EXHIBIT 10.20
CONVERTIBLE NOTE AND WARRANT PURCHASE AGREEMENT
This Convertible Note and Warrant Purchase Agreement (the "Agreement")
---------
is made as of March 21, 2000 between Lexar Media Inc., a California corporation
(the "Company"), and Sony Electronics Inc. (the "Investor").
------- --------
1. Issuance of Note and Warrant.
----------------------------
1.1 Convertible Note. Subject to the terms and conditions of this
----------------
Agreement, the Investor agrees to loan the Company an aggregate of Two Million
Dollars ($2,000,000), which loan shall be evidenced by a Convertible Promissory
Note in substantially the form of Exhibit A attached hereto (the "Note"). The
--------- ----
parties agree that the Note shall be convertible into shares of the Company's
Common Stock (the "Conversion Stock") at any time prior to the closing of an
----------------
Initial Public Offering (as defined in the Note) at the conversion rate set
forth in the Note. If on September 1, 2000 the Company has not closed an
Initial Public Offering, then the Note shall no longer be convertible, in whole
or in part, into Conversion Stock or any other security of the Company or any
other successor corporation to the Company.
1.2. Warrant. Subject to the terms and conditions of this Agreement,
-------
the Company further agrees to issue to the Investor a warrant (the "Warrant") in
-------
the form attached hereto as Exhibit B to purchase from the Company shares of
---------
Common Stock (the "Warrant Stock") at the exercise price set forth in the
-------------
Warrant. The parties agree that the Warrant shall not be exercisable until
September 1, 2000. The parties further agree that in the event that the closing
of an Initial Public Offering occurs prior to September 1, 2000, the Warrant
shall expire and shall be of no further force or effect.
2. Closing. The purchase and sale of the Note and the Warrant will take
-------
place at the offices of Fenwick & West LLP, Two Palo Alto Square, Palo Alto,
California, on March 21, 2000, or at such other time and place as the Company
and the Investor mutually agree upon (which time and place are referred to as
the "Closing"). At the Closing, the Investor will deliver to the Company
-------
payment in full for the Note in the amount of Two Million Dollars ($2,000,000),
which the Investor agrees to purchase at the Closing by (i) a check payable to
the Company's order, (ii) wire transfer of funds to the Company or (iii) any
combination of the foregoing. At the Closing, the Company will deliver to the
Investor a duly executed Note and a duly executed Warrant.
3. Representations and Warranties of Company. The Company hereby
-----------------------------------------
represents and warrants to the Investor that the statements in the following
paragraphs of this Section 3 are all true and complete:
3.1 Organization, Good Standing and Qualification. The Company has
---------------------------------------------
been duly incorporated and organized, and is validly existing in good standing,
under the laws of the State of California. The Company has the corporate power
and authority to own and operate its properties and assets and to carry on its
business as currently conducted and as presently proposed to be conducted.
3.2 Due Authorization. All corporate action on the part of the
-----------------
Company's directors and shareholders necessary for the authorization, execution,
delivery of and the performance of all obligations of the Company under this
Agreement, the Note and the Warrant has been taken or will be taken prior to the
Closing, and this Agreement constitutes, and the Note and the Warrant, when
executed and delivered, will constitute valid and legally binding obligations of
the Company, enforceable in accordance with their respective terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditor's rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies.
3.3 Corporate Power. The Company has the corporate power and
---------------
authority to execute and deliver this Agreement, the Note and the Warrant to be
purchased by the Investor hereunder, to issue the Note and the Warrant and to
carry out and perform all its obligations under this Agreement, the Note and the
Warrant.
3.4 Valid Issuance.
--------------
(a) The Note and the Warrant, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided for
herein, will be duly and validly issued, fully paid, nonassessable and free and
clear of all liens and encumbrances. The Conversion Stock and the Warrant
Stock, when issued in accordance with the terms of the Note and the Warrant,
respectively, will be duly and validly issued, fully paid, nonassessable and
free and clear of all liens and encumbrances.
(b) Based in part on the representations made by the Investors in
Section 4 hereof, the offer and sale of the Note and the Warrant solely to the
Investor in accordance with this Agreement are exempt from the registration and
prospectus delivery requirements of the U.S. Securities Act of 1933, as amended
(the "1933 Act"), and the securities registration and qualification requirements
--------
of the currently effective provisions of the securities laws of California and
the state in which the Investor is resident.
3.5 Preemptive Rights; Rights of First Refusal. The issuance of the
Securities will not trigger any preemptive rights, rights of first refusal or
other rights to purchase stock of the Company (whether in favor of the Company
or any other person), pursuant to any agreement or commitment of the Company,
other than pursuant to that certain Investors Rights Agreement, dated September
28, 1999, by and among the Company and certain investors named therein (the
"Rights Agreement"). As set forth in Section 7, the Company is in the process
----------------
of amending the Rights Agreement such that the issuance of the Securities will
not trigger the preemptive rights and rights of first refusal contained therein.
4. Representations of Investor. The Investor hereby represents and
---------------------------
warrants to, and agrees with, the Company, that:
2
4.1 Authorization. This Agreement constitutes the Investor's valid
-------------
and legally binding obligation, enforceable in accordance with its terms except
as may be limited by (i) applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies. The Investor represents that it has full
power and authority to enter into this Agreement.
4.2 Purchase for Own Account. The Note, the Warrant, the Conversion
------------------------
Stock and the Warrant Stock (collectively, the "Securities") will be acquired
----------
for investment for the Investor's own account, not as a nominee or agent, and
not with a view to the public resale or distribution thereof within the meaning
of the 1933 Act, and the Investor has no present intention of selling, granting
any participation in or otherwise distributing the same.
4.3 Disclosure of Information. The Investor believes that it has
-------------------------
received or has had full access to all the information it considers necessary or
appropriate to make an informed investment decision with respect to the
Securities. The Investor further has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Securities and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to the Investor
or to which the Investor had access. The foregoing, however, does not in any
way limit or modify the representations and warranties made by the Company in
Section 3.
4.4 Investment Experience. The Investor understands that the
---------------------
purchase of the Securities involves substantial risk. The Investor (i) has
experience as an investor in securities of companies in the development stage
and acknowledges that the Investor is able to fend for itself, can bear the
economic risk of the Investor's investment in the Securities and has such
knowledge and experience in financial or business matters that the Investor is
capable of evaluating the merits and risks of this investment in the Securities
and protecting its own interests in connection with this investment and/or (ii)
has a preexisting personal or business relationship with the Company and certain
of its officers, directors or controlling persons of a nature and duration that
enables the Investor to be aware of the character, business acumen and financial
circumstances of such persons.
4.5 Accredited Investor Status. The Investor is an "accredited
--------------------------
investor" within the meaning of Regulation D promulgated under the ▇▇▇▇ ▇▇▇.
4.6 Restricted Securities. The Investor understands that the
---------------------
Securities are characterized as "restricted securities" under the 1933 Act and
Rule 144 promulgated thereunder inasmuch as they are being acquired from the
Company in a transaction not involving a public offering, and that under the
1933 Act and applicable regulations thereunder such securities may be resold
without registration under the 1933 Act only in certain limited circumstances.
In this connection, the Investor represents that the Investor is familiar with
Rule 144 of the 1933 Act, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act.
3
The Investor understands that the Company is under no obligation to register any
of the securities sold hereunder, except pursuant to the Rights Agreement
described in Section 7.
4.7 No Solicitation. At no time was the Investor presented with or
---------------
solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Securities.
5. Further Limitations on Disposition. Without in any way limiting the
----------------------------------
representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) there is then in effect a registration statement under the 1933
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) the Investor shall have notified the Company of the proposed
disposition, and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and, at the expense of the
Investor or its transferee, with an opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of such
securities under the 1933 Act.
Notwithstanding the provisions of paragraphs (a) and (b) above, no such
registration statement or opinion of counsel shall be required: (i) for any
transfer of the Securities in compliance with Rule 144 or Rule 144A; or (ii) for
any transfer of the Securities by the Investor to an affiliate (as such term is
defined in the ▇▇▇▇ ▇▇▇) of the Investor; provided that in each of the foregoing
--------
cases the transferee agrees in writing to be subject to the terms of this
Section 5 to the same extent as if the transferee were the Investor.
6. Legends. The Investor understands and agrees that the certificates
-------
evidencing the Securities will bear legends substantially similar to those set
forth below in addition to any other legend that may be required by applicable
law, by the Company's Articles of Incorporation or Bylaws, or by any agreement
between the Company and the Investor:
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS
OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD
OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED
TRANSFER OR RESALE IS
4
IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code or any other state
securities laws.
The legend set forth in (a) above shall be removed by the Company from any
certificate evidencing the Securities upon delivery to the Company of an opinion
of counsel, reasonably satisfactory to the Company, that a registration
statement under the 1933 Act is at that time in effect with respect to the
legended security or that such security can be freely transferred in a public
sale (other than pursuant to Rule 144 or Rule 145 under the ▇▇▇▇ ▇▇▇) without
such a registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which the
Company issued the Securities.
7. Registration Rights. The Company agrees to use its best efforts to
-------------------
promptly cause the Rights Agreement to be amended to permit the Investor to
become a party thereto. It is understood and agreed that the Investor will not
have incidental registration rights as described in Section 5.2 of the Rights
Agreement with respect to the Initial Public Offering. Except as provided in
the previous sentence, the incidental registration rights to be granted to the
Investor under Section 5.2 of the Rights Agreement shall be granted on a pro
rata, pari passu basis with the registration rights of other holders of
registration rights under the Rights Agreement. As a condition to being granted
the registration rights described above, the Investor must execute and deliver
such signature pages to the Rights Agreement, as amended, as the Company may
reasonably request. In the event that the Company is unable to cause the Rights
Agreement to be amended to permit the Investor to become a party thereto within
fifteen (15) business days of the date of this Agreement, then the Company will
enter into a separate registration rights agreement with the Investor in order
to grant the Investor substantially the same rights it would have had if it had
become a party to the Rights Agreement.
8. Market Standoff Agreement. The Investor hereby agrees that, following
-------------------------
the effective date of a registration statement of the Company's initial sale of
securities under the 1933 Act, for the period of time and to the extent
reasonably requested by the underwriter(s) and the Company, the Investor shall
not sell, offer to sell, contract to sell (including, without limitation, any
short sale), grant any option to purchase or otherwise transfer or dispose of
any securities of the Company held by the Investor, directly or indirectly,
except securities covered by the registration statement and transfers to
affiliates who agree to be similarly bound) for the period; provided however,
that (i) the executive officers and directors of the Company, as well as any
holder of at least five percent (5%) of the Company's preferred Stock or common
Stock, shall have agreed to be bound by substantially the same terms and
conditions, (ii) the time period requested for such market standoff shall not
exceed one hundred eighty (180) days and (iii) the restriction shall not apply
to a registration relating solely to employee, consultant or advisor benefit
plans on Form S-1 or Form S-8 (or similar forms promulgated after the date
hereof) or a registration relating solely to a transaction pursuant to Rule 145
promulgated under the 1933 Act on Form S-4 (or similar forms promulgated after
the date hereof). The Company may impose
5
stop-transfer instructions during such standoff period with respect to the
securities of the Investor subject to this restriction if necessary to enforce
such restrictions.
9. GENERAL PROVISIONS.
------------------
9.1 Survival of Warranties. The representations, warranties and
----------------------
covenants of the Company and the Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of the Investor or the Company, as the case may be.
9.2 Successors and Assigns. The terms and conditions of this
----------------------
Agreement, the Note and the Warrant shall inure to the benefit of and be binding
upon the respective successors and assigns of the parties.
9.3 Governing Law. This Agreement, the Note and the Warrant shall be
-------------
governed by and construed under the internal laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California, without reference to principles of
conflict of laws or choice of laws.
9.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.5 Headings. The headings and captions used in this Agreement, the
--------
Note and the Warrant are used for convenience only and are not to be considered
in construing or interpreting this Agreement, the Note and the Warrant. All
references in this Agreement to sections and exhibits shall, unless otherwise
provided, refer to sections hereof and exhibits attached hereto, all of which
exhibits are incorporated herein by this reference.
9.6 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement, the Note and the Warrant shall be given in
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or upon deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the Investor at
the address set forth below or the last address furnished to the Company by the
Investor in writing or, in the case of the Company, at the principal offices of
the Company set forth below, or at such other address as any party or the
Company may designate by giving ten (10) days' advance written notice to all
other parties.
To the Company: To the Investor:
-------------- ---------------
Lexar Media, Inc. Sony Electronics Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Attention: Law Department
Phone: (▇▇▇) ▇▇▇-▇▇▇▇ Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
6
9.8 Amendments and Waivers. Any term of this Agreement, the Note and
----------------------
the Warrant may be amended, and the observance of any term of this Agreement,
the Note and the Warrant may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investor. Any amendment or waiver effected in
accordance with this Section shall be binding upon the Investor, each future
holder of the Note and/or Warrant and the Company. The waiver of any default
shall not be deemed to constitute a waiver of any other default or a succeeding
breach or default. Time is of the essence in respect to all provisions of this
Agreement, the Note and the Warrant that specify a time for performance.
9.9 Severability. If one or more provisions of this Agreement, the
------------
Note or the Warrant are held to be unenforceable under applicable law, such
provision(s) shall be excluded from this Agreement, the Note or the Warrant, as
applicable, and the balance of the Agreement, the Note or the Warrant shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
9.10 Entire Agreement. This Agreement, the Note and the Warrant
----------------
constitute the entire agreement and understanding of the parties with respect to
the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings duties or obligations between the
parties with respect to the subject matter hereof.
9.11 Further Assurances. From and after the date of this Agreement,
------------------
upon the request of the Investor or the Company, the Company and the Investor
shall execute and deliver such instruments, documents or other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
9.12 Attorneys' Fees. In the event any party is required to engage
---------------
the services of any attorneys for the purpose of enforcing this Agreement, the
Note and/or the Warrant, or any provision hereof or thereof, the prevailing
party shall be entitled to recover its reasonable expenses and costs in
enforcing this Agreement, the Note and/or the Warrant, including attorneys'
fees.
9.13 No Impairment. The Company will not, by amendment of its
-------------
Articles of Incorporation or Bylaws, or through reorganization, consolidation,
merger, dissolution, issue or sale of securities, sale of assets or any other
voluntary action, willfully avoid or seek to avoid the observance or performance
of any of the terms of this Agreement, the Note or the Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Investor under this Agreement, the Note and the Warrant
against wrongful impairment. Without limiting the generality of the foregoing,
the Company will take all such action as may be necessary or appropriate in
order that the Company may duly and validly issue fully paid and nonassessable
shares of Conversion Stock upon the conversion of the Note or Warrant Stock upon
the exercise of the Warrant.
7
9.14 Transfer. Except as set forth in Section 5, this Agreement, the
--------
Note and the Warrant, and any of the rights hereunder or thereunder, may not be
assigned, conveyed or transferred, in whole or in part, without the Company's
prior written consent, which the Company may withhold in its reasonable
discretion. The rights and obligations of the Company and the Investor under
this Agreement, the Note and the Warrant shall be binding upon and benefit their
respective permitted successors, assigns, heirs, administrators and transferees.
The Investor and any successors thereto shall have all of the rights of a holder
in due course as provided in the Uniform Commercial Code.
8
In Witness Whereof, the parties hereto have executed this Agreement as of
the date first above written.
LEXAR MEDIA, INC.: SONY ELECTRONICS INC.:
----------------- ---------------------
By:________________________ By:__________________________
Name:______________________ Name:________________________
Title:_____________________ Title:_______________________
[SIGNATURE PAGE TO NOTE AND WARRANT PURCHASE AGREEMENT]
Attachments:
Exhibit A Form of Note
Exhibit B Form of Warrant
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS NOTE HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS NOTE ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
CONVERTIBLE PROMISSORY NOTE
OF
LEXAR MEDIA, INC.
$ 2,000,000 March 21, ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
For value received, Lexar Media, Inc., a California corporation (the
"Company"), with principal offices at ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, hereby promises to pay to Sony Electronics Inc. the sum of Two Million
Dollars ($2,000,000) plus interest accrued on unpaid principal, compounded
annually based on actual days elapsed, at a rate equal to the lower of (a) the
highest permissible rate under applicable law and (b) 8% per annum from the date
of this Note until the principal amount hereof and all interest accrued thereon
is paid (or converted, as provided in Section 2 hereof). The principal amount
of this Note, and the interest accrued thereon, shall be due and payable in full
on September 1, 2000 at the principal offices of the Company or by mail to the
address of the registered holder of this Note in lawful money of the United
States, unless this Note shall have been previously converted pursuant to
Section 2 hereof. If this Note is not paid in full when due, then the entire
unpaid principal and interest shall bear interest thereafter at a rate of 3% per
annum higher than the rate then applicable, or the maximum legal interest rate,
if lower, due on or before the fifth (5th) day of each applicable month in
arrears.
1. Definitions. The following definitions shall apply for all purposes
-----------
of this Note:
1.1 "Change of Control" means the consummation of any transaction or
series of related transactions that results in the holders of record of the
Company's capital stock immediately prior to the transaction or transactions
holding less than fifty percent (50%) of the voting power of the Company (or in
the case of a triangular merger, the parent of the Company) immediately after
the transaction or transactions, including the acquisition of the Company by
another entity and any reorganization, merger, consolidation or share exchange,
or which results in the sale of all or substantially all of the assets of the
Company.
1.2 "Company" means the "Company" as defined above and includes any
corporation that shall succeed to or assume the obligations of the Company under
this Note.
1.3 "Conversion Price" means the lower of (i) ninety-three percent
(93%) of the per share public offering price of the common stock sold in the
Initial Public Offering and (ii) Fifteen Dollars ($15.00) per share. The
Conversion Price is subject to adjustment as provided herein.
1.4 "Conversion Stock" means the Company's common stock, par value
$0.0001 per share. The number and character of shares of Conversion Stock are
subject to adjustment as provided herein and the term "Conversion Stock" shall
include stock and other securities and property at any time receivable or
issuable upon conversion of this Note in accordance with its terms.
1.5 "Holder" means any person who shall at the time be the registered
holder of this Note.
1.6 "Initial Public Offering" means a firm commitment underwritten
public offering, the public offering price of which is not less than $6.18 per
share (as adjusted for any stock dividends, recapitalizations, combinations or
splits with respect to such shares) with gross proceeds to the Company of
$20,000,000 in the aggregate before deduction of underwriters commissions and
expenses pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended (the "1933 Act"), covering the offer and sale
of the Company's common stock for the account of the Company.
1.7 "Note" means this Convertible Promissory Note.
2. Conversion.
----------
2.1 At the closing of the Initial Public Offering, all principal and
interest accrued on this Note shall automatically convert into a number of
shares of Conversion Stock determined by dividing the aggregate dollar amount of
the outstanding principal and interest on the Note by the applicable Conversion
Price, without the need for any further action on the part of the Holder;
provided, however, that the Holder shall not be entitled to receive the stock
certificate representing
2
the shares of Conversion Stock to be issued upon conversion of this Note until
the original of this Note is surrendered to the Company.
2.2 In the event a Change of Control occurs before the closing of the
Initial Public Offering, then the Holder shall have five (5) business days after
it receives a written description of the consideration it would receive in
return for Conversion Stock (a "Change in Control Notice") to provide the
Company with a written election to receive repayment of the principal balance of
this Note and accrued interest thereon in cash. If the Company has not received
such written notice by the Holder electing cash repayment by the close of the
fifth (5th) business day after the Holder's receipt of a Change of Control
Notice, all principal and interest accrued on this Note shall automatically
convert into shares of Conversion Stock at the Conversion Price, without the
need for any further action on the part of the Holder, effective upon the later
of the close of business on the fifth (5th) business day after delivery of a
Change of Control Notice or immediately prior to the consummation of such Change
of Control. Notwithstanding the foregoing, that the Holder shall not be
entitled to receive the stock certificate representing the shares of Conversion
Stock to be issued upon conversion of this Note until the original of this Note
is surrendered to the Company.
2.3 If on September 1, 2000 the Company has not closed an Initial
Public Offering, then the Note shall no longer be convertible, in whole or in
part, into Conversion Stock or any other security of the Company or any other
successor corporation to the Company.
3. Issuance of Conversion Stock. As soon as practicable after conversion
----------------------------
of this Note, the Company, at its expense, will cause to be issued in the name
of and delivered to the Holder, a certificate or certificates for the number of
shares of Conversion Stock to which the Holder shall be entitled upon such
conversion (bearing such legends as may be required by applicable state and
federal securities laws in the opinion of legal counsel of the Company),
together with any other securities and property to which the Holder is entitled
upon such conversion under the terms of this Note. Such conversion shall be
deemed to have been made, (a) if made under Section 2.1 above, on the date of
the closing of the Initial Public Offering and (b) if made under Section 2.2
above, immediately prior to the consummation of the Change of Control. No
fractional shares will be issued upon conversion of this Note. If upon any
conversion of this Note a fraction of a share would otherwise result, then in
lieu of such fractional share, the Company will pay the cash value of that
fractional share, calculated on the basis of the applicable Conversion Price.
4. Adjustment Provisions. The number and character of shares of
---------------------
Conversion Stock issuable upon conversion of this Note (or any shares of stock
or other securities or property at the time receivable or issuable upon
conversion of this Note) and the Conversion Price therefor, are subject to
adjustment upon occurrence of the following events between the date this Note is
issued and the date it is converted:
4.1 Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
----------------------------------------------------------------
etc. The Conversion Price of this Note and the number of shares of Conversion
---
Stock issuable upon conversion of this Note (or any shares of stock or other
securities at the time issuable upon conversion of this Note) shall each be
proportionally adjusted to reflect any stock dividend, stock
3
split, reverse stock split, combination of shares, reclassification,
recapitalization or other similar event affecting the number of outstanding
shares of Conversion Stock (or such other stock or securities).
4.2 Adjustment for Other Dividends and Distributions. In case the
------------------------------------------------
Company shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution payable
with respect to the Conversion Stock that is payable in (a) securities of the
Company (other than issuances with respect to which adjustment is made under
Section 4.1) or (b) assets (other than cash dividends paid or payable solely out
of retained earnings), then, and in each such case, the Holder, upon conversion
of this Note at any time after the consummation, effective date or record date
of such event, shall receive, in addition to the shares of Conversion Stock
issuable upon such exercise prior to such date, the securities or such other
assets of the Company to which the Holder would have been entitled upon such
date if the Holder had converted this Note immediately prior thereto (all
subject to further adjustment as provided in this Note).
4.3 Adjustment for Reorganization, Consolidation, Merger. In case of
----------------------------------------------------
any reorganization of the Company (or of any other corporation the stock or
other securities of which are at the time receivable on the conversion of this
Note) after the date of this Note, or in case, after such date, the Company (or
any such corporation) shall consolidate with or merge into another corporation
or convey all or substantially all of its assets to another corporation, then,
and in each such case, the Holder, upon the conversion of this Note (as provided
in Section 2) at any time after the consummation of such reorganization,
consolidation, merger or conveyance, shall be entitled to receive, in lieu of
the stock or other securities and property receivable upon the conversion of
this Note prior to such consummation, the stock or other securities or property
to which the Holder would have been entitled upon the consummation of such
reorganization, consolidation, merger or conveyance if the Holder had converted
this Note immediately prior thereto, all subject to further adjustment as
provided in this Note, and the successor or purchasing corporation in such
reorganization, consolidation, merger or conveyance (if other than the Company)
shall duly execute and deliver to the Holder a supplement hereto acknowledging
such corporation's obligations under this Note; and in each such case, the terms
of the Note shall be applicable to the shares of stock or other securities or
property receivable upon the conversion of this Note after the consummation of
such reorganization, consolidation, merger or conveyance.
4.4 Conversion of Stock. In case all of the authorized Conversion
-------------------
Stock of the Company is converted, pursuant to the Company's Articles of
Incorporation, into or exchanged for other securities or property, or the
Conversion Stock otherwise ceases to exist, then, in such case, the Holder, upon
conversion of this Note at any time after the date on which the Conversion Stock
is so converted or ceases to exist (the "Termination Date"), shall receive, in
lieu of the number of shares of Conversion Stock that would have been issuable
upon such conversion immediately prior to the Termination Date (the "Former
Number of Shares of Conversion Stock"), the stock and other securities and
property to which the Holder would have been entitled to receive upon the
Termination Date if the Holder had converted this Note with respect to the
Former Number of Shares of Conversion Stock immediately prior to the Termination
Date (all subject to further adjustment as provided in this Note).
4
4.5 Notice of Adjustments. The Company shall promptly give the
---------------------
Holder written notice of each adjustment or readjustment of the Conversion Price
or the number of shares of Conversion Stock or other securities issuable upon
conversion of this Note. The notice shall describe the adjustment or
readjustment and show in reasonable detail the facts on which the adjustment or
readjustment is based.
4.6 No Change Necessary. The form of this Note need not be changed
-------------------
because of any adjustment in the Conversion Price or in the number of shares of
Conversion Stock issuable upon its conversion.
4.7 Reservation of Stock. If at any time the number of shares of
--------------------
Conversion Stock or other securities issuable upon conversion of this Note shall
not be sufficient to effect the conversion of this Note, the Company will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Conversion Stock or other
securities issuable upon conversion of this Note as shall be sufficient for such
purpose.
5. No Rights or Liabilities as Shareholder. This Note does not by itself
---------------------------------------
entitle the Holder to any voting rights or other rights as a shareholder of the
Company. In the absence of conversion of this Note, no provisions of this Note,
and no enumeration herein of the rights or privileges of the Holder, shall cause
the Holder to be a shareholder of the Company for any purpose.
6. Subordination. The indebtedness represented by this Note is hereby
-------------
expressly subordinated in right of payment to the prior payment in full of all
of the Company's indebtedness to banks, insurance companies, lease financing
institutions or other lending institutions (other than small business investment
companies or venture capital firms) regularly engaged in the business of lending
money.
7. Prepayment. The Company may not prepay, in whole or in part, the
----------
unpaid principal sum of this Note, plus any unpaid accrued interest under this
Note, prior to September 1, 2000.
8. Default. If the Company defaults in the payment of unpaid principal
-------
or interest hereunder, the holder hereof may declare this Note immediately due,
without notice, presentment, protest, demand and notice of dishonor, all of
which are hereby expressly waived.
9. Transfer. Except as set forth in Section 5 of that certain
--------
Convertible Note and Warrant Agreement, dated as of even date herewith, by and
between the Company and the Holder, this Note, neither this Note nor any of the
rights hereunder, may be assigned, conveyed or transferred, in whole or in part,
without the Company's prior written consent, which the Company may withhold in
its sole discretion. The rights and obligations of the Company and the Holder
under this Note shall be binding upon and benefit their respective permitted
successors, assigns, heirs, administrators and transferees. The Holder and any
successors thereto shall have all of the rights of a holder in due course as
provided in the Uniform Commercial Code.
5
IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name as of the date first above written.
LEXAR MEDIA, INC.:
------------------
By:______________________
Name:____________________
Title:___________________
AGREED AND ACKNOWLEDGED:
SONY ELECTRONICS INC.:
----------------------
By:______________________
Name:____________________
Title:___________________
[SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE]
6
EXHIBIT B
THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS WARRANT HAS NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND
THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS WARRANT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE COMMON STOCK
OF
LEXAR MEDIA, INC.
This certifies that, for value received, Sony Electronics Inc. or its
permitted registered assigns ("Registered Holder"), is entitled, subject to the
-----------------
terms and conditions of this Warrant, at any time after 10:00 a.m. Pacific Time
on September 1, 2000 (the "Exercise Date"), unless terminated earlier under
-------------
Section 10 hereof, to purchase from Lexar Media, Inc., a California corporation
(the "Company"), Four Hundred Thousand (400,000) shares of the Company's Common
-------
Stock, par value $0.0001 per share (the "Warrant Stock"), at a purchase price
-------------
equal to the lesser of (i) Five Dollars ($5.00) per share or (ii) ninety-three
percent (93%) of the per share public offering price of the common stock sold in
the Company's initial public offering (the "Conversion Price") upon surrender of
----------------
this Warrant at the principal office of the Company, together with a duly
executed subscription in the form attached hereto as Exhibit 1 and simultaneous
---------
payment of the full purchase price therefor in lawful money of the United States
as provided herein. The Conversion Price and the number and character of shares
of Warrant Stock purchasable hereunder are subject to adjustment as provided
herein. Unless the context otherwise
requires, the term "Warrant Stock" shall mean and include the stock and other
securities and property at any time receivable or issuable upon exercise of this
Warrant. The term "Warrant" as used herein, shall include this Warrant and any
warrants delivered in substitution or exchange therefor as provided herein.
1. Exercise.
--------
1.1 Method of Exercise. Subject to the terms and conditions of this
------------------
Warrant, the Registered Holder may exercise this Warrant in whole or in part, at
any time or from time to time, on any business day after the Exercise Date,
unless terminated earlier under Section 10 hereof, by surrendering this Warrant
at the principal executive office of the Company, together with the subscription
form attached hereto duly executed by the Registered Holder and payment in full
of the purchase price therefor, if applicable (as determined in accordance with
the terms hereof) for the number of shares of Warrant Stock to be purchased upon
such exercise of this Warrant. Upon such exercise, the Company shall promptly
issue or cause to be issued and cause to be delivered to or upon the written
order of the Registered Holder and in such name or names as the Registered
Holder may designate, a certificate for the Warrant Shares issuable upon such
exercise. Any person so designated by the Registered Holder to receive Warrant
Shares shall be deemed to have become holder of record of such Warrant Shares as
of the date of exercise of this Warrant.
1.2 Form of Payment. Payment may be made by (i) a check payable to
---------------
the Company's order, (ii) wire transfer of funds to the Company, (iii)
cancellation of indebtedness of the Company to the Holder or (iv) any
combination of the foregoing.
1.3 Partial Exercise. Upon a partial exercise of this Warrant: (i)
----------------
the Purchase Amount immediately prior to such exercise shall be reduced by the
aggregate amount paid to the Company upon such exercise of this Warrant and (ii)
this Warrant shall be surrendered by the Registered Holder and replaced with a
new Warrant of like tenor for purchase of the number of remaining shares of
Warrant Stock not previously purchased shall be issued by the Company to the
Registered Holder.
1.4 No Fractional Shares. No fractional shares may be issued upon
--------------------
any exercise of this Warrant, and any fractions shall be rounded down to the
nearest whole number of shares. If upon any exercise of this Warrant a fraction
of a share results, the Company will pay the cash value of any such fractional
share, calculated on the basis of the Warrant Price.
1.5 Restrictions on Exercise. This Warrant may not be exercised if
------------------------
the issuance of the Warrant Stock upon such exercise would constitute a
violation of any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of this Warrant, the Registered
Holder shall execute the subscription form attached hereto.
1.6 Net Exercise Election. The Registered Holder may elect to convert
---------------------
all or a portion of this Warrant, without the payment by the Registered Holder
of any additional
2
consideration, by the surrender of this Warrant or such portion to the Company,
with the net exercise election selected in the subscription form attached hereto
duly executed by the Holder, into up to the number of shares of Warrant Stock
that is obtained under the following formula:
X = Y (A-B)
-------
A
where X = the number of shares of Warrant Stock to be issued to the
Registered Holder pursuant to this Section 1.6.
Y = the number of shares of Common Stock purchasable under the
Warrant
A = the fair market value of one share of Warrant Stock.
B = the Conversion Price.
The fair market value of one share of Warrant Stock shall be
determined in good faith by the Company's Board of Directors at the time the net
exercise election is made pursuant to this Section 1.6; provided, however, that
if the Registered Holder elects to convert all or a portion of this Warrant
pursuant to this Section 1.6 in response to an Expiration Notice (as defined in
Section 10) issued as a result of an impending Qualified IPO (as defined in
Section 10), then the fair market value per share shall be the per share public
offering price of the common stock sold in the Qualified IPO. The Company will
promptly respond in writing to an inquiry by the Registered Holder as to the
then current fair market value of one share of Warrant Stock.
2. Taxes. The Company shall not be required to pay any tax or other
-----
charge imposed in connection with any transfer involved in the issue of any
certificate for shares of Warrant Stock in any name other than that of the
Registered Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate or security until such tax or
other charge has been paid, or it has been established to the Company's
satisfaction that no tax or other charge is due.
3. Transfer and Exchange. Except as set forth in Section 5 of that
---------------------
certain Convertible Note and Warrant Agreement, dated as of even date herewith,
by and between the Company and the Holder, this Note (the "Purchase Agreement"),
------------------
this Warrant and the rights hereunder may not be transferred in whole or in part
without the Company's prior written consent, which the Company may withhold in
its sole discretion. If a transfer of all or part of this Warrant is permitted
by the preceding sentence, then this Warrant and all rights hereunder may be
transferred, in whole or in part, on the books of the Company maintained for
such purpose at the principal office of the Company referred to above, by the
Registered Holder hereof in person, or by duly authorized attorney, upon
surrender of this Warrant properly endorsed and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Upon any
permitted partial transfer, the Company will issue and deliver to the Registered
Holder a new
3
Warrant or Warrants with respect to the shares of Warrant Stock not so
transferred. Each taker and holder of this Warrant, by taking or holding the
same, consents and agrees that when this Warrant shall have been so endorsed,
the person in possession of this Warrant may be treated by the Company, and all
other persons dealing with this Warrant, as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby,
any notice to the contrary notwithstanding; provided, however that until a
-------- -------
transfer of this Warrant is duly registered on the books of the Company, the
Company may treat the Registered Holder hereof as the owner of this Warrant for
all purposes.
4. Adjustment of Conversion Price and Number of Shares. The number and
---------------------------------------------------
character of shares of Warrant Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities or property at the time receivable or
issuable upon exercise of this Warrant) and the Conversion Price therefor, are
subject to adjustment upon occurrence of the following events:
4.1 Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
----------------------------------------------------------------
etc. The Conversion Price of this Warrant and the number of shares of Warrant
----
Stock issuable upon exercise of this Warrant shall each be proportionally
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of Warrant Stock.
4.2 Adjustment for Other Dividends and Distributions. In case the
------------------------------------------------
Company shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution with
respect to the Warrant Stock payable in securities of the Company then, and in
each such case, the Registered Holder of this Warrant, on exercise of this
Warrant at any time after the consummation, effective date or record date of
such event, shall receive, in addition to the shares of Warrant Stock (or such
other stock or securities) issuable on such exercise prior to such date, the
securities of the Company to which such Registered Holder would have been
entitled upon such date if such Registered Holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in this
Warrant).
4.3 Adjustment for Capital Reorganization, Consolidation, Merger. If
------------------------------------------------------------
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with or into another corporation, or the
sale of all or substantially all of the Company's assets to another corporation
shall be effected in such a way that holders of Warrant Stock will be entitled
to receive stock, securities or assets with respect to or in exchange for their
Warrant Stock, and in each such case, the Registered Holder of this Warrant,
upon the exercise this Warrant (as provided in Section 1), at any time after the
consummation of such capital reorganization, consolidation, merger, or sale,
shall be entitled to receive, in lieu of the stock or other securities and
property receivable upon the exercise of this Warrant prior to such
consummation, the stock or other securities or property to which such Registered
Holder would have been entitled upon such consummation if such Registered Holder
had exercised this Warrant immediately prior thereto, all subject to further
adjustment as provided in this Section 4; and in
4
each such case, the terms of this Warrant shall be applicable to the shares of
stock or other securities or property receivable upon the exercise of this
Warrant after such consummation.
4.4 Conversion of Warrant Stock. In case all of the authorized
---------------------------
Warrant Stock of the Company is converted, pursuant to the Company's Articles of
Incorporation, into or exchanged for other securities or property, or the
Warrant Stock otherwise ceases to exist, then, in such case, the Registered
Holder, upon exercise of this Warrant at any time after the date on which the
Warrant Stock is so converted or ceases to exist (the "Termination Date"), shall
receive, in lieu of the number of shares of Warrant Stock that would have been
issuable upon such exercise immediately prior to the Termination Date (the
"Former Number of Shares of Warrant Stock"), the stock and other securities and
property to which the Registered Holder would have been entitled to receive upon
the Termination Date if the Registered Holder had exercised this Warrant with
respect to the Former Number of Shares of Warrant Stock immediately prior to the
Termination Date (all subject to further adjustment as provided in this
Warrant).
5. Certificate as to Adjustments. In each case of any adjustment in
-----------------------------
either the Conversion Price or in the number of shares of Warrant Stock, or
other stock, securities or property receivable on the exercise of this Warrant,
the Chief Financial Officer of the Company shall compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing in detail the facts upon which such adjustment
is based, including a statement of the adjusted Conversion Price. The Company
will forthwith mail a copy of each such certificate to the Registered Holder of
this Warrant.
6. Notices of Record Date. In case:
----------------------
(a) the Company shall take a record of the holders of its Warrant
Stock (or other stock or securities at the time receivable upon the exercise of
this Warrant) for the purpose of entitling them to receive any stock dividend;
or
(b) of any consolidation or merger of the Company with or into another
corporation, or any conveyance of all or substantially all of the assets of the
Company to another corporation in which holders of the Company's stock are to
receive stock, securities or property of another corporation; or
(c) of any voluntary dissolution, liquidation or winding-up of the
Company; or
(d) of any redemption or conversion into Common Stock of all
outstanding Warrant Stock;
then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend, and
stating the amount and character of such dividend, or (ii) the date on which
such consolidation, merger, conveyance, dissolution, liquidation, winding-up,
redemption or conversion is to take place, and the time, if any is to be fixed,
as of
5
which the holders of record of Warrant Stock or Common Stock (or such stock or
securities as at the time are receivable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Warrant Stock or Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such consolidation, merger, conveyance, dissolution, liquidation or
winding-up. Such notice shall be mailed at least ten (10) days prior to the date
therein specified.
7. Loss or Mutilation. Upon receipt by the Company of evidence reasonably
------------------
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant, and of a written indemnity agreement reasonably
satisfactory to the Company, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor.
8. Reservation of Warrant Stock. The Company shall at all times reserve
----------------------------
and keep available for issue upon the exercise of this Warrant such number of
its authorized but unissued shares of Warrant Stock as will be sufficient to
permit the exercise in full of this Warrant.
9. No Rights or Liabilities as Shareholder. This Warrant does not by
---------------------------------------
itself entitle the Registered Holder to any voting rights or other rights as a
shareholder of the Company. In the absence of affirmative action by Registered
Holder to purchase Warrant Stock by exercise of this Warrant, no provisions of
this Warrant, and no enumeration herein of the rights or privileges of the
Registered Holder shall cause such Registered Holder to be a shareholder of the
Company for any purpose.
10. Termination. The right to exercise this Warrant shall terminate (i)
-----------
immediately prior to the closing of a firm commitment public offering
underwritten by a nationally recognized investment bank pursuant to an effective
registration statement filed under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the corporation
in which the aggregate public offering price (before deduction of underwriters'
discounts and commissions) equals or exceeds $20,000,000 and the public offering
price per share of which equals or exceeds $6.18 per share before deduction of
underwriters' discounts and commissions (a "Qualified IPO") or (ii) upon the
-------------
effective date of a merger or consolidation of the Company into or with another
corporation, or the sale of all or substantially all of the Company's assets to
another corporation or person, if, immediately after any such merger,
consolidation or sale of assets, at least fifty percent (50%) of the voting
power of the surviving corporation or such other person, as the case may be, is
owned by persons who are not shareholders of the Company immediately prior to
such merger, consolidation or sale (the "Terminating Transaction"). In case of
-----------------------
either such event, the Company shall, at least fifteen (15) days prior to the
effective date of the Qualified IPO or Terminating Transaction, give written
notice of the imminence of such Qualified IPO or Terminating Transaction (the
"Expiration Notice"). The right to exercise this Warrant shall terminate upon
-----------------
the closing or effective date, as applicable, of a Qualified IPO or Terminating
Transaction, even if such event occurs prior to September 1, 2000.
Dated: March 21, 2000
6
LEXAR MEDIA, INC. ACKNOWLEDGED AND ACCEPTED
BY SONY ELECTRONICS INC.:
By:_____________________________ By:______________________________
Name:___________________________ Name:____________________________
Title:__________________________ Title:___________________________
7
Exhibit 1
---------
FORM OF SUBSCRIPTION
--------------------
(To be signed only upon exercise of Warrant)
To: Lexar Media, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(1) The undersigned Holder hereby elects to purchase ________________
shares of Common Stock of _______________ (the "Warrant Stock"), pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price for such shares in full.
(1) Net Exercise Election. The undersigned Holder elects to convert the
---------------------
Warrant into shares of Warrant Stock by net exercise election pursuant to
Section 1.6 of the Warrant. This conversion is exercised with respect to
__________ shares of Common Stock of _______________ (the "Warrant Stock")
covered by the Warrant.
[STRIKE PARAGRAPH ABOVE THAT DOES NOT APPLY]
(2) In exercising the Warrant, the undersigned Holder hereby confirms and
acknowledges that the representations and warranties set forth in Section 4 of
the Purchase Agreement (as defined in the Warrant) continue to be true and
correct as of this date.
(3) Please issue a certificate or certificates representing such shares of
Warrant Stock in the name or names specified below:
______________________________________ ______________________________________
(Name) (Name)
______________________________________ ______________________________________
(Address) (Address)
______________________________________ ______________________________________
(City, State, Zip Code) (City, State, Zip Code)
______________________________________ ______________________________________
(Federal Tax Identification Number) (Federal Tax Identification Number)
______________________________________ ______________________________________
(Date) (Signature of Holder)
1
FORM OF ASSIGNMENT
------------------
FOR VALUE RECEIVED the undersigned Registered Holder of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under the within Warrant, with respect to the number of shares
of Common Stock set forth below:
Name of Assignee Address No. of Shares
---------------- ------- -------------
and does hereby irrevocably constitute and appoint ________________ Attorney to
make such transfer on the books of ___________________, maintained for the
purpose, with full power of substitution in the premises.
Dated: _____________________ [Registered Holder]
By:________________________________
Name:______________________________
Title:_____________________________
2