Rocky,
Lexar Media CompactFlash
I glanced through the SEC registration statement filed on 02August00 and there are some interesting things.
Lexar has a $10,000,000.00 loan that they obtained at the end of June, I believe.
There are certain covenants of the loan that must be fulfilled for the entire sum to be dispersed.
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AMOUNT AND TERMS OF LOANS
(a) Subject to the terms and conditions hereof, Lender agrees to make loans ("Loans") to the Borrower from time to time during the term hereof, in a total amount not to exceed $10,000,000, provided that no Loans will be made after the first anniversary of the date hereof. Loans, when made, may not be repaid and reborrowed.
(b) Loans will be disbursed in separate disbursements (each a "Disbursement") as follows:
(1) A Disbursement of $4,000,000 on the date the conditions in Sections 5.1, 5.2 and 5.3 have been satisfied.
(2) A Disbursement of $3,000,000, upon execution and delivery by Borrower of * with a * which either * (as defined below) of * (together with any of its affiliates, collectively, * whose products to be sold under * are not subject to any *, provided that (i) * in the business plan which it has previously provided to Lender, * and (ii) *. As used above *, including without limitation * the SanDisk Litigation (as defined below). As used herein "SanDisk Litigation" means the case entitled "SanDisk Corporation v. Lexar Media, Inc." (U.S. District Court, Northern District of California, Case No. (C98-01115CRB and any related cases, including the case entitled "Lexar Media, Inc. v. SanDisk Corporation" (U.S. District Court, Northern District of California, Case No. C99-02463CRB.
(3) A Disbursement of $2,000,000, upon completion of an alternate design for the Borrower's products which are the subject of the Borrower's business plan previously provided to Lender, if the following conditions are met: (i) the Borrower represents and warrants to the Lender in writing, in form satisfactory to Lender, that the design does not infringe any Pertinent Patents, and (ii) the Borrower delivers to the Lender a well-reasoned written opinion, in form and substance reasonably satisfactory to Lender and from reputable patent counsel reasonably satisfactory to Lender, which concludes that the design does not infringe any Pertinent Patents, and (iii) Borrower provides evidence to Lender, reasonably satisfactory to Lender, that Borrower is able to manufacture or have manufactured such design in a timely fashion, and at a market acceptable price point, in order to meet at least 80% of the revenues in the business plan which it has previously provided to Lender.
(4) A Disbursement of $1,000,000 upon entry of a final judgement (as to which all appeal periods have expired and no appeal has been taken), in favor of the Borrower on all claims of SanDisk and any other plaintiffs in the SanDisk Litigation and any other then pending litigation between Borrower and SanDisk.
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If you look through the loan default criteria there are some interesting things to be learned.
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EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan, or any other amount payable hereunder or under any other Loan Document, within three days after any such interest or other amount becomes due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or
(c) any Loan Party shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 6.4(a) (with respect to the Borrower only), Section 6.7(a) or Section 7 of this Agreement or Sections 5.4 and 5.6(b) of the Guarantee and Collateral Agreement; or
(d) any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Lender; or
(e) the Borrower or any of its Subsidiaries shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) default in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any timeconstitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $1,000,000; or
(f) (i) the Borrower or any of its Subsidiaries shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Borrower or any of its Subsidiaries shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Borrower or any of its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or
(g) (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Lender, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Lender is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the sole judgment of the Lender, reasonably be expected to have a Material Adverse Effect; or
(h) (i) one or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $1,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof, or (ii) any preliminary or permanent injunction(s) shall be issued in the SanDisk Litigation against the Borrower or its Subsidiaries adversely affecting the business practices of the Borrower, including, without limitation, its ability to manufacture products; or
(i) any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or
(j) the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or
(k) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 20% of the outstanding common stock of the Borrower; or (iii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors; or
(l) any Event of Default as defined in the Senior Loan Agreement, as the same is in effect on the date hereof, or as the same may hereafter be amended, shall occur (without regard to whether or not such Event of Default is waived by the lenders under the Senior Loan Agreement);
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SanDisk has Lexar over a barrel.
They have about 2 months to finalize a co-licensing agreement with SanDisk, if this is still possible, or assume the risk of the outcome of the patent nullification trial set for October 2000. The whole situation seems to boil down to sensibility vs. bravado.
I would appreciate updates on the Lexar Media IPO if anyone has information.
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