INTERCREDITOR AND SUBORDINATION AGREEMENT
This Intercreditor and Subordination
Agreement, dated as of October 31, 2005, is made by and among (i)
Exabyte Corporation, a Delaware corporation (“
Borrower ”), (ii) Wells Fargo Bank, National
Association (“ Wells Fargo ”), as successor in
interest to Wells Fargo Business Credit, Inc., (iii) the purchasers
of the Borrower’s 10% Secured Convertible Subordinated Notes
due September 30, 2010 (collectively, the “
Noteholders ”), and (iv) Imation Corp., a Delaware
corporation (“ Imation ”).
Recitals
Borrower is indebted to Wells Fargo
pursuant to that certain Credit and Security Agreement dated as of
March 9, 2005, as amended, supplemented or restated from time to
time (the “ Credit Agreement ”), providing for a
revolving line of credit in the amount of $20.0 million secured by
a first priority security interest in substantially all of
Borrower’s assets. All monetary obligations of Borrower to
Wells Fargo arising under the Credit Agreement are referred to
herein as the “ Senior Debt .”
Borrower is indebted to the
Noteholders pursuant to its 10% Secured Convertible Subordinated
Notes due September 30, 2010 in the aggregate principal amount of
up to $11.0 million, as amended, supplemented or restated from time
to time (the “ Notes ”), secured by a second
priority security interest in substantially all of Borrower’s
assets. All monetary obligations of Borrower to the Noteholders
arising under the Notes are referred to herein as the “
Senior Subordinated Debt .” Any action required or
permitted to be taken by the Noteholders pursuant to this Agreement
shall be taken by the holders of a majority in principal amount of
the then-outstanding Notes, and any action so taken shall be
binding on all existing and future holders of Notes. Any monetary
obligation of the Noteholders hereunder shall be a several (and not
joint) liability of each of the Noteholders in the same proportion
that the principal amount of Notes held by such Noteholder bears to
the aggregate principal amount of all outstanding Notes.
Borrower is indebted to Imation
pursuant to two separate promissory notes in the aggregate
principal amount of $7.0 million, as amended, supplemented or
restated from time to time (the “ Imation Notes
”) secured by a third priority security interest in
substantially all of Borrower’s assets. In addition, pursuant
to the terms of a Media Distribution Agreement with Borrower dated
November 10, 2003, as amended, supplemented or restated from time
to time (the “ MDA ”), Borrower has granted to
Imation a junior security interest in certain intellectual property
of Borrower. All obligations of Borrower to Imation arising under
the Imation Notes and the MDA are referred to herein as the “
Junior Subordinated Debt .”
In connection with the Credit
Agreement, Imation executed a Subordination Agreement dated as of
March 9, 2005, for the benefit of Wells Fargo (the “
Imation Subordination Agreement ”). This Agreement
replaces the Imation Subordination Agreement in its entirety, and
the Imation Subordination Agreement will cease to be of any force
or effect upon effectiveness of this Agreement.
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For purposes of this Agreement, (i)
Wells Fargo in its capacity as the holder of the Senior Debt shall
constitute the “ Senior Lender ” in relation to
both the Noteholders and Imation, and the Noteholders in their
capacity as the holders of the Senior Subordinated Debt shall also
constitute the “ Senior Lender ” in relation to
Imation, (ii) the Senior Debt shall constitute Senior Lender
Indebtedness (as defined below) with respect to both the Senior
Subordinated Debt and the Junior Subordinated Debt, and the Senior
Subordinated Debt shall also constitute Senior Lender Indebtedness
with respect to the Junior Subordinated Debt, (iii) both the
Noteholders and Imation shall constitute the “
Subordinated Creditor ” in relation to Wells Fargo,
and Imation shall also constitute the “ Subordinated
Creditor ” in relation to the Noteholders, and (iv) both
the Senior Subordinated Debt and the Junior Subordinated Debt shall
constitute Subordinate Indebtedness (as defined below) with respect
to the Senior Debt, and the Junior Subordinated Debt shall
constitute Subordinate Indebtedness with respect to the Senior
Subordinated Debt.
This Agreement shall inure to the
benefit of any successor to Wells Fargo as senior lender (pursuant
to a refinancing of the Credit Agreement or otherwise), and any
such successor lender shall constitute the “ Senior
Lender ” in relation to both the Noteholders and Imation,
and a principal amount of up to $40.0 million of obligations owing
by Borrower to Wells Fargo or such successor lender, plus interest,
charges, and fees associated therewith, shall constitute Senior
Lender Indebtedness (as defined below) for purposes of this
Agreement.
As a condition to making any loan or
extension of credit to the Borrower, the Senior Lender has required
that the Subordinated Creditor subordinate the payment of the
Subordinated Creditor’s loans and other financial
accommodations to the payment of any and all indebtedness of the
Borrower to the Senior Lender. Assisting the Borrower in obtaining
credit accommodations from the Senior Lender and subordinating the
Subordinated Creditor’s interests pursuant to the terms of
this Agreement are in the Subordinated Creditor’s best
interest.
ACCORDINGLY, in consideration of the
loans and other financial accommodations that have been made and
may hereafter be made by the Senior Lender for the benefit of the
Borrower, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
Subordinated Creditor hereby agrees as follows:
1.
Definitions . As used herein, the following terms have the
meanings set forth below:
“ Availability ”
has the meaning given in the Credit Agreement.
“ Borrower Default
” means a Default or Event of Default as defined in any
agreement or instrument evidencing, governing, or issued in
connection with Senior Lender Indebtedness, including, but not
limited to, the Credit Agreement, or any default under or breach of
any such agreement or instrument.
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“ Collateral ”
means all collateral now or hereafter securing payment of the
Senior Lender Indebtedness, including all proceeds
thereof.
“ Imation Trade
Receivables ” means all amounts owed by the Borrower to
Imation other than MDA Subordinated Debt and amounts owing under
the Imation Notes.
“ Lien ” means
any security interest, mortgage, deed of trust, pledge, lien,
charge, encumbrance, title retention agreement or analogous
instrument or device, including the interest of each lessor under
any capitalized lease and the interest of any bondsman under any
payment or performance bond, in, of or on any assets or properties
of a Person, whether now owned or hereafter acquired and whether
arising by agreement or operation of law.
“ MDA Subordinated
Payment ” means (a) any refund of the Distribution Fee,
as such term is defined in the MDA, (b) any increase in the margin
received by Imation in connection with the resale of
Borrower’s media products under the MDA, other than the
increase from 8% to 10% scheduled to take effect on January 1,
2007, and (c) any payment, such as for damages or indemnification,
under the MDA that is out of the ordinary course of
business.
“ Senior Lender
Indebtedness ” means each and every debt, liability and
obligation of every type and description which the Borrower may now
or at any time hereafter owe to the Senior Lender, whether such
debt, liability or obligation now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or secondary,
liquidated or unliquidated, or joint, several or joint and several,
all interest thereon, and all fees, costs and other charges related
thereto (including all interest, fees, costs and other charges
accruing after the commencement of any case, proceeding or other
action relating to the bankruptcy insolvency or reorganization of
the Borrower, whether or not allowed in such proceeding or other
action), all renewals, extensions and modifications thereof and any
notes issued in whole or partial substitution therefor; provided,
however, that “ Senior Lender Indebtedness ”
with respect to Wells Fargo and/or its successors and assigns shall
at no time exceed an aggregate principal amount of $40,000,000,
plus interest, charges, and fees associated therewith.
“ Subordinated
Indebtedness ” means all obligations which the Borrower
may now or at any time hereafter owe to the Subordinated Creditor,
whether such debt, liability or obligation now exists or is
hereafter created or incurred, and whether it is or may be direct
or indirect, due or to become due, absolute or contingent, primary
or secondary, liquidated or unliquidated, or joint, several or
joint and several; provided, however, that Subordinated
Indebtedness shall not include any obligations which the Borrower
may now or at any time hereafter owe to the Subordinated Creditor
under the Securities Purchase Agreement, dated April 30, 2004, or
any other documents or certificate of incorporation entered into in
connection therewith.
2.
Subordination . The payment of all of the Subordinated
Indebtedness is hereby expressly subordinated to the extent and in
the manner hereinafter set forth to the
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payment in full of the Senior Lender
Indebtedness; and regardless of any priority otherwise available to
the Subordinated Creditor by law or by agreement, the Senior Lender
shall hold a first priority Lien in the Collateral, and any Lien
claimed therein by the Subordinated Creditor shall be and remain
fully subordinate for all purposes to the Lien of the Senior Lender
therein for all purposes whatsoever. The Subordinated Indebtedness
shall continue to be subordinated to the Senior Lender Indebtedness
even if the Senior Lender Indebtedness is subordinated, avoided or
disallowed under the United States Bankruptcy Code or other
applicable law.
3.
Payments and Setoff . Until all of the Senior Lender
Indebtedness has been paid in full and the Senior Lender has
released its Lien in the Collateral:
(a)
Payments. The Subordinated Creditor shall not,
without the Senior Lender’s prior written consent, demand,
receive or accept any payment (whether of principal, interest or
otherwise) from the Borrower in respect of the Subordinated
Indebtedness, including (i) with respect to the Noteholders, any
payment of principal, interest or premium with respect to the Notes
(other than payments for accrued interest on the Notes or upon
conversion or exercise of the Notes or any other securities issued
in connection therewith, in each case made solely in shares of
Borrower’s common stock), and (ii) with respect to Imation,
any payment of principal or interest on the Imation Notes or any
MDA Subordinated Payment. Notwithstanding the foregoing, (A) the
Subordinated Creditor may accept payment of Imation Trade
Receivables, and (B) so long as (1) no Borrower Default exists with
respect to Senior Lender Indebtedness that has not been waived by
the applicable Senior Lender, (2) average daily Availability for
the 90 days prior to such payment is not less than the sum of
$400,000 plus the amount of such payment, and (3) after giving
effect to such payment, Availability would be not less than
$400,000, the Subordinated Creditor may accept scheduled payments
of principal and interest on the Notes and the Imation Notes, as
applicable.
(b)
Setoff. The Subordinated Creditor shall not, without
the Senior Lender’s prior written consent, exercise any
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