***Text Omitted and Filed Separately with the Commission
Confidential Treatment Requested
Under 17 C.F.R. Sec. 200.80(b)(4),
200.83 and 240.24b-2

 

Silicon Valley Bank

Third Modification Agreement

Borrower:   Exabyte Corporation
Address:     1685 38th Street
                   Boulder, Colorado 80301
Date:           April 17, 2003

     

THIS THIRD MODIFICATION AGREEMENT (the "Modification Agreement") is entered into
between Silicon Valley Bank ("Silicon") and the borrower named above
("Borrower").

     

Whereas the parties entered into the Loan and Security Agreement dated June 18,
2002, which instrument was modified by a certain Amendment and Waiver dated
September 26, 2002, and was further modified by a Modification Agreement dated
as of February 14, 2003, which documents are collectively referred to as the
"Loan Agreement". The Amended and Restated Schedule to Loan and Security
Agreement attached to the Modification Agreement dated as of February 14, 2003
is referred to herein as the "Amended Schedule", and

     

Whereas the parties wish to further amend the Loan Agreement as herein provided.

     

Now, therefore, in consideration of the foregoing, and other good and valuable
consideration, the parties agree as follows:

     1.     Capitalized Terms. Capitalized terms used but not defined herein
shall have the meanings set forth in the Loan Agreement.

     2.     Advances in Excess of Credit Limit. Silicon agrees to advance sums
in excess of the Credit Limit provided that the total Loans outstanding at any
time under the Loan Agreement shall not exceed the lesser of (i) $2,500,000 in
excess of the Credit Limit or (ii) the Maximum Credit Limit, which agreement to
advance sums in excess of the Credit Limit shall terminate automatically upon
the termination of the Overadvance Guaranties executed by Meritage Private
Equity Fund, L.P., a Delaware limited partnership, and Tom Ward (the
"Overadvance Guaranties").

     3.     Waiver of Defaults. Silicon waives all Events of Default existing as
of the date hereof.

     4.     Credit Limit. Section 1 of the Amended Schedule relating to the
Credit Limit and referring to Section 1.1 shall be amended to read as follows:
"An amount not to exceed the lesser of a total of $20,000,000 at any one time
outstanding (the 'Maximum Credit Limit'), or the sum of the following: (a) 70%
(an 'Advance Rate') of the amount of Borrower's Eligible Accounts (as defined in
Section 8 of the Loan Agreement), plus (b) $1,570,270 for advances against
Inventory. Silicon may, from time to time, modify the Advance Rates, in its good
faith business judgment, upon notice to the Borrower, based on changes in
collection experience with respect to Accounts, its evaluation of the Inventory
or other issues or factors relating to the Accounts, Inventory or other
Collateral."

     5.     Recalculation of March 31, 2003 Ineligible Receivables. For the
purpose of determining the Credit Limit for the month of April 2003, ineligible
receivables shall be reduced by the amounts collected between March 31, 2003 and
April 15, 2003, on all ineligible receivables as of March 31, 2003.

     6.     Discounting or Factoring of Ineligible Receivables. Borrower may
discount or factor ineligible receivables provided that Borrower first obtains
Silicon's written approval, which approval may be granted or withheld in
Silicon's sole discretion, and provided further that all proceeds of such
transactions shall be applied to repayment of outstanding Obligations.

     7.     Modification of Amended Schedule. Section 5 of the Amended Schedule
is hereby deleted and amended to read in its entirety as follows: "Financial
Covenants: Borrower shall comply with each of the following covenants.
Compliance shall be determined as of the end of each month except as otherwise
specifically provided below: (a) the Maximum Grand Totals Current Inventory
Value as set forth on the Distributor Detailed Quarterly Status reports as
required under Section 6(2) of this Amended Schedule shall not exceed the sum of
$[***], (b) Borrower shall not incur a cash loss (defined as the Borrower's
operating loss determined in accordance with GAAP reduced by all non-cash
charges and expenses) in excess of $[***] in either of the calendar quarters
ending June 30, 2003 or September 30, 2003."

     8.     Maturity Date. The Maturity Date is hereby amended to be September
30, 2003, on which date all Obligations under the Loan Agreement shall become
due and owing in full to Silicon, without further notice or demand.

     9.     Exercise of Remedies. Silicon shall not exercise any remedy under
the Loan Agreement unless and until (i) total outstanding Loans exceed the
amount of the Credit Limit by more than $2,500,000 or the applicable aggregate
Guarantee Amount as determined in accordance with the Overadvance Guaranties, or
(ii) an Event of Default occurs after the date hereof; provided however, that,
notwithstanding the foregoing, Silicon shall not accelerate the maturity of the
Obligations as a result of an Event of Default which, in the good faith
reasonable judgment of Silicon, will not materially impair the value of, or
Silicon's rights, in the Collateral or Silicon's prospect of recovery of payment
of the Obligations. In the event that Loans exceed the Credit Limit plus (a)
$2,500,000 or (b) the applicable aggregate Guarantee Amounts as determined in
accordance with the Overadvance Guaranties, Silicon will provide a five (5)-day
cure period to Borrower prior to accelerating the Borrower's obligations or
exercising any remedies under the Loan Agreement.

     10.     Plan of Borrower. On or before April 30, 2003: (a) Borrower shall
provide to Silicon, in form and substance reasonably satisfactory to Silicon,
Borrower's plan (i) to replace [***] as vendors, (ii) to reduce the expenses
relating to employees by at least [***], (iii) to consolidate Borrower's
Colorado operations into a single location, (iv) to reduce inventory held by
Borrower, and (v) to resolve Borrower's outstanding liability to vendors; (b)
Borrower shall hire a specialist to negotiate with vendors; and (c) Borrower
shall have identified in writing to Silicon segments of Borrower's business to
sell.

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*Confidential Treatment Requested

     11.     Further Actions of Borrower. On or before April 23, 2003, Borrower
shall provide to Silicon, in form and substance reasonably satisfactory to
Silicon, confirmation that Borrower has not and will not grant a security
interest or other lien or interest to any person other than Silicon, except as
otherwise provided in connection with the Overadvance Guaranties, in all
Intellectual Property of Borrower and of its subsidiaries, including without
limitation, its wholly-owned subsidiary Ecrix Corporation and that Borrower will
take such steps as Silicon may require to grant, confirm and assure such first
priority perfected security interest in favor of Silicon in such Intellectual
Property of Borrower and its subsidiaries. Further, Borrower shall use its
reasonable efforts to obtain a guarantee from DaisyTek, the parent corporation
of Digital Storage, Inc. (DSI"), with respect to the accounts receivable owing
from DSI to Borrower.

     12.     

Default. Any default under this Modification Agreement shall constitute an Event
of Default under the Loan Agreement.

     13.     

No Claims or Defenses. As a material inducement to Silicon to enter into this
Modification Agreement and to perform the obligations of Silicon hereunder,
Borrower acknowledges and represents that Borrower has no defense or right of
offset with respect to any of the Obligations and has no claims against Silicon,
its officers, directors, employees, subsidiaries, affiliates, agents or
representatives, which arises, directly or indirectly, out of any action or
omission by any of the foregoing persons with respect to the origination,
servicing, administration or enforcement of the Loan Agreement or out of
Silicon's performance or failure to perform any duty or obligation thereunder.

     14.     

Waiver Fee. In connection with this Modification Agreement, Borrower shall pay a
fee to Silicon in the amount of $[***] which fee shall be due and payable on the
earlier of consummation of the Borrower's rights offering or the Maturity Date.

     15.     

Stock. Borrower hereby agrees to issue to Lender, within 2 business days of the
date hereof, 2.0 million fully paid and non-assessable shares of Borrower's
Common Stock. Such share totals shall be appropriately adjusted to reflect any
stock splits, stock dividends and stock combinations affecting the common stock
occurring after the date hereof and prior to such issuances. Notwithstanding the
foregoing, Silicon shall have the right to receive, in lieu of an issuance of
shares pursuant to the foregoing provisions, warrants to purchase an equal
amount of shares of the Borrower's common stock at an exercise price per share
equal to market value of the common stock on the date of issuance. Should the
Bank choose warrants in lieu of stock, Borrower agrees to execute a warrant
acceptable to Bank within five business days of the execution of this
Modification Agreement. The warrant shall contain customary "cashless exercise"
provisions whereby the warrant may be exchanged without the payment of any
additional consideration for the company's stock based upon the values of the
warrant and the stock at the time of the exchange.

     

Borrower agrees to reserve a sufficient number of shares of its common stock to
satisfy its obligations pursuant to the foregoing paragraph and, if necessary,
to affect a reverse split of its common stock in order to maintain sufficient
authorized shares of common stock.

     16.     

Representations True. Borrower represents and warrants to Silicon that all
representations and warranties set forth in the Loan Agreement, as amended
hereby, are true and correct.

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*Confidential Treatment Requested

     17.     

General Provisions. This Modification Agreement, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and Borrower, and the
other written documents and agreements between Silicon and Borrower set forth in
full all of the representations and agreements of the parties with respect to
the subject matter hereof and supersede all prior discussions, representations,
agreements and understandings between the parties with respect to the subject
hereof.

     18.     

Loan Agreement Remains in Full Force and Effect. Except as herein expressly
amended, all of the terms and provisions of the Loan Agreement, and all other
documents and agreements between Silicon and Borrower shall continue in full
force and effect and the same are hereby ratified and confirmed

Borrower:

Silicon:

EXABYTE CORPORATION

SILICON VALLEY BANK

 

 

By

By

President or Vice President

Title

By

 

Secretary or Ass't Secretary