Document:

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                                                                   EXHIBIT 10.25

                      NOTE AND WARRANT PURCHASE AGREEMENT

     This NOTE AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made as of
May 19, 2000 by and among Lexar Media, Inc., a California corporation (the
"Company"), and the parties listed on the Schedule of Investors attached to this
Agreement as Exhibit A (individually an "Investor" and collectively the
             ---------
"Investors").

                                    RECITALS
                                    --------

     A.  The Company is currently in need of funds to help finance its
operations.

     B.  The Investors are willing to advance funds to the Company in exchange
for the issuance to them of (i) certain promissory notes evidencing the
Company's obligation to repay the Investor's loans of the advanced funds and
(ii) certain warrants to purchase shares of the Company's capital stock, all as
provided in this Agreement.

     NOW THEREFORE, the parties hereby agree as follows:

     1.  PURCHASE AND SALE OF NOTES AND WARRANTS.
         ---------------------------------------

         1.1  Note Purchase.  Subject to the terms and conditions of this
              -------------
Agreement, the Company agrees to sell to each Investor, and each Investor
severally agrees to purchase from the Company, a Promissory Note in the form
attached to this Agreement as Exhibit B (individually a "Note" and collectively
                              ---------
the "Notes") in the principal amount set forth opposite such Investor's name on
Exhibit A.
---------

         1.2  Warrant Issuance.  As additional consideration for the purchase of
              ----------------
the Note, subject to the terms and conditions of this Agreement, the Company
further agrees to sell and issue to each Investor (i) a warrant to purchase
shares of the Company's capital stock ("Warrant Stock") in the form attached
hereto as Exhibit C (individually a "Warrant" and collectively the "Warrants")
          ---------
and (ii) a warrant to purchase shares of the Company's capital stock ("Monthly
Warrant Stock") in the form attached hereto as Exhibit D (individually a
                                               ---------
"Monthly Warrant" and collectively the "Monthly Warrants").

     2.  CLOSING.
         -------

         2.1  The Closing.  The purchase and sale of the Notes, the Warrants
              -----------
and the Monthly Warrants will take place at the offices of Fenwick & West LLP,
Two Palo Alto Square, Palo Alto, California, at 1:00 p.m. Pacific time, on May
19, 2000, or at such other time and place as the Company and the Investors who
have agreed to purchase a majority of the aggregate principal amount of the
Notes listed on Exhibit A mutually agree upon (which time and place are referred
                ---------
to as the "Closing").  At the Closing, each Investor will deliver to the Company
payment in full for the Note, the Warrant and the Monthly Warrant in the amount
set forth opposite such Investor's name on Exhibit A, which such Investor agrees
                                           ---------
to purchase at the Closing by (i) a
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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 each Investor a duly executed Note in the principal amount set
forth opposite such Investor's name on Exhibit A, a duly executed Warrant and a
                                       ---------
duly executed Monthly Warrant.

         2.2  Additional Closing(s).
              ---------------------

              (a)  Conditions of Additional Closing(s).  At any time and from
                   -----------------------------------
time to time during the ninety (90) day period immediately following the Closing
(the "Additional Closing Period"), the Company may, at one or more additional
closings (each an "Additional Closing"), without obtaining the signature,
consent or permission of any of the Investors, offer and sell to other investors
(the "New Investors") Notes, Warrants and Monthly Warrants under terms no more
favorable to such New Investors than the terms and conditions set forth in this
Agreement, and such Notes having an aggregate principal amount of no more than
$16,000,000 less the aggregate principal amount of all Notes previously sold
hereunder. New Investors may include persons or entities who are already
Investors under this Agreement.

               (b)  Amendments.  The Company and the New Investors purchasing
                    ----------
Notes at each Additional Closing will execute counterpart signature pages to
this Agreement, and such New Investors will, upon delivery to the Company of
such signature pages, become parties to, and bound by, this Agreement to the
same extent as if they had been Investors at the Closing. Immediately after each
Additional Closing, the Schedule of Investors attached to this Agreement as
Exhibit A will be amended to list the New Investors purchasing Notes, Warrants
---------
and Monthly Warrants hereunder and the amount of the principal amount of each
Note purchased by each New Investor under this Agreement at each such Additional
Closing. The Company will promptly furnish to each Investor upon request a copy
of the amendments to Exhibit A referred to in the preceding sentence.
                     ---------

               (c)  Status of New Investors.  Upon the completion of each
                    -----------------------
Additional Closing as provided in this Section 2, each New Investor will be
deemed to be an "Investor" for all purposes of this Agreement.

     3.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company hereby
         ---------------------------------------------
represents and warrants to each 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 it properties and assets and to carry on its
business as currently conducted and as presently proposed to be conducted. The
Company is qualified to do business as a foreign corporation in good standing in
the State of Texas, which is the only jurisdiction other than California in
which the Company owns property, has offices or employs employees.

                                      -2-
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         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 Notes, the Warrants and the Monthly Warrants has been taken or
will be taken prior to the Closing, and this Agreement constitutes, and the
Notes, the Warrants and the Monthly Warrants 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 Notes, the Warrants and the
Monthly Warrants to be purchased by the Investors hereunder, to issue the Notes,
the Warrants and the Monthly Warrants and to carry out and perform all its
obligations under this Agreement, the Notes, the Warrants and the Monthly
Warrants.

         3.4  Valid Issuance.
              --------------

              The Notes, the Warrants and the Monthly Warrants, 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
and nonassessable.

     4.  REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF INVESTORS.  Each
         ---------------------------------------------------------------
Investor hereby represents and warrants to, and agrees with, the Company, that:

         4.1  Authorization.  This Agreement constitutes such 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. Each Investor represents that such Investor
has full power and authority to enter into this Agreement.

         4.2  Purchase for Own Account.  The Notes, the Warrants, the Monthly
              ------------------------
Warrants, the shares of the Company's capital stock issuable upon the conversion
of the Notes (the "Conversion Stock"), the Warrant Stock, the Monthly Warrant
Stock and the Company's Common Stock issuable upon conversion of such Conversion
Stock, Warrant Stock and Monthly Warrant Stock (collectively, the "Securities")
will be acquired for investment for such 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 such Investor has no present
intention of selling, granting any participation in, or otherwise distributing
the same.

         4.3  Disclosure of Information.  Such Investor believes that such
              -------------------------
Investor has received or has had full access to all the information it considers
necessary or appropriate to

                                      -3-
<PAGE>

make an informed investment decision with respect to the Securities. Such
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 such Investor or to
which such Investor had access. Such Investor acknowledges that it is aware of,
and has had the opportunity to discuss with the Company the status of the
Company's litigation with SanDisk. 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.  Such Investor understands that the
             ---------------------
purchase of the Securities involves substantial risk. Such Investor (i) has
experience as an investor in securities of companies in the development stage
and acknowledges that such Investor is able to fend for itself, can bear the
economic risk of such Investor's investment in the Securities and has such
knowledge and experience in financial or business matters that such 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 such Investor to be aware of the character, business acumen and
financial circumstances of such persons.

         4.5  Accredited Investor Status.  Such Investor is an "accredited
              --------------------------
investor" within the meaning of Regulation D promulgated under the 1933 Act.

         4.6  Restricted Securities.  Such 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, such Investor represents that such Investor is familiar with
Rule 144 of the U.S. Securities and Exchange Commission, as presently in effect,
and understands the resale limitations imposed thereby and by the 1933 Act. Such
Investor understands that the Company is under no obligation to register any of
the securities sold hereunder.

         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.

         4.8  Further Limitations on Disposition.  Without in any way limiting
              ----------------------------------
the representations set forth above, such 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

                                      -4-
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              (b)  such 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 such
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 any Notes, Warrants or Monthly Warrants in compliance with Rule 144
or Rule 144A; (ii) for any transfer of any Notes, Warrants or Monthly Warrants
by an Investor that is a partnership or a corporation to (A) a partner of such
partnership or shareholder of such corporation, (B) a retired partner of such
partnership who retires after the date hereof, (C) the estate of any such
partner or shareholder; or (iii) for the transfer by gift, will or intestate
succession by any Investor to his or her spouse or lineal descendants or
ancestors or any trust for any of the foregoing; provided that in each of the
                                                 --------
foregoing cases the transferee agrees in writing to be subject to the terms of
this Section 4 to the same extent as if the transferee were an original Investor
hereunder.

         4.9  Legends.  Such 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 such 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 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 1933 Act) without
such a

                                      -5-
<PAGE>

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.

          4.10  "Market Stand-Off" Agreement.  Each 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, such 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 or other shares of stock of the Company then owned by such
Investor, directly or indirectly, except securities covered by the registration
statement and transfers to donees who agree to be similarly bound, for the
period; provided however, that

                (a)  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,

                (b)  the time period requested for such market stand-off shall
not exceed one hundred eighty (180) days, and

                (c)  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 Act on Form
S-4 (or similar forms promulgated after the date hereof).

In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop-transfer instructions with respect to the
Securities and any other shares of stock of each Investor (and the shares or
securities of every other person subject to the foregoing restriction) during
such stand-off period if necessary to enforce such restrictions.

     5.   CONDITIONS TO CLOSING.
          ---------------------

          5.1  Conditions to Investors' Obligations.  The obligations of each
               ------------------------------------
Investor under Section 2 of this Agreement are subject to the fulfillment or
waiver, on or before the Closing, of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
to such waiver, which consent may be given by written, oral or telephone
communication to the Company, its counsel or to special counsel to the
Investors:

               (a)  Each of the representations and warranties of the Company
contained in Section 3 shall be true and correct on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing; and

               (b)  the Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be

                                      -6-
<PAGE>

performed or complied with by it on or before the Closing and shall have
obtained all approvals, consents and qualifications necessary to complete the
purchase and sale described herein.

          5.2  Condition to Company's Obligations.  The obligations of the
               ----------------------------------
Company to each Investor under this Agreement are subject to the fulfillment or
waiver on or before the Closing of the following condition by such Investor:

               (a)  Each of the representations and warranties of such Investor
contained in Section 4 shall be true and correct on the date of the Closing with
the same effect as though such representations and warranties had been made on
and as of the Closing; and

               (b)  such Investor shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.

     6.   GENERAL PROVISIONS.
          ------------------

          6.1  Survival of Warranties.  The representations, warranties and
               ----------------------
covenants of the Company and the Investors 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 any of the Investors or the Company, as the case may be.

          6.2  Successors and Assigns.  The terms and conditions of this
               ----------------------
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties.

          6.3  Governing Law.  This Agreement 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.

          6.4  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.

          6.5  Headings.  The headings and captions used in this Agreement are
               --------
used for convenience only and are not to be considered in construing or
interpreting this Agreement.  All references in this Agreement to sections,
paragraphs, exhibits and schedules shall, unless otherwise provided, refer to
sections and paragraphs hereof and exhibits and schedules attached hereto, all
of which exhibits and schedules are incorporated herein by this reference.

          6.6  Notices.  Unless otherwise provided, any notice required or
               -------
permitted under this Agreement 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,

                                      -7-
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by registered or certified mail, postage prepaid and addressed to the party to
be notified at the address indicated for such party on Exhibit A or, in the case
                                                       ---------
of the Company, at 47421 Bayside Parkway, Fremont, California 94538, 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.

          6.7  No Finder's Fees.  Each party represents that it neither is nor
               ----------------
will be obligated for any finder's or broker's fee or commission in connection
with this transaction.  Each Investor agrees to indemnify and to hold harmless
the Company from any liability for any commission or compensation in the nature
of a finders' or broker's fee (and any asserted liability) for which the
Investor or any of its officers, partners, employees, or representatives is
responsible.  The Company agrees to indemnify and hold harmless each Investor
from any liability for any commission or compensation in the nature of a
finder's or broker's fee (and any asserted liability) for which the Company or
any of its officers, employees or representatives is responsible.

          6.8  Amendments and Waivers.  Any term of this Agreement may be
               ----------------------
amended and the observance of any term of this Agreement 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 holders of
Notes representing at least a majority of the aggregate principal amount of the
Notes at the time outstanding.  Any amendment or waiver effected in accordance
with this Section 6.8 shall be binding upon each holder of any Notes, Warrants
and Monthly Warrants at the time outstanding, each future holder of such
securities, and the Company; provided, however, that New Investors may become
parties to this Agreement in accordance with Section 2.2 without any amendment
of this Agreement or any consent or approval of any Investor.

          6.9  Severability.  If one or more provisions of this Agreement are
               ------------
held to be unenforceable under applicable law, such provision(s) shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.

          6.10 Entire Agreement.  This Agreement, together with all exhibits
               ----------------
and schedules hereto, constitutes 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.

          6.11 Further Assurances.  From and after the date of this Agreement,
               ------------------
upon the request of any Investor or the Company, the Company and the Investors
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.

          6.12 Waiver of Right of First Refusal.  The Investors hereby waive
               --------------------------------
any rights to notice of, and hereby waive any rights of first refusal with
respect to, the issuance of the Notes, the Warrants and the Monthly Warrants
contained in Section 4 of that certain Investors'

                                      -8-
<PAGE>

Rights Agreement dated as of September 28, 1999 by and among the Company and
certain investors.

          6.13 Waiver of Conflict of Interest.  Each Investor and the Company
               ------------------------------
is aware that Fenwick & West LLP ("F&W") may have previously performed and may
continue to perform certain legal services for certain of the Investors in
matters unrelated to F&W's representation of the Company.  In connection with
its Investor representation, F&W may have obtained confidential information of
such Investors that could be material to F&W's representation of the Company in
connection with negotiation, execution and performance of this Agreement.  By
signing this Agreement, each Investor and the Company hereby acknowledges that
the terms of this Agreement were negotiated between the Investors and the
Company and are fair and reasonable and waives any potential conflict of
interest arising out of such representation or such possession of confidential
information.  Each Investor and the Company further represents that it has had
the opportunity to be, or has been, represented by independent counsel in giving
the waivers contained in this Section.

                                      -9-
<PAGE>

     In Witness Whereof, the parties hereto have executed this Agreement as of
the date first above written.

THE COMPANY:                               THE INVESTORS:
-----------                                -------------

By: ____________________________           By: _____________________________

Name: __________________________           Name: ___________________________

Title: _________________________           Title: __________________________

            [SIGNATURE PAGE TO NOTE AND WARRANT PURCHASE AGREEMENT]

Attachments:

Exhibit A      -     Schedule of Investors
Exhibit B      -     Form of Note
Exhibit C      -     Form of Warrant
Exhibit D      -     Form of Monthly Warrant

                                      -10-
<PAGE>

                                   EXHIBIT A

                             Schedule of Investors
                             ---------------------

                                                                Principal
Investors                                                         Amount
---------                                                       ----------

APV Technology Partners II, L.P.                                $  300,000
535 Middlefield Road
Suite 150
Menlo Park, CA 94025

Thomvest Holdings, Inc.                                          1,399,545
65 Queen Street West
Suite 2400
Toronto, Ontario
M5H 2M8
Canada

St. Paul Venture Capital V, LLC                                  3,075,000
10400 Viking Drive
Suite 550
Eden Prairie, MN 55344

Mellon Ventures, L.P.                                            3,000,000
400 S. Hope Street, 5th Floor
Los Angeles, CA 90071-2806

SunAmerica Inc.                                                  5,000,000
1999 Avenue of the Stars
Suite 3800
Los Angeles, CA 90067

GE Capital Equity Investments, Inc.                                500,000
c/o GE Equity Investments, Inc.
100 California Street, Suite 850
San Francisco, CA 94111

Total:                                                         $13,274,545

                                      -11-
<PAGE>

                                   EXHIBIT B

                                  Form of Note
                                  ------------

                                      -13-
<PAGE>

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.

                                PROMISSORY NOTE
                                       OF
                               LEXAR MEDIA, INC.

$__________________                                                May ___, 2000

     For value received, Lexar Media, Inc., a California corporation (the
"Company"), with principal offices at 47421 Bayside Parkway, Fremont, California
94538, hereby promises to pay to ________________________________ the sum of
___________________________ Dollars ($_________) plus simple interest accrued on
unpaid principal at a rate equal to the lower of (a) the highest permissible
rate under applicable law and (b) six percent (6%) 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
May 31, 2001 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.

     This Note is issued pursuant to that certain Note and Warrant Purchase
Agreement dated as of May ___, 2000 (the "Purchase Agreement"), by and among the
Company, the original holder of this Note and certain other investors listed on
the Schedule of Investors attached to the Purchase Agreement as Exhibit A, and
is subject to the provisions thereof.
<PAGE>

     1.   Definitions. The following definitions shall apply for all purposes of
          -----------
this Note:

          1.1  "Company" means the "Company" as defined above and includes any
corporation which shall succeed to or assume the obligations of the Company
under this Note.

          1.2  "Conversion Price" means an amount equal to the lowest per share
selling price of Conversion Stock.

          1.3  "Conversion Stock" means the Company's capital stock sold in the
Next Financing.

          1.4  "Holder" means any person who shall at the time be the registered
holder of this Note.

          1.5  "Initial Public Offering" means a firm commitment underwritten
public offering pursuant to an effective registration statement filed under the
Act covering the offer and sale of the Company's Common Stock for the account of
the Company.

          1.6  "Next Financing" means the Company's next sale of its Common
Stock or Preferred Stock (with or without other securities of the Company or
some combination thereof) in one transaction or series of related transactions,
occurring at any time before the earlier of (a) the date on which this Note
becomes due or (b) the Closing of an Initial Public Offering, for an aggregate
purchase price paid to the Company of no less than Ten Million Dollars
($10,000,000) (excluding the principal amount of any Notes converted into
capital stock and issued therein).

          1.7  "Note" means this Promissory Note.

          1.8  "Notes" means a series of notes aggregating up to a maximum of
$16,000,000 in principal amount issued under the Purchase Agreement, of which
this Note is one, each such note containing substantially identical terms and
conditions as this Note.

     2.   Conversion.  In the event the Company does not pay the full principal
          ----------
amount of this Note before the Next Financing, then, at the closing of the Next
Financing, 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; provided, however, 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. Each Investor whose
Note is so converted will become a party to such stock purchase agreement,
investors' rights agreement, co-sale agreement and/or voting agreement as are
entered into by the investors in the Next Financing generally.

     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

                                      -2-
<PAGE>

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, by the Company's Articles of
Incorporation or Bylaws, or by any agreement between the Company and the
Holder), 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 on the date of the initial closing of the Next
Financing. 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.  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.

     5.  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 Note. 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 this Note.

     6.  Priority of Note.  The Notes shall rank equally without preference or
         ----------------
priority of any kind over one another, and all payments on account of principal
and interest with respect to any of the Notes shall be applied ratably and
proportionately on all outstanding Notes on the basis of the original principal
amount of outstanding indebtedness represented thereby.

     7.  Subordination.  The indebtedness represented by this Note is hereby
         -------------
expressly subordinated in right of cash payment to the prior payment in full of
(i) the Term Notes (as defined in that certain Note Purchase Agreement dated as
of August 8, 1997 by and among the Company and John Tu and David Sun, as
amended) and (ii) all of the Company's secured 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 ("Bank Debt"). If requested by the
Company the Holder of this Note will enter into a subordination agreement with
the Holders of the Term Notes and/or Bank Debt.

     8.  Prepayment.   The Company may at any time, without penalty, upon at
         ----------
least five (5) days' advance written notice to the Holder, prepay in whole or in
part the unpaid principal sum of this Note, plus any unpaid accrued interest
under this Note. All payments will first be

                                      -3-
<PAGE>

applied to the repayment of accrued interest until all then outstanding accrued
interest has been paid, and then shall be applied to the repayment of principal.

     9.   Waivers.  The Company and all endorsers of this Note hereby waive
          -------
notice, presentment, protest and notice of dishonor.

     10.  Attorneys' Fees.  In the event any party is required to engage the
          ---------------
services of any attorneys for the purpose of enforcing this Note, or any
provision thereof, the prevailing party shall be entitled to recover its
reasonable expenses and costs in enforcing this Note, including attorneys' fees.

     11.  Transfer.  Neither this Note nor any 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;
provided, however, that this Note may be assigned, conveyed or transferred
without the prior written consent of the Company to any person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with the Holder. The rights and obligations of the Company
and the Holder under this Note and the Purchase Agreement shall be binding upon
and benefit their respective permitted successors, assigns, heirs,
administrators and transferees.

     12.  Governing Law.  This Note 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.

     13.  Headings.  The headings and captions used in this Note are used for
          --------
convenience only and are not to be considered in construing or interpreting this
Note.  All references in this Note 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.

     14.  Notices.  Unless otherwise provided, any notice required or permitted
          -------
under this Note 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 Holder at the last address furnished to the Company by the
Holder in writing or, in the case of the Company, at the principal offices of
the Company, 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.

     15.  Amendments and Waivers.  Any term of this Note may be amended, and the
          ----------------------
observance of any term of this Note 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 holders of Notes representing at least a
majority of the aggregate principal amount of the Notes at the time outstanding.
Any amendment or waiver effected in accordance with this Section shall be
binding upon each holder of any Notes at the time outstanding, each future
holder of such securities, and the Company.

                                      -4-
<PAGE>

     16.  Severability.  If one or more provisions of this Note are held to be
          ------------
unenforceable under applicable law, such provision(s) shall be excluded from
this Note and the balance of the Note shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.

     17.  "Market Stand-Off" Agreement.  The Holder hereby agrees that,
           ---------------------------
following the effective date of a registration statement of the Company's
initial sale of securities under the Act, for the period of time and to the
extent reasonably requested by the underwriter(s) and the Company, such Holder
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 this Note or any shares of Conversion Stock or other securities of the
Company then owned by the Holder, directly or indirectly, except securities
covered by the registration statement and transfers to donees who agree to be
similarly bound, for the period; provided however, that

               (a) 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,

               (b) the time period requested for such market stand-off shall not
     exceed one hundred eighty (180) days, and

               (c) 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
     Act on Form S-4 (or similar forms promulgated after the date hereof).

     In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the shares
subject to this Section and to impose stop-transfer instructions with respect to
the shares of Conversion Stock and any other shares of stock of the Holder (and
the shares or securities of every other person subject to the foregoing
restriction) during such stand-off period if necessary to enforce such
restrictions.

                                      -5-
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Note to be signed in its
name as of the date first above written.

                                      THE COMPANY:
                                      ------------

                                      By: __________________________

                                      Name: ________________________

                                      Title: _______________________

AGREED AND ACKNOWLEDGED:

THE HOLDER:
-----------

By: _______________________

Name: _____________________

Title: ____________________

                      [SIGNATURE PAGE TO PROMISSORY NOTE]

                                      -6-
<PAGE>

                                   EXHIBIT C

                                Form of Warrant
                                ---------------
<PAGE>

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.

No. ______                                               Void after May 31, 2005

     This certifies that for good and valuable consideration previously provided
to Lexar Media, Inc., a California corporation (the "Company"), with principal
offices at 47421 Bayside Parkway, Fremont, California 94538, receipt of which is
hereby acknowledged, _________________ is entitled, subject to the terms and
conditions of this Warrant, to purchase from the Company at any time prior to
5:00 p.m. Pacific time on May 31, 2005 (the "Expiration Date"), up to that
number of shares of Warrant Stock (as defined below) as may be purchased for the
Maximum Purchase Amount (as defined below) at a price per share equal to the
Warrant Price (as defined below), upon surrender of this Warrant at the
principal offices of the Company, together with a duly executed subscription
form in the form attached hereto as Exhibit 1 and simultaneous payment of the
                                    ---------
full Warrant Price for the shares of Warrant Stock so purchased in lawful money
of the United States.  The Warrant Price and the number and character of shares
of Warrant Stock purchasable under this Warrant are subject to adjustment as
provided herein.

     This Warrant is issued pursuant to that certain Note and Warrant Purchase
Agreement dated as of May __, 2000 (the "Purchase Agreement"), by and among the
Company, the original holder of this Warrant and certain other investors listed
on the Schedule of Investors attached to the Purchase Agreement as Exhibit A,
and is subject to the provisions thereof.

     1.   Definitions.  The following definitions shall apply for purposes of
          -----------
this Warrant:
<PAGE>

          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
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 which shall succeed to or assume the obligations of the Company
under this Warrant.

          1.3  "Holder" means any person who shall at the time be the registered
holder of this Warrant.

          1.4  "Initial Public Offering" means a firm commitment underwritten
public offering pursuant to an effective registration statement filed under the
Act covering the offer and sale of the Company's Common Stock to the public for
the account of the Company.

          1.5  "Maximum Purchase Amount" means fifteen percent (15%) of the
principal amount of the Note.

          1.6  "Next Financing" means the Company's next sale of its Common
Stock or Preferred Stock (with or without other securities of the Company or
some combination thereof) in one transaction or series of related transactions,
occurring at any time before the earlier of (a) the date the Note becomes due
and (b) the Closing of an Initial Public Offering, for an aggregate purchase
price paid to the Company of no less than Ten Million Dollars ($10,000,000)
(excluding the principal amount of any Notes converted into capital stock and
issued therein).

          1.7  "Note" means the Promissory Note of even date herewith initially
payable to the initial Holder hereof.

          1.8  "Notes" means a series of promissory notes aggregating up to a
maximum of $16,000,000 in principal amount issued under the Purchase Agreement,
of which the Note is one, each such note containing substantially identical
terms and conditions as the Note.

          1.9  "Purchase Amount" means, at a given time, an amount equal to the
Maximum Purchase Amount less the aggregate amount previously paid to the Company
for the purchase of Warrant Stock upon exercise of this Warrant.

          1.10 "Warrant" means this Warrant and any warrant(s) delivered in
substitution or exchange therefor, as provided herein.

          1.11 "Warrants" means a series of warrants to purchase the Company's
Common Stock issued under the Purchase Agreement, of which this Warrant is one,
each such warrant containing substantially identical terms and conditions as
this Warrant.

          1.12 "Warrant Price" means the lower of (a) $3.09 per share or (b) an
amount equal to the lowest per share issuance price of shares of Common Stock
issued or Common

                                      -2-
<PAGE>

Stock deemed to be issued (i.e., if the security issued is Preferred Stock the
per share issuance price of the Common Stock deemed to be issued is the price of
one share of such Preferred Stock divided by the number of shares of Common
Stock into which such Preferred Stock is convertible into) in the Next
Financing; provided, however, that if this Warrant is exercised before the Next
Financing then the "Warrant Price" shall be $3.09 per share. The Warrant Price
is subject to adjustment as provided herein.

          1.13 "Warrant Stock" means the Company's Common Stock.  The number
and character of shares of Warrant Stock are subject to adjustment as provided
herein and the term "Warrant Stock" shall include stock and other securities and
property at any time receivable or issuable upon exercise of this Warrant in
accordance with its terms.

     2.   Exercise.
          --------

          2.1  Method of Exercise.  Subject to the terms and conditions of this
               ------------------
Warrant, the Holder may exercise this Warrant in whole or in part, at any time
or from time to time, on any business day before the Expiration Date, for up to
that number of shares of Warrant Stock that is obtained by dividing (a) the
Maximum Purchase Amount by (b) the then effective Warrant Price, by surrendering
this Warrant at the principal offices of the Company, with the subscription form
attached hereto duly executed by the Holder, and payment of an amount equal to
the product obtained by multiplying (i) the number of shares of Warrant Stock to
be purchased by the Holder by (ii) the Warrant Price or adjusted Warrant Price
therefor, if applicable, as determined in accordance with the terms hereof.

          2.2  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.

          2.3  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 Holder and replaced with a new
Warrant of like tenor in which the Maximum Purchase Amount is the Purchase
Amount as so reduced.  In no event may the cumulative aggregate purchase price
paid to the Company upon all exercises of the Warrant exceed the Maximum
Purchase Amount.

          2.4  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.

          2.5  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 Holder shall
execute the subscription form attached hereto, confirming and acknowledging that
the representations and warranties of the Holder set forth in Section 4 of the
Purchase Agreement are true and correct as of this date of exercise.

                                      -3-
<PAGE>

          2.6  Net Exercise Election.  The Holder may elect to convert all or a
               ---------------------
portion of this Warrant, without the payment by the Holder of any additional
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 Holder
                pursuant to this Section 2.6.

          Y  =  the Maximum Purchase Amount divided by the Warrant Price.

          A  =  the fair market value of one share of Warrant Stock, as
          determined in good faith by the Company's Board of Directors, as at
          the time the net exercise election is made pursuant to this Section
          2.6.

          B  =  the Warrant Price.

          The Company will promptly respond in writing to an inquiry by the
Holder as to the then current fair market value of one share of Warrant Stock.

     3.   Issuance of Stock. This Warrant shall be deemed to have been exercised
          -----------------
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date.
As soon as practicable on or after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of whole shares of Warrant Stock issuable upon such
exercise.

     4.   Early Expiration. This Warrant shall automatically expire and be of no
          ----------------
further force and effect without any action by the Holder immediately prior to
the effective date of a Change of Control.  If the Company proposes at any time
to effect a Change of Control, the Company shall mail to the Holder a notice
specifying the date on which the Change of Control is anticipated to become
effective.

     5.   Adjustment Provisions.  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 Warrant Price therefor, are subject to adjustment upon the
occurrence of the following events between the date this Warrant is issued and
the date it is exercised:

          5.1  Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
               ----------------------------------------------------------------
etc. The Warrant Price of this Warrant and the number of shares of Warrant Stock
---
issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time issuable upon exercise of this Warrant) shall each be
proportionally adjusted to reflect any stock dividend, stock split,

                                      -4-
<PAGE>

reverse stock split, combination of shares, reclassification, recapitalization
or other similar event affecting the number of outstanding shares of Warrant
Stock (or such other stock or securities).

          5.2  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
respect to the Warrant Stock that is payable in (a) securities of the Company
(other than issuances with respect to which adjustment is made under Section
5.1), or (b) assets (other than cash dividends paid or payable solely out of
retained earnings), then, and in each such case, the Holder, upon 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
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 exercised this Warrant immediately prior thereto (all
subject to further adjustment as provided in this Warrant).

          5.3  Adjustment for Reorganization, Consolidation, Merger.  Except as
               ----------------------------------------------------
provided in Section 4 (Early Expiration), 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 exercise of this Warrant), after the date of this
Warrant, 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 exercise of this Warrant (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 exercise of this Warrant 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 exercised this Warrant
immediately prior thereto, all subject to further adjustment as provided in this
Warrant, 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 Warrant; and in 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 the consummation
of such reorganization, consolidation, merger or conveyance.

          5.4  Conversion of Stock.  In case all the authorized Warrant Stock of
               -------------------
the Company is converted, pursuant to the Company's Articles of Incorporation,
into other securities or property, or the Warrant Stock otherwise ceases to
exist, then, in such case, the 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 Holder would have been
entitled to receive upon the Termination Date if the 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-
<PAGE>

          5.5  Notice of Adjustments.  The Company shall promptly give written
               ---------------------
notice of each adjustment or readjustment of the Warrant Price or the number of
shares of Warrant Stock or other securities issuable upon exercise of this
Warrant. The notice shall describe the adjustment or readjustment and show in
reasonable detail the facts on which the adjustment or readjustment is based.

          5.6  No Change Necessary. The form of this Warrant need not be changed
               -------------------
because of any adjustment in the Warrant Price or in the number of shares of
Warrant Stock issuable upon its exercise.

          5.7  Reservation of Stock.  If at any time the number of shares of
               --------------------
Warrant Stock or other securities issuable upon exercise of this Warrant shall
not be sufficient to effect the exercise of this Warrant, 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 Warrant Stock or other securities
issuable upon exercise of this Warrant as shall be sufficient for such purpose.

     6.   No Rights or Liabilities as Shareholder.  This Warrant does not by
          ---------------------------------------
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by the 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 Holder, shall cause the
Holder to be a shareholder of the Company for any purpose.

     7.   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 Warrant. 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 Warrant Stock upon the exercise of this Warrant.

     8.  Attorneys' Fees.  In the event any party is required to engage the
         ---------------
services of any attorneys for the purpose of enforcing this Warrant, or any
provision thereof, the prevailing party shall be entitled to recover its
reasonable expenses and costs in enforcing this Warrant, including attorneys'
fees.

     9.  Transfer.  Neither this Warrant nor any 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;
provided, however, that this Warrant may be assigned, conveyed or transferred
without the prior written consent of the Company to any person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with the Holder. The rights and obligations of the Company
and the Holder under this Warrant and the Purchase Agreement shall be binding
upon and benefit their respective permitted successors, assigns, heirs,
administrators and transferees.

     10. Governing Law.  This 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.

                                      -6-
<PAGE>

     11.  Headings.  The headings and captions used in this Warrant are used for
          --------
convenience only and are not to be considered in construing or interpreting this
Warrant.  All references in this Warrant 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.

     12.  Notices.  Unless otherwise provided, any notice required or permitted
          -------
under this 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 Holder at the last address furnished to the Company by the
Holder in writing or, in the case of the Company, at the principal offices of
the Company, 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.

     13.  Amendment; Waiver. Any term of this Warrant may be amended, and the
          -----------------
observance of any term of this 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 holders of Warrants representing at least
a majority of the aggregate shares of Warrant Stock issuable upon exercise of
all the Warrants at the time outstanding.  Any amendment or waiver effected in
accordance with this Section shall be binding upon each holder of any Warrants
at the time outstanding, each future holder of such securities, and the Company.

     14.  Severability.  If one or more provisions of this Warrant are held to
          ------------
be unenforceable under applicable law, such provision(s) shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.

     15.  Terms Binding.  By acceptance of this Warrant, the Holder accepts and
          -------------
agrees to be bound by all the terms and conditions of this Warrant.

     16.  "Market Stand-Off" Agreement.  The Holder hereby agrees that,
           ---------------------------
following the effective date of a registration statement of the Company's
initial sale of securities under the Act, for the period of time and to the
extent reasonably requested by the underwriter(s) and the Company, such Holder
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 this Warrant or any shares of Warrant Stock or other securities of the
Company then owned by the Holder, directly or indirectly, except securities
covered by the registration statement and transfers to donees who agree to be
similarly bound, for the period; provided however, that

               (a)  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,

               (b)  the time period requested for such market stand-off shall
     not exceed one hundred eighty (180) days, and

               (c)  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

                                      -7-
<PAGE>

     promulgated after the date hereof) or a registration relating solely to a
     transaction pursuant to Rule 145 promulgated under the Act on Form S-4 (or
     similar forms promulgated after the date hereof).

     In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the shares
subject to this Section and to impose stop-transfer instructions with respect to
the shares of Warrant Stock and any other shares of stock of the Holder (and the
shares or securities of every other person subject to the foregoing restriction)
during such stand-off period if necessary to enforce such restrictions.

                                      -8-
<PAGE>

Dated:  May __, 2000

THE COMPANY:
-----------

By: _____________________________

Name: ___________________________

Title: __________________________

AGREED AND ACKNOWLEDGED:

THE HOLDER:
-----------

By: _____________________________

Name: ___________________________

Title: __________________________

                          [SIGNATURE PAGE TO WARRANT]

                                      -9-
<PAGE>

                                   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 Lexar Media, Inc. (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 2.6 of the Warrant.  This conversion is exercised with respect to
__________ shares of Common Stock of Lexar Media, Inc. (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) as they apply to the
undersigned Holder 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)

<PAGE>

                                   EXHIBIT D

                            Form of Monthly Warrant
                            -----------------------
<PAGE>

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.

No. _____                                               Void after May ___, 2005

          This certifies that for good and valuable consideration previously
provided to Lexar Media, Inc., a California corporation (the "Company"), with
principal offices at 47421 Bayside Parkway, Fremont, California 94538, receipt
of which is hereby acknowledged, ____________________ is entitled, subject to
the terms and conditions of this Warrant, to purchase from the Company at any
time prior to 5:00 p.m. Pacific time on May 31, 2005 (the "Expiration Date"), up
to that number of shares of Warrant Stock (as defined below) as may be purchased
for the Maximum Purchase Amount (as defined below) at a price per share equal to
the Warrant Price (as defined below), upon surrender of this Warrant at the
principal offices of the Company, together with a duly executed subscription
form in the form attached hereto as Exhibit 1 and simultaneous payment of the
                                    ---------
full Warrant Price for the shares of Warrant Stock so purchased in lawful money
of the United States; provided, however, that at any such time the Holder may
only purchase up to that number of shares of Warrant Stock as may be purchased
for the Purchase Amount (as defined below) at a price per share equal to the
Warrant Price.  The Warrant Price and the number and character of shares of
Warrant Stock purchasable under this Warrant are subject to adjustment as
provided herein.

          This Warrant is issued pursuant to that certain Note and Warrant
Purchase Agreement dated as of May ___, 2000 (the "Purchase Agreement"), by and
among the Company, the original holder of this Warrant and certain other
investors listed on the Schedule of Investors attached to the Purchase Agreement
as Exhibit A, and is subject to the provisions thereof.
<PAGE>

     1.   Definitions.  The following definitions shall apply for purposes of
          -----------
this Warrant:

          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
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 which shall succeed to or assume the obligations of the Company
under this Warrant.

          1.3  "Holder" means any person who shall at the time be the
registered holder of this Warrant.

          1.4  "Initial Public Offering" means a firm commitment underwritten
public offering pursuant to an effective registration statement filed under the
Act covering the offer and sale of the Company's Common Stock to the public for
the account of the Company.

          1.5  "Maximum Purchase Amount" means the principal amount of the Note.

          1.6  "Next Financing" means the Company's next sale of its Common
Stock or Preferred Stock (with or without other securities of the Company or
some combination thereof) in one transaction or series of related transactions,
occurring at any time before the earlier of (a) the date the Note becomes due
and (b) the closing of an Initial Public Offering, for an aggregate purchase
price paid to the Company of no less than Ten Million Dollars ($10,000,000)
(excluding the principal amount of any Notes converted into capital stock and
issued therein).

          1.7  "Note" means the Promissory Note of even date herewith initially
payable to the initial Holder hereof and issued under the Purchase Agreement.

          1.8  "Notes" means a series of promissory notes aggregating up to a
maximum of $16,000,000 in principal amount issued under the Purchase Agreement,
of which the Note is one, each such note containing substantially identical
terms and conditions as the Note.

          1.9  "Purchase Amount" means, at a given time, an amount equal to
eight and thirty-three hundredths percent (8.33%) of the Maximum Purchase Amount
multiplied by the number of full months after the date of the issuance of the
Note (up to a maximum of twelve months) less the aggregate amount previously
paid to the Company for the purchase of Warrant Stock upon exercise of this
Warrant.

          1.10 "Warrant" means this Warrant and any warrant(s) delivered in
substitution or exchange therefor, as provided herein.

          1.11 "Warrants" means a series of warrants to purchase the Company's
Common Stock dated of even date herewith issued under the Purchase Agreement, of
which this

                                      -2-
<PAGE>

Warrant is one, each such warrant containing substantially identical terms and
conditions as this Warrant.

          1.12 "Warrant Price" means the lower of (a) $8.00 per share or (b) an
amount equal to the lowest per share issuance price of shares of Common Stock
issued or Common Stock deemed to be issued (i.e., if the security issued is
Preferred Stock, the per share issuance price of the Common Stock deemed to be
issued is the per share price of the share of such Preferred Stock divided by
the number of shares of Common Stock into which such Preferred Stock is
convertible into) on the earlier to occur of the Next Financing or the Company's
Initial Public Offering; provided, however, that if this Warrant is exercised
before either the Next Financing or Initial Public Offering then the "Warrant
Price" shall be $8.00 per share.  The Warrant Price is subject to adjustment as
provided herein.

          1.13 "Warrant Stock" means the Company's Common Stock.  The number
and character of shares of Warrant Stock are subject to adjustment as provided
herein and the term "Warrant Stock" shall include stock and other securities and
property at any time receivable or issuable upon exercise of this Warrant in
accordance with its terms.

     2.   Exercise.
          --------

          2.1  Method of and Limitations on Exercise.  Subject to the terms and
               -------------------------------------
conditions of this Warrant, the Holder may exercise this Warrant in whole or in
part, at any time or from time to time, on any business day before the
Expiration Date, for up to that number of shares of Warrant Stock that is
obtained by dividing (a) the Purchase Amount by (b) the then effective Warrant
Price, by surrendering this Warrant at the principal offices of the Company,
with the subscription form attached hereto duly executed by the Holder, and
payment of an amount equal to the product obtained by multiplying (i) the number
of shares of Warrant Stock to be purchased by the Holder by (ii) the Warrant
Price or adjusted Warrant Price therefor, if applicable, as determined in
accordance with the terms hereof.

          2.2  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.

          2.3  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 Holder and replaced with a new
Warrant of like tenor in which the Maximum Purchase Amount is the Purchase
Amount as so reduced.  In no event may the cumulative aggregate purchase price
paid to the Company upon all exercises of the Warrant exceed the Maximum
Purchase Amount.

          2.4  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.

          2.5  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

                                      -3-
<PAGE>

federal or state securities laws or other laws or regulations. As a condition to
the exercise of this Warrant, the Holder shall execute the subscription form
attached hereto, confirming and acknowledging that the representations and
warranties of the Holder set forth in Section 4 of the Purchase Agreement are
true and correct as of this date of exercise.

          2.6  Net Exercise Election.  The Holder may elect to convert all or a
               ---------------------
portion of this Warrant, without the payment by the Holder of any additional
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 Holder
          pursuant to this Section 2.6.

          Y  =  the Purchase Amount divided by the Warrant Price.

          A  =  the fair market value of one share of Warrant Stock, as
          determined in good faith by the Company's Board of Directors,
          as at the time the net exercise election is made pursuant to this
          Section 2.6.

          B  =  the Warrant Price.

          The Company will promptly respond in writing to an inquiry by the
Holder as to the then current fair market value of one share of Warrant Stock.

     3.   Issuance of Stock. This Warrant shall be deemed to have been exercised
          -----------------
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date.
As soon as practicable on or after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of whole shares of Warrant Stock issuable upon such
exercise.

     4.   Early Expiration.  This Warrant shall automatically expire and be of
          ----------------
no further force and effect without any action by the Holder immediately prior
to the earlier of (i) the effective date of a Change of Control, or (ii) the
effective date of the Next Financing if the issuance price of shares of Common
Stock issued or Common Stock deemed to be issued (i.e., if the security issued
is Preferred Stock the per share issuance price of the Common Stock deemed to be
issued is the per share price of such Preferred Stock divided by the number of
shares of Common Stock into which such Preferred Stock is convertible into) in
the Next Financing is less than or equal to $5.50 per share (as adjusted for
stock splits, combinations and similar events). If the Company proposes at any
time to effect a Change of Control or the Next Financing, the Company shall mail
to the Holder a notice specifying the date on which the Change of Control or the
Next Financing is anticipated to become effective.

                                      -4-
<PAGE>

     5.   Adjustment Provisions.  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 Warrant Price therefor, are subject to adjustment upon the
occurrence of the following events between the date this Warrant is issued and
the date it is exercised:

          5.1  Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
               ----------------------------------------------------------------
etc.  The Warrant Price of this Warrant and the number of shares of Warrant
----
Stock issuable upon exercise of this Warrant (or any shares of stock or other
securities at the time 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 affecting the number of outstanding shares of Warrant Stock (or
such other stock or securities).

          5.2  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
respect to the Warrant Stock that is payable in (a) securities of the Company
(other than issuances with respect to which adjustment is made under Section
5.1), or (b) assets (other than cash dividends paid or payable solely out of
retained earnings), then, and in each such case, the Holder, upon 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
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 exercised this Warrant immediately prior thereto (all
subject to further adjustment as provided in this Warrant).

          5.3  Adjustment for Reorganization, Consolidation, Merger.  Except
               ----------------------------------------------------
as provided in Section 4 (Early Expiration), 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 exercise of this Warrant), after the date of
this Warrant, 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 exercise of this Warrant (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 exercise of this Warrant 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 exercised this Warrant
immediately prior thereto, all subject to further adjustment as provided in this
Warrant, 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 Warrant; and in 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 the consummation
of such reorganization, consolidation, merger or conveyance.

          5.4  Conversion of Stock.  In case all the authorized Warrant Stock
               -------------------
of the Company is converted, pursuant to the Company's Articles of
Incorporation, into other securities or property, or the Warrant Stock otherwise
ceases to exist, then, in such case, the Holder, upon

                                      -5-
<PAGE>

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 Holder would have been entitled to receive upon the Termination Date if the
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).

          5.5  Notice of Adjustments.  The Company shall promptly give written
               ---------------------
notice of each adjustment or readjustment of the Warrant Price or the number of
shares of Warrant Stock or other securities issuable upon exercise of this
Warrant. The notice shall describe the adjustment or readjustment and show in
reasonable detail the facts on which the adjustment or readjustment is based.

          5.6  No Change Necessary.  The form of this Warrant need not be
               -------------------
changed because of any adjustment in the Warrant Price or in the number of
shares of Warrant Stock issuable upon its exercise.

          5.7  Reservation of Stock.  If at any time the number of shares of
               --------------------
Warrant Stock or other securities issuable upon exercise of this Warrant shall
not be sufficient to effect the exercise of this Warrant, 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 Warrant Stock or other securities
issuable upon exercise of this Warrant as shall be sufficient for such purpose.

     6.   No Rights or Liabilities as Shareholder.  This Warrant does not by
          ---------------------------------------
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by the 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 Holder, shall cause the
Holder to be a shareholder of the Company for any purpose.

     7.   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 Warrant.  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 Warrant Stock upon the exercise of this Warrant.

     8.   Attorneys' Fees.  In the event any party is required to engage the
          ---------------
services of any attorneys for the purpose of enforcing this Warrant, or any
provision thereof, the prevailing party shall be entitled to recover its
reasonable expenses and costs in enforcing this Warrant, including attorneys'
fees.

     9.   Transfer.  Neither this Warrant nor any 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;
provided, however, that this Warrant may be assigned, conveyed or transferred
without the prior written consent of the Company to any

                                      -6-
<PAGE>

person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with the Holder. The
rights and obligations of the Company and the Holder under this Warrant and the
Purchase Agreement shall be binding upon and benefit their respective permitted
successors, assigns, heirs, administrators and transferees.

     10.  Governing Law.  This 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.

     11.  Headings.  The headings and captions used in this Warrant are used for
          --------
convenience only and are not to be considered in construing or interpreting this
Warrant.  All references in this Warrant 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.

     12.  Notices.  Unless otherwise provided, any notice required or permitted
          -------
under this 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 Holder at the last address furnished to the Company by the
Holder in writing or, in the case of the Company, at the principal offices of
the Company, 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.

     13.  Amendment; Waiver. Any term of this Warrant may be amended, and the
          -----------------
observance of any term of this 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 holders of Warrants representing at least
a majority of the aggregate shares of Warrant Stock issuable upon exercise of
all the Warrants at the time outstanding.  Any amendment or waiver effected in
accordance with this Section shall be binding upon each holder of any Warrants
at the time outstanding, each future holder of such securities, and the Company.

     14.  Severability.  If one or more provisions of this Warrant are held to
          ------------
be unenforceable under applicable law, such provision(s) shall be excluded from
this Warrant and the balance of the Warrant shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.

     15.  Terms Binding.  By acceptance of this Warrant, the Holder accepts and
          -------------
agrees to be bound by all the terms and conditions of this Warrant.

     16.  "Market Stand-Off" Agreement.  The Holder hereby agrees that,
           ---------------------------
following the effective date of a registration statement of the Company's
initial sale of securities under the Act, for the period of time and to the
extent reasonably requested by the underwriter(s) and the Company, such Holder
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 this Warrant or any shares of Warrant Stock or other securities of the
Company then owned by the Holder, directly or indirectly, except securities
covered by the registration statement and transfers to donees who agree to be
similarly bound, for the period; provided however, that

                                      -7-
<PAGE>

               (a) 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,

               (b) the time period requested for such market stand-off shall not
     exceed one hundred eighty (180) days, and

               (c) 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
     Act on Form S-4 (or similar forms promulgated after the date hereof).

     In order to enforce the foregoing covenant, the Company shall have the
right to place restrictive legends on the certificates representing the shares
subject to this Section and to impose stop-transfer instructions with respect to
the shares of Warrant Stock and any other shares of stock of the Holder (and the
shares or securities of every other person subject to the foregoing restriction)
during such stand-off period if necessary to enforce such restrictions.

                                      -8-
<PAGE>

Dated:  May __, 2000

THE COMPANY:
-----------

By: _______________________________

Name: _____________________________

Title: ____________________________

AGREED AND ACKNOWLEDGED:

THE HOLDER:
-----------

By: _______________________________

Name: _____________________________

Title: ____________________________

                          [SIGNATURE PAGE TO WARRANT]

                                      -9-
<PAGE>

                                   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 Lexar Media, Inc. (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 2.6 of the Warrant.  This conversion is exercised with respect to
__________ shares of Common Stock of Lexar Media, Inc. (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) as they apply to the
undersigned Holder 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)<PAGE>

                                                                   EXHIBIT 10.26

CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been
omitted pursuant to a request for confidential treatment and, where applicable,
have been marked with an astrisk to denote where omissions have been made. The
confidential material has been filed separately with the Commission.

________________________________________________________________________________

                                  $10,000,000

                                CREDIT AGREEMENT

                                    between

                               LEXAR MEDIA, INC.,

                                  as Borrower,

                                      and

                        ACCESS TECHNOLOGY PARTNERS, L.P.

                                   as Lender

                           Dated as of June 30, 2000

<PAGE>

SCHEDULES:
---------

4.4         Consents, Authorizations, Filings and Notices
4.15        Subsidiaries
4.19        UCC Filing Jurisdictions
7.2(e)      Existing Indebtedness
7.3(f)      Existing Liens

EXHIBITS:
--------
A           Form of Guarantee and Collateral Agreement
B           Form of Compliance Certificate
C           Form of Closing Certificate
D           [Omitted]
E           Form of Exemption Certificate

                                      -i-
<PAGE>

CREDIT AGREEMENT, dated as of June 30, 2000, between LEXAR MEDIA, INC., a
California corporation (the "Borrower"), and ACCESS TECHNOLOGY PARTNERS, L.P.
                             --------
(the "Lender").
      ------

The parties hereto hereby agree as follows:

SECTION 1.  DEFINITIONS

          1.1  Defined Terms.  As used in this Agreement, the terms listed in
               -------------
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.

          "Affiliate":  as to any Person, any other Person that, directly or
           ---------
indirectly, is in control of, is controlled by, or is under common control with,
such Person.  For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.

          "Agreement":  this Credit Agreement, as amended, supplemented or
           ---------
otherwise modified from time to time.

          "Amendment to Investors Rights Agreement": the Amendment No. 4 to the
           ---------------------------------------
Investors Rights Agreement, dated as of June 22, 2000, which amends that certain
Investors Rights Agreement, dated as of September 28, 1999, between the Borrower
and certain shareholders of the Borrower listed therein.

          "Board":  the Board of Governors of the Federal Reserve System of the
           -----
United States (or any successor).

          "Borrower":  as defined in the preamble hereto.
           --------

          "Bridge Financing": the Note and Warrant Purchase Agreement, dated as
           ----------------
of May 19, 2000, among the Borrower and the Investors (as defined therein), as
amended, supplemented or otherwise modified from time to time.

          "Business":  as defined in Section 4.17(b).
           --------

          "Business Day":  a day other than a Saturday, Sunday or other day on
           ------------
which commercial banks in New York City are authorized or required by law to
close.

          "Capital Expenditures":  for any period, with respect to any Person,
           --------------------
the aggregate of all expenditures by such Person and its Subsidiaries for the
acquisition or leasing (pursuant to a capital lease) of fixed or capital assets
or additions to equipment (including replacements, capitalized repairs and
improvements during such period) that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.

          "Capital Lease Obligations":  as to any Person, the obligations of
           -------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.

          "Capitalized Software Expenses":  for any period, with respect to any
           -----------------------------
Person, the aggregate of all software development expenses incurred by such
Person and its Subsidiaries that should be capitalized under GAAP on a
consolidated balance sheet of such Person and its Subsidiaries.

                                      -2-
<PAGE>

          "Capital Stock":  any and all shares, interests, participations or
           -------------
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.

          "Cash Equivalents":  (a) marketable direct obligations issued by, or
           ----------------
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b)
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any commercial bank organized under the laws of the United
States or any state thereof having combined capital and surplus of not less than
$500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard &
Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc.
                          ---
("Moody's"), or carrying an equivalent rating by a nationally recognized rating
  -------
agency, if both of the two named rating agencies cease publishing ratings of
commercial paper issuers generally, and maturing within six months from the date
of acquisition; (d) repurchase obligations of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30
days, with respect to securities issued or fully guaranteed or insured by the
United States government; (e) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by S&P or A by Moody's; (f) securities with maturities of six
months or less from the date of acquisition backed by standby letters of credit
issued by any commercial bank satisfying the requirements of clause (b) of this
definition; (g) shares of money market mutual or similar funds which invest
exclusively in assets satisfying the requirements of clauses (a) through (f) of
this definition; or (h) investments in instruments described in a corporate
investment policy which has been approved in writing by the Lender.

          "Chase":  The Chase Manhattan Bank.
           -----

          "Closing Date":  the date on which the conditions precedent set forth
           ------------
in Section 5.1 shall have been satisfied, or, in the Administrative Agent's
discretion, waived until the Initial Funding Date, which Closing Date is June
30, 2000.

          "Code":  the Internal Revenue Code of 1986, as amended from time to
           ----
time.

          "Collateral":  all property of the Loan Parties, now owned or
           ----------
hereafter acquired, upon which a Lien is purported to be created by any Security
Document.

          "Commonly Controlled Entity":  an entity, whether or not incorporated,
           --------------------------
that is under common control with the Borrower within the meaning of Section
4001 of ERISA or is part of a group that includes the Borrower and that is
treated as a single employer under Section 414 of the Code.

          "Compliance Certificate":  a certificate duly executed by a
           ----------------------
Responsible Officer substantially in the form of Exhibit B.

          "Consolidated Debt to Capital Ratio":  at any date, the ratio of (i)
           ----------------------------------
Consolidated Total Debt to (ii) the sum of Consolidated Total Debt, Consolidated
Net Worth and any preferred or preference stock of the Borrower.

          "Consolidated EBITDA":  for any period, Consolidated Net Income for
           -------------------
such period plus, without duplication and to the extent reflected as a charge in
            ----
the statement of such Consolidated Net Income for such period, the sum of (a)
income tax expense, (b) interest expense, amortization or writeoff of debt

                                      -3-
<PAGE>

discount and debt issuance costs and commissions, discounts and other fees and
charges associated with Indebtedness (including the Loans), (c) depreciation and
amortization expense, (d) amortization of intangibles (including, but not
limited to, goodwill) and organization costs, (e) any non-recurring non-cash
expenses incurred in connection with the Warrant Documents, (f) any non-
recurring non-cash imputed interest charges associated with any warrants to
purchase the Borrower's common stock, (g) any extraordinary, unusual or non-
recurring non-cash expenses or losses (including, whether or not otherwise
includable as a separate item in the statement of such Consolidated Net Income
for such period, non-cash losses on sales of assets outside of the ordinary
course of business), provided, that the amounts referred to in this clause (g)
                     --------
shall not, in the aggregate, exceed $1,000,000 for any fiscal year of the
Borrower, and (h) any other non-cash charges, and minus, to the extent included
                                                  -----
in the statement of such Consolidated Net Income for such period, the sum of (a)
interest income, (b) any extraordinary, unusual or non-recurring income or gains
(including, whether or not otherwise includable as a separate item in the
statement of such Consolidated Net Income for such period, gains on the sales of
assets outside of the ordinary course of business) and (c) any other non-cash
income, all as determined on a consolidated basis.

          "Consolidated Net Income":  for any period, the consolidated net
           -----------------------
income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
                                            --------
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Borrower or is merged into or consolidated with the
Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Borrower to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any Contractual Obligation (other than under any Loan
Document) or Requirement of Law applicable to such Subsidiary.

          "Consolidated Net Worth":  at any date, all amounts that would, in
           ----------------------
conformity with GAAP, be included on a consolidated balance sheet of the
Borrower and its Subsidiaries under stockholders' equity at such date.

          "Consolidated Revenue":  for any period, the consolidated revenue of
           --------------------
the Borrower and its Subsidiaries, determined on a consolidated basis in
accordance with GAAP.

          "Consolidated Total Debt":  at any date, the aggregate principal
           -----------------------
amount of all Indebtedness of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in accordance with GAAP.

          "Continuing Directors":  the directors of the Borrower on the Closing
           --------------------
Date, after giving effect to the transactions contemplated hereby, and each
other director, if, in each case, such other director's nomination for election
to the board of directors of the Borrower is recommended by a majority of the
then Continuing Directors.

          "Contractual Obligation":  as to any Person, any provision of any
           ----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.

          "Default":  any of the events specified in Section 8, whether or not
           -------
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.

          "Disposition":  with respect to any property, any sale, lease, sale
           -----------
and leaseback, assignment, conveyance, transfer or other disposition thereof.
The terms "Dispose" and "Disposed of" shall have correlative meanings.
           -------       -----------

                                      -4-
<PAGE>

          "Dollars" and A$":  dollars in lawful currency of the United States.
           -------       -

          "Domestic Subsidiary":  any Subsidiary of the Borrower organized under
           -------------------
the laws of any jurisdiction within the United States.

          "Environmental Laws":  any and all foreign, Federal, state, local or
           ------------------
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.

          "ERISA":  the Employee Retirement Income Security Act of 1974, as
           -----
amended from time to time.

          "Event of Default":  any of the events specified in Section 8,
           ----------------
provided that any requirement for the giving of notice, the lapse of time, or
--------
both, has been satisfied.

          "Excluded Foreign Subsidiary":  any Foreign Subsidiary in respect of
           ---------------------------
which either (a) the pledge of all of the Capital Stock of such Subsidiary as
Collateral or (b) the guaranteeing by such Subsidiary of the Obligations, would,
in the good faith judgment of the Borrower, result in adverse tax consequences
to the Borrower, which as of the Closing Date shall include Lexar Media K.K., a
Japanese corporation, and Lexar Media (Europe) Limited, a company organized
under the laws of England (registered #3136440 in England).

          "Foreign Subsidiary":  any Subsidiary of the Borrower that is not a
           ------------------
Domestic Subsidiary.

          "GAAP":  generally accepted accounting principles in the United States
           ----
as in effect from time to time, except that for purposes of Section 7.1, GAAP
shall be determined on the basis of such principles in effect on the date hereof
and consistent with those used in the preparation of the most recent audited
financial statements referred to in Section 4.1.  In the event that any
"Accounting Change" (as defined below) shall occur and such change results in a
change in the method of calculation of standards or terms in this Agreement,
then the Borrower and the Lender agree to enter into negotiations in order to
amend such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating the
Borrower's financial condition shall be the same after such Accounting Changes
as if such Accounting Changes had not been made.  Until such time as such an
amendment shall have been executed and delivered by the Borrower and the Lender,
all standards and terms in this Agreement shall continue to be calculated or
construed as if such Accounting Changes had not occurred.  "Accounting Changes"
refers to changes in accounting principles required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants or, if
applicable, the SEC.

          "Governmental Authority":  any nation or government, any state or
           ----------------------
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).

          "Guarantee and Collateral Agreement":  the Guarantee and Collateral
           ----------------------------------
Agreement to be executed and delivered by the Borrower and each Subsidiary
Guarantor, substantially in the form of Exhibit A, as the same may be amended,
supplemented or otherwise modified from time to time.

                                      -5-
<PAGE>

          "Guarantee Obligation":  as to any Person (the "guaranteeing person"),
           --------------------                           -------------------
any obligation of (a) the guaranteeing person or (b) another Person (including
any bank under any letter of credit) to induce the creation of which the
guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
                                                           -------------------
of any other third Person (the "primary obligor") in any manner, whether
                                ---------------
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation shall not include
         --------  -------
endorsements of instruments for deposit or collection in the ordinary course of
business.  The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.

          "Hedge Agreements":  all interest rate swaps, caps or collar
           ----------------
agreements or similar arrangements dealing with interest rates or currency
exchange rates or the exchange of nominal interest obligations, either generally
or under specific contingencies.

          "Indebtedness":  of any Person at any date, without duplication, (a)
           ------------
all indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than trade
payables incurred in the ordinary course of such Person's business), (c) all
obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations of such Person, (f)
all obligations of such Person, contingent or otherwise, as an account party or
applicant under or in respect of acceptances, letters of credit, surety bonds or
similar arrangements, (g) the liquidation value of all redeemable preferred
Capital Stock of such Person, (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses (a) through (g) above,
(i) all obligations of the kind referred to in clauses (a) through (h) above
secured by (or for which the holder of such obligations has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including
accounts and contract rights) owned by such Person, whether or not such Person
has assumed or become liable for the payment of such obligation, and (j) for the
purposes of Sections 7.2 and 8(e) only, all obligations of such Person in
respect of Hedge Agreements.  The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person's ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness expressly provide that such
Person is not liable therefor.

          "Initial Funding Date": the date on which the conditions precedent set
           --------------------
forth in Section 5.2 shall have been satisfied.

                                      -6-
<PAGE>

          "Insolvency":  with respect to any Multiemployer Plan, the condition
           ----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.

          "Insolvent":  pertaining to a condition of Insolvency.
           ---------

          "Intellectual Property":  the collective reference to all rights,
           ---------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, domain names, technology, know-how and processes, and all rights to
sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.

          "Intercreditor Agreement":  the Intercreditor Agreement, dated as of
           -----------------------
June 30, 2000, between Chase and Lender, as amended, supplemented or otherwise
modified from time to time.

          "Investments":  as defined in Section 7.7.
           -----------

          "Kingston Notes":  the secured promissory notes in the aggregate
           --------------
principal amount of $4,750,000 issued and sold by the Borrower pursuant to that
certain Note Purchase Agreement, dated as of August 8, 1997, as amended, between
the Borrower and David Sun and John Tu.

          "Lien":  any mortgage, pledge, hypothecation, assignment, deposit
           ----
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the
same economic effect as any of the foregoing).

          "Loan":  any loan made by Lender pursuant to this Agreement.
           ----

          "Loan Documents":  this Agreement, the Security Documents, and all
           --------------
other present and future documents, instruments and agreements relating hereto
or thereto.

          "Loan Parties":  the Borrower and each Subsidiary of the Borrower that
           ------------
is a party to a Loan Document.

          "Material Adverse Effect":  a material adverse effect on (a) the
           -----------------------
business, property, operations, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Lender hereunder or thereunder.

          "Materials of Environmental Concern":  any gasoline or petroleum
           ----------------------------------
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.

          "Maturity Date":  June 30, 2003.
           -------------

          "Multiemployer Plan":  a Plan that is a multiemployer plan as defined
           ------------------
in Section 4001(a)(3) of ERISA.

          "Non-Excluded Taxes":  as defined in Section 2.6.
           ------------------

          "Obligations":  the unpaid principal of and interest on (including
           -----------
interest accruing after the maturity of the Loans and interest accruing after
the filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Borrower, whether or

                                      -7-
<PAGE>

not a claim for post-filing or post-petition interest is allowed in such
proceeding) the Loans and all other obligations and liabilities of the Borrower
to the Lender, whether direct or indirect, absolute or contingent, due or to
become due, or now existing or hereafter incurred, which may arise under, out
of, or in connection with, this Agreement, any other Loan Document, or any other
document made, delivered or given in connection herewith or therewith, whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses (including all fees, charges and disbursements of counsel to the
Lender that are required to be paid by the Borrower pursuant hereto) or
otherwise.

          "Other Taxes":  any and all present or future stamp or documentary
           -----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.

          "Participant":  as defined in Section 10.6(b).
           -----------

          "PBGC":  the Pension Benefit Guaranty Corporation established pursuant
           ----
to Subtitle A of Title IV of ERISA (or any successor).

          "Person":  an individual, partnership, corporation, limited liability
           ------
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.

          "Plan":  at a particular time, any employee benefit plan that is
           ----
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.

          "Projections":  a detailed consolidated budget for the following
           -----------
fiscal year (including a projected consolidated balance sheet of the Borrower
and its Subsidiaries as of the end of the following fiscal year, the related
consolidated statements of projected cash flow, projected changes in financial
position and projected income and a description of the underlying assumptions
applicable thereto), and, as soon as available, significant revisions, if any,
of such budget and projections with respect to such financial year.

          "Properties":  as defined in Section 4.17(a).
           ----------

          "Regulation U":  Regulation U of the Board as in effect from time to
           ------------
time.

          "Reorganization":  with respect to any Multiemployer Plan, the
           --------------
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.

          "Reportable Event":  any of the events set forth in Section 4043(b) of
           ----------------
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.
4043.

          "Requirement of Law":  as to any Person, the Certificate of
           ------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.

                                      -8-
<PAGE>

          "Responsible Officer":  the chief executive officer, president or
           -------------------
chief financial officer of the Borrower, but in any event, with respect to
financial matters, the chief financial officer of the Borrower.

          "Restricted Payments":  as defined in Section 7.6.
           -------------------

          "SEC":  the Securities and Exchange Commission, any successor thereto
           ---
and any analogous Governmental Authority.

          "Security Documents":  the collective reference to the Guarantee and
           ------------------
Collateral Agreement and all other security documents hereafter delivered to the
Lender granting a Lien on any property of any Person to secure the obligations
and liabilities of any Loan Party under any Loan Document.

          "Senior Loans":  Loans and other extensions of credit and credit
           ------------
accommodations made to the Borrower pursuant to the Senior Loan Agreement.

          "Senior Loan Agreement":  That certain Credit Agreement among
           ---------------------
Borrower, Chase, as administrative agent, and the several lenders from time to
time parties thereto, dated June 30, 2000, and all extensions, renewals and
modifications thereof.

          "Single Employer Plan":  any Plan that is covered by Title IV of
           --------------------
ERISA, but that is not a Multiemployer Plan.

          "Solvent":  when used with respect to any Person, means that, as of
           -------
any date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be greater
than the amount that will be required to pay the liability of such Person on its
debts as such debts become absolute and matured, (c) such Person will not have,
as of such date, an unreasonably small amount of capital with which to conduct
its business, and (d) such Person will be able to pay its debts as they mature.
For purposes of this definition, (i) "debt" means liability on a "claim", and
(ii) "claim" means any (x) right to payment, whether or not such a right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a right to payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured or unmatured, disputed,
undisputed, secured or unsecured.

          "Sony Consent": the consent, in form and substance satisfactory to the
           ------------
Lender, of Sony Corporation to the granting of Liens by the Borrower and its
Subsidiaries in connection with this Agreement and the other Loan Documents
under the Sony Technology License Agreement and the Lexar Technology License
Agreement, each dated as of March 21, 2000, between Sony Corporation and the
Borrower.

          "Sony Debt": the promissory note in the aggregate principal amount of
           ---------
$2,000,000 issued and sold by the Borrower pursuant to that certain Convertible
Note and Warrant Purchase Agreement, dated as of March 21, 2000, between Sony
Corporation and the Borrower.

          "Subsidiary":  as to any Person, a corporation, partnership, limited
           ----------
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person.  Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall
refer to a Subsidiary or Subsidiaries of the Borrower.

                                      -9-
<PAGE>

          "Subsidiary Guarantor":  each Subsidiary of the Borrower other than
           --------------------
any Excluded Foreign Subsidiary.

          "Toshiba Debt":  the secured promissory note in the aggregate
           ------------
principal amount of $400,000 issued and sold by the Borrower to Toshiba America
Electronic Components, Inc. on June 26, 1997.

          "United States":  the United States of America.
           -------------

          "Warrant Documents":  the collective reference to (i) the Warrant
           -----------------
Agreement, dated as of June 30, 2000, among the Borrower, the Lender, and Chase
Securities Inc., (ii) the Regulatory Agreement, dated as of June 30, 2000, among
the Borrower, the Lender, and Chase Securities Inc., and (iii) the Common Stock
Purchase Warrant, dated as of June 30, 2000, issued by the Borrower to the
Lender.

          "Wholly Owned Subsidiary":  as to any Person, any other Person all of
           -----------------------
the Capital Stock of which (other than directors' qualifying shares required by
law) is owned by such Person directly and/or through other Wholly Owned
Subsidiaries.

          "Wholly Owned Subsidiary Guarantor":  any Subsidiary Guarantor that is
           ---------------------------------
a Wholly Owned Subsidiary of the Borrower.

          1.2  Other Definitional Provisions.  (a)  Unless otherwise specified
               -----------------------------
therein, all terms defined in this Agreement shall have the defined meanings
when used in the other Loan Documents or any certificate or other document made
or delivered pursuant hereto or thereto.

          (b)  As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto, (i)
accounting terms relating to the Borrower and its Subsidiaries not defined in
Section 1.1 and accounting terms partly defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP, (ii)
the words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation", (iii) the word "incur" shall be construed to
mean incur, create, issue, assume, become liable in respect of or suffer to
exist (and the words "incurred" and "incurrence" shall have correlative
meanings), and (iv) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, Capital Stock, securities, revenues,
accounts, leasehold interests and contract rights.

          (c)  The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Schedule and
Exhibit references are to this Agreement unless otherwise specified.

          (d)  The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.

SECTION 2.  AMOUNT AND TERMS OF LOANS.

     2.1  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:

                                      -10-
<PAGE>

               (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 *, upon execution and delivery by Borrower
of *.

               (3) A Disbursement of *, upon completion of an * 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, *, and (ii) the Borrower
delivers to the Lender *, and (iii) Borrower provides evidence to Lender,
reasonably satisfactory to Lender, that Borrower *.

               (4) A Disbursement of * (as to which *.

Each of the Disbursements shall be made to Borrower at such time as Lender has
been provided with copies of documents (including any manufacturing, patent or
other like agreements), representations and other evidence reasonably
satisfactory to it and its counsel to confirm the satisfaction of the applicable
condition to the Disbursement, and Lender has had a reasonable time to review
the same and to confirm that the same satisfy the applicable condition to the
Disbursement. Borrower shall make its counsel available to Lender's counsel to
review any and all information necessary to understand how its counsel reached
its conclusions. The conditions in Sections 2.1(b) (2), (3) and (4) above shall
be deemed satisfied in the event the Borrower *, on terms and conditions
reasonably satisfactory to Lender, pursuant to which * provided to Lender.

          (c)  Borrower  shall repay the entire unpaid principal balance of all
Loans and all accrued and unpaid interest thereon, and all other Obligations on
the Maturity Date.

          2.2  Fees.  Borrower shall pay Lender a loan fee of $200,000, as set
               ----
forth in Section 6.11 below.

          2.3 Prepayments.  The Borrower may at any time and from time to time
              -----------
prepay the Loans, in whole or in part, upon three Business Days prior written
notice to the Lender, provided that Borrower shall, concurrently with the
prepayment, pay to Lender a prepayment fee (the "Make-Whole Payment") in an
amount equal to quarterly interest payments on the principal amount prepaid, at
the Differential Interest Rate, for the number of full or partial calendar
quarters remaining from the prepayment date to the Maturity Date, which interest
payments shall be discounted to present value at the Treasury Rate.  As used
herein, "Differential Interest Rate" means the interest rate determined at the
prepayment date, by subtracting the Treasury Rate, at the prepayment date, from
the Loan Interest Rate, provided that, in no event shall the Differential
Interest Rate be a negative number.  The "Treasury Rate" shall mean  the
interest rate on United States government securities for the period, as near as
practicable, from the prepayment date to the Maturity Date, as calculated by
Lender in its good faith discretion, which calculation shall be conclusive and
binding on Borrower absent manifest error.  In the event said interest rate on
United States government securities is, for any reason, not ascertainable, a
comparable rate selected by Lender in its discretion shall be used in place
thereof, which selection shall be conclusive and binding on Borrower.  The Make-
Whole Payment shall be in addition to all accrued interest and all other fees
and shall be non-refundable.  In the event the Loans are paid prior to the
Maturity Date, for any other reason, other than at the option of the Borrower,
including without limitation prepayments as a result of an Event of Default, the
Borrower shall make the Make-Whole Payment to Lender with respect to the amount
so prepaid, on the date of the prepayment.

          2.4  Interest Rates and Payment Dates.
               --------------------------------

          (a)  Each Loan shall bear interest at the rate of 12% per annum
computed on the basis of a 360-day year for the actual number of days elapsed
(the "Loan Interest Rate").

*  Material has been omitted and filed separately with the Commission.

                                      -11-
<PAGE>

          (b) Interest accrued on the unpaid principal balance of all Loans
shall be paid quarterly on the last day of March, June, September and December
in each year (the "Interest Payment Dates").

          (c) If all or a portion of the principal amount of any Loan shall not
be paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum equal to the Loan
Interest Rate plus 4% per annum.  If all or a portion of any interest payable on
              ----
any Loan or other amount payable hereunder, other than principal, shall not be
paid when due (whether at the stated maturity, by acceleration or otherwise),
such overdue amount shall bear interest at a rate per annum equal to the Loan
Interest Rate plus 4% per annum, provided that if such payment is not paid
              ----
within 10 days after the date due, without limiting Lender's other rights and
remedies, Borrower shall pay Lender an amount equal to the greater of (i) a late
charge of 5% of the amount of such payment not paid within 10 days after the
date due, or (ii) interest on the amount not paid at a rate per annum equal to
the Loan Interest Rate plus 4% per annum.  In all of the foregoing cases such
                       ----
additional interest shall be paid from the date of such non-payment until such
amount is paid in full (as well after as before judgment).

          (d)  Interest shall be payable in arrears on each Interest Payment
Date, provided that any additional interest or late charges accruing pursuant to
      --------
paragraph (c) of this Section shall be payable from time to time on demand.

          (e) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
New York time, on the due date thereof to the Lender, at such place as the
Lender shall direct, in Dollars and in immediately available funds. If any
payment hereunder becomes due and payable on a day other than a Business Day,
such payment shall be extended to the next succeeding Business Day. In the case
of any extension of any payment of principal pursuant to the preceding sentence,
interest thereon shall be payable at the then applicable rate during such
extension.

          2.5  Requirements of Law.  (a)  If the adoption of or any change in
               -------------------
any Requirement of Law or in the interpretation or application thereof or
compliance by Lender with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:

               (i)  shall subject Lender to any tax of any kind whatsoever with
     respect to this Agreement, or change the basis of taxation of payments to
     Lender in respect thereof (except for Non-Excluded Taxes covered by Section
     2.6 and changes in the rate of tax on the overall net income of Lender);

               (ii)  shall impose, modify or hold applicable any reserve,
     special deposit, compulsory loan or similar requirement against assets held
     by, deposits or other liabilities in or for the account of, advances, loans
     or other extensions of credit by, or any other acquisition of funds by, any
     office of Lender; or

               (iii)  shall impose on Lender any other condition;

and the result of any of the foregoing is to increase the cost to Lender, by an
amount that Lender deems to be material, of making, converting into, continuing
or maintaining Loans or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay Lender, upon
its demand, any additional amounts necessary to compensate Lender for such
increased cost or reduced amount receivable.

          (b)  If Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by Lender or

                                      -12-
<PAGE>

any corporation controlling Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on Lender's or such corporation's capital as a consequence of
its obligations hereunder or under to a level below that which Lender or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration Lender's or such corporation's policies with respect
to capital adequacy) by an amount deemed by Lender to be material, then from
time to time, after submission by Lender to the Borrower of a written request
therefor, the Borrower shall pay to Lender such additional amount or amounts as
will compensate Lender for such reduction; provided that the Borrower shall not
                                           --------
be required to compensate Lender pursuant to this paragraph for any amounts
incurred more than six months prior to the date that Lender notifies the
Borrower of Lender's intention to claim compensation therefor; and provided
                                                                   --------
further that, if the circumstances giving rise to such claim have a retroactive
-------
effect, then such six-month period shall be extended to include the period of
such retroactive effect.

          (c)  A certificate as to any additional amounts payable pursuant to
this Section submitted by Lender to the Borrower shall be conclusive in the
absence of manifest error.  The obligations of the Borrower pursuant to this
Section shall survive the termination of this Agreement and the payment of the
Loans and all other amounts payable hereunder.

          2.6  Taxes.  (a)  All payments made by the Borrower under this
               -----
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Lender as a result of a present or former
connection between the Lender and the jurisdiction of the Governmental Authority
imposing such tax or any political subdivision or taxing authority thereof or
therein (other than any such connection arising solely from the Lender having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other Loan Document).  If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-
                                                                            ---
Excluded Taxes") or Other Taxes are required to be withheld from any amounts
--------------
payable to the Lender hereunder, the amounts so payable to the Lender shall be
increased to the extent necessary to yield to the Lender (after payment of all
Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement; provided,
                                                                      --------
however, that the Borrower shall not be required to increase any such amounts
-------
payable to Lender with respect to any Non-Excluded Taxes (i) that are
attributable to Lender's failure to comply with the requirements of paragraph
(d) or (e) of this Section or (ii) that are United States withholding taxes
imposed on amounts payable to Lender at the time Lender becomes a party to this
Agreement, except to the extent that Lender's assignor (if any) was entitled, at
the time of assignment, to receive additional amounts from the Borrower with
respect to such Non-Excluded Taxes pursuant to this paragraph.

          (b)  In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.

          (c)  Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrower, as promptly as possible thereafter the Borrower shall send to the
Lender a certified copy of an original official receipt received by the Borrower
showing payment thereof.  If the Borrower fails to pay any Non-Excluded Taxes or
Other Taxes when due to the appropriate taxing authority or fails to remit to
the Lender the required receipts or other required documentary evidence, the
Borrower shall indemnify the Lender for any incremental taxes, interest or
penalties that may become payable by the Lender as a result of any such failure.

                                      -13-
<PAGE>

          (d)  Each Lender (or Transferee) that is not a "U.S. Person" as
defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver
to the Borrower and the Administrative Agent (or, in the case of a Participant,
to the Lender from which the related participation shall have been purchased)
two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI,
or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit E and a Form W-8BEN, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. federal withholding tax on
all payments by the Borrower under this Agreement and the other Loan Documents.
Such forms shall be delivered by each Non-U.S. Lender on or before the date it
becomes a party to this Agreement (or, in the case of any Participant, on or
before the date such Participant purchases the related participation). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it
determines that it is no longer in a position to provide any previously
delivered certificate to the Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this paragraph, a Non-U.S. Lender shall not be required to
deliver any form pursuant to this paragraph that such Non-U.S. Lender is not
legally able to deliver.

          (e) A Lender that is entitled to an exemption from or reduction of
non-U.S. withholding tax under the law of the jurisdiction in which the Borrower
is located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law or
reasonably requested by the Borrower, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate, provided that such Lender is
legally entitled to complete, execute and deliver such documentation.

          (f)  The agreements in this Section shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.

SECTION 3.  [Omitted]

SECTION 4.  REPRESENTATIONS AND WARRANTIES.

          To induce the Lender to enter into this Agreement and to make the
Loans the Borrower hereby represents and warrants to the Lender that:

          4.1  Financial Condition. The audited consolidated balance sheets of
               -------------------
the Borrower and its Subsidiaries as at December 31, 1999, and the related
consolidated statements of income and of cash flows for the fiscal years ended
on such dates, reported on by and accompanied by an unqualified report from
PricewaterhouseCoopers LLP, present fairly the consolidated financial condition
of the Borrower as at such date, and the consolidated results of its operations
and its consolidated cash flows for the respective fiscal years then ended.  The
unaudited interim consolidated balance sheet of the Borrower and the related
unaudited consolidated statements of income and cash flows for the three-month
period ended March 31, 2000 present fairly the consolidated financial condition
of the Borrower as at such date, and the consolidated results of its operations
and its consolidated cash flows for the three-month period then ended (subject
to normal year-end audit adjustments).  All such financial statements, including
the related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved by
the aforementioned firm of accountants and disclosed therein).  The Borrower and
its Subsidiaries do not have any material Guarantee Obligations, contingent
liabilities and liabilities for taxes, or

                                      -14-
<PAGE>

any long-term leases or unusual forward or long-term commitments, including any
interest rate or foreign currency swap or exchange transaction or other
obligation in respect of derivatives, that are not reflected in the most recent
financial statements referred to in this paragraph. During the period from
December 31, 1999 to and including the date hereof there has been no Disposition
by the Borrower of any material part of its business or property.

          4.2  No Change.  Since December 31, 1999, there has been no
               ---------
development or event that has had or could reasonably be expected to have a
Material Adverse Effect (other than with respect to the SanDisk Litigation as of
the date hereof).

          4.3  Corporate Existence; Compliance with Law.  Each of the Borrower
               ----------------------------------------
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
failure to so qualify and be in good standing could reasonably be expected to
have a Material Adverse Effect, and (d) is in compliance with all Requirements
of Law except to the extent that the failure to comply therewith could not, in
the aggregate, reasonably be expected to have a Material Adverse Effect.

          4.4  Corporate Power; Authorization; Enforceable Obligations.  Each
               -------------------------------------------------------
Loan Party has the corporate power and authority, and the legal right, to make,
deliver and perform the Loan Documents to which it is a party and, in the case
of the Borrower, to obtain extensions of credit hereunder.  Each Loan Party has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Loan Documents to which it is a party and, in the case of the
Borrower, to authorize the extensions of credit on the terms and conditions of
this Agreement.  No consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the extensions of credit hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents, authorizations, filings and
notices described in Schedule 4.4, which consents, authorizations, filings and
notices (other than the Sony Consent) have been obtained or made and are in full
force and effect and (ii) the filings referred to in Section 4.19. Each Loan
Document has been duly executed and delivered on behalf of each Loan Party party
thereto. This Agreement constitutes, and each other Loan Document upon execution
will constitute, a legal, valid and binding obligation of each Loan Party party
thereto, enforceable against each such Loan Party in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).

          4.5  No Legal Bar.  The execution, delivery and performance of this
               ------------
Agreement and the other Loan Documents, the borrowings hereunder and the use of
the proceeds thereof will not violate any Requirement of Law or any Contractual
Obligation of  the Borrower or any of its Subsidiaries (except to the extent
that such violations could not, in the aggregate, be reasonably expected to have
a Material Adverse Effect) and will not result in, or require, the creation or
imposition of any Lien on any of their respective properties or revenues
pursuant to any Requirement of Law or any such Contractual Obligation (other
than the Liens created by the Security Documents).  No Requirement of Law or
Contractual Obligation applicable to the Borrower or any of its Subsidiaries
could reasonably be expected to have a Material Adverse Effect.

          4.6  Litigation.  No litigation, investigation or proceeding of or
               ----------
before any arbitrator or Governmental Authority is pending or, to the knowledge
of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of their respective properties or revenues (a) with
respect to any of the Loan Documents or any of the transactions contemplated
hereby or thereby, or (b) that could reasonably be expected to have a Material
Adverse Effect (other than with respect to the SanDisk Litigation as of the date
hereof).

                                      -15-
<PAGE>

          4.7  No Default.  Neither the Borrower nor any of its Subsidiaries is
               ----------
in default under or with respect to any of its Contractual Obligations in any
respect that could reasonably be expected to have a Material Adverse Effect.  No
Default or Event of Default has occurred and is continuing.

          4.8  Ownership of Property; Liens.  Each of the Borrower and its
               ----------------------------
Subsidiaries has title in fee simple to, or a valid leasehold interest in, all
its real property, and good title to, or a valid leasehold interest in, all its
other property, and none of such property is subject to any Lien except as
permitted by Section 7.3.

          4.9  Intellectual Property.  The Borrower and each of its Subsidiaries
               ---------------------
owns, or is licensed to use, or could obtain the right to use on terms not
materially adverse, all Intellectual Property necessary for the conduct of its
business as currently conducted.  Except for the "SanDisk Litigation" as defined
in the Senior Loan Agreement, no material claim has been asserted and is pending
by any Person challenging or questioning the use of any Intellectual Property or
the validity or effectiveness of any Intellectual Property, nor does the
Borrower know of any valid basis for any such claim.  The use of Intellectual
Property by the Borrower and its Subsidiaries does not infringe on the rights of
any Person in any material respect.

          4.10  Taxes.  Each of the Borrower and each of its Subsidiaries has
                -----
filed or caused to be filed all Federal, state and other material tax returns
that are required to be filed and has paid all taxes shown to be due and payable
on said returns or on any assessments made against it or any of its property and
all other taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than any the amount or validity of which are
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries, as the case may be); no tax Lien has
been filed, and, to the knowledge of the Borrower, no claim is being asserted,
with respect to any such tax, fee or other charge.

          4.11  Federal Regulations.  No part of the proceeds of any Loans, and
                -------------------
no other extensions of credit hereunder, will be used for "buying" or "carrying"
any "margin stock" within the respective meanings of each of the quoted terms
under Regulation U or G as now and from time to time hereafter in effect or for
any purpose that violates the provisions of the Regulations of the Board.  If
requested by the Lender, the Borrower will furnish to the Lender a statement to
the foregoing effect in conformity with the requirements of Form G-3 or Form U-
1, as applicable, referred to in Regulation U.

          4.12  Labor Matters.  Except as, in the aggregate, could not
                -------------
reasonably be expected to have a Material Adverse Effect:  (a) there are no
strikes or other labor disputes against the Borrower or any of its Subsidiaries
pending or, to the knowledge of the Borrower, threatened; (b) hours worked by
and payment made to employees of the Borrower and its Subsidiaries have not been
in violation of the Fair Labor Standards Act or any other applicable Requirement
of Law dealing with such matters; and (c) all payments due from the Borrower or
any of its Subsidiaries on account of employee health and welfare insurance have
been paid or accrued as a liability on the books of the Borrower or the relevant
Subsidiary.

          4.13  ERISA.  Neither a Reportable Event nor an "accumulated funding
                -----
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code.  No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount.  Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan that
has resulted or

                                      -16-
<PAGE>

could reasonably be expected to result in a material liability under ERISA, and
neither the Borrower nor any Commonly Controlled Entity would become subject to
any material liability under ERISA if the Borrower or any such Commonly
Controlled Entity were to withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on which this representation
is made or deemed made. No such Multiemployer Plan is in Reorganization or
Insolvent.

          4.14  Investment Company Act; Other Regulations.  No Loan Party is an
                -----------------------------------------
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.  No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur Indebtedness.

          4.15  Subsidiaries.  Except as disclosed to the Lender by the Borrower
                ------------
in writing from time to time after the Closing Date, (a) Schedule 4.15 sets
forth the name and jurisdiction of incorporation of each Subsidiary and, as to
each such Subsidiary, the percentage of each class of Capital Stock owned by any
Loan Party and  there are no outstanding subscriptions, options, warrants,
calls, rights or other agreements or commitments (other than stock options
granted to employees or directors and directors' qualifying shares) of any
nature relating to any Capital Stock of the Borrower or any Subsidiary, except
as created by the Loan Documents.

          4.16  Use of Proceeds.  The proceeds of the Loans shall be used for
                ---------------
working capital and general corporate purposes of the Borrower and its
Subsidiaries in the ordinary course of business.

          4.17  Environmental Matters.  Except as, in the aggregate, could not
                ---------------------
reasonably be expected to have a Material Adverse Effect:

          (a)  the facilities and properties owned, leased or operated by the
     Borrower or any of its Subsidiaries (the "Properties") do not contain, and
                                               ----------
     have not previously contained during the time of Borrower's control and use
     thereof, any Materials of Environmental Concern in amounts or
     concentrations or under circumstances that constitute or constituted a
     violation of, or could give rise to liability under, any Environmental Law;

          (b)  neither the Borrower nor any of its Subsidiaries has received or
     is aware of any notice of violation, alleged violation, non-compliance,
     liability or potential liability regarding environmental matters or
     compliance with Environmental Laws with regard to any of the Properties or
     the business operated by the Borrower or any of its Subsidiaries (the
     "Business"), nor does the Borrower have knowledge or reason to believe that
     ---------
     any such notice will be received or is being threatened;

          (c)  Materials of Environmental Concern have not been transported or
     disposed of by Borrower from the Properties in violation of, or in a manner
     or to a location that could give rise to liability under, any Environmental
     Law, nor have any Materials of Environmental Concern been generated,
     treated, stored or disposed of at, on or under any of the Properties in
     violation of, or in a manner that could give rise to liability under, any
     applicable Environmental Law;

          (d)  no judicial proceeding or governmental or administrative action
     is pending or, to the knowledge of the Borrower, threatened, under any
     Environmental Law to which the Borrower or any Subsidiary is or will be
     named as a party with respect to the Properties or the Business, nor are
     there any consent decrees or other decrees, consent orders, administrative
     orders or other orders, or other administrative or judicial requirements
     outstanding under any Environmental Law with respect to the Properties or
     the Business;

                                      -17-
<PAGE>

          (e)  there has been no release or threat of release of Materials of
     Environmental Concern at or from the Properties, or arising from or related
     to the operations of the Borrower or any Subsidiary in connection with the
     Properties or otherwise in connection with the Business, in violation of or
     in amounts or in a manner that could give rise to liability under
     Environmental Laws;

          (f)  the Properties and all operations at the Properties by Borrower
     are in compliance, with all applicable Environmental Laws, and there is no
     contamination at, under or about the Properties or violation of any
     Environmental Law with respect to the Properties or the Business; and

          (g)  neither the Borrower nor any of its Subsidiaries has assumed any
     liability of any other Person under Environmental Laws.

          4.18  Accuracy of Information, etc.  No statement or information
                ----------------------------
contained in this Agreement, any other Loan Document, or any other document,
certificate or statement furnished by or on behalf of any Loan Party to the
Lender, or any of them, for use in connection with the transactions contemplated
by this Agreement or the other Loan Documents, contained as of the date such
statement, information, document or certificate was so furnished, any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements contained herein or therein not misleading.  The projections
and pro forma financial information contained in the materials referenced above
    --- -----
are based upon good faith estimates and assumptions believed by management of
the Borrower to be reasonable at the time made, it being recognized by the
Lender that such financial information as it relates to future events is not to
be viewed as fact and that actual results during the period or periods covered
by such financial information may differ from the projected results set forth
therein by a material amount.  There is no fact known to any Loan Party that
could reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents or in any other
documents, certificates and statements furnished to the Lender for use in
connection with the transactions contemplated hereby and by the other Loan
Documents.

          4.19  Security Documents.  The Guarantee and Collateral Agreement is
                ------------------
effective to create in favor of the Lender, a legal, valid and enforceable
security interest in the Collateral described therein and proceeds thereof.
When financing statements and other filings specified on Schedule 4.19 in
appropriate form are filed in the offices specified on Schedule 4.19, the
Guarantee and Collateral Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the Loan Parties in
such Collateral and the proceeds thereof, as security for the Obligations (as
defined in the Guarantee and Collateral Agreement), in each case prior and
superior in right to any other Person (except, in the case of Collateral other
than Pledged Stock, Liens permitted by Section 7.3), and except for Liens in
favor of the lenders of the Senior Loans.

          4.20  Solvency.  Each Loan Party is, and after giving effect to the
                --------
incurrence of all Indebtedness and obligations being incurred in connection
herewith and therewith will be and will continue to be, Solvent.

SECTION 5.  CONDITIONS PRECEDENT.

          5.1  Conditions to Effectiveness. This Agreement shall become
               ---------------------------
effective on and as of the first date, on which the following conditions
precedent shall have been satisfied:

          (a)  Credit Agreement; Guarantee and Collateral Agreement.  The Lender
               ----------------------------------------------------
     shall have received (i) this Agreement, executed and delivered by the
     Lender and the Borrower, (ii) the Guarantee and Collateral Agreement,
     executed and delivered by the Borrower and each Subsidiary

                                      -18-
<PAGE>

     Guarantor, (iii) an Acknowledgment and Consent in the form attached to the
     Guarantee and Collateral Agreement, executed and delivered by each Issuer
     (as defined therein), if any, that is not a Loan Party, and (iv) the
     Intercreditor Agreement, executed and delivered by Chase and Lender.

          (b) Financial Statements.  The Lender shall have received (i) audited
              --------------------
     consolidated financial statements of the Borrower for the 1999 fiscal year
     and (ii) unaudited interim consolidated and consolidating (on a division-
     by-division basis) financial statements of the Borrower for the fiscal
     month of April 2000 and each quarterly period ended subsequent to the date
     of the latest applicable financial statements delivered pursuant to clause
     (i) of this paragraph as to which such financial statements are available,
     and such financial statements shall not, in the reasonable judgment of the
     Lender, reflect any material adverse change in the consolidated financial
     condition of the Borrower, as reflected in the financial statements or
     projections delivered to the Lender prior to the Closing Date.

          (c)  Approvals.  All governmental and third party approvals (including
               ---------
     landlords' and other consents) necessary in connection with the continuing
     operations of the Borrower and its Subsidiaries and the transactions
     contemplated hereby shall have been obtained and be in full force and
     effect, and all applicable waiting periods shall have expired without any
     action being taken or threatened by any competent authority that would
     restrain, prevent or otherwise impose adverse conditions on the financing
     contemplated hereby.

          (d)  Lien Searches.  The Lender shall have received the results of a
               -------------
     recent lien search in each of the jurisdictions where assets of the Loan
     Parties are located, and such search shall reveal no liens on any of the
     assets of the Borrower or its Subsidiaries except for liens permitted by
     Section 7.3 or discharged on or prior to the Closing Date pursuant to
     documentation satisfactory to the Lender.

          (e)  Fees.     [Reserved]
               ----

          (f)  Closing Certificate.  The Lender shall have received a
               -------------------
     certificate of each Loan Party, dated the Closing Date, substantially in
     the form of Exhibit C, with appropriate insertions and attachments.

          (g)  Legal Opinions.  The Lender shall have received the following
               --------------
     executed legal opinions:

               (i)  the legal opinion of Fenwick & West LLP, counsel to the
          Borrower and its Subsidiaries, in form and substance satisfactory to
          Lender; and

               (ii)  the legal opinion of Winthrop, Stimson, Putnam & Roberts,
          special New York counsel to the Borrower and its Subsidiaries, in form
          and substance satisfactory to Lender.

     Each such legal opinion shall cover such other matters incident to the
     transactions contemplated by this Agreement as the Lender may reasonably
     require.

          (h)  Pledged Stock; Stock Powers; Pledged Notes.  Chase shall have
               ------------------------------------------
     received (i) the certificates representing the shares of Capital Stock
     pledged to Chase, together with an undated stock power for each such
     certificate executed in blank by a duly authorized officer of the pledgor
     thereof and (ii) each promissory note (if any) pledged to Chase pursuant to
     the Guarantee and Collateral

                                      -19-
<PAGE>

     Agreement between the Loan Parties and Chase endorsed (without recourse) in
     blank (or accompanied by an executed transfer form in blank) by the pledgor
     thereof.

          (i)  Filings, Registrations and Recordings.  Each document (including
               -------------------------------------
     any Uniform Commercial Code financing statement) required by the Security
     Documents or under law or reasonably requested by the Lender to be filed,
     registered or recorded in order to create in favor of the Lender, a
     perfected Lien on the Collateral described therein, prior and superior in
     right to any other Person (other than with respect to Liens expressly
     permitted by Section 7.3), shall be in proper form for filing, registration
     or recordation.

          (j)  Insurance.  The Lender shall have received insurance certificates
               ---------
     satisfying the requirements of Section 5.2(b) of the Guarantee and
     Collateral Agreement.

          (k)  Projections.  The Lender shall have received projections and a
               -----------
     written analysis of the business and prospects of the Borrower and its
     Subsidiaries, for the period from the Closing Date through a date agreed to
     by Lender, each in form and substance satisfactory to the Lender.

          (l)  Warrant.  The Borrower shall have executed the Warrant Documents,
               -------
     containing terms and conditions satisfactory to Lender.

          5.2 Conditions to Initial Extension of Credit. The agreement of Lender
              -----------------------------------------
to make the initial extension of credit requested to be made by it is subject to
the satisfaction, prior to or concurrently with the making of such extension of
credit on the Initial Funding Date, of the following conditions precedent:

          (a) Existing Debt.  Each of the Toshiba Debt and the Kingston Notes
              -------------
     shall have been either (i) subordinated to the Obligations on terms and
     conditions satisfactory to Lender or (ii) terminated and all amounts
     thereunder shall have been paid in full and satisfactory arrangements shall
     have been made for the termination of all Liens, if any, granted in
     connection therewith.

          (b) Amendment to Investors Rights Agreement. Lender shall have
              ---------------------------------------
     received a copy of the Amendment to Investors Rights Agreement, executed
     and delivered by the parties thereto.

          5.3  Amendment to Investors Rights Agreement.  The agreement of Lender
               ---------------------------------------
to make any Disbursements (including the initial Disbursement) is subject to the
satisfaction of the following additional conditions precedent, in addition to
the conditions set forth in Section 2:

          (a)  Representations and Warranties.  Each of the representations and
               ------------------------------
     warranties made by any Loan Party in or pursuant to the Loan Documents
     shall be true and correct on and as of such date as if made on and as of
     such date.

          (b)  No Default.  No Default or Event of Default shall have occurred
               ----------
     and be continuing on such date or after giving effect to the extensions of
     credit requested to be made on such date.

Each borrowing on behalf of the Borrower hereunder shall constitute a
representation and warranty by the Borrower as of the date of such extension of
credit that the conditions contained in this Section 5.3 have been satisfied.

SECTION 6.  AFFIRMATIVE COVENANTS.

          The Borrower hereby agrees that, during the term of this Agreement and
so long as any Loan or other amount is owing to the Lender hereunder, the
Borrower shall and shall cause each of its Subsidiaries to:

                                      -20-
<PAGE>

          6.1  Financial Statements.  Furnish to the Lender:
               --------------------

          (a)  as soon as available, but in any event within 90 days after the
     end of each fiscal year of the Borrower, a copy of the audited consolidated
     balance sheet of the Borrower and its consolidated Subsidiaries as at the
     end of such year and the related audited consolidated statements of income
     and of cash flows for such year, setting forth in each case in comparative
     form the figures for the previous year, reported on without a "going
     concern" or like qualification or exception, or qualification arising out
     of the scope of the audit, by PricewaterhouseCoopers LLP or other
     independent certified public accountants of nationally recognized standing;

          (b)  as soon as available, but in any event not later than 45 days
     after the end of each of the first three quarterly periods of each fiscal
     year of the Borrower, the unaudited consolidated balance sheet of the
     Borrower and its consolidated Subsidiaries as at the end of such quarter
     and the related unaudited consolidated statements of income and of cash
     flows for such quarter and the portion of the fiscal year through the end
     of such quarter, setting forth in each case in comparative form the figures
     for the previous year, certified by a Responsible Officer as being fairly
     stated in all material respects (subject to normal year-end audit
     adjustments); and

          (c)  as soon as available, but in any event not later than 15 days
     after the end of each month occurring during each fiscal year of the
     Borrower (other than the third, sixth, ninth and twelfth such month), the
     unaudited consolidated balance sheets of the Borrower and its Subsidiaries
     as at the end of such month and the related unaudited consolidated
     statements of income and of cash flows for such month and the portion of
     the fiscal year through the end of such month, setting forth in each case
     in comparative form the figures for the previous year, certified by a
     Responsible Officer as being fairly stated in all material respects
     (subject to normal year-end audit adjustments).

All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein).

          6.2  Certificates; Other Information.  Furnish to the Lender:
               -------------------------------

          (a)  concurrently with the delivery of the financial statements
     referred to in Section 6.1(a), a certificate of the independent certified
     public accountants reporting on such financial statements stating that in
     making the examination necessary therefor no knowledge was obtained of any
     Default or Event of Default, except as specified in such certificate;

          (b)  concurrently with the delivery of any financial statements
     pursuant to Section 6.1, (i) a certificate of a Responsible Officer on
     behalf of the Borrower stating that, to the best of each such Responsible
     Officer's knowledge, each Loan Party during such period has observed or
     performed all of its covenants and other agreements, and satisfied every
     condition, contained in this Agreement and the other Loan Documents to
     which it is a party to be observed, performed or satisfied by it, and that
     such Responsible Officer has obtained no knowledge of any Default or Event
     of Default except as specified in such certificate and (ii) in the case of
     monthly, quarterly or annual financial statements, (x) a Compliance
     Certificate containing all information and calculations necessary for
     determining compliance by the Borrower and its Subsidiaries with the
     provisions of this Agreement referred to therein as of the last day of the
     fiscal quarter or fiscal year of the Borrower, as the case may be, and (y)
     to the extent not previously disclosed to the Lender, a listing of any
     county or state within the United States where any Loan Party keeps
     inventory or equipment and of any Intellectual

                                      -21-
<PAGE>

     Property acquired by any Loan Party since the date of the most recent list
     delivered pursuant to this clause (y) (or, in the case of the first such
     list so delivered, since the Closing Date);

          (c)  within 45 days after the end of each fiscal quarter of the
     Borrower, a narrative discussion and analysis of the financial condition
     and results of operations of the Borrower and its Subsidiaries for such
     fiscal quarter and for the period from the beginning of the then current
     fiscal year to the end of such fiscal quarter, as compared to the portion
     of the Projections covering such periods and to the comparable periods of
     the previous year;

          (d)  within five days after the same are sent, copies of all financial
     statements and reports that the Borrower sends to the holders of any class
     of its debt securities or public equity securities and, within five days
     after the same are filed, copies of all financial statements and reports
     that the Borrower may make to, or file with, the SEC;

          (e)  promptly, such additional financial and other information as
     Lender may from time to time reasonably request.

          6.3  Payment of Obligations.  Pay, discharge or otherwise satisfy at
               ----------------------
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of the Borrower or its Subsidiaries, as the case may be.

          6.4  Maintenance of Existence; Compliance.  (a)(i)  Preserve, renew
               ------------------------------------
and keep in full force and effect its corporate existence and (ii) take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business, except, in each case, as
otherwise permitted by Section 7.4 and except, in the case of clause (ii) above,
to the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and (b) comply with all Contractual Obligations and
Requirements of Law except to the extent that failure to comply therewith could
not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

          6.5   Maintenance of Property; Insurance.  (a)  Keep all property
                ----------------------------------
useful and necessary in its business in good working order and condition,
ordinary wear and tear excepted and (b) maintain with financially sound and
reputable insurance companies insurance on all its property in at least such
amounts and against at least such risks (but including in any event public
liability, product liability and business interruption) as are usually insured
against in the same general area by companies engaged in the same or a similar
business.

          6.6  Inspection of Property; Books and Records; Discussions.  (a)
               ------------------------------------------------------
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities and (b)
permit representatives of Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties, subject to the Borrower's reasonable security procedures
and financial and other condition of the Borrower and its Subsidiaries with
officers and employees of the Borrower and its Subsidiaries and with its
independent certified public accountants.

          6.7  Notices.  Promptly give notice to the Lender of:
               -------

          (a)  the occurrence of any Default or Event of Default;

                                      -22-
<PAGE>

          (b)  any (i) default or event of default under any Contractual
     Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
     investigation or proceeding that may exist at any time between the Borrower
     or any of its Subsidiaries and any Governmental Authority, that in either
     case, if not cured or if adversely determined, as the case may be, could
     reasonably be expected to have a Material Adverse Effect;

          (c)  any litigation or proceeding affecting the Borrower or any of its
     Subsidiaries (i) in which the amount involved is $1,000,000 or more and not
     covered by insurance, (ii) in which injunctive or similar relief is sought
     or (iii) which relates to any Loan Document;

          (d)  the following events, as soon as possible and in any event within
     30 days after the Borrower knows or has reason to know thereof:  (i) the
     occurrence of any Reportable Event with respect to any Plan, a failure to
     make any required contribution to a Plan, the creation of any Lien in favor
     of the PBGC or a Plan or any withdrawal from, or the termination,
     Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
     institution of proceedings or the taking of any other action by the PBGC or
     the Borrower or any Commonly Controlled Entity or any Multiemployer Plan
     with respect to the withdrawal from, or the termination, Reorganization or
     Insolvency of, any Plan; and

          (e)  any development or event that has had or could reasonably be
     expected to have a Material Adverse Effect.

Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer on behalf of the Borrower setting forth details of the
occurrence referred to therein and stating what action the Borrower or the
relevant Subsidiary proposes to take with respect thereto.

          6.8  Environmental Laws.  (a)  Comply in all material respects with,
               ------------------
and ensure compliance in all material respects by all tenants and subtenants, if
any, with, all applicable Environmental Laws, and obtain and comply in all
material respects with and maintain, and ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws.

          (b)  Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws.

          6.9  Additional Collateral, etc.  (a)  With respect to any property
               --------------------------
acquired after the Closing Date by the Borrower or any of its Subsidiaries
(other than (x) any property described in paragraph (b), (c) or (d) below, (y)
any property subject to a Lien expressly permitted by Section 7.3(g) and (z)
property acquired by any Excluded Foreign Subsidiary) as to which the Lender,
does not have a perfected Lien, promptly (i) execute and deliver to the Lender
such amendments to the Guarantee and Collateral Agreement or such other
documents as the Lender deems necessary or advisable to grant to the Lender, a
security interest in such property and (ii) take all actions necessary or
advisable to grant to the Lender, a perfected first priority security interest
in such property, including the filing of Uniform Commercial Code financing
statements in such jurisdictions as may be required by the Guarantee and
Collateral Agreement or by law or as may be requested by the Lender.

          (b)  With respect to any fee interest in any real property having a
value (together with improvements thereof) of at least $250,000 acquired after
the Closing Date by the Borrower or any of its Subsidiaries (other than (x) any
such real property subject to a Lien expressly permitted by Section 7.3(g) and
(z) real property acquired by any Excluded Foreign Subsidiary), promptly (i)
execute and deliver a first

                                      -23-
<PAGE>

priority mortgage, in favor of the Lender, covering such real property, (ii) if
requested by the Lender, provide the Lender with (x) title and extended coverage
insurance covering such real property in an amount at least equal to the
purchase price of such real property (or such other amount as shall be
reasonably specified by the Lender) as well as a current ALTA survey thereof,
together with a surveyor's certificate and (y) any consents or estoppels
reasonably deemed necessary or advisable by the Lender in connection with such
mortgage or deed of trust, each of the foregoing in form and substance
reasonably satisfactory to the Lender and (iii) if requested by the Lender,
deliver to the Lender legal opinions relating to the matters described above,
which opinions shall be in form and substance, and from counsel, reasonably
satisfactory to the Lender.

          (c)  With respect to any new Subsidiary (other than an Excluded
Foreign Subsidiary) created or acquired after the Closing Date by the Borrower
(which, for the purposes of this paragraph (c), shall include any existing
Subsidiary that ceases to be an Excluded Foreign Subsidiary), the Borrower or
any of its Subsidiaries, promptly (i) execute and deliver to the Lender such
amendments to the Guarantee and Collateral Agreement as the Lender deems
necessary or advisable to grant to the Lender, a perfected security interest in
the Capital Stock of such new Subsidiary that is owned by the Borrower or any of
its Subsidiaries (subject only to the Lien in favor of the lenders under the
Senior Loan Agreement), (ii) deliver to the Lender the certificates representing
such Capital Stock, together with undated stock powers, in blank, executed and
delivered by a duly authorized officer of the Borrower or such Subsidiary, as
the case may be, (iii) cause such new Subsidiary (A) to become a party to the
Guarantee and Collateral Agreement, (B) to take such actions necessary or
advisable to grant to the Lender a perfected first priority security interest in
the Collateral described in the Guarantee and Collateral Agreement with respect
to such new Subsidiary (subject only to the Lien in favor of the lenders under
the Senior Loan Agreement), including the filing of Uniform Commercial Code
financing statements in such jurisdictions as may be required by the Guarantee
and Collateral Agreement or by law or as may be requested by the Lender and (C)
to deliver to the Lender a certificate of such Subsidiary, substantially in the
form of Exhibit C, with appropriate insertions and attachments, and (iv) if
requested by the Lender, deliver to the Lender legal opinions relating to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Lender.

          (d)  With respect to any new Excluded Foreign Subsidiary created or
acquired after the Closing Date by the Borrower or any of its Subsidiaries,
promptly (i) execute and deliver to the Lender such amendments to the Guarantee
and Collateral Agreement as the Lender deems necessary or advisable to grant to
the Lender a perfected security interest (subject only to the Lien in favor of
the lenders under the Senior Loan Agreement) in the Capital Stock of such new
Subsidiary that is owned by the Borrower or any of its Subsidiaries (provided
that in no event shall more than 65% of the total outstanding Capital Stock of
any such new Subsidiary be required to be so pledged), (ii) take such other
action as may be necessary or, in the opinion of the Lender, desirable to
perfect the Lender's security interest therein, and (iii) if requested by the
Lender, deliver to the Lender legal opinions relating to the matters described
above, which opinions shall be in form and substance, and from counsel,
reasonably satisfactory to the Lender.

          6.10  Subordination and Consents. Within 30 days after Closing Date,
                --------------------------
(i) subordinate all amounts owing under the Sony Debt and the Bridge Financing
to the Obligations on terms and conditions satisfactory to Lender and (ii)
obtain the Sony Consent. The subordination agreement signed by the holders of
the Borrower's notes included in the Bridge Financing shall prohibit any payment
or prepayment of principal thereof or interest thereon, unless, at the date the
payment is to be made, and after giving effect thereto, the Borrower has cash
and Cash Equivalents of not less than three times the "Applicable Amount" (as
defined below), and at said date the trade payables of the Borrower have not
increased over the amounts thereof generally outstanding in relation to the
revenues of Borrower. "Applicable Amount" as used above means $10,000,000,
provided that if Borrower, at its option, signs an amendment to this Agreement,
in form and substance satisfactory to Lender, permanently reducing the maximum
amount Borrower may borrow from Lender under this Agreement, then the Applicable
Amount shall be reduced to the maximum amount Borrower may borrow from Lender
under this Agreement.

          6.11  Fees and Expenses. Within the earlier of (i) 15 days after the
          -----------------------
Closing Date and (ii) the date on which the conditions precedent set forth in
Section 5.2 shall have been satisfied, pay to the Lender a loan fee in the
amount of $200,000 and all other fees, and all expenses for which invoices have
been presented on or before such date (including the reasonable fees and
expenses of legal counsel).

SECTION 7.  NEGATIVE COVENANTS.

          The Borrower hereby agrees that, so long as the Loan Commitments
remain in effect, or any Loan or other amount is owing to Lender hereunder, the
Borrower shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly:

                                     -24-
<PAGE>

          7.1  Financial Condition Covenants.
               ------------------------------

          (a) Consolidated Revenue.  Permit the Consolidated Revenue as at the
              --------------------
last day of any fiscal quarter of the Borrower set forth below to be less than
the amount set forth below opposite such fiscal quarter:

<TABLE>
<CAPTION>
Fiscal Quarter                                  Consolidated Revenue
--------------                                  --------------------
<S>                                             <C>
06/30/2000                                      $22,000,000

09/30/2000                                      $24,000,000

12/31/2000                                      $26,000,000

03/31/2001 and each fiscal quarter              $28,000,000
thereafter
</TABLE>

          (b) Consolidated EBITDA.  Permit the Consolidated EBITDA as at the
              -------------------
last day of any fiscal quarter of the Borrower set forth below to be less than
the amount set forth below opposite such fiscal quarter (amounts in brackets
([]) are negative amounts):

<TABLE>
<CAPTION>
Fiscal Quarter                                  Consolidated EBITDA
--------------                                  --------------------
<S>                                             <C>
06/30/2000                                      [$6,000,000]

09/30/2000                                      [$8,000,000]

12/31/2000                                      [$8,000,000]

03/31/2001 and each fiscal quarter              [$6,000,000]
thereafter
</TABLE>

          (c) Consolidated Debt to Capital Ratio.  Permit the Consolidated Debt
              ----------------------------------
to Capital Ratio as at the last day of any fiscal quarter of the Borrower set
forth below to exceed the ratio set forth below opposite such fiscal quarter:

<TABLE>
<CAPTION>
Fiscal Quarter                                  Consolidated Debt to Capital Ratio
--------------                                  ----------------------------------
<S>                                             <C>
06/30/2000                                      0.50 to 1.00

09/30/2000                                      0.75 to 1.00

12/31/2000                                      1.00 to 1.00

03/31/2001 and each fiscal quarter              1.25 to 1.00
thereafter
</TABLE>

                                      -25-
<PAGE>

          (d) Capital Expenditures and Capitalized Software Expenses.  Permit
              ------------------------------------------------------
the sum of (i) Capital Expenditures and (ii) Capitalized Software Expenses of
the Borrower and its Subsidiaries for any period of four consecutive fiscal
quarters of the Borrower ending with any fiscal quarter set forth below to
exceed the amount set forth below opposite such fiscal quarter:

<TABLE>
<CAPTION>
Fiscal Quarter                                  Amount
--------------                                  ------
<S>                                             <C>
12/31/2000                                      $6,000,000

03/31/2001 and each fiscal quarter              $8,000,000
thereafter
</TABLE>

          7.2  Indebtedness.  Create, issue, incur, assume, become liable in
               ------------
respect of or suffer to exist any Indebtedness, except:

          (a) Indebtedness of any Loan Party pursuant to any Loan Document;

          (b) Indebtedness incurred by the Borrower under the Senior Loan
     Agreement;

          (c) Indebtedness of the Borrower to any Subsidiary and of any Wholly
     Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;

          (d) Guarantee Obligations incurred in the ordinary course of business
     by the Borrower or any of its Subsidiaries of obligations of any Wholly
     Owned Subsidiary Guarantor;

          (e) Indebtedness outstanding on the date hereof and listed on
     Schedule 7.2(e) and any refinancings, refundings, renewals or extensions
     thereof (without increasing, or shortening the maturity of, the principal
     amount thereof);

          (f) Indebtedness (including, without limitation, Capital Lease
     Obligations) secured by Liens permitted by Section 7.3(g) in an aggregate
     principal amount not to exceed $5,000,000 at any one time outstanding;

          (g) letters of credit for the account of the Borrower or any of its
     Subsidiaries obtained other than pursuant to the Senior Loan Agreement, so
     long as the aggregate undrawn face amount thereof, together with any
     unreimbursed reimbursement obligations in respect thereof, does not exceed
     $5,000,000 at any one time; and

          (h) additional Indebtedness of the Borrower or any of its
     Subsidiaries in an aggregate principal amount (for the Borrower and all
     Subsidiaries) not to exceed $1,000,000 at any one time outstanding.

          7.3  Liens.  Create, incur, assume or suffer to exist any Lien upon
               -----
any of its property, whether now owned or hereafter acquired, except for:

          (a) Liens for taxes not yet due or that are being contested in good
     faith by appropriate proceedings, provided that adequate reserves with
                                       --------
     respect thereto are maintained on the books of the Borrower or its
     Subsidiaries, as the case may be, in conformity with GAAP and no notice of
     such Liens have been filed of record in any governmental office;

                                      -26-
<PAGE>

          (b) carriers', warehousemen's, mechanics', landlords', materialmen's,
     repairmen's or other like Liens arising in the ordinary course of business
     that are not overdue for a period of more than 30 days or that are being
     contested in good faith by appropriate proceedings;

          (c) pledges or deposits in connection with workers' compensation,
     unemployment insurance and other social security legislation;

          (d) deposits to secure the performance of bids, trade contracts
     (other than for borrowed money), leases, statutory obligations, surety and
     appeal bonds, performance bonds and other obligations of a like nature
     incurred in the ordinary course of business;

          (e) easements, rights-of-way, restrictions and other similar
     encumbrances incurred in the ordinary course of business that, in the
     aggregate, are not substantial in amount and that do not in any case
     materially detract from the value of the property subject thereto or
     materially interfere with the ordinary conduct of the business of the
     Borrower or any of its Subsidiaries;

          (f) Liens in existence on the date hereof listed on Schedule 7.3(f),
     securing Indebtedness permitted by Section 7.2(e), provided that no such
                                                        --------
     Lien is spread to cover any additional property after the Closing Date and
     that the amount of Indebtedness secured thereby is not increased;

          (g) Liens securing Indebtedness of the Borrower or any other
     Subsidiary incurred pursuant to Section 7.2(f) to finance the acquisition
     of fixed or capital assets, provided that (i) such Liens shall be created
                                 --------
     substantially simultaneously with the acquisition of such fixed or capital
     assets, (ii) such Liens do not at any time encumber any property other than
     the property financed by such Indebtedness and (iii) the amount of
     Indebtedness secured thereby is not increased;

          (h) Liens created pursuant to the Senior Loan Agreement;

          (i) any interest or title of a lessor under any lease entered into by
     the Borrower or any other Subsidiary in the ordinary course of its business
     and covering only the assets so leased;

          (j) Liens, securing obligations of the Borrower or any of its
     Subsidiaries under letters of credit issued pursuant to Section 7.2(g),
     solely on segregated cash collateral accounts or segregated bank accounts
     that contain cash and Cash Equivalents not to exceed 110% of the aggregate
     face amount of such letters of credit; and

          (k) Liens not otherwise permitted by this Section so long as neither
     (i) the aggregate outstanding principal amount of the obligations secured
     thereby nor (ii) the aggregate fair market value (determined as of the date
     such Lien is incurred) of the assets subject thereto exceeds (as to the
     Borrower and all Subsidiaries) $1,000,000 at any one time.

          7.4  Fundamental Changes.  Enter into any merger, consolidation or
               -------------------
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of, all or substantially all of its
property or business, except that:

          (a) any Subsidiary of the Borrower may be merged or consolidated with
     or into the Borrower (provided that the Borrower shall be the continuing or
                           --------
     surviving corporation) or with or into any Wholly Owned Subsidiary
     Guarantor (provided that the Wholly Owned Subsidiary Guarantor shall be the
                --------
     continuing or surviving corporation); and

          (b) any Subsidiary of the Borrower may Dispose of any or all of its
     assets (upon voluntary liquidation or otherwise) to the Borrower or any
     Wholly Owned Subsidiary Guarantor.

                                      -27-
<PAGE>

          7.5  Disposition of Property.  Dispose of any of its property, whether
               -----------------------
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person, except:

          (a) the Disposition of unneeded, obsolete or worn out property in the
     ordinary course of business;

          (b) the sale of inventory in the ordinary course of business;

          (c) Dispositions permitted by Section 7.4(b);

          (d) the sale or issuance of any Subsidiary's Capital Stock to the
     Borrower or any Wholly Owned Subsidiary Guarantor;

          (e) so long as no Default or Event of Default has occurred and is
     continuing, the Disposition or cancellation of promissory notes issued to
     the Borrower by its employees in connection with the repurchase by the
     Borrower of Capital Stock owned by employees of the Borrower or any
     Subsidiary after such employee discontinues employment with the Borrower or
     such Subsidiary; and

          (f) the Disposition of other property having a fair market value not
     to exceed $1,000,000 in the aggregate for any fiscal year of the Borrower.

          7.6  Restricted Payments.  Declare or pay any dividend (other than
               -------------------
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Capital Stock of the Borrower or any Subsidiary (other than
any payments made in connection with the repurchase or redemption of Capital
Stock owned by employees of the Borrower or any Subsidiary after such employee
discontinues employment with the Borrower or such Subsidiary, provided that the
aggregate amount of such Restricted Payments shall not exceed $250,000 in any
fiscal year of the Borrower), whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly, whether in
cash or property or in obligations of the Borrower or any Subsidiary
(collectively, "Restricted Payments"), except that any Subsidiary may make
Restricted Payments to the Borrower or any Wholly Owned Subsidiary Guarantor.

          7.7  Investments.  Make any advance, loan, extension of credit (by way
               -----------
of guaranty or otherwise) or capital contribution to, or purchase any Capital
Stock, bonds, notes, debentures or other debt securities of, or any assets
constituting a business unit of, or make any other investment in, any Person
(all of the foregoing, "Investments"), except:
                        -----------

          (a) extensions of trade credit in the ordinary course of business;

          (b) investments in Cash Equivalents;

          (c) Guarantee Obligations permitted by Section 7.2;

          (d) intercompany Investments by the Borrower or any of its
     Subsidiaries in the Borrower or any Person that, prior to such investment,
     is a Wholly Owned Subsidiary Guarantor; and

          (e) in addition to Investments otherwise expressly permitted by this
     Section, Investments by the Borrower or any of its Subsidiaries in an
     aggregate amount (valued at cost) not to exceed $1,000,000 during the term
     of this Agreement.

          7.8  Optional Payments and Modifications of Certain Debt Instruments.
               ---------------------------------------------------------------
Make any optional payment or prepayment on or redemption or purchase of any
Indebtedness (other than the Loans, any Indebtedness permitted under Section
7.2(b) or (c), or the Bridge Financing or Sony Debt to the extent permitted
under the applicable subordination agreement entered into pursuant to Section
6.10) or amend, modify or change, or consent or agree to any amendment,
modification or change to any of the terms relating to the payment or prepayment
or principal of or interest on, any such Indebtedness (other than any such
amendment, modification or change which would extend the maturity or

                                      -28-

<PAGE>

reduce the amount of any payment of principal thereof or which would reduce the
rate or extend the date for payment of interest thereon).

          7.9  Transactions with Affiliates.  Enter into any transaction,
               ----------------------------
including any purchase, sale, lease or exchange of property, the rendering of
any service or the payment of any management, advisory or similar fees, with any
Affiliate (other than the Borrower or any Wholly Owned Subsidiary Guarantor)
unless such transaction is (a) otherwise permitted under this Agreement, (b) in
the ordinary course of business of the Borrower or such Subsidiary, as the case
may be, and (c) upon fair and reasonable terms no less favorable to the Borrower
or such Subsidiary, as the case may be, than it would obtain in a comparable
arm's length transaction with a Person that is not an Affiliate.

          7.10  Sales and Leasebacks.  Enter into any arrangement with any
                --------------------
Person providing for the leasing by the Borrower or any Subsidiary of real or
personal property that has been or is to be sold or transferred by the Borrower
or such Subsidiary to such Person or to any other Person to whom funds have been
or are to be advanced by such Person on the security of such property or rental
obligations of the Borrower or such Subsidiary.

          7.11  Changes in Fiscal Periods.  Permit the fiscal year of the
                -------------------------
Borrower to end on a day other than December 31 or change the Borrower's method
of determining fiscal quarters.

          7.12  Negative Pledge Clauses.  Enter into or suffer to exist or
                -----------------------
become effective any agreement that prohibits or limits the ability of the
Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist
any Lien upon any of its property or revenues, whether now owned or hereafter
acquired, to secure its obligations under the Loan Documents to which it is a
party other than (a) this Agreement, the other Loan Documents and the Secured
Term Loan and (b) any agreements governing any purchase money Liens or Capital
Lease Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby).

          7.13  Lines of Business.  Enter into any business, either directly or
                -----------------
through any Subsidiary, except for those businesses in which the Borrower and
its Subsidiaries are engaged on the date of this Agreement or that are
reasonably related thereto.

SECTION 8.  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

                                      -29-
<PAGE>

          (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 time
     constitute 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

                                      -30-
<PAGE>

     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);

then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the obligation of Lender to make Loans shall immediately terminate
and the Loans hereunder (with accrued interest thereon) and all other amounts
owing under this Agreement and the other Loan Documents shall immediately become
due and payable, and (B) if such event is any other Event of Default, either or
both of the following actions may be taken at any time thereafter:  (i) the
Lender may, by notice to the Borrower declare the obligation of Lender to make
Loans to be terminated forthwith, whereupon said obligation shall immediately
terminate; and (ii) the Lender may, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents to be due and payable forthwith,
whereupon the same shall immediately become due and payable. Except as expressly
provided above in this Section, presentment, demand, protest and all other
notices of any kind are hereby expressly waived by the Borrower.

SECTION 9.  [Omitted]

                                      -31-
<PAGE>

SECTION 10.  MISCELLANEOUS.

          10.1  Amendments and Waivers.  Neither this Agreement, any other Loan
                ----------------------
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1.  The
Lender and each Loan Party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lender or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Lender may specify in such instrument, any of the
requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences. In the case of any waiver, the Loan
Parties and the Lender shall be restored to their former position and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default or Event of Default, or
impair any right consequent thereon, whether or not similar to the Default of
Event of Default so waived.

          10.2  Notices.  All notices, requests and demands to or upon the
                -------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Borrower and the Lender, or to
such other address as may be hereafter notified by the respective parties
hereto:

     The Borrower:       Lexar Media, Inc.
                         47421 Bayside Parkway
                         Fremont, CA  94538
                         Attention:  Chief Financial Officer
                         Telecopy:  510.440.3499
                         Telephone:  510.413.1200

     with a copy to:     Fenwick & West LLP
                         Two Palo Alto Square
                         Palo Alto, CA 94306
                         Attention: Blakeney Stafford, Esq.
                         Telecopy:  650.494.1417
                         Telephone:  650.494.0600

     The Lender:         Access Technology Partners, L.P.
                         One Bush St., Suite 1380
                         San Francisco, CA  94104
                         Attn:  Shannon Horton
                         Telecopy:  415.371.3818
                         Telephone:  415.371.4281

     with a copy to:     Levy, Small & Lallas
                         815 Morage Drive
                         Los Angeles, CA 90049
                         Attention: Steven G. Small, Esq.
                         Telecopy: 310.471.7990
                         Telephone:  310.471.3000

                                      -32-
<PAGE>

provided that any notice, request or demand to or upon the Lender shall not be
--------
effective until received.

          10.3  No Waiver; Cumulative Remedies.  No failure to exercise and no
                ------------------------------
delay in exercising, on the part of the Lender, any right, remedy, power or
privilege hereunder or under the other Loan Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege.  The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.

          10.4  Survival of Representations and Warranties.  All representations
                ------------------------------------------
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.

          10.5  Payment of Expenses and Taxes.  The Borrower agrees (a) to pay
                -----------------------------
or reimburse the Lender for all its out-of-pocket costs and expenses incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including the reasonable fees and disbursements of counsel to the
Lender and filing and recording fees and expenses, with statements with respect
to the foregoing to be submitted to the Borrower prior to the Closing Date (in
the case of amounts to be paid on the Closing Date) and from time to time
thereafter on a quarterly basis or such other periodic basis as the Lender shall
deem appropriate, (b) to pay or reimburse the Lender for all its costs and
expenses incurred in connection with the enforcement or preservation of any
rights under this Agreement, the other Loan Documents and any such other
documents, including the fees and disbursements of counsel (including the
allocated fees and expenses of in-house counsel) to Lender, (c) to pay,
indemnify, and hold Lender harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, that may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
or administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the other Loan Documents and any such other documents, and (d)
to pay, indemnify, and hold Lender and its officers, directors, employees,
affiliates, agents and controlling persons (each, an "Indemnitee") harmless from
                                                      ----------
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the other Loan Documents and
any such other documents, including any of the foregoing relating to the use of
proceeds of the Loans or the violation of, noncompliance with or liability
under, any Environmental Law applicable to the operations of the Borrower any of
its Subsidiaries or any of the Properties and the reasonable fees and expenses
of legal counsel in connection with claims, actions or proceedings by any
Indemnitee against any Loan Party under any Loan Document (all the foregoing in
this clause (d), collectively, the "Indemnified Liabilities"), provided, that
                                    -----------------------    --------
the Borrower shall have no obligation hereunder to any Indemnitee with respect
to Indemnified Liabilities to the extent such Indemnified Liabilities are found
by a final and nonappealable decision of a court of competent jurisdiction to
have resulted from the gross negligence or willful misconduct of such
Indemnitee.  Without limiting the foregoing, and to the extent permitted by
applicable law, the Borrower agrees not to assert and to cause its Subsidiaries
not to assert, and hereby waives and agrees to cause its Subsidiaries to waive,
all rights for contribution or any other rights of recovery with respect to all
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, under or related to Environmental Laws,
that any of them might have by statute or otherwise against any Indemnitee.  All
amounts due under this Section 10.5 shall be payable not later than 10 days
after written demand therefor.  Statements payable by the Borrower pursuant to
this

                                      -33-
<PAGE>

Section 10.5 shall be submitted to the Chief Financial Officer of the Borrower,
at the address of the Borrower set forth in Section 10.2, or to such other
Person or address as may be hereafter designated by the Borrower in a written
notice to the Lender. The agreements in this Section 10.5 shall survive
repayment of the Loans and all other amounts payable hereunder.

          10.6  Successors and Assigns; Participations and Assignments.
                ------------------------------------------------------

          (a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lender, all future holders of the Loans and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of Lender.

          (b) Lender may, without the consent of the Borrower, in accordance
with applicable law, at any time sell to one or more banks, financial
institutions or other entities (each, a "Participant") participating interests
                                         -----------
in any Loan owing to Lender, or any other interest of Lender hereunder and under
the other Loan Documents.  In the event of any such sale by Lender of a
participating interest to a Participant, Lender's obligations under this
Agreement to the Borrower shall remain unchanged, Lender shall remain solely
responsible for the performance thereof, Lender shall remain the holder of any
such Loan for all purposes under this Agreement and the other Loan Documents,
and the Borrower and the Lender shall continue to deal solely and directly with
Lender in connection with Lender's rights and obligations under this Agreement
and the other Loan Documents.  In no event shall any Participant under any such
participation have any right to approve any amendment or waiver of any provision
of any Loan Document, or any consent to any departure by any Loan Party
therefrom.  The Borrower agrees that if amounts outstanding under this Agreement
and the Loans are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall, to the maximum extent permitted by applicable law, be deemed
to have the right of setoff in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.

          (c) Lender may, in accordance with applicable law, at any time and
from time to time assign to any other person all or any part of its rights and
obligations under this Agreement and the other Loan Documents.

          10.7  [Omitted]
                ---------

          10.8  Counterparts.  This Agreement may be executed by one or more of
                ------------
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.  Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof.

          10.7  Severability.  Any provision of this Agreement that is
                ------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

          10.8  Integration.  This Agreement and the other Loan Documents
                -----------
represent the entire agreement of the Borrower and the Lender with respect to
the subject matter hereof and thereof, and there are no promises, undertakings,
representations or warranties by the Lender relative to subject matter hereof
not expressly set forth or referred to herein or in the other Loan Documents.

                                      -34-
<PAGE>

          10.9  GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
                -------------
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

          10.10  Submission To Jurisdiction; Waivers. The Borrower hereby
                 -----------------------------------
irrevocably and unconditionally:

          (a) submits for itself and its property in any legal action or
     proceeding relating to this Agreement and the other Loan Documents to which
     it is a party, or for recognition and enforcement of any judgment in
     respect thereof, to the non-exclusive general jurisdiction of the courts of
     the State of New York, the courts of the United States for the Southern
     District of New York, and appellate courts from any thereof;

          (b) consents that any such action or proceeding may be brought in
     such courts and waives any objection that it may now or hereafter have to
     the venue of any such action or proceeding in any such court or that such
     action or proceeding was brought in an inconvenient court and agrees not to
     plead or claim the same;

          (c)  agrees that service of process in any such action or proceeding
     may be effected by mailing a copy thereof by registered or certified mail
     (or any substantially similar form of mail), postage prepaid, to the
     Borrower at its address set forth in Section 10.2 or at such other address
     of which the Lender shall have been notified pursuant thereto;

          (d) agrees that nothing herein shall affect the right to effect
     service of process in any other manner permitted by law or shall limit the
     right to sue in any other jurisdiction; and

          (e) waives, to the maximum extent not prohibited by law, any right it
     may have to claim or recover in any legal action or proceeding referred to
     in this Section any special, exemplary, punitive or consequential damages.

          10.11  Acknowledgements.  The Borrower hereby acknowledges that:
                 ----------------

          (a) it has been advised by counsel in the negotiation, execution and
     delivery of this Agreement and the other Loan Documents;

          (b) the Lender does not have any fiduciary relationship with or duty
     to the Borrower arising out of or in connection with this Agreement or any
     of the other Loan Documents, and the relationship between Lender, on one
     hand, and the Borrower, on the other hand, in connection herewith or
     therewith is solely that of debtor and creditor; and

          (c) no joint venture is created hereby or by the other Loan Documents
     or otherwise exists by virtue of the transactions contemplated hereby
     between the Borrower and the Lender.

          10.12  Releases of Guarantees and Liens.
                 --------------------------------

          (a) [Omitted]

          (b) At such time as the Loans, and the other obligations under the
Loan Documents shall have been paid in full and the obligation to make Loans has
been terminated in a manner satisfactory to the Lender, the Collateral shall be
released from the Liens created by the Security Documents, and the Security
Documents and all obligations (other than those expressly stated to survive such
termination) of the Lender

                                      -35-
<PAGE>

and each Loan Party under the Security Documents shall terminate, all without
delivery of any instrument or performance of any act by any Person.

          10.13  Confidentiality.  Lender agrees to keep confidential all non-
                 ---------------
public information provided to it by any Loan Party pursuant to this Agreement
that is designated by such Loan Party as confidential; provided that nothing
                                                       --------
herein shall prevent the Lender from disclosing any such information (a) to any
affiliate of the Lender, (b) to any actual or prospective transferee of any of
the Loans that agrees to comply with the provisions of this Section, (c) to its
employees, directors, agents, attorneys, accountants and other professional
advisors or those of any of its affiliates, (d) upon the request or demand of
any Governmental Authority, (e) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to any
Requirement of Law, (f) if requested or required to do so in connection with any
litigation or similar proceeding, (g) that has been publicly disclosed, (h) to
the National Association of Insurance Commissioners or any similar organization
or any nationally recognized rating agency that requires access to information
about Lender's investment portfolio in connection with ratings issued with
respect to Lender, or (i) in connection with the exercise of any remedy
hereunder or under any other Loan Document.

          10.14  WAIVERS OF JURY TRIAL.  THE BORROWER AND THE LENDER HEREBY
                 ---------------------
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.

                  [Remainder of Page Intentionally Left Blank]

                                      -36-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.

                              LEXAR MEDIA, INC.

                              By:    _________________________
                              Name:  _________________________
                              Title: _________________________

                              ACCESS TECHNOLOGY PARTNERS, L.P.

                              By:  ACCESS TECHNOLOGY MANAGEMENT, L.L.C.
                              Its: General Partner

                                   By:  H&Q VENTURE MANAGEMENT, L.L.C.
                                   Its: Managing Member

                                        By:   __________________________
                                        Name: __________________________
                                        Title:__________________________

                                      -37-

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