled and disposed of by the Company. The Company shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders during normal business hours 4 8 at its office or such other place as the Company may from time to time designate by written notice to the holders. SECTION 6. Payment of Taxes. The Company will pay all stamp, documentary, transfer or similar taxes attributable to the initial issuance of the Warrants and the Warrant Shares upon the exercise of Warrants. SECTION 7. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated lost, stolen or destroyed, the Company shall issue, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of such Warrant Certificate and indemnity also reasonably satisfactory to it. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations as the Company may prescribe and shall pay all reasonable out of pocket expenses actually incurred by Company in connection with any such exchange and substitution described in this Section 7. SECTION 8. Reservation of Warrant Shares; Rights. The Company will at all times reserve and keep available free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Company shall issue, together with each Warrant Share issued upon exercise of a Warrant, any rights issued to holders of Common Stock in addition thereto or in replacement therefor, whether or not such rights shall be exercisable at such time, but only if such rights are issued and outstanding and held by other holders of Common Stock at such time and have not expired. The Company or, if appointed, the transfer agent for the Common Stock (the "Transfer Agent") and every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of any of the rights of purchase aforesaid will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent transfer agent for any shares of the Company's capital stock issuable upon the exercise of the rights of purchase represented by the Warrants. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 14 hereof. Before taking any action which would cause an adjustment pursuant to Section 10 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any corporate action which may, in the opinion of its counsel, be necessary in 5 9 order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted. SECTION 9. Obtaining Stock Exchange Listings. The Company will from time to time take all action which may be necessary so that the Warrant Shares, immediately upon their issuance upon the exercise of Warrants, will be listed or quoted on the principal securities exchanges and markets within the United States of America, if any, on which other shares of Common Stock are then listed. SECTION 10. Adjustment of Exercise Price and Number of Warrant Shares Issuable. The Exercise Price and the number of Warrant Shares issuable upon the exercise of each Warrant are subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 10. For purposes of this Section 10, "Common Stock" means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount. (a) Adjustment for Change in Capital Stock. If the Company: (1) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (2) subdivides its outstanding shares of Common Stock into a greater number of shares; or (3) combines its outstanding shares of Common Stock into a smaller number of shares; then the Exercise Price in effect immediately prior to such action shall then be adjusted in accordance with the formula: O E' = E x ---- A where: E' = the adjusted Exercise Price E = the current Exercise Price O = the number of Shares of Common Stock outstanding prior to such action A = the number of shares of Common Stock outstanding immediately after such action 6 10 In the case of a dividend or distribution, the adjustment shall become effective immediately after the record date for determination of holders of shares of Common Stock entitled to receive such dividend or distribution, and in the case of a subdivision or combination, the adjustment shall become effective immediately after the effective date of such corporate action. If after an adjustment a holder of a Warrant upon exercise of it may receive shares of two or more classes of capital stock of the Company, the Company shall determine the allocation of the adjusted Exercise Price between the classes of capital stock. After such allocation, the exercise privilege, the number of shares issuable upon such exercise, and the Exercise Price of each class of capital stock shall thereafter be subject to adjustment on terms comparable to those applicable to Common Stock in this Section 10. Such adjustment shall be made successively whenever any event listed above shall occur in accordance with this Section 10(a). (b) Adjustment for Rights Issue. If the Company distributes any rights, options or warrants to any holder of its Common Stock entitling such holder at any time after the record date mentioned below to purchase shares of Common Stock at a price per share less than the current market price per share on that record date, the Exercise Price shall be adjusted in accordance with the formula: O + N x P ----- E' = E x M --------------- O + N where: E' = the adjusted Exercise Price. E = the current Exercise Price. O = the number of Shares of Common Stock outstanding on the record date. N = the number of additional shares of Common Stock issuable upon exercise of the rights, options or warrants offered. P = the exercise price per share of the additional shares issuable upon exercise of the rights, options or warrants. M = the current market price per share of Common Stock on the record date. 7 11 The adjustment shall be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, options or warrants. If at the end of the period during which such rights, options or warrants are exercisable, not all rights, options or warrants shall have been exercised, the Exercise Price shall be immediately readjusted to what it would have been if "N" in the above formula had been the number of shares actually issued. (c) Adjustment for Other Distributions. If the Company distributes to any holder of its Common Stock any of its assets (including but not limited to securities and cash), debt securities, capital stock, or any rights or warrants to purchase assets, debt securities, capital stock, or other securities of the Company, the Exercise Price shall be adjusted in accordance with the formula: M - F E' = E x ------- M where: E' = the adjusted Exercise Price. E = the current Exercise Price. M = the current market price per share of Common Stock on the record date mentioned below. F = the Fair Market Value (as defined in Section 10(f)) on the record date of the assets, debt securities, capital stock, rights or warrants or other securities applicable to one share of Common Stock. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of stockholders entitled to receive the distribution. This subsection does not apply to (i) dividends, distributions, subdivisions, or combinations referred to in subsection (a) of this Section 10, (ii) rights, options or warrants referred to in subsection (b) of this Section 10, or (iii) ordinary course quarterly cash dividends distributed to all holders of Common Stock. (d) Adjustment for Common Stock Issue. If the Company issues shares of Common Stock for a consideration per share less than the current market price per share of Common Stock on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted in accordance with the formula: 8 12 P O + -- M E' = E x --------------- A where: E' = the adjusted Exercise Price. E = the current Exercise Price. O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for issuance of such additional shares. M = the current market price per share of Common Stock on the date of issuance of such additional shares. A = the number of shares outstanding immediately after the issuance of such additional shares. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. This subsection (d) does not apply to: (1) rights, options, warrants or other distributions referred to in subsections (b), (c) or (e) of this Section 10, (2) Common Stock issued to the Company's directors, employees and non-employee service providers under bona fide benefit plans, if such Common Stock would otherwise be covered by this subsection (d), or (3) Common Stock issued in a bona fide underwritten public offering. (e) Adjustment for Convertible Securities Issue. If the Company issues any securities convertible into or exchangeable for Common Stock (other than securities issued in transactions described in subsections (b) and (c) of this Section 10) for a consideration per share of Common Stock initially deliverable upon conversion or exchange of such securities less than the current market price per share of Common Stock on the date of issuance of such securities, the Exercise Price shall be adjusted in accordance with this formula: 9 13 P O + -- M E' = E x ------------- O + D where: E' = the adjusted Exercise Price. E = the then current Exercise Price. O = the number of shares outstanding immediately prior to the issuance of such additional shares. P = the aggregate consideration received for issuance of such securities. M = the current market price per share of Common Stock on the date of issuance of such securities. D = the maximum number of shares deliverable upon conversion or in exchange for such securities at the initial conversion or exchange rate. The adjustment shall be made successively whenever any such issuance is made, and shall become effective immediately after such issuance. If all of the Common Stock deliverable upon conversion or exchange of such securities have not been issued when such securities are no longer outstanding, then the Exercise Price shall promptly be readjusted to the Exercise Price which would then be in effect had the adjustment upon the issuance of such securities been made on the basis of the actual number of shares of Common Stock issued upon conversion or exchange of such securities. (f) Current Market Price. (1) Current Market Price. In subsections (b), (c), (d) and (e) of this Section 10, the current market price per share of Common Stock on any date is: (i) if the Common Stock is not registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), then the Fair Market Value of the Common Stock based upon the Fair Market Value of 100% of the Company if sold as a going concern and without regard to any discount for the lack of liquidity or on the basis that the relevant shares of the Common Stock do not constitute a majority or controlling interest in the Company; or 10 14 (ii) if the Common Stock is registered under the Exchange Act, the average of the Quoted Prices of the Common Stock for no fewer than 10 consecutive trading days during a period of no more than 20 consecutive trading days ending on the date in question. The "Quoted Price" of the Common Stock is the last reported sales price of the Common Stock as reported by NASDAQ National Market, or if the Common Stock is listed on a national securities exchange, the last reported sales price of the Common Stock on such exchange (which shall be for consolidated trading if applicable to such exchange), or if neither so reported or listed, the last reported bid price of the Common Stock. In the absence of one or more such quotations, the current market price of the Common Stock shall be determined as if the Common Stock was not registered under the Exchange Act. (2) Fair Market Value. Fair Market Value means the value obtainable upon a sale in an arm's-length transaction to a third party under usual and normal circumstances, with neither the buyer nor the seller under any compulsion to act, with equity to both, as determined by the Board in good faith; provided, however, that if the holder of a Warrant shall dispute the Fair Market Value as determined by the Board, such holder may undertake to have it and the Company retain an Independent Expert. The determination of Fair Market Value by the Independent Expert shall be final, binding and conclusive on the Company and such holder. All costs and expenses of the Independent Expert shall be borne by such holder unless the Fair Market Value as determined by the Independent Expert exceeds the Fair Market Value as determined by the Board by 5% but less than 10%, in which case the cost of the Independent Expert shall be shared equally by such holder and the Company, and unless the Fair Market Value as determined by the Independent Expert exceeds the Fair Market Value as determined by the Board by 10% or more, in which case the cost of the Independent Expert shall be borne solely by the Company. (3) Independent Expert. Independent Expert means a nationally recognized investment banking firm reasonably acceptable to the Company and the holder of this Warrant who does not (and whose affiliates do not) have a financial interest in the Company, any holder or any of their affiliates. For purposes of this Section 10(f)(3), an "affiliate" shall mean any such firm in which the Company or any holder owns or controls, directly or indirectly, a voting interest greater than 10% of the outstanding voting securities of such firm, or a firm which owns or controls, directly or indirectly, a voting interest greater than 10% of the outstanding voting securities of the Company or any holder. (g) Consideration Received. For purposes of any computations respecting consideration received pursuant to subsections (d) and (e) of this Section 10, the following shall apply: 11 15 (1) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (2) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board (irrespective of the accounting treatment thereof), whose determination shall be conclusive, and described in a Board resolution; and (3) in the case of the issuance of securities convertible into or exchangeable for Common Stock, the aggregate consideration received therefore shall be deemed to be the consideration received by the Company for the issuance of such securities plus the additional minimum cash consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (1) and (2) of this subsection). (h) When De Minimis Adjustment May Be Deferred. No adjustment in the Exercise Price need be made unless the adjustment would require an increase or decrease of at least 1% in the Exercise Price. Any adjustments that are not made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section shall be made to the nearest cent or to the nearest 1/100th of a share, as the case may be. (i) When No Adjustment Required. No adjustment need be made for rights to purchase Common Stock pursuant to a Company plan for reinvestment of dividends or interest. No adjustment need be made for a change in the par value or no par value of the Common Stock. To the extent Warrants become convertible into cash, no adjustment need be made thereafter as to the cash. Interest will not accrue on the cash. (j) Notice of Adjustment. Whenever the Exercise Price is adjusted, the Company shall provide the notices required by Section 14 hereof. 12 16 (k) Voluntary Reduction. The Company from time to time may reduce the Exercise Price by any amount for any period of time if the period is at least 20 days and if the reduction is irrevocable during the period; provided, however, that in no event may the Exercise Price be less than the par value of a share of Common Stock. Whenever the Exercise Price is reduced, the Company shall mail to Warrant holders a notice of the reduction. The Company shall mail the notice at least 15 days before the date the reduced Exercise Price takes effect. The notice shall state the reduced Exercise Price and the period it will be in effect. A reduction of the Exercise Price does not change or adjust the Exercise Price otherwise in effect for purposes of subsections (a), (b), (c), (d) and (e) of this Section 10. (l) Reorganization of Company. If any reclassification of the Common Stock of the Company or any consolidation or merger of the Company with another entity, or the sale or lease of all or substantially all of the Company's assets to another entity shall be effected in such a way that holders of the Common Stock of the Company shall be entitled to receive stock, securities or assets with respect to or in exchange for such Common Stock, then, as a condition precedent to such reclassification, consolidation, merger, sale or lease, lawful and adequate provisions shall be made whereby the Warrant holder shall thereafter have the right to purchase and receive upon the basis and the terms and conditions specified in this Agreement and in lieu of the shares of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, such shares of stock, securities or assets as may be issued or payable in such reclassification, consolidation, merger, sale or lease with respect to or in exchange for the number of shares of Common Stock purchasable and receivable upon the exercise of the rights represented hereby had such rights been exercised immediately prior thereto, and in any such case appropriate provision shall be made with respect to the rights and interests of the holders of the Warrants to the end that the provisions hereof (including without limitation provisions for adjustments of the Exercise Price and of the number of shares of Common Stock purchasable and receivable upon the exercise of the Warrant) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. The Company will not effect any such reclassification, consolidation, merger, sale or lease, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such reclassification, consolidation or merger or the corporation purchasing or leasing such assets shall assume by a supplemental Warrant Agreement, executed and mailed or delivered to the holders of the Warrants at the last address thereof appearing on the books of Company, the obligation to deliver to such holders such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holders may be entitled to purchase. 13 17 If the issuer of securities deliverable upon exercise of Warrants under the supplemental Warrant Agreement is an affiliate of the formed, surviving, transferee or lessee corporation, that issuer shall join in the supplemental Warrant Agreement. If this subsection (1) applies, subsections (a), (b), (c), (d) and (e) of this Section 10 do not apply. (m) When Issuance or Payment May Be Deferred. In any case in which this Section 10 shall require that an adjustment in the Exercise Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event (i) issuing to the holder of any Warrant exercised after such record date the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise over and above the Warrant Shares and other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price and (ii) paying to such holder any amount in cash in lieu of a fractional share pursuant to Section 11; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional Warrant Shares, other capital stock and cash upon the occurrence of the event requiring such adjustment. (n) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to this Section 10, each Warrant outstanding prior to the making of the adjustment in the Exercise Price shall thereafter evidence the right to receive upon payment of the adjusted Exercise Price that number of shares of Common Stock (calculated to the nearest hundredth) obtained from the following formula: E N' = N x -- E' where: N'= the adjusted number of Warrant Shares issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. N= the number of Warrant Shares previously issuable upon exercise of a Warrant by payment of the adjusted Exercise Price. E'= the adjusted Exercise Price. E= the Exercise Price prior to adjustment. 14 18 (o) Form of Warrants. Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon the exercise of the Warrants, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the Warrants initially issuable pursuant to this Agreement. SECTION 11. Fractional Interests. The Company shall not be required to issue fractional Warrant Shares on the exercise of Warrants. If more than one Warrant shall be presented for exercise in full at the same time by the same holder, the number of full Warrant Shares which shall be issuable upon the exercise thereof shall be computed on the basis of the aggregate number of Warrant Shares purchasable on exercise of the Warrants so presented. If any fraction of a Warrant Share would, except for the provisions of this Section 11, be issuable on the exercise of any Warrants (or specified portion thereof), the number of Warrant Shares which shall be issued by the Company on exercise of such Warrants shall be rounded (i) to the last previous whole number if the fraction is less than 0.5 of a Warrant Share or (ii) to the next higher whole number if the fraction is greater than or equal to 0.5 of a Warrant Share. SECTION 12. Representations and Warranties of the Company. The Company represents and warrants to each of the Banks, as of the date hereof, as follows: (a) Corporate Organization. The Company is duly organized, validly existing and in good standing under the laws of the state of its formation. The Company is also duly authorized, qualified and licensed in all applicable jurisdictions, and under all applicable laws, regulations, ordinances or orders of public authorities, to carry on its business in the locations and in the manner presently conducted, to the extent that the failure to do so would not reasonably be expected to materially adversely affect the consolidated financial condition or operations of the Company and could not reasonably be expected to have a material adverse effect on the Company's ability to perform its obligations under the Restructure Loan Documents (as defined in the Loan Restructure Agreement), having regard for its other financial obligations. (b) Authorization. The execution, delivery and performance by the Company of this Agreement and the Registration Rights Agreement of even date hereof between the parties hereto (the "Registration Rights Agreement," and, together with this Agreement, the "Warrant Documents"), and the issuance by the Company of the Warrants, are within the Company's corporate powers, have been duly authorized by all necessary corporate action and do not contravene (i) the Company's certificate of incorporation, bylaws or other organizational documents or (ii) any law or regulation or any contractual restriction binding on or affecting the Company. 15 19 (c) Governmental Consents. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (except routine reports required pursuant to the Securities Exchange Act of 1934, as amended (if such act is applicable to the Company), which reports will be made in the ordinary course of business) is required for the due execution, delivery and performance by the Company of the Warrant Documents or for the issuance by the Company of the Warrants or the Warrant Shares. (d) Validity. The Warrant Documents are the binding obligations of the Company, enforceable in accordance with their respective terms and when executed and delivered by the Company in accordance with the terms hereof, the Warrants will constitute a legally valid and binding obligation of the Company; except in each case as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar laws of general application and equitable principles relating to or affecting creditors' rights. (e) Not an Investment Company. The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (f) Reports. The Company has filed all required forms, reports and documents with the Securities and Exchange Commission (the "SEC") since January 1, 1997 (collectively, the "SEC Reports"), all of which have complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act") and the Exchange Act. Except as set forth in subsequent filings with the SEC, none of the SEC Reports, including without limitation any financial statements or schedules including therein, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading. Each of the balance sheets (including the related notes) included in the SEC Reports fairly presents the consolidated financial position of the Company and its consolidated subsidiaries as of the respective dates thereof, and the other related statements (including the related notes) included therein fairly present the results of operations and the changes in financial position of the Company and its consolidated subsidiaries for the respective fiscal years, except, in the case of interim financial statements, for year-end audit adjustments, consisting only of normal recurring accruals. Each of the financial statements (including the related notes) included in the SEC Reports has been prepared in accordance with generally accepted accounting principles consistently applied during the periods involved, except as otherwise noted therein. 16 20 (g) Authorized Shares. As of May 10, 2000, (i) the Company has 151,000,000 authorized shares of capital stock, of which 66,054,041 shares of Common Stock and no shares of Preferred Stock are issued and outstanding, (ii) the Company has 83,945,959 authorized but unissued shares of Common Stock which will be required to be issued to satisfy conversions or exercises of the Warrants, (iii) the Series A Warrants are exercisable into a number of shares of Common Stock equal to, in the aggregate, 2.5% of the issued and outstanding Common Stock, and (iv) the Series B Warrants are exercisable into a number of shares of Common Stock equal to, in the aggregate, 1% of the issued and outstanding Common Stock. (h) Status of the Warrants and the Warrant Shares. Upon issuance hereunder, the Warrants will be validly issued and outstanding, fully paid and nonassessable, and the issuance thereof is not subject to preemptive rights of any other stockholder of the Company. The Warrant Shares will be duly authorized by all necessary corporate action on the part of the Company (no consent or approval of stockholders being required by law, the corporate documents of the Company, the qualification criteria of any securities exchange or market or otherwise), and upon issuance in accordance with the terms of this Agreement, will be validly issued and outstanding, fully paid and nonassessable, and the issuance thereof is not subject to preemptive rights of any other stockholder of the Company. The Warrant Shares have been validly reserved for issuance upon the exercise of the Warrants. SECTION 13. Purchase for Investment; Authority; Binding Agreement. Each of the Banks represents and warrants to the Company that: (a) such Bank is an Accredited Investor within the meaning of Rule 501(a) under the Securities Act and the Warrants to be acquired by it pursuant to this Agreement are being acquired for its own account for investment and without intent to resell, and such Bank will not offer, sell, transfer, pledge, hypothecate or otherwise dispose of any of such Warrants, unless pursuant to a transaction either registered under, or exempt from registration under, the Securities Act; (b) the execution, delivery and performance of each of the Warrant Documents and the receipt of the Warrants pursuant hereto are within such Bank's corporate powers and has been duly and validly authorized by all requisite corporate action; (c) each of the Warrant Documents has been duly executed and delivered by such Bank; (d) each of the Warrant Documents constitutes a legally valid and binding agreement of such Bank; and 17 21 (e) such Bank has knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investments in the Warrants and such Bank is capable of bearing the economic risks of such investments. SECTION 14. Notices to Warrant Holders. Upon any adjustment of the Exercise Price pursuant to Section 10, the Company shall promptly thereafter (i) cause the Company's Chief Financial Officer to execute a certificate setting forth the Exercise Price after such adjustment and setting forth in reasonable detail the method of calculation and the facts upon which such calculations are based and setting forth the number of Warrant Shares (or portion thereof) issuable after such adjustment in the Exercise Price, upon exercise of a Warrant and payment of the adjusted Exercise Price, and (ii) cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register written notice of such adjustments by first-class mail, postage prepaid. Where appropriate, such notice may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 14. In case: (a) the Company shall authorize the issuance to all holders of shares of Common Stock of rights, options or warrants to subscribe for or purchase shares off Common Stock or of any other subscription rights or warrants; or (b) the Company shall authorize the distribution to all holders of shares of Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of earnings or earned surplus or dividends or distributions payable in shares of Common Stock); or (c) of any consolidation or merger to which the Company is a party and for which approval of any shareholders of the Company is required, or of the conveyance or transfer of all or substantially all of the properties and assets of the Company, or of any reclassification or change of Common Stock issuable upon exercise of the Warrants (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination), or a tender offer or exchange offer for shares of Common Stock; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; or (e) the Company proposes to take any action that would require an adjustment in the Exercise Price pursuant to subsections (a), (b), (c), (d) or (e) of Section 10, or if the Company takes any action that would require a supplemental Warrant Agreement pursuant to subsection (1) of Section 10. then the Company shall cause to be given to each of the registered holders of the Warrant Certificates at his address appearing on the Warrant register, at least 20 days (or 10 days in any case specified in clauses (a), (b) or (c) above) prior to the applicable record date hereinafter 18 22 specified, or promptly in the case of events for which there is no record date, by first-class mail, postage prepaid, a written notice stating (i) the date as of which the holders of record of shares of Common Stock to be entitled to receive any such rights, options, warrants or distribution are to be determined, or (ii) the initial expiration date set forth in any tender offer or exchange offer for shares of Common Stock, or (iii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective or consummated, and the date as of which it is expected that holders of record of shares of Common Stock shall be entitled to exchange such shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up. The failure to give the notice required by this Section 14 or any defect therein shall not affect the legality or validity of any distribution, right, option, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up, or the vote upon any action. Nothing contained in this Agreement or in any of the Warrants shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as shareholders in respect of the meetings of shareholders or the election of Directors of the Company or any other matter, or any rights whatsoever as shareholders of the Company. SECTION 15. Notices to Company and Warrant Holder. Any notice or demand authorized by this Agreement to be given or made by the registered holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, addressed to the office of the Company expressly designated by the Company at its office for purposes of this Agreement (until the Warrant holders are otherwise notified in accordance with this Section by the Company), as follows: Komag, Incorporated 1710 Automation Parkway San Jose, California 95131-1873 Facsimile: 408-944-9234 Attn: Chief Financial Officer Any notice pursuant to this Agreement to be given by the Company to the registered holder(s) of any Warrant Certificate shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until the Company is otherwise notified in accordance with this Section by such holder) to such holder at the address appearing on the Warrant register of the Company. SECTION 16. Supplements and Amendments. The Company may not supplement or amend this Agreement without the prior written approval of the holders of Warrants representing at least 51% of the aggregate outstanding Warrants affected by such supplement or amendment; provided however, that without the written approval of the holders of all Warrants affected by such supplement or amendment, no supplement or amendment shall do any of the following: (a) reduce the number of Warrant Shares for which the Warrants may be exercised; 19 23 (b) amend the provisions of Section 10 of this Agreement; (c) except as expressly provided in Section 10(a)(3) of this Agreement, increase the Exercise Price applicable to the Warrants; (d) reduce the duration of the Warrants; (e) extend the issuance date of the Series B Warrants; or (f) amend the provisions of this Section 16. SECTION 17. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company shall bind and inure to the benefit of its respective successors and assigns hereunder. SECTION 18. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of California and for all purposes shall be construed in accordance with the internal laws of said State. SECTION 19. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company and the registered holders of the Warrant Certificates. SECTION 20. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. [Signature Pages Follow] 20 24 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. KOMAG, INCORPORATED By: ---------------------------- Title: ------------------------- Address: 1710 Automation Parkway San Jose, California 95131-1873 Facsimile: (408) 944-9234 Attention: Chief Financial Officer FLEET NATIONAL BANK f/k/a BANKBOSTON, N.A., as Restructure Agent and as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 100 Federal Street, Mail Stop 01-06-01 Boston, MA 02110 Facsimile: (617) 434-4775 Attention: Donald Sheehan BANK OF MONTREAL, as a Restructure Lender By: ---------------------------- Title: ------------------------- S-1 25 Address: 115 S. LaSalle Street, 12 West Chicago, IL 60603 Facsimile: (312) 750-6057 Attention: Jack J. Kane BEAR, STEARNS & CO. INC., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 245 Park Avenue New York, New York 10167 Facsimile: (212) 272-8102 Attention: COMERICA BANK - CALIFORNIA, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 55 Almaden Boulevard Mail Code: 4041 San Jose, California 95113 Facsimile: (408) 556-5855 Attention: Carol A. Palestro OLYMPUS SECURITIES, LTD., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: c/o Citadel Investment Group, LLC S-2 26 225 West Washington Street, 9th Floor Chicago, Illinois 60606 Facsimile: (312) 368-4650 Attention: Bradford Couri S-3 27 NELSON PARTNERS LTD., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: c/o Citadel Investment Group, LLC 225 West Washington Street, 9th Floor Chicago, Illinois 60606 Facsimile: (312) 368-4650 Attention: Bradford Couri THE BANK OF NOVA SCOTIA, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: One Liberty Plaza New York, New York 10006 Facsimile: (212) 225-5205 Attention: Norm Gillespie UNION BANK OF CALIFORNIA, N.A., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 350 California Street, 7th Floor San Francisco, California 94104 Facsimile: (415) 705-7390 Attention: Christiana Creekpaum S-4 28 LOEB PARTNERS CORPORATION, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 61 Broadway, 24th Floor New York, New York 10006 Facsimile: (212) 574-2003 Attention: Robert Grubin THE DAI-ICHI KANGYO BANK, LIMITED, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: Corporate Finance Department I One World Trade Center, Suite 4911 New York, NY 10048 Facsimile: (212) 912-1879 Attention: Nelson Chang THE INDUSTRIAL BANK OF JAPAN, LIMITED, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: One Market Street Spear Tower, Suite 1610 San Francisco, California 94105 Facsimile: (415) 982-1917 Attention: Joseph A. Endoso S-5 29 THE MITSUBISHI TRUST AND BANKING CORPORATION, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 520 Madison Avenue, 26th Floor New York, New York 10022 Facsimile: (212) 644-6825 Attention: Daniel Chang SANWA BANK CALIFORNIA, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 444 Market Street, 22nd Floor San Francisco, CA 94111 Facsimile: (415) 597-5491 Attention: George Vetek BANK ONE, N.A., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: Bank One, N.A. Western Region Managed Assets AZ1-1283 201 N. Central Avenue Phoenix, AZ 85004-2267 Facsimile: (602) 221-1737 Attention: Dennis B. Warren S-6 30 THE FUJI BANK, LIMITED, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 333 South Hope Street, 39th Floor Los Angeles, CA 90071 Facsimile: (213) 253-4178 Attention: THE SUMITOMO BANK, LIMITED, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 555 California Street, Suite 3350 San Francisco, California 94104 Facsimile: (415) 362-6527 Attention: Azar Shakeri S-7 31 SCHEDULE 1
BANK WARRANT SHARES WARRANT SHARES - ---- -------------- -------------- SERIES A SERIES B -------- -------- Fleet National Bank f/k/a/ BankBoston, N.A 214,131 85,652 Bank of Montreal 54,440 21,776 Bear, Stearns & Co. Inc. 22,230 8,892 Comerica Bank - California 90,734 36,293 Olympus Securities, Ltd. 53,987 21,595 Nelson Partners Ltd. 35,386 14,154 The Bank of Nova Scotia 72,587 29,035 Loeb Partners Corporation 19,054 7,622 Union Bank of California, N.A 72,587 29,035 The Dai-Ichi Kangyo Bank, Limited 222,297 88,919 The Industrial Bank of Japan, Limited 95,270 38,108 The Mitsubishi Trust and Banking Corporation 63,514 25,405 Sanwa Bank California 63,513 25,405 Bank One, N.A 95,270 38,108 The Industrial Bank of Japan, Limited 158,784 63,514 The Mitsubishi Trust and Banking Corporation 127,027 50,811 The Fuji Bank, Limited 95,270 38,108 The Sumitomo Bank, Limited 95,270 38,108 ---------- -------- 1,651,351 660,540
Schedule-1 32 EXHIBIT A [Form of Warrant Certificate] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENT OF SUCH ACT OR SUCH LAWS. SUCH SALE OR OTHER DISPOSITION MUST ALSO BE IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE WARRANT AGREEMENT DATED AS OF JUNE 1, 2000, A COPY OF WHICH MAY BE OBTAINED FROM KOMAG, INCORPORATED AT ITS PRINCIPAL EXECUTIVE OFFICE. EXERCISABLE ON OR AFTER THE DATE HEREOF AND ON OR BEFORE JUNE 1, 2010 No. ___ Series A Warrants Series A Warrant Certificate KOMAG, INCORPORATED This Warrant Certificate certifies that _________________, or registered assigns, is the registered holder of ___ Series A Warrants expiring June 1, 2010 (the "Warrants") to purchase Common Stock, $0.01 par value (the "Common Stock"), of Komag, Incorporated, a Delaware corporation (the "Company"). Each Series A Warrant entitles the holder upon exercise on or after the date hereof to receive from the Company on or before 5:00 p.m., Los Angeles time, on June 1, 2010, one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $_______ payable as otherwise provided in the Warrant Agreement referred to below, upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. No Warrant may be exercised after 5:00 p.m., Los Angeles time, on June 1, 2010, and to the extent not exercised by such time such Warrants shall become void. The Series A Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring June 1, 2010 entitling the holder on exercise to receive shares of Common Stock of the Company, and are issued pursuant to a Warrant Agreement dated as of the date hereof (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" A-1 33 meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time on or before June 1, 2010. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. The holders of the Warrants are entitled to certain registration rights with respect to the Common Stock purchasable upon exercise thereof. Said registration rights are set forth in full in the Registration Rights Agreement dated as of the date hereof, between the Company and the Banks identified in the Warrant Agreement. A copy of the Registration Rights Agreement may be obtained by the holder hereof upon written request to the Company. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem to treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. A-2 34 This Warrant Certificate shall not be valid unless countersigned by the Company, as such term is used in the Warrant Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant certificate to be signed by its President and by its Secretary and has caused its corporate seal to be affixed hereunto or imprinted hereon. KOMAG, INCORPORATED, a Delaware corporation By: --------------------------------------- Name: Thian Hoo Tan Title: President By: --------------------------------------- Name: Edward H. Siegler Title: Secretary A-3 35 [Form of Election] (To Be Executed Upon Exercise of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive _________ shares of Common Stock and herewith tenders payment for such shares to the order of Komag, Incorporated in the amount of $________ as follows: (check applicable box) [ ] in the form of cash or in immediately available funds payable to the order of the Company *[ ] in lieu of cash, net shares of Common Stock calculated as follows: Current Market Price - Exercise Price -------------------------------------- x Warrant Shares Exercised Current Market Price The undersigned requests that a certificate for such shares be registered in the name of ________________, whose address is ____________________________ and that such shares be delivered to ________________ whose address is ________________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _____________, whose address is ___________________________, and that such Warrant Certificate be delivered to _________________, whose address is _____________________. Signature: --------------------------------- Date: Signature Guaranteed: ---------------------- * Please note that this is the only form of payment available if this Warrant Certificate is to be exercised within two years of its issuance. A-4 36 [Form of Assignment] (To Be Executed Upon Assignment of Warrant) If you, the holder, want to assign this Warrant, fill in the form below and have your signature guaranteed: For value received, I or we assign and transfer this Warrant to: - -------------------------------------------------------------------------------- (INSERT ASSIGNEE'S SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER) ----------------------------------------------------------- ----------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and appoints ______________________________________ agent to transfer this security on the books of the Company. The agent may substitute another to act for him. In connection with the transfer of this Warrant, the undersigned certifies that: (Check one) [ ] This Warrant is being transferred to Komag, Incorporated. [ ] This Warrant is being transferred to a person or entity other than Komag, Incorporated, in connection with which the Company has received an opinion of counsel (satisfactory to it in form and substance) to the effect that the transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Date: --------------------------------------------------------------------------- Your signature: ----------------------------------------------------------------- (Sign exactly as your name appears on this Warrant) Signature Guaranteed by *: ------------------------------------------------------ * Signature must be guaranteed by an eligible guarantor institution within the meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks, stock brokers, savings and loan associations, national securities exchanges, registered securities associations, clearing agencies and credit unions) with membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other signature guarantee medallion program as may be approved by the Registrar in addition to, or substitution for, STAMP, if this Security is to be delivered other than to and in the name of the registered holder. IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE SHALL NOT BE OBLIGATED TO REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE CONDITIONS TO ANY SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN THE WARRANT AGREEMENT SHALL HAVE BEEN SATISFIED. A-5 37 EXHIBIT B [Form of Warrant Certificate] THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENT OF SUCH ACT OR SUCH LAWS. SUCH SALE OR OTHER DISPOSITION MUST ALSO BE IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE WARRANT AGREEMENT DATED AS OF JUNE 1, 2000, A COPY OF WHICH MAY BE OBTAINED FROM KOMAG, INCORPORATED AT ITS PRINCIPAL EXECUTIVE OFFICE. EXERCISABLE ON OR AFTER JUNE 1, 2001 AND ON OR BEFORE JUNE 1, 2011 No. ___ Series B Warrants Series B Warrant Certificate KOMAG, INCORPORATED This Warrant Certificate certifies that _________________, or registered assigns, is the registered holder of ___ Series B Warrants expiring not later than June 1, 2011 (the "Warrants") to purchase Common Stock, $0.01 par value (the "Common Stock"), of Komag, Incorporated, a Delaware corporation (the "Company"). Each Series B Warrant entitles the holder upon exercise on or after June 1, 2001 to receive from the Company on or before 5:00 p.m., Los Angeles time, on June 1, 2011, unless earlier terminated, one fully paid and nonassessable share of Common Stock (a "Warrant Share") at the initial exercise price (the "Exercise Price") of $_______ payable as otherwise provided in the Warrant Agreement referred to below, upon surrender of this Warrant Certificate and payment of the Exercise Price at the office of the Company designated for such purpose, but only subject to the conditions set forth herein and in the Warrant Agreement. The Exercise Price and number of Warrant Shares issuable upon exercise of the Warrants are subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. Notwithstanding anything to the contrary in this Warrant Certificate, the Series B Warrants shall become void and all rights thereunder and all rights in respect thereof under this Warrant Certificate shall cease if the unpaid loan balances on the notes issued pursuant to the Credit Facilities, in the aggregate, does not exceed $160 million. No Warrant may be exercised after 5:00 p.m., Los Angeles time, on June 1, 2011, and to the extent not exercised by such time such Warrants shall become void. The Series B Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring June 1, 2011 entitling the holder on exercise to receive shares of Common Stock, $0.01 par value, of the Company (the "Common Stock"), and are issued B-1 38 pursuant to a Warrant Agreement dated as of the date hereof (the "Warrant Agreement"), duly executed and delivered by the Company, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. A copy of the Warrant Agreement may be obtained by the holder hereof upon written request to the Company. Warrants may be exercised at any time on or after June 1, 2001 and on or before June 1, 2011. The holder of Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate, with the form of election to purchase set forth hereon properly completed and executed, together with payment of the Exercise Price at the office of the Company designated for such purpose. In the event that upon any exercise of Warrants evidenced hereby the number of Warrants exercised shall be less than the total number of Warrants evidenced hereby, there shall be issued to the holder hereof or his assignee a new Warrant Certificate evidencing the number of Warrants not exercised. No adjustment shall be made for any dividends on any Common Stock issuable upon exercise of this Warrant. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price set forth on the face hereof may, subject to certain conditions, be adjusted. If the Exercise Price is adjusted, the Warrant Agreement provides that the number of shares of Common Stock issuable upon the exercise of each Warrant shall be adjusted. No fractions of a share of Common Stock will be issued upon the exercise of any Warrant, but the Company will pay the cash value thereof determined as provided in the Warrant Agreement. The holders of the Warrants are entitled to certain registration rights with respect to the Common Stock purchasable upon exercise thereof. Said registration rights are set forth in full in the Registration Rights Agreement dated as of the date hereof, between the Company and the Banks identified in the Warrant Agreement. A copy of the Registration Rights Agreement may be obtained by the holder hereof upon written request to the Company. Warrant Certificates, when surrendered at the office of the Company by the registered holder thereof in person or by legal representative or attorney duly authorized in writing, may be exchanged, in the manner and subject to the limitations provided in the Warrant Agreement, but without payment of any service charge, for another Warrant Certificate or Warrant Certificates of like tenor evidencing in the aggregate a like number of Warrants. Upon due presentation for registration of transfer of this Warrant Certificate at the office of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. The Company may deem to treat the registered holder(s) thereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, of any distribution to the holder(s) B-2 39 hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. Neither the Warrants nor this Warrant Certificate entitles any holder hereof to any rights of a stockholder of the Company. This Warrant Certificate shall not be valid unless countersigned by the Company, as such term is used in the Warrant Agreement. IN WITNESS WHEREOF, the Company has caused this Warrant certificate to be signed by its President and by its Secretary and has caused its corporate seal to be affixed hereunto or imprinted hereon. KOMAG, INCORPORATED, a Delaware corporation By: -------------------------------------- Name: Thian Hoo Tan Title: President By: -------------------------------------- Name: Edward H. Siegler Title: Secretary B-3 40 [Form of Election] (To Be Executed Upon Exercise of Warrant) The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to receive _________ shares of Common Stock and herewith tenders payment for such shares to the order of Komag, Incorporated in the amount of $________ as follows: (check applicable box) [ ] in the form of cash or in immediately available funds payable to the order of the Company *[ ] in lieu of cash, net shares of Common Stock calculated as follows: Current Market Price - Exercise Price -------------------------------------x Warrant Shares Exercised Current Market Price The undersigned requests that a certificate for such shares be registered in the name of ________________, whose address is ____________________________ and that such shares be delivered to ________________ whose address is ________________________. If said number of shares is less than all of the shares of Common Stock purchasable hereunder, the undersigned requests that a new Warrant Certificate representing the remaining balance of such shares be registered in the name of _____________, whose address is ___________________________, and that such Warrant Certificate be delivered to _________________, whose address is _____________________. Signature: --------------------------------- Date: Signature Guaranteed: ---------------------- * Please note that this is the only form of payment available if this Warrant Certificate is to be exercised within two years of its issuance. B-4 41 [Form of Assignment] (To Be Executed Upon Assignment of Warrant) If you, the holder, want to assign this Warrant, fill in the form below and have your signature guaranteed: For value received, I or we assign and transfer this Warrant to: - -------------------------------------------------------------------------------- (INSERT ASSIGNEE'S SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER) ---------------------------------------------------------------- ---------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and appoints __________________________________________ agent to transfer this security on the books of the Company. The agent may substitute another to act for him. In connection with the transfer of this Warrant, the undersigned certifies that: (Check one) [ ] This Warrant is being transferred to Komag, Incorporated. [ ] This Warrant is being transferred to a person or entity other than Komag, Incorporated, in connection with which the Company has received an opinion of counsel (satisfactory to it in form and substance) to the effect that the transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Date: --------------------------------------------------------------------------- Your signature: ----------------------------------------------------------------- (Sign exactly as your name appears on this Warrant) Signature Guaranteed by *: ------------------------------------------------------ * Signature must be guaranteed by an eligible guarantor institution within the meaning of Securities and Exchange Commission Rule 17Ad-15 (including banks, stock brokers, savings and loan associations, national securities exchanges, registered securities associations, clearing agencies and credit unions) with membership or participation in the Securities Transfer Agents Medallion Program ("STAMP") or such other signature guarantee medallion program as may be approved by the Registrar in addition to, or substitution for, STAMP, if this Security is to be delivered other than to and in the name of the registered holder. IF NONE OF THE FOREGOING BOXES IS CHECKED, THE TRUSTEE SHALL NOT BE OBLIGATED TO REGISTER THE TRANSFER OF THIS SECURITY UNLESS AND UNTIL THE CONDITIONS TO ANY SUCH TRANSFER OF REGISTRATION SET FORTH HEREIN, ON THE FACE HEREOF AND IN THE WARRANT AGREEMENT SHALL HAVE BEEN SATISFIED. B-5 EX-4.3 4 ex4-3.txt REGISTRATION RIGHTS AGREEMENT 1 EXECUTION COPY EXHIBIT 4.3 - -------------------------------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT BY AND BETWEEN KOMAG, INCORPORATED AND FLEET NATIONAL BANK F/K/A BANKBOSTON, N.A. BANK OF MONTREAL BEAR, STEARNS & CO. INC. COMERICA BANK - CALIFORNIA OLYMPUS SECURITIES, LTD. NELSON PARTNERS LTD THE BANK OF NOVA SCOTIA UNION BANK OF CALIFORNIA, N.A. LOEB PARTNERS CORPORATION THE DAI-ICHI KANGYO BANK, LIMITED THE INDUSTRIAL BANK OF JAPAN, LIMITED THE MITSUBISHI TRUST AND BANKING CORPORATION SANWA BANK CALIFORNIA BANK ONE, N.A. THE FUJI BANK, LIMITED THE SUMITOMO BANK, LIMITED DATED AS OF JUNE 1, 2000 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
SECTION 1. Definitions......................................................................................................1 SECTION 2. Securities Subject to this Agreement.............................................................................2 (a) Registrable Securities.....................................................................2 (b) Holders of Registrable Securities..........................................................2 SECTION 3. Piggyback Registrations..........................................................................................3 (a) Piggyback Registration.....................................................................3 (b) Demand Registrations.......................................................................4 SECTION 4. Registration Procedures..........................................................................................5 SECTION 5. Registration Expenses............................................................................................9 SECTION 6. Indemnification.................................................................................................11 (a) Indemnification by Company................................................................11 (b) Indemnification by Holder of Registrable Securities.......................................12 (c) Contribution..............................................................................12 SECTION 7. Rule 144........................................................................................................13 SECTION 8. Participation in Underwritten Registrations.....................................................................13 SECTION 9. Miscellaneous...................................................................................................14 (a) Termination...............................................................................14 (b) No Inconsistent Agreements................................................................14 (c) Adjustments Affecting Registrable Securities..............................................14 (d) Amendments and Waivers....................................................................14 (e) Notices...................................................................................14 (f) Successors and Assigns....................................................................15 (g) Counterparts..............................................................................15 (h) Headings..................................................................................15 (i) Governing Law.............................................................................16 (j) Severability..............................................................................16 (k) Entire Agreement..........................................................................16
- ----------------------- This Table of Contents does not constitute a part of this Agreement or have any bearing upon the interpretation of any of its terms or provisions. i 3 THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is dated as of June 1, 2000, and entered into by and between Komag, Incorporated, a Delaware corporation (the "Company"), and Fleet National Bank f/k/a BankBoston, N.A., Bank of Montreal, Bear Stearns & Co., Inc., Comerica Bank - California, Olympus Securities, Ltd., Nelson Partners, Ltd., The Bank of Nova Scotia, Union Bank of California, N.A., Loeb Partners Corporation, The Dai-Ichi Kangyo Bank, Limited, The Industrial Bank of Japan, Limited, The Mitsubishi Trust and Banking Corporation, Sanwa Bank California, Bank One, N.A., The Fuji Bank, Limited, and The Sumitomo Bank, Limited (collectively, "Banks"). This Agreement is made pursuant to the Warrant Agreement dated as of the date hereof, between the Company and Banks (the "Warrant Agreement"). To induce Banks to enter into the Warrant Agreement, the Company has agreed to provide the registration rights set forth in this Agreement. The parties hereby agree as follows: SECTION 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: Agent: Any Person authorized to act and who acts on behalf of a Bank with respect to the transactions contemplated by this Agreement. Common Stock: The common stock, $0.01 par value per share, of the Company. Exchange Act: The Securities Exchange Act of 1934, as amended from time to time. NASD: National Association of Securities Dealers, Inc. Person: An individual, partnership, corporation, limited liability company, trust or unincorporated organization, or other business entity, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. Registrable Securities: The Warrant Shares. Registrable Securities shall also include any securities which may be issued or distributed with respect to, or in exchange for, such Registrable Securities pursuant to a stock dividend, stock split or other distribution, merger, consolidation, recapitalization or reclassification or similar transaction; provided, however, that any such Registrable Securities shall cease to be Registrable Securities to the extent (i) a Registration Statement with respect to the sale of such Registrable Securities has been declared effective under the Securities Act and such Registrable Securities have been disposed of in 1 4 accordance with the plan of distribution set forth in such Registration Statement, (ii) such Registrable Securities are distributed pursuant to Rule 144 (or any similar provision then in force) under the Securities Act, or (iii) such Registrable Securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting transfer under the Securities Act shall have been delivered by the Company and they may be publicly resold without subsequent registration under the Securities Act or in compliance with Rule 144 thereunder; provided, further, however, that any securities that have ceased to be Registrable Securities cannot thereafter become Registrable Securities, and any securities that are issued or distributed in respect of securities that have ceased to be Registrable Securities are not Registrable Securities. Registration: A Piggyback Registration (as defined in Section 3(a)) or Demand Registration (as defined in Section 3(b)) of the Company's securities for sale to the public under a Registration Statement. Registration Expenses: See Section 6 hereof. Registration Statement: Any registration statement of the Company filed with the Securities and Exchange Commission under the rules and regulations promulgated under the Securities Act, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such Registration Statement. Securities Act: The Securities Act of 1933, as amended from time to time. SEC: The Securities and Exchange Commission. Underwritten Registration or Underwritten Offering: A Registration in which securities of the Company are sold to an underwriter for reoffering to the public. Warrants: The Series A Common Stock Purchase Warrants and the Series B Common Stock Purchase Warrants both to purchase shares of Common Stock, issued and sold pursuant to the Warrant Agreement. Warrant Shares: Any shares of Common Stock issued or issuable upon exercise of any of the Warrants. SECTION 2. Securities Subject to this Agreement. (a) Registrable Securities. The securities entitled to the benefits of this Agreement are the Registrable Securities. (b) Holders of Registrable Securities. Subject to Section 10(f), a Person is deemed to be a holder of Registrable Securities whenever such Person owns Registrable Securities or the Warrants. 2 5 SECTION 3. Registrations. (a) Piggyback Registrations. (1) Participation. Subject to Section 3(a)(2) hereof, if at any time from and after the date hereof the Company proposes to file a Registration Statement under the Securities Act with respect to any offering of any of its securities of the same class as the Registrable Securities, whether or not by the Company for its own account (other than (i) a registration on Form S-4 or S-8 or any successor form to such Forms, or (ii) any registration of securities as it relates to an offering and sale by any employee stock plan or other employee benefit plan arrangement), then, as promptly as practicable, the Company shall give written notice of such proposed filing to each holder of Registrable Securities and such notice shall offer the holders of Registrable Securities the opportunity to register such number of Registrable Securities as each such holder may request (a "Piggyback Registration"). Subject to Section 3(b), the Company shall include in such Registration Statement all Registrable Securities requested within 30 days after the receipt of any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder) to be included in the Registration for such offering pursuant to a Piggyback Registration. Each holder of Registrable Securities shall be permitted to withdraw all or part of such holder's Registrable Securities from a Piggyback Registration at any time prior to the earlier of the effective date or any request for the acceleration of the effective date thereof. The Company shall keep any Registration Statement filed pursuant to this Section 3(a)(1) current and effective for a period expiring on the earlier of six months from the effective date of such Registration Statement or until all of the Registrable Securities registered pursuant to this Section 3(a) have been sold. Notwithstanding the foregoing, in the event that, in the good faith judgment of the Company's Board of Directors, it is advisable to suspend use of the Prospectus due to impending corporate developments, public filings with the SEC or similar events, the Company shall deliver promptly a written certificate to each holder of Registrable Securities and the managing underwriters, if any, to the effect that the use of the Prospectus is to be suspended until the Company shall deliver a written notice that the use of the Prospectus may be resumed. Thereafter, the use of the Prospectus shall be suspended, and the Company shall not be required to maintain the effectiveness of, or amend or update the Registration Statement, or amend or supplement the Prospectus; provided, however, that the Company shall only be permitted to suspend the use of the Prospectus for a period not to exceed 45 days in any six-month period or two periods not to exceed an aggregate of 90 days in any 12-month period. The Company will use its best efforts to ensure that the use of the Prospectus may be resumed as soon as, in the good faith judgment of the Company's Board of Directors, disclosure of the material relating to such pending development, filing or event would not have a materially adverse effect on the Company. If the Company shall give any suspension notice pursuant to this Section 3(a)(1), the period contemplated by Section 4(b) hereof shall be extended by the number of days during such period from and including the date of giving notice to and including the date of giving such notice to and including the date when each holder of Registrable Securities shall have received notice that the use of the Prospectus may be resumed. 3 6 (2) Underwriter's Cutback. The Company shall use its best efforts to cause the managing underwriter or underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested to be included in the Registration for such offering under Section 3(a)(1) (the "Piggyback Securities"), to be included on the same terms and conditions as any similar securities included therein. Notwithstanding the foregoing, if the managing underwriter of any such proposed Underwritten Offering determines that marketing factors require a limitation of the number of securities to be underwritten, the managing underwriter may limit or exclude the amount of Registrable Securities to be included in the registration and underwriting as follows: the Company will include in such registration (i) first, all of the securities the Company proposes to sell and (ii) second, the Piggyback Securities and other securities sought to be registered, on a pro rata basis, based upon the number of securities sought to be registered by the holders of the Piggyback Securities and the holders of the other securities sought to be registered. If the managing underwriter makes such a determination, the Company shall promptly advise the holders of the Registrable Securities, in writing, that a limitation or inclusion of fewer than all of the Piggyback Securities is likely. If a reduction in the total amount of securities to be included in such offering is necessary as described in the prior sentence, the Company shall not treat the holders of the Piggyback Securities less favorably than directors, officers, controlling stockholders and their affiliates seeking piggyback registration rights. (b) Demand Registrations. (1) Obligation to File. At any time following the issuance of Warrants pursuant to the Warrant Agreement, promptly upon the written request of holders of a majority of the then outstanding Registrable Securities, the Company will use its reasonable best efforts to file with the SEC a Registration Statement under the Securities Act for the offering of all of the Registrable Securities which such holders request to be registered (the "Demand Registration"), provided, that the number of Registrable Securities to be registered (i) are not less than 200,000 or (ii) if less than 200,000, constitutes all of the remaining Registrable Securities. The Demand Registration shall be on an appropriate form and the Demand Registration and any form of prospectus included therein shall reflect such plan of distribution or method of sale as such holders notify the Company, including the sale of some or all of the Registrable Securities in a public offering. The Company shall use its reasonable best efforts to cause the Demand Registration to become effective, and, upon the request of any of such holders, keep the Demand Registration effective for up to 60 days, unless the distribution of securities registered thereunder has been earlier completed. During the period during which the Demand Registration is effective, the Company shall supplement or make amendments to the Demand Registration, if required by the Securities Act, including to reflect any specific plan of distribution or method of sale, and shall use its reasonable best efforts to have such supplements and amendments declared effective, if required, as soon as practicable after filing. Notwithstanding the foregoing, the Company shall have the right to delay any Demand Registration for a period of not more than 90 days after the date of any request to register the Registrable Securities pursuant to the Demand Registration, if, at the time of such request, the Company is preparing, or within ten days thereafter engages an underwriter, and commences in good faith to prepare, 4 7 a Registration Statement for a public offering (other than a registration relating solely to employee benefit plans) which is in fact filed and becomes effective within 90 days after the date the holders of the Registrable Securities have provided the written registration request, or is engaged in any material acquisition or divestiture or other business transaction with a third party which the Board of Directors of the Company reasonably determines in good faith would be adversely affected by the Demand Registration to the material detriment of the Company. (2) Number of Demand Registrations. The Company shall be obligated to effect, under this Section 3(b), (i) not more than two Demand Registrations during any 12 month period covering Registrable Securities issued or issuable within the two year period prior to the request for such Demand Registration, and (ii) not more than one Demand Registration during any 12 month period covering Registrable Securities issued more than two years before the request for such Demand Registration in the event that Rule 144 of the Securities Act does not permit such Registrable Securities to be freely tradeable by the purchasers thereof, provided, however, that, in any event, the Company shall not be obligated to effect more than one Demand Registration during the 12 month period after the Company files a Registration Statement on which holders of Registrable Securities that so elect are permitted to include as many Piggyback Securities as such holder desires without any reduction in the amount of such Piggyback Securities pursuant to paragraph 3(a)(2) hereof. A Demand Registration shall not be deemed to have been effected, nor shall it be sufficient to reduce the number of Demand Registrations available to the holders of Registrable Securities requesting a Demand Registration under this Section 3(b), if such registration cannot be used by holders of Registrable Securities for more than 120 days as a result of any stop order, injunction or other order of the SEC or other government authority for any reason other than an act or omission of such holders and all the Registrable Securities registered thereunder are not sold. (3) Selection of Underwriters. Any and all underwriters or other agents involved in any sale of Registrable Securities pursuant to a Registration Statement contemplated by this Section 3(b) shall include such underwriter(s) or other agent(s) as selected by the holders of a majority of Registrable Securities being registered and approved of by the Company, which approval shall not be unreasonably withheld; provided that any affiliate of a holder requesting a Demand Registration shall in all events be approved by the Company. SECTION 4. Registration Procedures. In connection with the Company's registration obligations pursuant to Section 3 hereof, the Company will use its commercially reasonable efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended methods or methods of disposition thereof, and pursuant thereto the Company will as expeditiously as possible: (a) before filing a Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the holders of the Registrable Securities covered by such Registration Statement and the underwriters, if any, copies of all such documents proposed to be 5 8 filed, which documents will be subject to the review of such holders and underwriters, and the Company will not file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto to which the holders of a majority of the Registrable Securities covered by such Registration Statement or the underwriters, if any, shall reasonably object within three days after such documents are delivered; (b) prepare and file with the SEC a Registration Statement or Registration Statements relating to the applicable Demand Registration or Piggyback Registration including all exhibits and financial statements required by the SEC to be filed therewith, and use its commercially reasonable efforts to cause such Registration Statement to become effective under the Securities Act; and prepare and file with the SEC such amendments and post-effective amendments to such Registration Statement, and such supplements to the Prospectus, as may be required by the rules, regulations or instructions applicable to the registration form utilized by the Company or by the Securities Act or rules and regulations otherwise necessary to keep the Registration Statement effective for a period of not less than 180 days (or such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold or withdrawn), or, if such Registration Statement relates to an Underwritten Offering, such longer period as in the opinion of counsel for the underwriters a Prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer; and cause the Prospectus as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (c) notify the selling holders of Registrable Securities and the managing underwriters, if any, promptly; (1) when the Prospectus or any Prospectus supplement or posteffective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (2) of any request by the SEC during the period of effectiveness for amendments or supplements to the Registration Statement or the Prospectus or for additional information relating to the Registration Statement, (3) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (4) if at any time the representations and warranties of the Company contemplated by paragraph (n) below cease to be true and correct, (5) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose, and 6 9 (6) of the existence of any fact known which results in the Registration Statement, the Prospectus or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (d) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment; (e) if requested by the managing underwriter or underwriters or a holder of Registrable Securities being sold in connection with an Underwritten Offering, immediately incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters and the holders of a majority of the Registrable Securities being sold require to be included therein relating to the plan of distribution with respect to such Registrable Securities, including, without limitation, information with respect to the amount of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the underwritten (or best efforts underwritten) offering of the Registrable Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (f) deliver to each selling holder of Registrable Securities and the underwriters, if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request (it being understood that the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling holders of Registrable Securities and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto) and such other documents as such selling holder and the underwriters, if any, may reasonably request in order to facilitate the disposition of the Registrable Securities by such holder and underwriters, if any, but only while the Company shall be required under the provisions hereof to cause the Registration Statement to remain current; (g) prior to any public offering of Registrable Securities, use its commercially reasonable efforts to register or qualify or cooperate with the selling holders of Registrable Securities, the underwriters, if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any selling holder of Registrable Securities or any underwriter reasonably requests in writing and do any and all other acts or things reasonably necessary to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (h) cooperate with the selling holders of Registrable Securities and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates 7 10 representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of Registrable Securities to the underwriters; (i) use its commercially reasonable efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities within the U.S. as may be necessary to enable the seller or sellers thereof or the underwriters, if any, to consummate the disposition of such Registrable Securities; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process in any such jurisdiction where it is not then so subject; (j) if any fact contemplated by paragraph (c)(6) above shall exist, prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, but only while the Company shall be required under the provisions hereof to cause the Registration Statement to remain current; (k) use its commercially reasonable efforts to cause all Registrable Securities covered by the Registration Statement to be quoted on the NASDAQ National Market or listed on each securities exchange on which similar securities issued by the Company are then listed; (l) enter into agreements (including underwriting agreements) and take all other appropriate actions that are reasonable, necessary and in typical form for such transactions in order to expedite or facilitate the disposition of such Registrable Securities. The above shall be done at the effectiveness of such Registration Statement, each closing under any underwriting or similar agreement as and to the extent required thereunder and from time to time as may be requested by any selling holder in connection with the disposition of Registrable Securities pursuant to such Registration Statement, but only while the Company shall be required under the provisions hereof to cause the Registration Statement to remain current; (m) make available for inspection at reasonable times and upon reasonable notice by a representative of the holders of a majority of the Registrable Securities, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by the sellers or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors and employees to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with the registration; provided that any records, information or documents that are designated by the Company in writing as confidential shall be kept confidential by such Persons unless disclosure of such records, information or documents is required by court or administrative order; and 8 11 (n) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, earnings statements satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of any fiscal quarter (or 90 days after the end of any fiscal year) (1) commencing at the end of any fiscal quarter in which Registrable Securities are sold to underwriters in an Underwritten Offering, or, if not sold to underwriters in such an offering, (2) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statements shall cover said 12-month periods. The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding itself, the Registrable Securities held by it and the distribution of such securities as the Company may from time to time reasonably request in writing, and shall take such commercially reasonable action as may be reasonably required in order to permit the Company and any underwriters to comply with all applicable requirements of the SEC and the NASD. Such provision of information and materials is a condition precedent to the obligations of the Company pursuant to this Agreement. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in Sections 4(c)(3), 4(c)(4), 4(c)(5), 4(c)(6) or 4(j) hereof, such holder will forthwith discontinue disposition of Registrable Securities until such holder's receipt of the copies of the supplemented or amended Prospectus contemplate by Sections 4(c)(3), 4(c)(4), 4(c)(5), 4(c)(6) or 4(j) hereof, or until it is advised in writing by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, such holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the time periods during which such Registration Statement shall be maintained effective shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of Registrable Securities covered by such Registration Statement either receives the copies of the supplemented or amended prospectus contemplated by Sections 4(c)(3), 4(c)(4), 4(c)(5), 4(c)(6) or 4(j) hereof or is advised in writing by the Company that the use of the Prospectus may be resumed. SECTION 5. Registration Expenses. (a) All expenses incident to the Company's performance of or compliance with this Agreement will be paid by the Company, regardless of whether the Registration Statement becomes effective, including without limitation: (1) all registration and filing fees (including all filings required to be made with the SEC and the NASD; (2) fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel for the underwriters or selling holders in 9 12 connection with blue sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters or holders of a majority of the Registrable Securities being sold may designate); (3) printing (including expenses of printing certificates for the Registrable Securities in a form eligible for deposit with the Depository Trust Company and of printing prospectus), messenger, telephone and delivery expenses; (4) fees and disbursements of counsel for the (i) Company, (ii) the underwriters and (iii) the sellers of the Registrable Securities (subject to the provisions of Section 6(b) hereof); (5) fees and disbursements of all independent certified public accountants of the Company (including the expenses of any special audit and "cold comfort" letters required by or incident to such performance); (6) fees and disbursements of underwriters (including, if applicable, the fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained in accordance with the rules and regulations of the NASD, but excluding discounts, commissions or fees of underwriters, selling brokers, dealer managers or similar securities industry professionals relating to the distribution of the Registrable Securities or legal expenses of any Person other than the Company, the underwriters and the selling holders); (7) securities acts liability insurance if the Company so desires or if the underwriters or selling holders of a majority of the Registrable Securities so require; and (8) fees and expenses of other Persons retained by the Company, (all such expenses being herein called "Registration Expenses"). The Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed, rating agency fees and the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with each Registration Statement required hereunder, the Company will reimburse the holders of Registrable Securities being registered pursuant to such Registration Statement for the reasonable fees and disbursements of not more than one counsel chosen by the holders of a majority of such Registrable Securities. 10 13 SECTION 6. Indemnification. (a) Indemnification by Company. The Company agrees to indemnify and hold harmless each holder of Registrable Securities, its officers, directors, employees and Agents and each Person who controls such holder within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person being sometimes hereinafter referred to as an "Indemnified Holder") from and against all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses arises out of or are based upon any such untrue statement or omission or allegation thereof based upon information furnished in writing to the Company by or on behalf of such holder expressly for use therein; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission in any such Registration Statement or Prospectus or preliminary prospectus, if such untrue statement or alleged untrue statement, omission or alleged omission is completely corrected in an amendment or supplement to such Registration Statement or Prospectus or preliminary prospectus and if, having previously been furnished by or on behalf of the Company with copies of the Prospectus or preliminary prospectus as so amended or supplemented, such holder thereafter fails to deliver such Prospectus or preliminary prospectus as so amended or supplemented, prior to or concurrently with the sale of a Registrable Security to the Person asserting such loss, claim, damage, liability or expense who purchased such Registrable Security which is the subject thereof from such holder. The indemnity will be in addition to any liability which the Company may otherwise have. The Company will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Indemnified Holders of Registrable Securities. If any action or proceeding (including any governmental investigation or inquiry) shall be brought or asserted against an Indemnified Holder in respect of which indemnity may be sought from the Company, such Indemnified Holder shall promptly notify the Company in writing, and the Company shall assume the defense thereof, including the employment of counsel satisfactory to such Indemnified Holder and the payment of all expenses. Such Indemnified Holder shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Holder unless (a) the Company has agreed to pay such fees and expenses or (b) the Company shall have failed to assume the defense of such action or proceeding and has failed to employ counsel reasonably satisfactory to such Indemnified Holder in any such action or proceeding (including any impleaded parties) include both such Indemnified Holder and the Company or (c) such Indemnified Holder shall have been advised in writing by counsel that there is a conflict of interest between such 11 14 Indemnified Holder and the Company or that there are additional defenses or claims that it may assert that are adverse to or not in the interest of the Company and separate counsel is required to represent such interests (in which case, if such Indemnified Holder notifies the Company in writing that it elects to employ separate counsel at the expense of the Company, the Company shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Holder, it being understood, however, that the Company shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for such Indemnified Holder and any other Indemnified Holders, which firm shall be designated in writing by such Indemnified Holders). The Company shall not be liable for any settlement of any such action or proceeding effected without its written consent, but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding for which the Company received notice hereunder, the Company agrees to indemnify and hold harmless such Indemnified Holder from and against any loss or liability by reason of such settlement or judgment. (b) Indemnification by Holder of Registrable Securities. Each holder of Registrable Securities agrees to indemnify and hold harmless the Company, its directors and officers and each Person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to such holder, but only with respect to information relating to such holder furnished in writing by such holder expressly for use in any Registration Statement or Prospectus, or any amendment thereto, or any preliminary prospectus. In case any action or proceeding shall be brought against the Company or directors or officers or any such controlling person, in respect of which indemnity may be sought against a holder of Registrable Securities, such holder shall have the rights and duties given the Company and the Company or its directors or officers or such controlling person shall have the rights and duties given to each holder by the preceding paragraph. In no event shall the liability of any selling holder of Registrable Securities hereunder be greater in amount than the gross amount of the proceeds (before expenses and commissions) from the sale of Registrable Securities by such holder giving rise to such indemnification obligation. The Company and each holder of Registrable Securities shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Person specifically for inclusion in any Prospectus or Registration Statement or any amendment or supplement thereto, or any preliminary prospectus. (c) Contribution. If the indemnification provided for in this Section 7 is unavailable to an indemnified party under Section 7(a) or Section 7(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Indemnified Holder on the 12 15 other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnified Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Indemnified Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, subject to the limitations set forth in the second paragraph of Section 7(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company and each holder of Registrable Securities agree that it would not be just and equitable if contribution pursuant to this Section 7(c) were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 7(c), an Indemnified Holder shall not be required to contribute any amount in excess of the amount by which the total price at which the Securities sold by such Indemnified Holder or its affiliated Indemnified Holders and distributed to the public were offered to the public exceeds the amount of any damages which such Indemnified Holder or its affiliated Indemnified Holder, has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. SECTION 7. Rule 144. The Company covenants that it will file the reports required to be filed by it under the Securities Acts and the Exchange Act and rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of any holder of Registrable Securities made after the first anniversary of the date hereof, make publicly available such information as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it had complied with such information and requirements. SECTION 8. Participation in Underwritten Registrations. No Person may participate in any Underwritten Registration hereunder unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 13 16 SECTION 9. Miscellaneous. (a) Termination. The registration rights set forth in this Agreement shall terminate (a) at any time, upon mutual agreement in writing of the Parties hereto or (b) upon such time as all of the Registrable Securities then held by the parties hereto can be sold by such parties in a three-month period in accordance with Rule 144 under the Securities Act. Notwithstanding the foregoing, the obligations of each party to this Agreement pursuant to Section 12 hereof, shall survive the termination of registration rights sets forth in this Agreement. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities which is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. (c) Adjustments Affecting Registrable Securities. The Company will not take any action, or permit any change to occur, with respect to the Registrable Securities which would (i) adversely affect the ability of the holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement or (ii) adversely affect the marketability of such Registrable Securities in any such registration. (d) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and holders of at least a majority of the outstanding Registrable Securities affected by such amendment. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other holders of Registrable Securities may be given by the holders of a majority of the Registrable Securities being sold. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a holder of Registrable Securities, at the most current address given by such holder to the Company in accordance with the provisions of this Section 10(e). With a copy to: Stroock & Stroock & Lavan LLP 2029 Century Park East, 16th Floor Los Angeles, California 90067 Facsimile: 310-556-5959 Attention: Gregory A. Bray, Esq. 14 17 (ii) if to the Company, initially to: Komag, Incorporated 1710 Automation Parkway San Jose, California 95131-1873 Facsimile: 408-944-9234 Attention: Chief Financial Officer and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 10(e), With a copy to: Wilson Sonsini Goodrich & Rosati 650 Page Mill Road Palo Alto, California 94304-1050 Facsimile: 650-493-6811 Attn: Alan K. Austin, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent permitted holders of Registrable Securities. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 15 18 (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the securities sold pursuant to the Purchase Agreement. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signature Pages To Follow] 16 19 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. KOMAG, INCORPORATED By: ---------------------------- Title: ------------------------- Address: 1710 Automation Parkway San Jose, California 95131-1873 Facsimile: (408) 944-9234 Attention: Chief Financial Officer FLEET NATIONAL BANK f/k/a BANKBOSTON, N.A., as Restructure Agent and as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 100 Federal Street, Mail Stop 01-06-01 Boston, MA 02110 Facsimile: (617) 434-4775 Attention: Donald Sheehan BANK OF MONTREAL, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 115 S. LaSalle Street, 12 West Chicago, IL 60603 Facsimile: (312) 750-6057 Attention: Jack J. Kane S-1 20 BEAR, STEARNS & CO. INC., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 245 Park Avenue New York, New York 10167 Facsimile: (212) 272-8102 Attention: --------------------- COMERICA BANK - CALIFORNIA, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 55 Almaden Boulevard Mail Code: 4041 San Jose, California 95113 Facsimile: (408) 556-5855 Attention: Carol A. Palestro OLYMPUS SECURITIES, LTD., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: c/o Citadel Investment Group, LLC 225 West Washington Street, 9th Floor Chicago, Illinois 60606 Facsimile: (312) 368-4650 Attention: Bradford Couri S-2 21 NELSON PARTNERS LTD., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: c/o Citadel Investment Group, LLC 225 West Washington Street, 9th Floor Chicago, Illinois 60606 Facsimile: (312) 368-4650 Attention: Bradford Couri THE BANK OF NOVA SCOTIA, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: One Liberty Plaza New York, New York 10006 Facsimile: (212) 225-5205 Attention: Norm Gillespie UNION BANK OF CALIFORNIA, N.A., as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 350 California Street, 7th Floor San Francisco, California 94104 Facsimile: (415) 705-7390 Attention: Christiana Creekpaum S-3 22 LOEB PARTNERS CORPORATION, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 61 Broadway, 24th Floor New York, New York 10006 Facsimile: (212) 574-2003 Attention: Robert Grubin THE DAI-ICHI KANGYO BANK, LIMITED, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: Corporate Finance Department I One World Trade Center, Suite 4911 New York, NY 10048 Facsimile: (212) 912-1879 Attention: Nelson Chang THE INDUSTRIAL BANK OF JAPAN, LIMITED, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: One Market Street Spear Tower, Suite 1610 San Francisco, California 94105 Facsimile: (415) 982-1917 Attention: Joseph A. Endoso S-4 23 THE MITSUBISHI TRUST AND BANKING CORPORATION, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 520 Madison Avenue, 26th Floor New York, NY 10022 Facsimile: (212) 644-6825 Attention: Daniel Chang SANWA BANK CALIFORNIA, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 444 Market Street, 22nd Floor San Francisco, CA 94111 Facsimile: (415) 597-5491 Attention: George Vetek BANK ONE, N.A. as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: Bank One, N.A. Western Region Managed Assets AZ1-1283 201 N. Central Avenue Phoenix, AZ 85004-2267 Facsimile: (602) 221-1737 Attention: Dennis B. Warren S-5 24 THE FUJI BANK, LIMITED, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 333 South Hope Street Los Angeles, CA 90071 Facsimile: (213) 253-4178 Attention: --------------------- THE SUMITOMO BANK, LIMITED, as a Restructure Lender By: ---------------------------- Title: ------------------------- Address: 555 California Street, Suite 3350 San Francisco, California 94104 Facsimile: (415) 362-6527 Attention: Azar Shakeri S-6 EX-99.1 5 ex99-1.txt PRESS RELEASE DATED JUNE 1, 2000 1 EXHIBIT 99.1 KOMAG ANNOUNCES SIGNING OF RESTRUCTURED LOAN AGREEMENT FOR IMMEDIATE RELEASE SAN JOSE, Calif., June 1, 2000 /PRNewswire/ -- Komag, Incorporated (Nasdaq: KMAG), a technical leader in the disk drive component industry, today announced that the company and its senior lenders signed a definitive Loan Restructure Agreement ("Agreement") that supersedes and replaces the four senior credit facilities between the company and its senior lenders. Under the prior credit facilities the company was in technical default since June 1998. By entering into this new Agreement the company is no longer in default. Also, pursuant to the Agreement, certain lenders elected to exchange their notes for new subordinated convertible notes. ABOUT KOMAG Founded in 1983, Komag, Incorporated has produced over 450 million thin-film disks, the primary storage medium for digital data used in computer disk drives. The company is well positioned as the broad-based strategic supplier of choice for the industry leading disk drive manufacturers. Through its advanced development facilities in the United States and high volume production factories in Southeast Asia, Komag provides high quality, leading-edge disk products at a low overall cost to its customers. These attributes enable Komag to partner with customers in the execution of their time-to-market design and time-to-volume manufacturing strategies. For more information about Komag, visit Komag's Internet home page at http://www.komag.com or call Komag's Investor Relations 24-hour Hot Line at 888-66-KOMAG or 408-576-2901. Contact: KOMAG, INCORPORATED, San Jose, CA Ted Siegler at (408) 576-2209 E-mail communications: ir_web@komag.com -----END PRIVACY-ENHANCED MESSAGE-----