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EXHIBIT 10.20
STOCK PLEDGE AGREEMENT
(CERTAIN GUARANTORS)
THIS STOCK PLEDGE AGREEMENT (this "Agreement"), dated as of May
29, 1998, is executed and delivered by each of the undersigned Subsidiaries of
STORMEDIA INCORPORATED, a Delaware corporation (each a "Pledgor" and
collectively "Pledgors"), on the one hand, and, on the other hand, FOOTHILL
CAPITAL CORPORATION, a California corporation, as agent for the Lenders from
time to time party to the Loan Agreement (defined below), (in such capacity
"Secured Party"), with reference to the following:
WHEREAS, each undersigned Pledgor beneficially owns the specified
number of shares identified as Pledged Shares in the Persons identified as
Issuers on Schedule A attached hereto (or any addendum thereto);
WHEREAS, Borrowers and Secured Party are parties to that certain
Loan and Security Agreement (as amended and in effect from time to time, the
"Loan Agreement"), of even date herewith, pursuant to which Secured Party has
agreed to make certain financial accommodations to Borrower;
WHEREAS, to induce Secured Party to make the financial
accommodations provided to Borrowers pursuant to the Loan Agreement, Pledgors
desire to pledge, grant, transfer, and assign to Secured Party security
interests in the Collateral (as hereinafter defined) to secure the Secured
Obligations (as hereinafter defined), as provided herein.
NOW, THEREFORE, in consideration of the mutual promises,
covenants, representations, and warranties set forth herein and for other good
and valuable consideration, the parties hereto agree as follows:
1. Definitions and Construction.
(a) Definitions. All initially capitalized terms used
herein and not otherwise defined herein shall have the meaning ascribed thereto
in the Loan Agreement and the rules of construction set forth in Section 1 of
the Loan Agreement shall likewise govern this Agreement. As used in this
Agreement:
"Agreement" shall mean this Stock Pledge Agreement.
"Borrowers" shall mean STORMEDIA INCORPORATED, a
Delaware corporation and AKASHIC MEMORIES CORPORATION, a California corporation.
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"Bridge Term Loan Secured Obligations" means those
of the Secured Obligations arising under the Guaranty with respect to the Bridge
Term Loan Obligations.
"Chief Executive Office" shall mean where each
Pledgor is deemed located pursuant to Section 9-103(3)(d) of the Code.
"Collateral" shall mean the Pledged Shares, the
Future Rights, and the Proceeds, collectively.
"Future Rights" shall mean: (a) all shares of stock
(other than Pledged Shares) of the Issuers, and all securities convertible or
exchangeable into, and all warrants, options, or other rights to purchase,
shares of stock of the Issuers; (b) to the extent of each Pledgor's interest
therein, all shares of, all securities convertible or exchangeable into, and all
warrants, options, or other rights to purchase shares of stock of any Person in
which each Pledgor, after the date of this Agreement, acquires a direct equity
interest, irrespective of whether such Person is or becomes a Subsidiary of any
Pledgor; and (c) the certificates or instruments representing such additional
shares, convertible or exchangeable securities, warrants, and other rights and
all dividends, cash, options, warrants, rights, instruments, and other property
or proceeds from time to time received, receivable, or otherwise distributed in
respect of or in exchange for any or all of such shares.
"Holder" and "Holders" shall have the meanings
ascribed thereto in Section 3 of this Agreement.
"Issuers" shall mean each of the Persons identified
as an Issuer on Schedule A attached hereto (or any addendum thereto), and any
successors thereto, whether by merger or otherwise.
"Loan Agreement" shall have the meaning ascribed
thereto in the recitals to this Agreement.
"Other Secured Obligations" means all Secured
Obligations other than the Bridge Term Loan Secured Obligations.
"Pledged Shares" shall mean all of the shares
identified as Pledged Shares on Schedule A attached hereto (or any addendum
thereto).
"Pledgor" shall have the meaning ascribed thereto
in the preamble to this Agreement.
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"Proceeds" shall mean all proceeds (including
proceeds of proceeds) of the Pledged Shares and Future Rights including all: (a)
rights, benefits, distributions, premiums, profits, dividends, interest, cash,
instruments, documents of title, accounts, investment property, contract rights,
inventory, equipment, general intangibles, deposit accounts, chattel paper, and
other property from time to time received, receivable, or otherwise distributed
in respect of or in exchange for, or as a replacement of or a substitution for,
any of the Pledged Shares, Future Rights, or proceeds thereof (including any
cash, stock, or other securities, investment property or instruments issued
after any recapitalization, readjustment, reclassification, merger or
consolidation with respect to the Issuers and any claims against financial
intermediaries under Section 8-313(2) of the Code or otherwise); (b) "proceeds,"
as such term is used in Section 9-306 of the Code; (c) proceeds of any
insurance, indemnity, warranty, or guaranty (including guaranties of delivery)
payable from time to time with respect to any of the Pledged Shares, Future
Rights, or proceeds thereof; (d) payments (in any form whatsoever) made or due
and payable to any Pledgor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of the
Pledged Shares, Future Rights, or proceeds thereof; and (e) other amounts from
time to time paid or payable under or in connection with any of the Pledged
Shares, Future Rights, or proceeds thereof.
"Secured Obligations" shall mean all liabilities,
obligations, or undertakings owing by Pledgors to Secured Party of any kind or
description arising out of or outstanding under, advanced or issued pursuant to,
or evidenced by the Guaranty, the other Loan Documents, or this Agreement,
irrespective of whether for the payment of money, whether direct or indirect,
absolute or contingent, due or to become due, voluntary or involuntary, whether
now existing or hereafter arising, and including all interest (including
interest that accrues after the filing of a case under the Bankruptcy Code) and
any and all costs, fees (including attorneys fees), and expenses which any
Pledgor is required to pay pursuant to any of the foregoing, by law, or
otherwise.
"Secured Party" shall have the meaning ascribed
thereto in the preamble to this Agreement, together with its successors or
assigns.
"Securities Act" shall have the meaning ascribed
thereto in Section 9(c) of this Agreement.
(b) Construction.
(i) Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular and to the
singular include the plural, the part includes the whole, the term "including"
is not limiting, and the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or." The words "hereof,"
"herein," "hereby," "hereunder," and other similar terms in this
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Agreement refer to this Agreement as a whole and not exclusively to any
particular provision of this Agreement. Article, section, subsection, exhibit,
and schedule references are to this Agreement unless otherwise specified. All of
the exhibits or schedules attached to this Agreement shall be deemed
incorporated herein by reference. Any reference to any of the following
documents includes any and all alterations, amendments, restatements,
extensions, modifications, renewals, or supplements thereto or thereof, as
applicable: this Agreement, the Loan Agreement, or any of the other Loan
Documents.
(ii) Neither this Agreement nor any uncertainty
or ambiguity herein shall be construed or resolved against Secured Party or
Pledgors, whether under any rule of construction or otherwise. On the contrary,
this Agreement has been reviewed by both of the parties and their respective
counsel and shall be construed and interpreted according to the ordinary meaning
of the words used so as to fairly accomplish the purposes and intentions of the
parties hereto.
(iii) In the event of any direct conflict between
the express terms and provisions of this Agreement and of the Loan Agreement,
the terms and provisions of the Loan Agreement shall control.
2. Pledges.
(a) As security for the prompt payment and performance
of the Bridge Term Loan Secured Obligations in full by Borrowers when due,
whether at stated maturity, by acceleration or otherwise (including amounts that
would become due but for the operation of the provisions of the Bankruptcy
Code), Pledgors hereby pledge, grant, transfer, and assign to Secured Party a
security interest in all of Pledgors' right, title, and interest in and to the
Collateral.
(b) As security for the prompt payment and performance
of the Other Secured Obligations in full by Borrowers when due, whether at
stated maturity, by acceleration or otherwise (including amounts that would
become due but for the operation of the provisions of the Bankruptcy Code),
Pledgors hereby pledge, grant, transfer, and assign to Secured Party a security
interest in all of Pledgors' right, title, and interest in and to the
Collateral.
3. Delivery and Registration of Collateral.
(a) All certificates or instruments representing or
evidencing the Collateral shall be promptly delivered by Pledgors to Secured
Party or Secured Party's designee pursuant hereto at a location designated by
Secured Party and shall be held by or on behalf of Secured Party pursuant
hereto, and shall be in suitable form for transfer by delivery,
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or shall be effectively endorsed or accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party.
(b) After the occurrence and during the continuance of
an Event of Default, Secured Party shall have the right, at any time in its
discretion and without notice to Pledgors, to transfer to or to register on the
books of the Issuers (or of any other Person maintaining records with respect to
the Collateral) in the name of Secured Party or any of its nominees as
registered owner of any or all of the Collateral. In addition, Secured Party
shall have the right at any time to exchange certificates or instruments
representing or evidencing Collateral for certificates or instruments of smaller
or larger denominations.
(c) If, at any time and from time to time, any
Collateral (including any certificate or instrument representing or evidencing
any Collateral) is in the possession of a Person other than Secured Party or any
Pledgor (a "Holder"), then Pledgors shall immediately, at Secured Party's
option, either cause such Collateral to be delivered into Secured Party's
possession, or execute and deliver to such Holder a written
notification/instruction, and take all other steps necessary to perfect the
security interests of Secured Party in such Collateral, including obtaining from
such Holder a written acknowledgement that such Holder holds such Collateral for
Secured Party, all pursuant to Sections 9115 of the Code or other applicable law
governing the perfection of Secured Party's security interests in the Collateral
in the possession of such Holder. Each such notification/instruction and
acknowledgement shall be in form and substance satisfactory to Secured Party.
(d) Any and all Collateral (including dividends,
interest, and other cash distributions) at any time received or held by any
Pledgor shall be so received or held in trust for Secured Party, shall be
segregated from other funds and property of any Pledgor and shall be forthwith
delivered to Secured Party in the same form as so received or held, with any
necessary endorsements; provided that cash dividends or distributions received
by Pledgors, if and to the extent they are not prohibited by the Loan Agreement,
may be retained by Pledgors in accordance with Section 4 and used in the
ordinary course of Pledgors' business.
(e) If at any time and from time to time any Collateral
consists of an uncertificated security or a security in book entry form, then
Pledgors shall immediately cause such Collateral to be registered or entered, as
the case may be, in the name of Secured Party as the registered owner of, or
otherwise cause Secured Party's security interests thereon to be perfected in
accordance with applicable law.
4. Voting Rights and Dividends.
(a) So long as no Event of Default shall have occurred
and be continuing, Pledgors shall be entitled to exercise any and all voting and
other consensual rights
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pertaining to the Collateral or any part thereof for any purpose not
inconsistent with the terms of the Loan Documents and shall be entitled to
receive and retain any cash dividends or distributions paid in respect of the
Collateral.
(b) Upon the occurrence and during the continuance of
an Event of Default, all rights of each Pledgor to exercise the voting and other
consensual rights or receive and retain cash dividends or distributions that it
would otherwise be entitled to exercise or receive and retain, as applicable
pursuant to Section 4(a), shall cease, and all such rights shall thereupon
become vested in Secured Party, who shall thereupon have the sole right to
exercise such voting or other consensual rights and to receive and retain such
cash dividends and distributions. Each Pledgor shall execute and deliver (or
cause to be executed and delivered) to Secured Party all such proxies and other
instruments as Secured Party may reasonably request for the purpose of enabling
Secured Party to exercise the voting and other rights which it is entitled to
exercise and to receive the dividends and distributions that it is entitled to
receive and retain pursuant to the preceding sentence.
5. Representations and Warranties. Pledgors represent,
warrant, and covenant as follows:
(a) Each Pledgor has taken all steps it deems necessary
or appropriate to be informed on a continuing basis of changes or potential
changes affecting the Collateral (including rights of conversion and exchange,
rights to subscribe, payment of dividends, reorganizations or recapitalization,
tender offers and voting rights), and Pledgor agrees that Secured Party shall
have no responsibility or liability for informing Pledgors of any such changes
or potential changes or for taking any action or omitting to take any action
with respect thereto;
(b) All information herein or hereafter supplied to
Secured Party by or on behalf of Pledgors in writing with respect to the
Collateral is, or in the case of information hereafter supplied will be,
accurate and complete in all material respects;
(c) Each Pledgor is and will be the sole legal and
beneficial owner of the Collateral (including the Pledged Shares and all other
Collateral acquired by Pledgors after the date hereof) free and clear of any
adverse claim, Lien, or other right, title, or interest of any party (other than
the interests of Secured Party hereunder and the interests of the Bank Group
pursuant to the Bank Group Financing Documents as contemplated by the
Intercreditor Agreement);
(d) This Agreement, and the delivery to Secured Party
of the Pledged Shares representing Collateral (or the delivery to all Holders of
the Pledged Shares representing Collateral of the notification/instruction
referred to in Section 3 of this Agreement), creates a valid, perfected, and
security interests of the priority contemplated by
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the Intercreditor Agreement in one hundred percent (100%) of the Pledged Shares
in favor of Secured Party securing payment of the Secured Obligations, and all
actions necessary to achieve such perfection have been duly taken;
(e) Schedule A to this Agreement is true and correct
and complete in all material respects; without limiting the generality of the
foregoing: (i) all the Pledged Shares are in certificated form, and, except to
the extent registered in the name of Secured Party or its nominee pursuant to
the provisions of this Agreement or in the name of the Bank Group Agent pursuant
to the Bank Group Financing Documents as contemplated by the Intercreditor
Agreement, are registered in the name of Pledgors; and (ii) the Pledged Shares
as to each of the Issuers constitute at least the percentage of all the fully
diluted issued and outstanding shares of stock of such Issuer as set forth in
Schedule A to this Agreement;
(f) There are no presently existing Future Rights or
Proceeds owned by Pledgors, except as set forth in Schedule C hereto;
(g) The Pledged Shares have been duly authorized and
validly issued and are fully paid and nonassessable; and
(h) Neither the pledge of the Collateral pursuant to
this Agreement nor the extensions of credit represented by the Secured
Obligations violates Regulation T, U or X of the Board of Governors of the
Federal Reserve System.
6. Further Assurances.
(a) Pledgors agree that from time to time, at the
expense of Pledgors, Pledgors will promptly execute and deliver all further
instruments and documents, and take all further action that may be necessary or
reasonably desirable, or that Secured Party may request, in order to perfect and
protect any security interests granted or purported to be granted hereby or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, Pledgors will: (i) at the request of Secured Party, xxxx
conspicuously each of their records pertaining to the Collateral with a legend,
in form and substance reasonably satisfactory to Secured Party, indicating that
such Collateral is subject to the security interests granted hereby; (ii)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
reasonably desirable, or as Secured Party may request, in order to perfect and
preserve the security interests granted or purported to be granted hereby; (iii)
allow inspection of the Collateral by Secured Party or Persons designated by
Secured Party; and (iv) appear in and defend any action or proceeding that may
affect Pledgors' title to or Secured Party's security interests in the
Collateral.
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(b) Pledgors hereby authorize Secured Party to file one
or more financing or continuation statements, and amendments thereto, relative
to all or any part of the Collateral without the signature of Pledgors where
permitted by law. A carbon, photographic, or other reproduction of this
Agreement or any financing statement covering the Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law.
(c) Pledgors will furnish to Secured Party, upon the
request of Secured Party: (i) a certificate executed by an authorized officer of
Pledgors, and dated as of the date of delivery to Secured Party, itemizing in
such detail as Secured Party may request, the Collateral which, as of the date
of such certificate, has been delivered to Secured Party by Pledgors pursuant to
the provisions of this Agreement; and (ii) such statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Secured Party may request.
7. Covenants of Pledgors. Each Pledgor shall:
(a) Perform each and every covenant in the Loan
Documents applicable to Pledgors;
(b) At all times keep at least one complete set of its
records concerning substantially all of the Collateral at its Chief Executive
Office as set forth in Schedule B hereto, and not change the location of its
Chief Executive Office or such records without giving Secured Party at least
thirty (30) days prior written notice thereof;
(c) To the extent it may lawfully do so, use its best
efforts to prevent the Issuers from issuing Future Rights or Proceeds, except
for cash dividends and other distributions, if any, that are not prohibited by
the terms of the Loan Agreement to be paid by any Issuer to Pledgors; and
(d) Upon receipt by any Pledgor of any material notice,
report, or other communication from any of the Issuers or any Holder relating to
all or any part of the Collateral, deliver such notice, report or other
communication to Secured Party as soon as possible, but in no event later than
five (5) days following the receipt thereof by any Pledgor.
8. Secured Party as Pledgors' Attorney-in-Fact.
(a) Pledgors hereby irrevocably appoint Secured Party
as Pledgors' attorney-in-fact, with full authority in the place and stead of
Pledgors and in the name of Pledgors, Secured Party or otherwise, from time to
time at Secured Party's discretion, to take any action and to execute any
instrument that Secured Party may reasonably deem necessary or advisable to
accomplish the purposes of this Agreement, including: (i) after the occurrence
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and during the continuance of an Event of Default, to receive, endorse, and
collect all instruments made payable to Pledgors representing any dividend,
interest payment or other distribution in respect of the Collateral or any part
thereof to the extent permitted hereunder and to give full discharge for the
same and to execute and file governmental notifications and reporting forms;
(ii) to issue any notifications/instructions Secured Party deems necessary
pursuant to Section 3 of this Agreement; or (iii) to arrange for the transfer of
the Collateral on the books of any of the Issuers or any other Person to the
name of Secured Party or to the name of Secured Party's nominee.
(b) In addition to the designation of Secured Party as
Pledgors' attorney-in-fact in subsection (a), Pledgors hereby irrevocably
appoint Secured Party as Pledgors' agent and attorney-in-fact to make, execute
and deliver any and all documents and writings which may be necessary or
appropriate for approval of, or be required by, any regulatory authority located
in any city, county, state or country where Pledgors or any of the Issuers
engage in business, in order to transfer or to more effectively transfer any of
the Pledged Shares or otherwise enforce Secured Party's rights hereunder.
9. Remedies upon Default. Subject to the Loan Agreement and
the Intercreditor Agreement, upon the occurrence and during the continuance of
an Event of Default:
(a) Secured Party may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code (irrespective of whether the Code applies to the affected
items of Collateral), and Secured Party may also without notice (except as
specified below) sell the Collateral or any part thereof in one or more parcels
at public or private sale, at any exchange, broker's board or at any of Secured
Party's offices or elsewhere, for cash, on credit or for future delivery, at
such time or times and at such price or prices and upon such other terms as
Secured Party may deem commercially reasonable, irrespective of the impact of
any such sales on the market price of the Collateral. To the maximum extent
permitted by applicable law, Secured Party may be the purchaser of any or all of
the Collateral at any such sale and shall be entitled, for the purpose of
bidding and making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such public sale, to use and apply all or
any part of the Secured Obligations as a credit on account of the purchase price
of any Collateral payable at such sale. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right on the part of
any Pledgor, and each Pledgor hereby waives (to the extent permitted by law) all
rights of redemption, stay, or appraisal that it now has or may at any time in
the future have under any rule of law or statute now existing or hereafter
enacted. Each Pledgor agrees that, to the extent notice of sale shall be
required by law, at least ten (10) calendar days notice to Pledgors of the time
and place of any public sale or the time after which a private sale is to be
made shall constitute reasonable notification. Secured Party shall not be
obligated to make any sale
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of Collateral regardless of notice of sale having been given. Secured Party may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. To the maximum extent permitted
by law, each Pledgor hereby waives any claims against Secured Party arising
because the price at which any Collateral may have been sold at such a private
sale was less than the price that might have been obtained at a public sale,
even if Secured Party accepts the first offer received and does not offer such
Collateral to more than one offeree.
(b) Each Pledgor hereby agrees that any sale or other
disposition of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies, or other financial institutions in the
City of Los Angeles, California in disposing of property similar to the
Collateral shall be deemed to be commercially reasonable.
(c) Each Pledgor hereby acknowledges that the sale by
Secured Party of any Collateral pursuant to the terms hereof in compliance with
the Securities Act of 1933 as now in effect or as hereafter amended, or any
similar statute hereafter adopted with similar purpose or effect (the
"Securities Act"), as well as applicable "Blue Sky" or other state securities
laws may require strict limitations as to the manner in which Secured Party or
any subsequent transferee of the Collateral may dispose thereof. Each Pledgor
acknowledges and agrees that in order to protect Secured Party's interest it may
be necessary to sell the Collateral at a price less than the maximum price
attainable if a sale were delayed or were made in another manner, such as a
public offering under the Securities Act. Each Pledgor has no objection to sale
in such a manner and agrees that Secured Party shall have no obligation to
obtain the maximum possible price for the Collateral. Without limiting the
generality of the foregoing, each Pledgor agrees that, upon the occurrence and
during the continuation of an Event of Default, Secured Party may, subject to
applicable law, from time to time attempt to sell all or any part of the
Collateral by a private placement, restricting the bidders and prospective
purchasers to those who will represent and agree that they are purchasing for
investment only and not for distribution. In so doing, Secured Party may solicit
offers to buy the Collateral or any part thereof for cash, from a limited number
of investors deemed by Secured Party, in its reasonable judgment, to be
institutional investors or other responsible parties who might be interested in
purchasing the Collateral. If Secured Party shall solicit such offers, then the
acceptance by Secured Party of one of the offers shall be deemed to be a
commercially reasonable method of disposition of the Collateral.
(d) If Secured Party shall determine to exercise its
right to sell all or any portion of the Collateral pursuant to this Section,
each Pledgor agrees that, upon request of Secured Party, each Pledgor will, at
its own expense:
(i) use its best efforts to execute and deliver,
and cause the Issuers and the directors and officers thereof to execute and
deliver, all such instruments
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and documents, and to do or cause to be done all such other acts and things, as
may be necessary or, in the opinion of Secured Party, advisable to register such
Collateral under the provisions of the Securities Act, and to cause the
registration statement relating thereto to become effective and to remain
effective for such period as prospectuses are required by law to be furnished,
and to make all amendments and supplements thereto and to the related
prospectuses which, in the opinion of Secured Party, are necessary or advisable,
all in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto;
(ii) use its best efforts to qualify the
Collateral under the state securities laws or "Blue Sky" laws and to obtain all
necessary governmental approvals for the sale of the Collateral, as requested by
Secured Party;
(iii) cause the Issuers to make available to their
respective security holders, as soon as practicable, an earnings statement which
will satisfy the provisions of Section 11(a) of the Securities Act;
(iv) execute and deliver, or cause the officers
and directors of the Issuers to execute and deliver, to any person, entity or
governmental authority as Secured Party may choose, any and all documents and
writings which, in Secured Party's reasonable judgment, may be necessary or
appropriate for approval, or be required by, any regulatory authority located in
any city, county, state or country where Pledgors or the Issuers engage in
business, in order to transfer or to more effectively transfer the Pledged
Shares or otherwise enforce Secured Party's rights hereunder; and
(v) do or cause to be done all such other acts
and things as may be necessary to make such sale of the Collateral or any part
thereof valid and binding and in compliance with applicable law.
Each Pledgor acknowledges that there is no adequate remedy at law for failure by
it to comply with the provisions of this Section and that such failure would not
be adequately compensable in damages, and therefore agrees that its agreements
contained in this Section may be specifically enforced.
(e) EACH PLEDGOR EXPRESSLY WAIVES TO THE MAXIMUM EXTENT
PERMITTED BY LAW: (i) ANY CONSTITUTIONAL OR OTHER RIGHT TO A JUDICIAL HEARING
PRIOR TO THE TIME SECURED PARTY DISPOSES OF ALL OR ANY PART OF THE COLLATERAL AS
PROVIDED IN THIS SECTION; (i) ALL RIGHTS OF REDEMPTION, STAY, OR APPRAISAL THAT
IT NOW HAS OR MAY AT ANY TIME IN THE FUTURE HAVE UNDER ANY RULE OF LAW OR
STATUTE NOW EXISTING OR HEREAFTER ENACTED; AND
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(iii) EXCEPT AS SET FORTH IN SUBSECTION (a) OF THIS SECTION, ANY REQUIREMENT OF
NOTICE, DEMAND, OR ADVERTISEMENT FOR SALE.
10. Application of Proceeds. After the occurrence and during
the continuance of an Event of Default, any cash held by Secured Party as
Collateral and all cash proceeds received by Secured Party in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral pursuant to the exercise by Secured Party of its remedies as a
secured creditor as provided in Section 9 shall be applied from time to time by
Secured Party as provided in the Loan Agreement.
11. Duties of Secured Party. The powers conferred on Secured
Party hereunder are solely to protect its interests in the Collateral and shall
not impose on it any duty to exercise such powers. Except as provided in Section
9-207 of the Code, Secured Party shall have no duty with respect to the
Collateral or any responsibility for taking any necessary steps to preserve
rights against any Persons with respect to any Collateral.
12. CHOICE OF LAW AND VENUE. THE VALIDITY OF THIS AGREEMENT,
ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF SECURED PARTY, IN ANY
OTHER COURT IN WHICH SECURED PARTY SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH
PLEDGOR AND SECURED PARTY WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO
OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 12.
13. Amendments; Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by any Pledgor herefrom shall in
any event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No failure on the part of
Secured Party to exercise, and no delay in exercising any right under this
Agreement, any other Loan Document, or otherwise with respect to any of the
Secured Obligations, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under this Agreement, any other Loan Document, or
otherwise with respect to any of the Secured Obligations preclude any other or
further exercise
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thereof or the exercise of any other right. The remedies provided for in this
Agreement or otherwise with respect to any of the Secured Obligations are
cumulative and not exclusive of any remedies provided by law.
14. Notices. Unless otherwise specifically provided herein,
any notice or other communication herein required or permitted to be given shall
be in writing and shall be delivered in the manner set forth in the Loan
Agreement.
15. Continuing Security Interests. This Agreement shall create
continuing security interests in the Collateral and shall: (i) remain in full
force and effect until the indefeasible payment in full of the Secured
Obligations, including the cash collateralization, expiration, or cancellation
of all Secured Obligations, if any, consisting of letters of credit, and the
full and final termination of any commitment to extend any financial
accommodations under the Loan Agreement; (ii) be binding upon each Pledgor and
its successors and assigns; and (iii) inure to the benefit of Secured Party and
its successors, transferees, and assigns. Upon the indefeasible payment in full
of the Secured Obligations, including the cash collateralization, expiration, or
cancellation of all Secured Obligations, if any, consisting of letters of
credit, and the full and final termination of any commitment to extend any
financial accommodations under the Loan Agreement, the security interests
granted herein shall automatically terminate and all rights to the Collateral
shall revert to Pledgors. Upon any such termination, Secured Party will, at
Pledgors' expense, execute and deliver to Pledgors such documents as Pledgors
shall reasonably request to evidence such termination. Such documents shall be
prepared by Pledgors and shall be in form and substance reasonably satisfactory
to Secured Party.
16. Security Interests Absolute. To the maximum extent
permitted by law, all rights of Secured Party, all security interests hereunder,
and all obligations of Pledgors hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of any of
the Secured Obligations or any other agreement or instrument relating thereto,
including any of the Loan Documents;
(b) any change in the time, manner, or place of payment
of, or in any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from any of the Loan
Documents, or any other agreement or instrument relating thereto;
(c) any exchange, release, or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Secured Obligations; or
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(d) any other circumstances that might otherwise
constitute a defense available to, or a discharge of, Pledgors.
To the maximum extent permitted by law, Pledgors hereby waive any right to
require Secured Party to: (A) proceed against or exhaust any security held from
Pledgors; or (B) pursue any other remedy in Secured Party's power whatsoever.
17. Headings. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement or be given any substantive effect.
18. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
19. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same Agreement.
20. Waiver of Marshaling. Each Pledgor and Secured Party
acknowledges and agrees that in exercising any rights under or with respect to
the Collateral: (i) Secured Party is under no obligation to marshal any
Collateral; (ii) may, in its absolute discretion, realize upon the Collateral in
any order and in any manner it so elects; and (iii) may, in its absolute
discretion, apply the proceeds of any or all of the Collateral to the Secured
Obligations in any order and in any manner it so elects. Each Pledgor and
Secured Party waive any right to require the marshaling of any of the
Collateral.
21. WAIVER OF JURY TRIAL. PLEDGORS AND SECURED PARTY HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. PLEDGORS AND SECURED PARTY
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.
22. Waivers.
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(a) To the maximum extent permitted by law, Pledgors
hereby waive: (i) notice of acceptance hereof; (ii) notice of any loans or other
financial accommodations made or extended under the Loan Agreement, or the
creation or existence of any Obligations; (iii) notice of the amount of the
Obligations, subject, however, to Pledgors' right to make inquiry of Secured
Party to ascertain the amount of the Obligations at any reasonable time; (iv)
notice of any adverse change in the financial condition of Borrower or of any
other fact that might increase Pledgors' risk hereunder; (v) notice of
presentment for payment, demand, protest, and notice thereof as to any
instrument among the Loan Documents; (vi) notice of any unmatured Event of
Default or Event of Default under the Loan Agreement; and (vii) all other
notices (except if such notice is specifically required to be given to Pledgors
under this Agreement) and demands to which Pledgors might otherwise be entitled.
(b) To the fullest extent permitted by applicable law,
Pledgors waive the right by statute or otherwise to require Secured Party to
institute suit against Borrower or to exhaust any rights and remedies which
Secured Party has or may have against Borrower. Pledgors further waive any
defense arising by reason of any disability or other defense (other than the
defense that the Obligations shall have been fully and finally indefeasibly
paid) of Borrowers or by reason of the cessation from any cause (other than that
the Obligations shall have been fully and finally indefeasibly paid) whatsoever
of the liability of Borrowers in respect thereof.
(c) To the maximum extent permitted by law, Pledgors
hereby waive: (i) any rights to assert against Secured Party any defense (legal
or equitable), set-off, counterclaim, or claim which Pledgors may now or at any
time hereafter have against Borrowers or any other party liable to Secured Party
on account of or with respect to the Obligations; (ii) any defense, set-off,
counterclaim, or claim, of any kind or nature, arising directly or indirectly
from the present or future sufficiency, validity, or enforceability of the
Obligations; (iii) any defense arising by reason of any claim or defense based
upon an election of remedies by Secured Party including, to the extent
applicable, the provisions of Sections 580d and 726 of the California Code of
Civil Procedure, or any similar law of California or any other jurisdiction;
(iv) the benefit of any statute of limitations affecting Pledgors' liability
hereunder or the enforcement thereof.
(d) To the maximum extent permitted by law, Pledgors
hereby waive any right of subrogation Pledgors have or may have as against
Borrower with respect to the Obligations. In addition, Pledgors hereby waive any
right to proceed against Borrowers, now or hereafter, for contribution,
indemnity, reimbursement, or any other suretyship rights and claims
(irrespective of whether direct or indirect, liquidated or contingent), with
respect to the Obligations. Pledgors also hereby waive any right to proceed or
to seek recourse against or with respect to any property or asset of Borrower.
Pledgors hereby agree that, in light of the waivers contained in this Section,
Pledgors shall not be deemed to be a "creditor" (as that term
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is defined in the Bankruptcy Code or otherwise) of Borrower, whether for
purposes of the application of Sections 547 or 550 of the United States
Bankruptcy Code or otherwise.
(e) If any of the Secured Obligations at any time are
secured by a mortgage or deed of trust upon real property, Secured Party may
elect, in its sole discretion, upon a default with respect to the Secured
Obligations, to foreclose such mortgage or deed of trust judicially or
nonjudicially in any manner permitted by law, before or after enforcing this
Agreement, without diminishing or affecting the liability of Pledgors hereunder.
Pledgors understand that (a) by virtue of the operation of California's
antideficiency law applicable to nonjudicial foreclosures, an election by
Secured Party nonjudicially to foreclose such a mortgage or deed of trust
probably would have the effect of impairing or destroying rights of subrogation,
reimbursement, contribution, or indemnity of Pledgors against Borrower or
guarantors or sureties, and (b) absent the waiver given by Pledgors herein, such
an election might estop Secured Party from enforcing this Agreement against
Pledgors. Understanding the foregoing, and understanding that Pledgors are
hereby relinquishing a defense to the enforceability of this Agreement, Pledgors
hereby waive any right to assert against Secured Party any defense to the
enforcement of this Agreement, whether denominated "estoppel" or otherwise,
based on or arising from an election by Secured Party nonjudicially to foreclose
any such mortgage or deed of trust. Pledgors understand that the effect of the
foregoing waiver may be that Pledgors may have liability hereunder for amounts
with respect to which Pledgors may be left without rights of subrogation,
reimbursement, contribution, or indemnity against Borrower or guarantors or
sureties. Pledgors also agree that the "fair market value" provisions of Section
580a of the California Code of Civil Procedure shall have no applicability with
respect to the determination of Pledgors' liability under this Agreement.
(f) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER
OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, PLEDGORS HEREBY WAIVE, TO THE
MAXIMUM EXTENT SUCH WAIVER IS PERMITTED BY LAW, ANY AND ALL DEFENSES ARISING
DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS
2808, 2809, 2810, 2815, 2819, 2820, 2821, 2838, 2839, 2845, 2848, 2849, AND
2850, TO THE EXTENT APPLICABLE, CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS
580a, 580b, 580c, 580d, AND 726, AND, TO THE EXTENT APPLICABLE, CHAPTER 2 OF
TITLE 14 OF THE CALIFORNIA CIVIL CODE.
(g) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER
OR OTHER PROVISION SET FORTH IN THIS AGREEMENT, PLEDGORS HEREBY WAIVE ALL RIGHTS
AND DEFENSES ARISING OUT OF AN ELECTION OF REMEDIES BY SECURED PARTY, EVEN
THOUGH THAT ELECTION OF REMEDIES, SUCH AS A NONJUDICIAL FORECLOSURE WITH RESPECT
TO SECURITY FOR A SECURED OBLIGATION, HAS DESTROYED PLEDGORS' RIGHTS OF
SUBROGATION AND REIMBURSEMENT AGAINST THE PRINCIPAL
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BY THE OPERATION OF SECTION 580d OF THE CODE OF CIVIL PROCEDURE OR OTHERWISE.
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IN WITNESS WHEREOF, Pledgors have caused this Agreement to be
duly executed and delivered by their officers thereunto duly authorized as of
the date first written above.
STORMEDIA FOREIGN SALES CORPORATION,
a United States Virgin Islands corporation
By: /s/
------------------------------------
Title:
---------------------------------
STORMEDIA INTERNATIONAL LTD.,
a Cayman Islands corporation
By: /s/
------------------------------------
Title:
---------------------------------
STRATES PTE. LTD,
a Singapore corporation
By: /s/
------------------------------------
Title:
---------------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/
------------------------------------
Title:
---------------------------------
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SCHEDULE A
TO
STOCK PLEDGE AGREEMENT
Pledgor: _____________________
Pledged Shares
Former Name, if Pledgor's
Issuer Number of Certificate any, in which Percentage Jurisdiction of
Shares Class Number(s) Certificate Issued Ownership Incorporation
------ ----- --------- ------------------ --------- -------------
AAA 100%
BBB 100%
CCC 100%
DDD 100%
EEE 100%
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SCHEDULE B
TO
STOCK PLEDGE AGREEMENT
Pledgor: ____________________________, a ________ corporation
Address of Chief Executive Office:
21
SCHEDULE C
TO
STOCK PLEDGE AGREEMENT
Existing Future Rights and Proceeds: [None.]
