Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to___________
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Commission File Number 0-12390
QUANTUM CORPORATION
Incorporated Pursuant to the Laws of the State of Delaware
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IRS Employer Identification Number 94-2665054
500 McCarthy Blvd., Milpitas, California 95035
(408) 894-4000
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934,
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 29, 1997: 132,226,790
<PAGE>
QUANTUM CORPORATION
10-Q REPORT
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Balance Sheets 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II - OTHER INFORMATION 23
SIGNATURE 24
2
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QUANTUM CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(unaudited)
Three Months Ended
June 29, June 30,
1997 1996
----------- -----------
Sales $ 1,446,144 $ 1,153,502
Cost of sales 1,170,210 1,012,223
----------- -----------
Gross profit 275,934 141,279
Operating expenses:
Research and development 74,029 66,665
Sales and marketing 41,732 36,195
General and administrative 27,473 21,487
----------- -----------
143,234 124,347
Income from operations 132,700 16,932
Other (income) expense:
Interest expense 6,035 11,032
Interest and other income, net (3,759) 707
----------- -----------
2,276 11,739
Income before income taxes 130,424 5,193
Income tax provision 33,910 1,350
----------- -----------
Net income $ 96,514 $ 3,843
=========== ===========
Net income per share:
Primary $ 0.69 $ 0.03
Fully diluted $ 0.61 $ 0.03
Weighted average common and common
equivalent shares:
Primary 140,881 115,692
Fully diluted 162,511 115,692
See accompanying notes to condensed consolidated financial statements
3
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QUANTUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 29, March 31,
1997 1997
----------- -----------
(unaudited) (Note 1)
Assets
Current assets:
Cash and cash equivalents $ 365,973 $ 345,125
Accounts receivable, net of allowance for
doubtful accounts of $10,539 and $10,610 887,389 887,477
Inventories 295,251 252,802
Deferred taxes 122,899 122,899
Other current assets 49,105 80,116
---------- ----------
Total current assets 1,720,617 1,688,419
Property and equipment, net of accumulated
depreciation of $177,957 and $226,691 231,845 407,206
Purchased intangibles, net 8,945 42,131
Investment in joint venture 134,944 --
Other assets 17,079 20,507
---------- ----------
$2,113,430 $2,158,263
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 472,354 $ 502,069
Accrued warranty expense 97,651 94,989
Accrued compensation 56,340 63,093
Income taxes payable 47,091 31,153
Current portion of long-term debt 872 44,229
Other accrued liabilities 123,124 80,045
---------- ----------
Total current liabilities 797,432 815,578
Deferred taxes 34,264 33,587
Convertible subordinated debt 241,350 241,350
Long-term debt 40,694 177,668
Redeemable preferred stock 3,888 3,888
Shareholders' equity:
Common stock 472,896 459,800
Retained earnings 522,906 426,392
---------- ----------
Total shareholders' equity 995,802 886,192
---------- ----------
$2,113,430 $2,158,263
========== ==========
See accompanying notes to condensed consolidated financial statements.
4
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<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<CAPTION>
Three Months Ended
June 29, June 30,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 96,514 $ 3,843
Items not requiring the current use of cash:
Depreciation 21,094 21,423
Amortization 3,802 6,731
Deferred income taxes 677 --
Compensation related to stock plans 669 365
Changes in assets and liabilities:
Accounts receivable 93 (19,114)
Inventories (42,449) 10,017
Accounts payable (29,715) (33,252)
Income taxes payable 15,938 (87)
Accrued warranty expense 2,662 (13,948)
Other assets and liabilities 42,323 (61,367)
--------- ---------
Net cash provided by (used in) operating activities 111,608 (85,389)
--------- ---------
Cash flows from investing activities:
Investment in property and equipment (33,282) (43,980)
Proceeds from disposition of property and equipment 4,176 --
Proceeds from repayment of note receivable 18,000 --
Proceeds from sale of interest in recording heads operations 94,000 --
--------- ---------
Net cash provided by (used in) investing activities 82,894 (43,980)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term credit facilities -- 125,000
Principal payments on credit facilities (180,331) (31,349)
Proceeds from issuance of common stock 6,677 11,002
--------- ---------
Net cash provided by (used in) financing activities (173,654) 104,653
--------- ---------
Net increase (decrease) in cash and cash equivalents 20,848 (24,716)
Cash and cash equivalents at beginning of period 345,125 164,752
--------- ---------
Cash and cash equivalents at end of period $ 365,973 $ 140,036
========= =========
Supplemental disclosure of cash flow information:
Conversion of debentures -- $ 35,583
Cash paid during the period for:
Interest $ 3,433 $ 9,611
Income Taxes $ 637 $ 1,494
<FN>
See accompanying notes to condensed consolidated financial statements
</FN>
</TABLE>
5
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QUANTUM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of presentation
The accompanying unaudited condensed consolidated financial statements reflect
all adjustments, consisting only of normal recurring adjustments which, in the
opinion of management, are necessary for a fair presentation of the results for
the periods shown. The results of operations for such periods are not
necessarily indicative of the results expected for the full fiscal year. Certain
prior period amounts have been reclassified to conform to the current period's
presentation. The condensed consolidated balance sheet as of March 31, 1997 has
been derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
financial statements should be read in conjunction with the audited financial
statements of Quantum Corporation for the fiscal year ended March 31, 1997.
2. Inventories
Inventories consisted of the following:
(In thousands)
June 29, March 31,
1997 1997
-------- --------
Materials and purchased parts $ 41,720 $ 39,898
Work in process 17,249 48,005
Finished goods 236,282 164,899
-------- --------
$295,251 $252,802
======== ========
3. Net income per share
Net income per share amounts are computed by dividing income or loss amounts by
the weighted average of common and common equivalent shares (when dilutive)
outstanding during the period. Primary net income per share computations for the
three month periods ended June 29, 1997 and June 30, 1996 were computed based on
weighted average shares outstanding, including the dilutive impact of common
stock equivalents, which consist of outstanding stock options. Net income per
share computed on a fully diluted basis for the three month periods ended June
29, 1997 and June 30, 1996 assumes conversion of the Company's outstanding
convertible subordinated debentures as of the beginning of the respective
periods. Net income per share reflects the effect of the two-for-one stock split
effected as a stock dividend in June 1997.
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In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share," which is required to be adopted in the Company's
fiscal quarter ending December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements, primary earnings per
share is replaced by basic earnings per share, for which the dilutive effect of
stock options will be excluded. Under Statement 128, basic earnings per share
will exceed previously computed primary earnings per share in periods with net
income. The impact of Statement 128 on the calculation of fully diluted earnings
per share is not expected to be material.
4. Debt & Capital
The previously outstanding revolving credit line, term loan, and equipment loan,
which had carrying amounts of $110 million, $56 million, and $14 million, as of
March 31, 1997, respectively, were repaid and terminated in the first fiscal
1998 quarter.
In June 1997, the Company entered into an unsecured senior credit facility which
provides a $500 million revolving credit line and expires in June 2000. At the
option of the Company, borrowings under the revolving credit line bear interest
at either LIBOR plus a margin determined by a total funded debt ratio, or a base
rate, with option periods of one to six months. As of June 29, 1997, there was
no outstanding balance drawn on this line.
The Company has filed a registration statement pursuant to which the Company may
issue debt or equity securities, in one or more series or issuances, limited to
$450 million aggregate public offering price or its equivalent in one or more
foreign currencies, currency units or composite currencies as may be designated
by the Company. Debt securities which may be offered under the registration may
be either senior or subordinated, and the specific terms would be set pursuant
to a specific offering. The number of shares of Common stock, par value $0.01
per share, which may be issued under the registration, as well as the initial
public offering price or method of determining the initial public offering
price, would be set pursuant to a specific offering. The registration statement
became effective on July 24, 1997. For a description of securities issued
pursuant to the registration statement, refer to Note 7 of the Notes to
Condensed Consolidated Financial Statements.
7
<PAGE>
5. Litigation
The Company and certain of its current and former officers and directors have
been named as defendants in two class action lawsuits, one filed on August 28,
1996 in the Superior Court of Santa Clara County, California, and one filed on
August 30, 1996 in the U.S. District Court for the Northern District of
California. The plaintiff in both class actions purports to represent a class of
all persons who purchased the Company's common stock between February 26, 1996
and June 13, 1996. The complaints allege that the defendants violated various
federal securities laws and California statutes by concealing and/or
misrepresenting material adverse information about the Company and that
individual defendants sold shares of the Company's stock based upon material
nonpublic information.
On February 25, 1997, in the Santa Clara County action, the Court sustained
defendants' demurrer to most of the causes of action in the complaint, with
leave to amend. At a June 12, 1997 demurrer hearing in state court, the judge
dismissed the action as to four of the individual defendants with prejudice and
as to three of the individual defendants without prejudice. The demurrer as to
the Company was overruled. Defendants' motion that the action not be permitted
to proceed as a class action was denied without prejudice and the hearing on
class certification has been continued for ninety days.
Defendants filed their motion to dismiss the federal complaint on April 16,
1997. Oral argument was heard on July 30, 1997. Following oral argument, the
Court granted defendants' motion to dismiss. The Court did not indicate whether
dismissal would be with or without prejudice. To date, no formal ruling has been
issued by the Court.
Certain of the Company's current and former officers and directors were also
named as defendants in a derivative lawsuit, which was filed on November 8, 1996
in the Superior Court of Santa Clara County. The derivative complaint was based
on factual allegations substantially similar to those alleged in the class
action lawsuits. Defendants' demurrer to the derivative complaint was sustained
without prejudice on April 14, 1997. Plaintiffs did not file an amended
complaint. On August 7, 1997, the Court issued an order of dismissal and entered
final judgment dismissing the complaint.
6. MKE/Quantum Joint Venture
On May 16, 1997, the Company sold a controlling interest in its recording heads
operations (RHO) to MKE. RHO designs, develops, and manufactures MR recording
heads used in the Company's disk drive products. The sale was achieved through
MKE acquiring a 51% interest in a new joint venture (JV) entity, MKE-Quantum
Components LLC, that was formed to hold the operations, assets, and certain
liabilities of RHO.
Pursuant to the terms of the transaction, Quantum contributed certain RHO assets
and operations and leased certain premises to the JV and retained a 49%
ownership interest in the JV; the JV assumed $51 million of debt payable to
Quantum; and MKE paid Quantum $94 million and contributed $110 million to the JV
in exchange for a 51% controlling ownership interest in the JV.
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The RHO assets which Quantum contributed to the JV are primarily comprised of
inventory, equipment, accounts receivable, and intangibles, which aggregated
approximately $210 million and the third party liabilities totaled approximately
$32 million. In addition, the JV will lease certain premises from Quantum, and
RHO employees will become employees of the JV. One of these leases results, in
substance, in a transfer of premises with an approximate carrying value of $48
million to the JV.
MKE and the Company will share pro rata in the capital funding requirements, if
any, and results of operations of the JV. The Company plans to continue to
utilize the recording heads manufactured by the JV in its disk drive products
manufactured by MKE.
Effective May 16, 1997, the Company began to account for its 49% interest in the
JV using the equity method of accounting. The Company's equity interest in the
operating results of the JV were reported in interest and other income, net. The
results of RHO through May 15, 1997 were consolidated.
Unaudited Pro Forma Information
Giving effect to the above-noted sale transaction as if it had occurred on April
1, 1996, the pro forma effect on the Company's consolidated balance sheet at
March 31, 1997, would not have been significant, and net income for the three
month period ended June 29, 1997 would have been approximately $99 million or
$0.62 per share, fully diluted compared to $10 million or $0.09 per share, fully
diluted for the three month period ended June 30, 1996. This unaudited pro forma
information is intended for information purposes only and is not necessarily
indicative of the future results of operations of the JV or the results of the
Company that would have occurred had the JV arrangement been in effect for the
full fiscal quarter presented.
7. Subsequent Event
In July 1997, the Company issued $288 million of 7% convertible subordinated
notes. The notes mature on August 1, 2004, and are convertible at the option of
the holder at any time prior to maturity, unless previously redeemed, into
shares of the Company's common stock at a conversion price of $46.325 per share.
The notes are redeemable at the Company's option on or after August 1, 1999 and
prior to August 1, 2001, under certain conditions related to the price of the
Company's common stock. In the event of certain changes involving all or
substantially all of the Company's common stock, the notes would become
redeemable at the option of the holder. Redemption prices range from 107% of the
principal to 100% at maturity. The notes are unsecured obligations subordinated
in right of payment to all existing and future senior indebtedness of the
Company.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's discussion and analysis includes:
o Business overview.
o Strategic developments.
o A comparison of Quantum's results of operations in the quarter ended
June 29, 1997 with the results in the quarter ended June 30, 1996.
o A discussion of Quantum's operating liquidity and capital resources.
o A discussion of trends and uncertainties, which include those related
to the information storage industry and those related to more specific
characteristics of Quantum.
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Forward-looking statements usually contain the
words "estimate," "anticipate," "expect" or similar expressions. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties. These uncertainties could
cause actual results to differ materially from those expected for the reasons
set forth below under Trends and Uncertainties. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date hereof.
Business Overview
Quantum Corporation ("Quantum" or the "Company"), operating in a single business
segment, designs, develops, and markets information storage products, including
high-performance, high-quality hard disk drives, half-inch cartridge tape
drives, tape drive related products, and solid state disk drives. The half-inch
cartridge tape drives and solid state disk drives are manufactured by the
Company. The Company combines its engineering and design expertise with the
high-volume manufacturing capabilities of its exclusive manufacturing partner,
Matsushita-Kotobuki Electronics Industries, Ltd. ("MKE") of Japan, a subsidiary
of Matsushita Electric Industrial Co., Ltd., to produce high-quality hard disk
drives. Quantum is also involved in the manufacture of magnetoresistive ("MR")
recording heads that are used in hard disk drives produced for the Company.
The Company's strategy is to offer a diversified product portfolio that features
leading-edge technology and high-quality manufacturing for a broad range of
market applications. Inherent in this strategy is a focus on meeting and
anticipating customers' information storage needs and on the research and
development of storage product technology.
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The Company markets its products worldwide to major original equipment
manufacturers ("OEMs"), a broad range of distributors, resellers, and systems
integrators.
The Company's information storage business currently includes the following four
components:
Desktop and Portable Storage Products. Quantum designs, develops, and
markets hard disk drives designed to meet the storage needs of desktop
systems. These products are designed for entry-level to high-end
desktop personal computers ("PCs") for use in both home and business
environments.
Workstation and Systems Storage Products. Quantum designs, develops,
and markets technologically advanced hard disk drives for the demanding
storage needs of network servers, workstations, storage subsystems,
high-end desktop systems, and minicomputers. These products are
designed for storage-intensive applications, such as graphics, disk
arrays, desktop publishing systems, multimedia computing systems, and
networked data bases and file servers.
Specialty Storage Products. Quantum designs, develops, manufactures,
and markets half-inch cartridge tape drives and solid state disk
drives. The tape drives use advanced linear recording technology and a
highly accurate tape guide system to perform data backup for mid-range
and high-end computer systems. The solid state disk drives have the
high execution speeds required for applications such as imaging,
multimedia, video-on-demand, on-line transaction processing, material
requirements planning, and scientific modeling.
Recording Heads. Quantum is involved in the design, development, and
manufacture of MR recording heads used in the Company's products. The
Company believes that MR technology, which provides higher capacity per
disk than conventional thin-film heads, will replace thin-film heads as
the leading recording head technology. The Company does not currently
market thin-film or MR heads to other companies. Effective May 16,
1997, the Company's involvement in the design, development, and
manufacture of recording heads is through a 49% ownership interest in a
joint venture with MKE as discussed in the Strategic Developments
section.
Quantum operates in an industry characterized by rapid technological change. The
Company is currently concentrating its product development efforts on broadening
its existing disk and tape drive product lines through the introduction of new
products, including new tape drives, new high-capacity hard disk drive products
to be manufactured by MKE, as well as new products targeted specifically for the
increasing storage needs of the desktop market. The Company is also focusing its
efforts on applying its MR technology to new generations of disk drives.
11
<PAGE>
Strategic Developments
MKE/Quantum Recording Heads Joint Venture. On May 16, 1997, MKE and Quantum
formed a recording heads joint venture company, MKE-Quantum Components LLC.
Pursuant to the terms of the transaction, Quantum contributed certain recording
heads assets and operations, transfered employees of the Company's recording
heads operations and leased certain premises to the joint venture and retained a
49% ownership interest in the joint venture; the joint venture assumed $51
million of debt payable to Quantum; and MKE paid Quantum $94 million and
contributed $110 million to the joint venture in exchange for a 51% controlling
ownership interest in the joint venture. The joint venture combines Quantum's
engineering and design expertise with MKE's manufacturing expertise.
Renegotiated MKE Master Agreement. In May 1997, Quantum completed renegotiation
of its master agreement with MKE, which covers the general terms of the business
relationship. The agreement was extended for a period of 10 years, unless sooner
terminated as a result of certain specified events including a change-in-control
of either Quantum or MKE. MKE currently manufactures all of the hard disk drives
developed and marketed by Quantum. Quantum's relationship with MKE, which dates
from 1984, is built on Quantum's engineering and design expertise and MKE's
high-volume, high-quality manufacturing expertise.
Results of Operations
Sales. Sales in the quarter ended June 29, 1997, were $1,446 million compared to
$1,154 million in the quarter ended June 30, 1996. The increase reflected an
increase in shipments of tape drives, tape drive-related products and disk
drives, as well as an increase in the average drive price. The increase in the
average drive price reflected a change in sales mix to a higher proportion of
high capacity drives and tape drives, which generally have a higher unit price
than the desktop products and a shift in sales to higher capacity desktop
drives. The increase in sales also reflects the impact of the successful
completion of the transition of the manufacturing of high-end disk drives to MKE
during fiscal 1997 which depressed sales in the quarter ended June 30, 1996. As
part of the transition, older high-end disk drive products ceased production in
July 1996, and new high-end drives manufactured by MKE did not ramp until the
third and fourth quarters of fiscal 1997.
Sales of desktop hard drives represented 67% of total sales for the quarter
ended June 29, 1997, and the company anticipates that desktop products will
continue to constitute a majority of sales in the future. However, the company
also expects that sales of DLT product, which represented 18% of sales and a
much higher percentage operating profits for the quarter ended June 29, 1997,
will continue to increase as a percentage of the Company's total sales and
operating profits in the future. The summer months of the second fiscal quarter
for hard disk drives are expected to continue the historical pattern of soft
demand. However, an expected continuation of growth in the tape business is
anticipated to partially offset this pattern, and accordingly, sales are
expected to be relatively flat compared to the first fiscal 1998 quarter.
Sales to the Company's top five customers were 46% of sales in the quarter ended
June 29, 1997, compared with 42% of sales in the quarter ended June 30, 1996.
Sales to Hewlett-Packard were
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$174 million, or 12% of sales, in the quarter ended June 29, 1997, and were less
than 10% of sales in the quarter ended June 30, 1996. Sales to Digital Equipment
Corporation were $162 million, or 11% of sales, in the quarter ended June 29,
1997, and were less than 10% of sales in the quarter ended June 30, 1996. Sales
to Compaq Computer, Inc. were less than 10% in the quarter ended June 29, 1997,
compared with $121 million, or 10% of sales, in the quarter ended June 30, 1996.
Gross Margin Rate. The gross margin rate increased 6.9 percentage points to
19.1% in the quarter ended June 29, 1997, from 12.2% in the quarter ended June
30, 1996. The increase reflected a higher proportion of tape drive and tape
drive related product sales in the quarter ended June 29, 1997, compared to the
quarter ended June 30, 1996, as these products achieved a higher gross margin
rate than sales of hard disk drive products of the Company. The gross margin
increase also reflected a stronger product mix and pricing in the desktop market
in the quarter ended June 29, 1997, compared to the quarter ended June 30, 1996.
In addition, the increase reflected the introduction and market acceptance of
the new high end products; high-end margins in the quarter ended June 30, 1996
had been largely eroded during the transition of high-end disk drive
manufacturing to MKE.
For the second fiscal 1998 quarter, the Company expects to experience continued
gross margin pressure with respect to both its desktop and high-end hard disk
drive products. However, an expected continuation of growth in the tape business
is anticipated to partially offset this impact, and accordingly, the gross
margin rate is expected to be relatively flat compared to the first fiscal 1998
quarter.
Research and Development Expenses. In the quarter ended June 29, 1997, the
Company's investment in research and development was $74 million, or 5.1% of
sales, compared to $67 million, or 5.8% of sales, in the quarter ended June 30,
1996. The decrease in research and development expense as a percentage of sales
reflects the timing of certain pre-production activity which varies from quarter
to quarter. For the second fiscal 1998 quarter, the Company expects increased
expenditures associated with pre-production activity for hard disk drive
products in development. The decrease also reflects the impact of applying the
equity method of accounting to the Company's involvement in the recording heads
operations, effective May 16, 1997. Reflecting management's continued focus on
the development and timely introduction of new information storage products and
technologies, as a percentage of sales, research and development expenses for
the remainder of fiscal 1998 are expected to increase over the level achieved in
the first fiscal 1998 quarter.
Sales and Marketing Expenses. Sales and marketing expenses in the quarter ended
June 29, 1997 were $42 million, or 2.9% of sales, compared with $36 million, or
3.1% of sales, in the quarter ended June 30, 1996. The increase in sales and
marketing expenses was related to the costs of supporting the Company's higher
volume of sales. As a percentage of sales, sales and marketing expenses for the
second fiscal 1998 quarter are expected to increase slightly compared with the
level achieved in the first fiscal 1998 quarter.
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General and Administrative Expenses. General and administrative expenses in the
quarter ended June 29, 1997, were $27 million, or 1.9% of sales, compared to $21
million, or 1.9% of sales, in the quarter ended June 30, 1996. The increase in
general and administrative expenses reflected expansion of the Company's
infrastructure. As compared to the first fiscal 1998 quarter, general and
administrative expenses are expected to be relatively flat for the second fiscal
quarter.
Interest and Other Income/Expense. Net interest and other income and expense was
$2 million net expense in the quarter ended June 29, 1997, and $12 million net
expense in the quarter ended June 30, 1996. The decline in net expense reflects
a decrease in the average amount of debt outstanding during the quarter ended
June 29, 1997, compared to the quarter ended June 30, 1996, and an increase in
interest income reflecting higher average cash balances during the quarter ended
June 29, 1997.
Income Taxes. The effective tax rate in the quarter ended June 29, 1997, at 26%
was flat compared to the rate in the quarter ended June 30, 1996.
Liquidity and Capital Resources
At June 29, 1997, the Company had $366 million in cash and cash equivalents,
compared to $345 million at March 31, 1997. For the three month period ended
June 29, 1997, cash was provided by operating activities, primarily from net
income, and from investing activities. Cash provided by investing activities
included a $94 million payment from MKE as part of the formation of the
recording heads joint venture company and the repayment of a note receivable,
partially offset by investment in property and equipment. Cash was used in
financing activities for the repayment of the previously outstanding senior
credit facility, which included a revolving credit line and term loan, and a
term loan secured by specified capital equipment.
The revolving credit line, term loan, and equipment loan, which were paid off
and terminated in the first fiscal 1998 quarter had carrying amounts of $110
million, $56 million, and $14 million, as of March 31, 1997, respectively.
In June 1997, the Company entered into an unsecured senior credit facility which
provides a $500 million revolving credit line and expires in June 2000. At the
option of the Company, borrowings under the revolving credit line, bear interest
at either LIBOR plus a margin determined by a total funded debt ratio, or a base
rate, with option periods of one to six months. As of June 29, 1997, there was
no outstanding balance drawn on this line.
The Company has filed a registration statement pursuant to which the Company may
issue debt or equity securities, in one or more series or issuances, limited to
$450 million aggregate public offering price or its equivalent in one or more
foreign currencies, currency units or composite currencies as may be designated
by the Company. Debt securities which may be offered under the registration may
be either senior or subordinated, and the specific terms would be set pursuant
to a
14
<PAGE>
specific offering. The number of shares of Common stock, par value $0.01 per
share, which may be issued under the registration, as well as the initial public
offering price or method of determining the initial public offering price, would
be set pursuant to a specific offering. The registration statement became
effective on July 24, 1997.
The Company expects to spend approximately $200 million for capital equipment,
expansion of the Company's facilities, and leasehold improvements in fiscal
1998. These capital expenditures will support the tape business, research and
development, and general corporate operations. The Company believes that it will
be able to fund these capital requirements. Refer to the Future Capital Needs
section of the Trends and Uncertainties section for additional discussion of
capital.
The Company believes that its existing and available capital resources,
including its unsecured senior credit facility and any cash generated from
operations will be sufficient to meet all currently planned expenditures and
sustain operations for the remainder of the fiscal year. However, this belief
assumes that operating results and cash flow from operations will meet the
Company's expectations, and actual results could vary due to certain of the
factors described in the Trends and Uncertainties section that follows.
Trends and Uncertainties
Operating in the information storage industry, Quantum is affected by numerous
trends and uncertainties, some of which are specific to the industry while
others relate more specifically to Quantum. These are discussed below.
Trends and Uncertainties - Information Storage Industry
Key trends and uncertainties inherent in the information storage industry and
how these trends and uncertainties specifically impact the Company are
summarized below.
o Intense competition - The information storage products industry in
general, and the disk drive industry in particular, is characterized by
intense competition that results in rapid price erosion; short product
life cycles; and continuous introduction of new, more cost-effective
products offering increased levels of capacity and performance.
o Rapid technological change - Technology advancement in the information
storage industry is increasingly rapid.
o Customer concentration - High-purchase-volume customers for information
storage products are concentrated within a small number of computer
system manufacturers, distribution channels, and system integrators.
o Fluctuating product demand - The demand for hard disk drive products
depends on the demand for the computer systems in which hard disk
drives are used, which in turn is affected by computer system product
cycles and by prevailing economic conditions.
15
<PAGE>
o Intellectual property conflicts - The hard disk drive industry has been
characterized by significant litigation relating to patent and other
intellectual property rights.
Intensely Competitive Industry. To compete within the information storage
industry, Quantum frequently introduces new products and transitions to newer
versions of existing products. Product introductions and transitions are
significant to the operating results of Quantum, and if they are not successful,
the Company would be materially and adversely affected. The hard disk drive
industry also tends to experience periods of excess product inventory and
intense price competition. If price competition intensifies, the Company may be
forced to lower prices more than expected, which could materially adversely
affect the Company. In addition, the Company's customers could commence the
manufacture of disk and tape drives for their own use or for sale to others. Any
such loss of customers could have a material adverse effect on the Company.
Quantum faces direct competition from a number of companies, including Seagate,
Western Digital, IBM, Maxtor, Exabyte and Sony. In the event that the Company is
unable to compete effectively with these or any other company, the Company would
be materially adversely affected. The Company's information storage product
competition can be further broken down as follows:
Desktop Storage Products. In the market for desktop products, Quantum
competes primarily with Seagate, Western Digital, and Maxtor. Quantum
and its competitors have developed and are developing a number of
products targeted at particular segments of this market, such as
business users and home PC buyers, and factors such as time to market
can have a significant effect on the success of any particular product.
The desktop market is characterized by more competitiveness and shorter
product life cycles than the hard disk drive market in general.
Workstation and System Storage Products. The Company faces competition
in the high-capacity disk drive market primarily from Seagate, IBM and
Fujitsu. Seagate has the largest share of the market for high-capacity
disk drives. Although the same competitive factors identified above as
being generally applicable to the overall disk drive industry apply to
high-capacity disk drives, the Company believes that the performance
and quality of its products are more important to the users in this
market than to users in the desktop market. The Company's success in
the high-capacity market during the foreseeable future is dependent on
the successful development, timely introduction, and market acceptance
of key new products, as to which there can be no assurance.
Specialty Storage Products. In the market for tape drives, the Company
competes with other companies that have tape drive product offerings
and alternative formats. The company targets a market segment that
requires a mission critical backup system and competes in this segment
based on the reliability and durability of its tape drives. Although
the Company has experienced excellent market acceptance of its tape
drive products, the market may become more competitive as other
companies broaden their product line in this market. As a result, the
Company could experience increased price
16
<PAGE>
competition. If price competition occurs, the Company may be forced to
lower prices, in which case the Company could be materially adversely
affected.
Rapid Technological Change, New Product Development, and Qualification. The
combination of an environment of rapid technological changes, short product life
cycles and competitive pressures results in gross margins on specific products
decreasing rapidly. Accordingly, any delay in introduction of more advanced and
more cost-effective products can result in significantly lower sales and gross
margins. The Company's future is therefore dependent on its ability to
anticipate what customers will demand and to develop the new products to meet
this demand. The Company must also qualify new products with its customers,
successfully introduce these products to the market on a timely basis, and
commence volume production to meet customer demands. For example, during the
first quarter of fiscal 1998 the Company expects to introduce a new desktop
product that will account for a significant portion of the Company's sales.
There can be no assurance that the Company will successfully qualify this new
desktop product with its customers on a timely basis or that such product will
be produced in sufficient quantities to meet customer demand. Due to these
factors, the Company expects that sales of new products will continue to account
for a significant portion of its future sales and that sales of older products
will decline accordingly.
The Company is frequently in the process of qualifying new products with its
customers. The customer qualification process for disk drive products,
particularly high-capacity products, can be lengthy, complex, and difficult. In
addition, the Company transitioned the manufacturing of its high capacity
products to MKE during the first half of fiscal 1997, and MKE has only recently
begun volume production of such high-capacity products. In the event that the
Company is unable to obtain additional customer qualifications for new products
in a timely manner, or at all, or in the event that MKE is unable to continue to
manufacture such products in volume and with consistent high quality, the
Company would be materially adversely affected.
There can be no assurance that the Company will be successful in the development
and marketing of any new products and components in response to technological
change or evolving industry standards, that the Company will not experience
difficulties that could delay or prevent the successful development,
introduction and marketing of these products and components; or that the
Company's new products and components will adequately meet the requirements of
the marketplace and achieve market acceptance. In addition, technological
advances in magnetic, optical or other technologies, or the development of new
technologies, could result in the introduction of competitive products with
superior performance to and substantially lower prices than the Company's
products. Further, the Company's new products and components are subject to
significant technological risks. If the Company experiences delays in the
commencement of commercial shipments of new products or components, the Company
could experience delays or loss of product sales. If the Company is unable, for
technological or other reasons, to develop and introduce new products in a
timely manner in response to changing market conditions or customer
requirements, the Company would be materially adversely affected.
Customer Concentration. In addition to the information storage industry and the
Company's customer base being concentrated, the customers generally are not
obligated to purchase any
17
<PAGE>
minimum volume of the Company's products, and the Company's relationships with
its customers are generally terminable at will by its customers.
Sales of the Company's desktop products, which comprise a majority of its
overall sales, were concentrated with several key customers in the quarter ended
June 29, 1997, and the fiscal year ended March 31, 1997. Sales to the top five
customers of the Company represented 46% of total sales for the first quarter of
fiscal 1998, and 38% of sales for the fiscal year ended March 31, 1997. In the
three month period ended June 29, 1997, revenue from the top five customers was
derived from both the OEM and Distribution sales channel, 31% and 15%
respectively. On the OEM side both HP and Digital represented over 10% of total
revenue. On the Distribution side Electronic Resources represented just under
10% of total revenue. In addition the Company is unable to predict whether or
not there will be any significant change in demand for any of its customers'
products in the future. In the event that any such changes result in decreased
demand for the Company's products, whether by loss of or delays in orders, the
Company could be materially adversely affected.
Fluctuation in Product Demand. Fluctuation in demand for the Company's products
generally results in fluctuations in the Company's operating results. Demand for
computer systems-especially in the PC market segment, where the Company derives
a significant amount of its disk drive sales-has historically been subject to
significant fluctuations. Such fluctuations in end-user demand have in the past,
and may in the future, result in the deferral or cancellation of orders for the
Company's products, each of which could have a material adverse effect on the
Company. During the past several years, there has been significant growth in the
demand for PCs, a portion of which represented sales of PCs for use in the home.
However, many analysts predict that future growth may be at a moderately slower
rate than the rate experienced in recent years.
Sales of tape drives and tape drive-related products, which have been a less
significant component of sales for the Company than sales of disk drive products
but which have recently had a significant impact on margins and profitability,
have tended to be more stable. In this regard the company expects sales of DLT
products, which represented 18% of sales and a much higher percentage of
operating profits for the quarter ended June 29, 1997, will continue to increase
as a percentage of the Company's total sales and operating profits in the
future.
The Company has experienced longer product cycles for its tape drives and tape
drive-related products, compared with the short product cycles of disk drive
products. However, there is no assurance that this trend will continue.
The Company could experience decreases in demand for its products in the future,
which could have a material adverse effect on the Company. For the second fiscal
1998 quarter, the Company expects to experience continued gross margin pressure
with respect to both its desktop and high-end hard disk drive products.
The hard disk drive industry has also been subject, from time to time, to
seasonal fluctuations in demand. The Company has typically experienced
relatively flat demand in the quarter ending September 30 compared with the
quarter ending June 30. The Company expects this trend to continue with respect
to the quarter ended September 28, 1997. In addition, the Company's
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<PAGE>
shipments tend to be highest in the third month of each quarter, which occurred
in the quarter ended June 29, 1997 and which the Company expects to occur again
in the quarter ending September 28, 1997. As a result, and because the Company
has no long-term purchase commitments from its customers, future demand is
difficult to predict. The failure by the Company to complete shipments in the
final month of a quarter due to a decline in customer demand, manufacturing
problems or other factors would adversely affect the Company's operating results
for that quarter.
Intellectual Property Matters. From time to time, the Company is approached by
companies and individuals alleging Quantum's need for a license under patented
technology that Quantum assertedly uses. If required, there can be no assurance
that licenses to any such technology could be obtained or obtained on
commercially reasonable terms. Adverse resolution of any intellectual property
litigation could subject the Company to substantial liabilities and require it
to refrain from manufacturing certain products. In addition, the costs of
engaging in such litigation may be substantial, regardless of the outcome.
Trends and Uncertainties More Specific to Quantum
Certain trends and uncertainties relate more specifically to Quantum and are not
necessarily indicative of the information storage industry as a whole. These
trends and uncertainties include dependence on MKE for the manufacture of the
disk drives that Quantum develops and markets, costs associated with the MR
recording head development and manufacture, the recording heads joint venture
with MKE, dependence on suppliers, component shortages, future capital needs,
warranty costs, foreign manufacturing, and price volatility of Quantum common
stock. For information regarding litigation refer to "Legal Proceedings" below.
Dependence on MKE Relationship. Quantum is dependent on MKE for the manufacture
of its disk drive products. Approximately 82% of the Company's quarter ended
June 29, 1997 sales, and 81% of the year ended March 31,1997 sales, were derived
from products manufactured by MKE. In addition, the formation of the joint
venture with MKE to produce recording heads used in disk drive production in
combination with the transition of the manufacturing of the Company's
high-capacity products to MKE in fiscal 1997 has resulted in an increased
dependence on MKE. The Company's relationship with MKE is therefore critical to
the Company's business and financial performance.
In May 1997, Quantum completed renegotiation of its master agreement with MKE,
which covers the general terms of the business relationship. The agreement was
extended for a period of 10 years, unless sooner terminated as a result of
certain specified events including a change-in-control of either Quantum or MKE.
MKE currently manufactures all of the hard disk drives developed and marketed by
Quantum. Quantum's relationship with MKE, which dates from 1984, is built on
Quantum's engineering and design expertise and MKE's high-volume, high-quality
manufacturing expertise.
The Company's dependence on MKE entails, among others, the following principal
risks:
19
<PAGE>
Quality and Delivery. The Company relies on MKE's ability to bring new
products rapidly to volume production at low cost, to meet the
Company's stringent quality requirements, and to respond quickly to
changing product delivery schedules from the Company. This requires,
among other things, close and continuous collaboration between the
Company and MKE in all phases of design, engineering, and production.
The Company's business and financial results would be adversely
affected if products manufactured by MKE fail to satisfy the Company's
quality requirements or if MKE is unable to meet the Company's delivery
commitments. In the event MKE is unable to satisfy Quantum's production
requirements, the Company would not have an alternative manufacturing
source to meet the demand without substantial delay and disruption of
the Company's operations. As a result, the Company would be materially
adversely affected.
Volume and Pricing. MKE's production schedule is based on the Company's
forecasts of its product purchase requirements, and the Company has
limited contractual rights to modify short-term purchase orders issued
to MKE. Further, the demand in the desktop business is inherently
volatile, and there is no assurance that the Company's forecasts are
accurate. In addition, the Company periodically negotiates pricing
arrangements with MKE. The failure of the Company to accurately
forecast its requirements or successfully adjust MKE's production
schedule, which could lead to inventory shortages or surpluses, or the
failure to reach pricing agreements reasonable to the Company would
have a material adverse effect on the Company.
Manufacturing Capacity and Capital Commitment. The Company believes
that MKE's current and committed manufacturing capacity should be
adequate to meet the Company's requirements at least through the end of
fiscal 1998. The Company's future growth will require, however, that
MKE continue to devote substantial financial resources to property,
plant and equipment and working capital to support manufacture of the
Company's products, as to which there can be no assurance. In the event
that MKE is unable or unwilling to meet the Company's manufacturing
requirements, there can be no assurance that the Company would be able
to obtain an alternate source of supply. Any such failure to obtain an
alternative source would have a material adverse effect on the Company.
MR Recording Heads Development and Manufacturing. Since the fiscal 1995
acquisition of MR recording heads technology as part of the acquisition of
certain businesses of the Storage Business Unit of Digital Equipment
Corporation, Quantum has made significant efforts to advance the development of
its MR recording heads capability. To further this effort, MKE and Quantum
formed a joint venture in the first quarter of fiscal 1998 to partner in the
research, development, and production of MR heads and technology. Quantum
believes that through MKE's manufacturing expertise, the potential of the MR
heads operations will be realized to the benefit of both MKE and Quantum.
However, cost-effective production of MR recording heads is not expected to be
realized in the near term. Until that time, the Company will incur losses based
on its pro rata ownership interest in the new joint venture. However, there can
be no assurance that the benefits of the joint venture will be realized on a
timely basis or at all.
Although the Company currently obtains the majority of its MR heads from outside
sources, the Company believes that by manufacturing MR heads it has developed
in-depth knowledge of MR
20
<PAGE>
head technology. The Company believes that MR head technology, which enables
higher capacity per disk than conventional thin-film inductive heads, will
replace inductive heads as the leading recording head technology. This knowledge
is leveraged in the research, development, and production of disk drive products
that utilize MR head technology. In addition, the Company believes that having a
captive supply of MR heads lowers the risk of MR head supply shortages that may
occur in the future as a result of increased requirements for disk drive
products that utilize MR recording heads. However, MR technology is relatively
complex and, to date, the Company's manufacturing yields for its MR heads have
been lower than would be necessary for cost effective production of MR recording
heads.
There is an additional uncertainty associated with maintaining or increasing the
supply of MR recording heads used in the manufacture of disk drives. There are
limited alternative sources of supply for MR recording heads. In the event that
current sources of MR recording heads, which include the joint venture's MR
heads operations, do not meet disk drive production requirements, there can be
no assurance that the Company will be able to locate and obtain adequate
supplies from alternative sources. A shortage of MR recording heads would
materially adversely affect the Company.
Dependence on Suppliers of Components and Sub-Assemblies; Component Shortages.
Each of the Company and its manufacturing partner, MKE, are dependent on
qualified suppliers for components and sub-assemblies, including recording
heads, media, and integrated circuits, which are essential to the manufacture of
the Company's disk drive and tape drive products. In connection with certain
products, the Company and MKE qualify only a single source for certain
components and sub-assemblies, which can magnify the risk of shortages.
Component shortages have constrained the Company's sales growth in the past, and
the Company believes that the industry will periodically experience component
shortages. For example, during the quarter ended June 29, 1997, the Company's
ability to meet customer demand for its tape drive products was somewhat
constrained by component availibility. If component shortages occur, or if the
Company experiences quality problems with component suppliers, shipments of
products could be significantly delayed or costs significantly increased, which
would have a material adverse effect on the Company.
Future Capital Needs. The information storage industry is capital and research
and development intensive and the Company will need to maintain adequate
financial resources for capital expenditures, working capital, and research and
development, in order to remain competitive in the information storage business.
The Company believes that it will be able to fund these capital requirements at
least through fiscal 1998. However, if the Company decides to increase its
capital expenditures further, or sooner than presently contemplated, or if
results of operations do not meet the Company's expectations, the Company could
require additional debt or equity financing. There can be no assurance that such
additional funds will be available to the Company or will be available on
favorable terms. The Company may also require additional capital for other
purposes not presently contemplated. If the Company is unable to obtain
sufficient capital, it could be required to curtail its capital equipment and
research and development expenditures, which could adversely affect the Company.
21
<PAGE>
Warranty. Quantum generally warrants its products against defects for a period
of one to five years. A provision for estimated future costs relating to
warranty expense is recorded when products are shipped. The actual warranty
expenditures could have a material unfavorable impact on the Company if the
actual rate of unit failure or the cost to repair a unit is greater than what
the Company has used in estimating the warranty expense accrual.
Risks Associated with Foreign Manufacturing. Many of the Company's products are
currently manufactured outside the United States. As a result, the Company is
subject to certain risks associated with contracting with foreign manufacturers,
including obtaining requisite United States and foreign governmental permits and
approvals, currency exchange fluctuations, currency restrictions, political
instability, labor problems, trade restrictions, and changes in tariff and
freight rates.
Foreign Exchange Contracts. The Company manages the impact of foreign currency
exchange rate changes on certain foreign currency receivables and payables using
foreign currency forward exchange contracts. With this approach the Company
expects to minimize the impact of changing foreign exchange rates on the
Company's net income. However, there can be no assurance that all foreign
currency exposures will be adequately managed, and the Company could incur
material charges as a result of changing foreign exchange rates. Refer to Note 2
of the Notes to Consolidated Financial Statements for additional information
regarding foreign currency forward exchange contracts.
Volatility of Stock Price. The market price of the Company's common stock has
been, and may continue to be, extremely volatile. Factors such as new product
announcements by the Company or its competitors; quarterly fluctuations in the
operating results of the Company, its competitors, and other technology
companies; and general conditions in the computer market may have a significant
impact on the market price of the common stock. In particular, if the Company
were to report operating results that did not meet the expectations of the
analysts, the market price of the common stock could be materially adversely
affected.
22
<PAGE>
QUANTUM CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal proceedings
Refer to Note 5 of the Notes to Condensed Consolidated Financial Statements.
Item 2. Changes in securities - Not Applicable.
Item 3. Defaults upon senior securities - Not Applicable
Item 4. Submission of matters to a vote of security holders - Not Applicable
Item 5. Other information - Not Applicable
Item 6. Exhibits and reports on Form 8-K.
(a) Exhibits. The exhibits listed on the accompanying index
to exhibits immediately following the
signature page are filed as part of this
report.
(b) Reports on Form 8-K.
(1) Form 8-K dated May 16, 1997
(2) Form 8-K dated July 28, 1997
(3) Form 8-K dated August 6, 1997
23
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
QUANTUM CORPORATION
(Registrant)
Date: August 13, 1997 By: /s/ Richard L. Clemmer
----------------------
Richard L. Clemmer
Executive Vice President, Finance
and Chief Financial Officer
24
<PAGE>
QUANTUM CORPORATION
INDEX TO EXHIBITS
Exhibit
Number
4.1(1) Indenture, dated August 1, 1997, between the Registrant and La Salle
National Bank as trustee ("Trustee") related to the Registrants
subordinated debt securities
4.2(1) Supplemental Indenture, dated August 1, 1997, between the Registrant
and Trustee, relating to the Notes (including the form of Note)
4.3 Certificate of Amendment of Certificate of Incorporation of Quantum
Corporation, dated April 29, 1997
10.1 Lease (dated April 16, 1997) between Registrant and John Arrillaga,
Trustee
10.2 Credit Agreement dated June 6, 1997, among Quantum Corporation and the
Banks Named Herein and ABN AMRO BANK N.V., San Francisco International
Branch and CIBC INC. as Co-Arrangers for the Banks and CANADIAN
IMPERIAL BANK OF COMMERCE, as Administrative Agent for the Banks and
ABN AMRO BANK N.V., San Francisco International Branch, as Syndication
Agent for the Banks and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION as Documentation Agent for the Banks
10.3(2) Amended and Restated Master Agreement, dated April 30, 1997 between
Registrant and MKE
10.4(2) Amended and Restated Purchase Agreement, dated April 30, 1997 between
Registrant and MKE
10.5(2) License Agreement, effective January 1, 1996, dated April 17, 1997,
between International Business Machines Corporation and Quantum
Corporation
11.1 Statement of Computation of Net Income Per Share
27 Financial Data Schedule
- -----------------------------------
(1) Incorporated by reference to the Form 8-K, dated August 6, 1997, filed with
the Securities and Exchange Commission.
(2) The Company has requested confidential treatment for certain portions of
this agreement. The confidential portions have been separately filed with
the Securities and Exhchange Commission.
25
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
QUANTUM CORPORATION
Quantum Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does hereby
certify that:
The amendment to the Corporation's Certificate of Incorporation set
forth in the following resolution was approved by the Corporation's Board of
Directors and stockholders and was duly adopted in accordance with the
applicable provisions of Section 242 of the General Corporation Law of the State
of Delaware.
RESOLVED: That the first paragraph of Section 4 of the Certificate of
Incorporation of this corporation is hereby amended to read in its
entirety as follows:
"The total number of shares of all classes of stock which the
corporation has authority to issue is Five Hundred Four
Million (504,000,000) shares, consisting of Five Hundred
Million (500,000,000) shares of Common Stock, $.01 par value
(the "Common Stock"), and Four Million (4,000,000) shares of
Preferred Stock, $.01 par value (the "Preferred Stock").
IN WITNESS WHEREOF, QUANTUM CORPORATION has caused this Certificate to
be signed and attested by its duly authorized officers this 29th day of April,
1997.
QUANTUM CORPORATION
By: /s/ Michael A. Brown
Michael A. Brown
President and Chief Executive Officer
ATTEST
By: /s/ Andrew Kryder
------------------------
Andrew Kryder
Vice President, Corporate General Counsel
and Assistant Secretary
BLDG: Quantum 6
OWNER: 500
PROP: 225
UNIT: 1
TENANT: 22501
LEASE AGREEMENT
THIS LEASE, made this 16th day of April, 1997 between JOHN ARRILLAGA, Trustee,
or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) as
amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated
7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended
____________________________________________, hereinafter called Landlord, and
QUANTUM CORPORATION, a Delaware corporation, hereinafter called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord
those certain premises (the "Premises") outlined in red on Exhibit "A", attached
hereto and incorporated herein by this reference thereto more particularly
described as follows:
All of that land containing approximately 9.56+/- acres and that certain
182,355+/- square foot two-story building ("Building 6") and parking appurtenant
thereto, to be constructed and installed by Landlord as shown within the area
outlined in Green on Exhibit A to be located on Sumac Drive, Milpitas,
California, 95035. Said Premises is more particularly shown within the area
outlined in Red in Exhibit A attached hereto and incorporated herein by this
reference. The interior of the Leased Premises shall be improved by Landlord in
the configuration as shown in Red on Exhibit B to be attached hereto and
incorporated herein by this reference. The building shell shall be constructed
in accordance with the shell and site improvement specifications set forth on
Exhibit A, and the general building elevation set forth on Exhibit A.
The word "Premises" as used throughout this lease is hereby defined to include
the Hetch-Hetchy Land as described in Paragraph 49, the nonexclusive use of
landscaped areas, sidewalks and driveways in front of or adjacent to the
Premises, and the nonexclusive use of the area directly underneath or over such
sidewalks and driveways. The gross leasable area of the building shall be
measured from outside of exterior walls to outside of exterior walls, and shall
include any atriums, covered entrances or egresses and covered loading areas.
Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.
1. USE Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of office,
sales and R&D, and related uses necessary for the use of Tenant or any approved
assignee or subtenant to conduct its business providing any and all uses of the
Premises shall be subject to and in conformance with all governmental laws and
ordinances, and for no other purpose without Landlord's prior written consent,
Tenant shall not do or permit to be done in or about the Premises nor bring or
keep or permit to be brought or kept in or about the Premises anything which is
prohibited by or will in any way increase the existing rate of (or otherwise
affect) fire or any insurance covering the Premises or any part thereof, or any
of its contents without the prior written consent of Landlord, and provided
Tenant bears any cost related to such increased rate, or will cause a
cancellation of any insurance covering the Premises or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the Premises which will in any way obstruct or interfere with the rights
of other tenants or occupants of the Premises or neighboring premises or injure
or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. No sale by auction shall be
permitted on the Premises. Tenant shall not place any loads upon the floors,
walls, or ceiling which endanger the structure, or place any harmful fluids or
other materials in the drainage system of the building, or overload existing
electrical or other mechanical systems. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises or outside of
the building in which the Premises are a part, except in trash containers placed
inside exterior enclosures designated by Landlord for that purpose or inside of
the building proper where designated by Landlord. No materials, supplies,
equipment, finished products or semi-finished products, raw materials or
articles of any nature shall be stored upon or permitted to remain outside the
Premises. Tenant shall not place anything or allow anything to be placed near
the glass of any window, door partition or wall which may appear unsightly from
outside the Premises. No loudspeaker or other device, system or apparatus which
can be heard outside the Premises shall be used in or at the Premises without
the prior written consent of Landlord. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises. Tenant shall indemnify, defend and
hold Landlord harmless against any loss, expense, damage, reasonable attorneys'
fees, or liability arising out of failure of Tenant to comply with any
applicable law that governs Tenant's use of the Premises. Tenant shall comply
with any covenant, condition, or restriction ("CC&R's") affecting the Premises.
The Provisions of this paragraph are for the benefit of Landlord only and shall
not be construed to be for the benefit of any tenant or occupant of the
Premises.
2. TERM AND COMMENCEMENT DATE OF LEASE: See Paragraph 40, 41 & 42 of this Lease.
<PAGE>
3. POSSESSION If Landlord, for any reason whatsoever other than Landlord's
default, cannot deliver possession of said premises to Tenant at the
commencement of the said term, as hereinbefore specified, this Lease shall not
be void or voidable; no obligation of Tenant shall be affected thereby; nor
shall Landlord or Landlord's agents be liable to Tenant for any loss or damage
resulting therefrom; but in that event the commencement and termination dates of
the Lease, and all other dates affected thereby shall be revised to conform to
the date of Landlord's delivery of possession, as specified in Paragraph 2B,
above. The above is, however, subject to the provision that the period of delay
of delivery of the Premises shall not exceed 180 days from the commencement date
herein (except those delays caused by Acts of God, strikes, war, utilities,
governmental bodies, weather, unavailable materials, and delays beyond
Landlord's control shall be excluded in calculating such period) in which
instance Tenant, at its option, may, by written notice to Landlord, terminate
this Lease.
4. RENT
A. Basic Rent. Tenant agrees to pay to Landlord at such place as Landlord may
designate without deduction, offset, prior notice, or demand, and Landlord
agrees to accept as Basic Rent for the leased Premises the total sum of the
amount for the original Lease Term to be calculated pursuant to Paragraph 39.
B. Time for Payment. Full monthly rent is due in advance on the first day of
each calendar month. In the event that the term of this Lease commences on a
date other than the first day of a calendar month, on the date of commencement
of the term hereof Tenant shall pay to Landlord as rent for the period from such
date of commencement to the first day of the next succeeding calendar month that
proportion of the monthly rent hereunder which the number of days between such
date of commencement and the first day of the next succeeding calendar month
bears to thirty (30). In the event that the term of this Lease for any reason
ends on a date other than the last day of a calendar month, on the first day of
the last calendar month of the term hereof Tenant shall pay to Landlord as rent
for the period from said first day of said last calendar month to and including
the last day of the term hereof that proportion of the monthly rent hereunder
which the number of days between said first day of said last calendar month and
the last day of the term hereof bears to thirty (30).
C. Late Charge. Notwithstanding any other provision of this Lease, if Tenant
is in default in the payment of rental as set forth in this Paragraph 4 when
due, or any part thereof, Tenant agrees to pay Landlord, in addition to the
delinquent rental due, a late charge for each rental payment in default ten (10)
days. Said late charge shall equal ten percent (10%) of each rental payment so
in default.
D. Additional Rent. Beginning with the commencement date of the term of
thisease, Tenant shall pay to Landlord or to Landlord's designated agent in
addition to the Basic Rent and as Additional Rent the following:
(a) All Taxes relating to the Premises as set forth in Paragraph 9, and
(b) All insurance premiums relating to the Premises, as set forth in
Paragraph 12, and
(c) All charges, costs and expenses, which Tenant is required to pay
hereunder, together with all interest and penalties, costs and expenses
including reasonable attorneys' fees and legal expenses, that may accrue thereto
in the event of Tenant's failure to pay such amounts, and all damages,
reasonable costs and expenses which Landlord may incur by reason of default of
Tenant or failure on Tenant's part to comply with the terms of this Lease. In
the event of nonpayment by Tenant of Additional Rent, Landlord shall have all
the rights and remedies with respect thereto as Landlord has for nonpayment of
rent.
The Additional Rent due hereunder shall be paid to Landlord or Landlord's
agent (i) within five days for taxes and insurance and within thirty (30) days
for all other Additional Rent items after presentation of invoice from Landlord
or Landlord's agent setting forth such Additional rent and/or (ii) at the option
of Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's prorata
share of an amount estimated by Landlord to be Landlord's approximate average
monthly expenditure for such Additional Rent items, which estimated amount shall
be reconciled within 180 days of the end of each calendar year or more
frequently if Landlord elects to do so at Landlord's sole and absolute
discretion as compared to Landlord's actual expenditure for said Additional Rent
items, with Tenant paying to Landlord, upon demand, any amount of actual
expenses expended by Landlord in excess of said estimated amount, or Landlord
crediting to Tenant's account (providing Tenant is not in default in the
performance of any of the terms, covenants and conditions of this Lease, in
which case such amount shall be held by Landlord as a credit for Tenant's
account until such default has been cured) any amount of estimated payments made
by Tenant in excess of Landlord's actual expenditures for said Additional Rent
items.
E. Fixed Management Fee. Beginning with the Commencement Date of the Term of
this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent and
Additional Rent, a fixed monthly management fee ("Management Fee") equal to 1%
of the Basic Rent due for each month during the Lease Term.
The respective obligations of Landlord and Tenant under this paragraph shall
survive the expiration or other termination of the term of this Lease, and if
the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year preceding such expiration or termination bears to
365.
F. Place of Payment of Rent and Additional Rent. All Basic Rent hereunder and
all payments hereunder for Additional Rent shall be paid to Landlord at the
office of Landlord at Peery/Arrillaga, File 1504, Box 60000, San Francisco, CA
94160 or to such other person or to such other place as Landlord may from time
to time designate in writing.
G. Security Deposit. Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the sum of SEVEN HUNDRED ELEVEN THOUSAND ONE
HUNDRED EIGHTY FOUR AND 50/100 Dollars ($711,184.50). Said sum shall be held by
Landlord as a Security Deposit for the faithful performance by Tenant of all of
the terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the term hereof. If Tenant defaults with respect to any provision
of this Lease, including, but not limited to, the provisions relating to the
payment of rent and any of the monetary sums due herewith, Landlord may (but
shall not be required to) use, apply or retain all or any part of this Security
Deposit for the payment of any other amount which Landlord may spend by reason
of Tenant's default or to compensate Landlord for
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any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of said Deposit is so used or applied, Tenant shall,
within ten (10) days after written demand therefor, deposit cash with Landlord
in the amount sufficient to restore the Security Deposit to its original amount.
Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest on such Deposit. If Tenant
fully and faithfully performs every provision of this Lease to be performed by
it, the Security Deposit or any balance thereof shall be returned to Tenant (or
at Landlord's option, to the last assignee of Tenant's interest hereunder) at
the expiration of the Lease term and after Tenant has vacated the Premises. In
the event of termination of Landlord's interest in this Lease, Landlord shall
transfer said Deposit to Landlord's successor in interest whereupon Tenant
agrees to release Landlord from liability for the return of such Deposit or the
accounting therefor. See Paragraph 50
5. ACCEPTANCE AND SURRENDER OF PREMISES By entry hereunder, Tenant accepts the
Premises as being in good and sanitary order, condition and repair and accepts
the building and improvements included in the Premises in their present
condition and without representation or warranty by Landlord as to the condition
of such building or as to the use or occupancy which may be made thereof. Any
exceptions to the foregoing must be by written agreement executed by Landlord
and Tenant. Tenant agrees on the last day of the Lease term, or on the sooner
termination of this Lease, to surrender the Premises promptly and peaceably to
Landlord in good condition and repair (damage by Acts of God, fire, normal wear
and tear excepted), with all interior walls cleaned so that they appear freshly
painted, and repaired and replaced, if damaged; all floors cleaned and waxed;
all carpets cleaned and shampooed; all broken, marred or nonconforming
accoustical ceiling tiles replaced; all windows washed; the airconditioning and
heating systems serviced by a reputable and licensed service firm and in good
operating condition and repair; the plumbing and electrical systems and lighting
in good order and repair, including replacement of any burned out or broken
light bulbs or ballasts; the lawn and shrubs in good condition including the
replacement of any dead or damaged plantings; the sidewalk, driveways and
parking areas in good order, condition and repair; together with all
alterations, additions, and improvements which may have been made in, to, or on
the Premises (except moveable trade fixtures installed at the expense of Tenant)
except that Tenant shall ascertain from Landlord within ninety (90) days before
the end of the term of this Lease whether Landlord desires to have the Premises
or any part or parts thereof restored to their condition and configuration as
when the Premises were delivered to Tenant and if Landlord shall so desire, then
Tenant shall restore said Premises or such part or parts thereof before the end
of this Lease at Tenant's sole cost and expense. Tenant, on or before the end of
the term or sooner termination of this Lease, shall remove all of Tenant's
personal property and trade fixtures from the Premises, and all property not so
removed on or before the end of the term or sooner termination of this Lease
shall be deemed abandoned by Tenant and title to same shall thereupon pass to
Landlord without compensation to Tenant. Landlord may, upon termination of this
Lease, remove all moveable furniture and equipment so abandoned by Tenant, at
Tenant's sole cost, and repair any damage caused by such removal at Tenant's
sole cost. If the Premises be not surrendered at the end of the term or sooner
termination of this Lease, Tenant shall indemnify Landlord against loss or
liability resulting from the delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding tenant founded
on such delay. Nothing contained herein shall be construed as an extension of
the term hereof or as a consent of Landlord to any holding over by Tenant. The
voluntary or other surrender of this Lease or the Premises by Tenant or a mutual
cancellation of this Lease shall not work as a merger and, at the option of
Landlord, shall either terminate all or any existing subleases or subtenancies
or operate as an assignment to Landlord of all or any such subleases or
subtenancies. See Paragraph 51
6. ALTERATIONS AND ADDITIONS Tenant shall not make, or suffer to be made, any
alteration or addition to the Premises, or any part thereof, without the written
consent of Landlord first had and obtained by Tenant (such consent not to be
unreasonably withheld), but at the cost of Tenant, and any addition to, or
alteration of, the Premises, except moveable furniture and trade fixtures, shall
at once become a part of the Premises and belong to Landlord. Landlord reserves
the right to approve all contractors and mechanics proposed by Tenant to make
such alterations and additions. Tenant shall retain title to all moveable
furniture and trade fixtures placed in the Premises. All heating, lighting,
electrical, airconditioning, floor to ceiling partitioning, drapery, carpeting,
and floor installations made by Tenant, together with all property that has
become an integral part of the Premises, shall not be deemed trade fixtures.
Tenant agrees that it will not proceed to make such alteration or additions,
without having obtained consent from Landlord to do so, and until five (5) days
from the receipt of such consent, in order that Landlord may post appropriate
notices to avoid any liability to contractors or material suppliers for payment
for Tenant's improvements. Tenant will at all times permit such notices to be
posted and to remain posted until the completion of work. Tenant shall, if
required by Landlord, secure at Tenant's own cost and expense, a completion and
lien indemnity bond, satisfactory to Landlord, for such work. Tenant further
covenants and agrees that any mechanic's lien filed against the Premises for
work claimed to have been done for, or materials claimed to have been furnished
to Tenant, will be discharged by Tenant, by bond or otherwise, within ten (10)
days after Tenant receives notice of the filing thereof, at the cost and expense
of Tenant. Any exceptions to the foregoing must be made in writing and executed
by both Landlord and Tenant. See Paragraph 51
7. TENANT MAINTENANCE Tenant shall, at its sole cost and expense, keep and
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maintain the Premises (including appurtenances) and every part thereof in a high
standard of maintenance and repair, or replacement, and in good and sanitary
condition. Tenant's maintenance and repair responsibilities herein referred to
include, but are not limited to, janitorization, all windows (interior and
exterior), window frames, plate glass and glazing (destroyed by accident or act
of third parties), truck doors, plumbing systems (such as water and drain lines,
sinks, toilets, faucets, drains, showers and water fountains), electrical
systems (such as panels, conduits, outlets, lighting fixtures, lamps, bulbs,
tubes and ballasts), heating and airconditioning systems (such as compressors,
fans, air handlers, ducts, mixing boxes, thermostats, time clocks, boilers,
heaters, supply and return grills), structural elements and exterior surfaces of
the building, store fronts, roofs, downspouts, all interior improvements within
the premises including but not limited to wall coverings, window coverings,
carpet, floor coverings, partitioning, ceilings, doors (both interior and
exterior), including closing mechanisms, latches, locks, skylights (if any),
automatic fire extinguishing systems, and elevators and all other interior
improvements of any nature whatsoever, and all exterior improvements including
but not limited to landscaping, sidewalks, driveways, parking lots including
striping and sealing, sprinkler systems, lighting, ponds, fountains, waterways,
and drains. Tenant agrees to provide carpet shields under all rolling chairs or
to otherwise be responsible for wear and tear of the carpet caused by such
rolling chairs if such wear and tear exceeds that caused by normal foot traffic
in surrounding areas. Areas of excessive wear shall be replaced at Tenant's sole
expense upon Lease termination. Tenant hereby waives all rights under, and
benefits of, Subsection 1 of Section 1932 and Section 1941 and 1942 of the
California Civil Code and under any similar law, statute or ordinance now or
hereafter in effect. In the event any of the above maintenance responsibilities
apply to any other tenant(s) of Landlord where there is common usage with other
tenant(s), such maintenance responsibilities and charges shall be allocated to
the leased Premises by square footage or other equitable basis as calculated and
determined by Landlord. See Paragraph 52
8. UTILITIES Tenant shall pay promptly, as the same become due, all charges for
water, gas, electricity, telephone, telex and other electronic communication
service, sewer service, waste pick-up and any other utilities, materials or
services furnished directly to or used by Tenant on or about the Premises during
the term of this Lease, including, without limitation, any temporary or
permanent utility surcharge or other exactions whether or not hereinafter
imposed. In the event the above charges apply to any other tenant(s) of Landlord
where there is common usage with other tenant(s), such charges shall be
allocated to the leased Premises by square footage or other equitable basis as
calculated and determined by landlord.
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.
9. TAXES
A. Notwithstanding the following, Tenant is responsible for paying all real
estate taxes and assessments assessed on the Premises leased hereunder from
November 1, 1995. As Additional Rent and in accordance with Paragraph 4D of this
Lease, Tenant shall pay to Landlord, or if Landlord so directs, directly to the
Tax Collector, all Real Property Taxes relating to the Premises. In the event
the Premises leased hereunder consist of only a portion of the entire tax
parcel, Tenant shall pay to Landlord Tenant's proportionate share of such real
estate taxes allocated to the leased Premises by square footage or other
reasonable basis as calculated and determined by Landlord. If the tax billing
pertains 100% to the leased Premises, and Landlord chooses to have Tenant pay
said real estate taxes directly to the Tax Collector, then in such event it
shall be the responsibility of Tenant to obtain the tax and assessment bills and
pay, prior to delinquency, the applicable real property taxes and assessments
pertaining to the leased Premises, and failure to receive a bill for taxes
and/or assessments shall not provide a basis for cancellation of or
nonresponsibility for payment of penalties for nonpayment or late payment by
Tenant. The term "Real Property Taxes", as used herein, shall mean (i) all
taxes, assessments, levies and other charges of any kind or nature whatsoever,
general and special, foreseen and unforeseen (including all installments of
principal and interest required to pay any general or special assessments for
public improvements and any increases resulting from reassessments caused by any
change in ownership of the Premises) now or hereafter imposed by any
governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy or use of, all or any
portion of the Premises (as now constructed or as may at any time hereafter be
constructed, altered, or otherwise changed) or Landlord's interest therein; any
improvements located within the Premises (regardless of ownership); the
fixtures, equipment and other property of Landlord, real or personal, that are
an integral part of and located in the Premises; or parking areas, public
utilities, or energy within the Premises; (ii) all charges, levies or fees
imposed by reason of environmental regulation or other governmental control of
the Premises; and (iii) all costs and fees (including
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<PAGE>
reasonable attorneys' fees) incurred by Landlord in reasonably contesting any
Real Property Tax and in negotiating with public authorities as to any Real
Property Tax. If at any time during the term of this Lease the taxation or
assessment of the Premises prevailing as of the commencement date of this Lease
shall be altered so that in lieu of or in addition to any Real property Tax
described above there shall be levied, assessed or imposed (whether by reason of
a change in the method of taxation or assessment, creation of a new tax or
charge, or any other cause) an alternate or additional tax or charge (i) on the
value, use or occupancy of the Premises or Landlord's interest therein or (ii)
on or measured by the gross receipts, income or rentals from the Premises, on
Landlord's business of leasing the Premises, or computed in any manner with
respect to the operation of the Premises, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Premises, then only that part of such Real
Property Tax that is fairly allocable to the Premises shall be included within
the meaning of the term "Real Property Taxes". Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift or
franchise taxes of Landlord or the federal or state net income tax imposed on
Landlord's income from all sources. See Paragraph 53
B. Taxes on Tenant's Property. Tenant shall be liable for and shall pay ten
days before delinquency, taxes levied against any personal property or trade
fixtures placed by Tenant in or about the Premises. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based on such increased assessment, which Landlord shall have the right to
do regardless of the validity thereof, but only under proper protest if
requested by Tenant, Tenant shall upon demand, as the case may be, repay to
Landlord the taxes so levied against Landlord, or the proportion of such taxes
resulting from such increase in the assessment; provided that in any such event
Tenant shall have the right, in the name of Landlord and with Landlord's full
cooperation, to bring suit in any court of competent jurisdiction to recover the
amount of such taxes so paid under protest, and any amount so recovered shall
belong to Tenant.
10. LIABILITY INSURANCE Tenant, at Tenant's expense, agrees to keep in force
during the term of this Lease a policy of commercial general liability insurance
with combined single limit coverage of not less than Two Million Dollars
($2,000,000) per occurrence, for bodily injury and property damage occurring in,
on or about the Premises, including parking and landscaped areas. Such insurance
shall be primary and noncontributory as respects any insurance carried by
Landlord. The policy or policies effecting such insurance shall name Landlord as
additional insureds, and shall insure any liability of Landlord, contingent or
otherwise, as respects acts or omissions of Tenant, its agents, employees or
invitees or otherwise by any conduct or transactions of any of said persons in
or about or concerning the Premises, including any failure of Tenant to observe
or perform any of its obligations hereunder; shall be issued by an insurance
company admitted to transact business in the State of California; and shall
provide that the insurance effected thereby shall not be canceled, except upon
thirty (30) days' prior written notice to Landlord. A certificate of insurance
of said policy shall be delivered to Landlord. If, during the term of this
Lease, in the considered opinion of Landlord's Lender, insurance advisor, or
counsel, the amount of insurance described in this Paragraph 10 is not adequate,
Tenant agrees to increase said coverage to such reasonable amount as Landlord's
Lender, insurance advisor, or counsel shall deem adequate.
11. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE
Tenant shall maintain a policy or policies of fire and property damage insurance
in "all risk" form with a sprinkler leakage endorsement insuring the personal
property, inventory, trade fixtures, and leasehold improvements within the
leased Premises for the full replacement value thereof. The proceeds from any of
such policies shall be used for the repair or replacement of such items so
insured.
Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with all
laws.
12. PROPERTY INSURANCE Landlord shall purchase and keep in force, and as
Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall
pay to Landlord (or Landlord's agent if so directed by Landlord) Tenant's
proportionate share (allocated to the leased Premises by square footage or other
equitable basis as calculated and determined by Landlord) of the deductibles on
insurance claims and the cost of, policy or policies of insurance covering loss
or damage to the Premises (excluding routine maintenance and repairs and
incidental damage or destruction caused by accidents or vandalism for which
Tenant is responsible under Paragraph 7) in the amount of the full replacement
value thereof, providing protection against those perils included within the
classification of "all risks" insurance and flood and/or earthquake insurance,
if available, plus a policy of rental income insurance in the amount of one
hundred (100%) percent of twelve (12) months Basic Rent, plus sums paid as
Additional Rent. If such insurance cost is increased due to Tenant's use of the
Premises, Tenant agrees to pay to Landlord the full cost of such increase.
Tenant shall have no interest in nor any right to the proceeds of any insurance
procured by Landlord for the Premises.
Landlord and Tenant do each hereby respectively release the other, to the
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extent of insurance coverage of the releasing party, from any liability for loss
or damage caused by fire or any of the extended coverage casualties included in
the releasing party's insurance policies, irrespective of the cause of such fire
or casualty; provided, however, that if the insurance policy of either releasing
party prohibits such waiver, then this waiver shall not take effect until
consent to such waiver is obtained. If such waiver is so prohibited, the insured
party affected shall promptly notify the other party thereof.
13. INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person or
damage to or destruction of property in or about the Premises by or from any
cause whatsoever, including, without limitation, gas, fire, oil, electricity or
leakage of any character from the roof, walls, basement or other portion of the
Premises but excluding, however, the willful misconduct or negligence of
Landlord, its agents, servants, employees, invitees, or contractors of which
negligence Landlord has knowledge and reasonable time to correct. Except as to
injury to persons or damage to property to the extent arising from the willful
misconduct or the negligence of Landlord, its agents, servants, employees,
invitees or contractors, and subject to the last two sentences of Paragraph 12,
Tenant shall hold Landlord harmless from and defend Landlord against any and all
expenses, including reasonable attorneys' fees, in connection therewith, arising
out of any injury to or death of any person or damage to or destruction of
property occurring in, on or about the Premises, or any part thereof, from any
cause whatsoever.
14. COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply with
all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board of
fire underwriters or other similar body now or hereafter constituted; and with
any direction or occupancy certificate issued pursuant to law by any public
officer; provided, however, that no such failure shall be deemed a breach of the
provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that fact as between Landlord and Tenant. Tenant shall, at its
sole cost and expese, comply with any and all requirements pertaining to said
Premises, of any insurance orgainzation or company, necessary for the
maintenance of reasonable fire and public liability insurance covering
requirements pertaining to said Premises, of any insurance orgainzation or
company, necessary for the maintenance of reasonable fire and public liability
insurance covering the Premises. See Paragraphs 44 and 52
15. LIENS Tenant shall keep the Premises free from any liens arising out of any
work performed, materials furnished or obligation incurred by Tenant. In the
event that Tenant shall not, within ten (10) days following Tenant's receipt of
notice of the imposition of such lien, cause the same to be released of record,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right, but no obligation, to cause the same to be released by such
means as it shall deem proper, including payment of the claim giving rise to
such lien. All sums paid by Landlord for such purpose, and all expenses incurred
by it in connection therewith, shall be payable to Landlord by Tenant on demand
with interest at the prime rate of interest as quoted by the Bank of America.
16. ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or hypothecate
the leasehold estate under this Lease, or any interest therein, and shall not
sublet the Premises, or any part thereof, or any right or privilege appurtenant
thereto, or suffer any other person or entity to occupy or use the Premises, or
any portion thereof, without, in each case, the prior written consent of
Landlord which consent will not be unreasonably withheld. In the event Tenant is
allowed to assign, transfer or sublet the whole or any part of the Premises,
with the prior written
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consent of Landlord, no assignee, transferee or subtenant shall assign or
transfer this Lease, either in whole or in part, or sublet the whole or any part
of the Premies, without also having obtained the prior written consent of
Landlord. A consent of Landlord to one assignment, transfer, hypothecation,
subletting, occupation or use by any other person shall not release Tenant from
any of Tenant's obligations hereunder or be deemed to be a consent to any
subsequent similar or dissimilar assignment, transfer, hypothecation,
subletting, occupation or use by any other person. Any such assignment,
transfer, hypothecation, subletting, occupation or use without such consent
shall be void and shall constitute a breach of this Lease by Tenant and shall,
at the option of Landlord exercised by written notice to Tenant, terminate this
Lease. The leasehold estate under this Lease shall not, nor shall any interest
therein, be assignable for any purpose by operation of law without the written
consent of Landlord. As a condition to its consent, Landlord shall require
Tenant to pay all reasonable expenses in connection with the assignment, and
Landlord shall require Tenant's assignee or transferee (or other assignees or
transferees) to assume in writing all of the obligations under this Lease and
for Tenant to remain liable to Landlord under the Lease. See Paragraphs 55 and
56
17. SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust, upon the interest of
Landlord in the land and buildings in which the demised Premises are located, to
secure a loan from a lender (hereinafter referred to as "Lender") to Landlord,
Tenant shall, at the request of Landlord or Lender, execute in writing an
agreement subordinating its rights under this Lease to the lien of such deed of
trust, or, if so requested, agreeing that the lien of Lender's deed of trust
shall be or remain subject and subordinate to the rights of Tenant under this
Lease. Notwithstanding any such subordination, Tenant's possession under this
Lease shall not be disturbed if Tenant is not in default and so long as Tenant
shall pay all rent and observe and perform all of the provisions set forth in
this Lease. See Paragraph 57
18. ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times have,
the right to enter the Premises to inspect them; to perform any services to be
provided by Landlord hereunder; to make repairs or provide any services to a
contiguous tenant(s); to submit the Premises to prospective purchasers,
mortgagers or tenants; to post notices of nonresponsibility; and to alter,
improve or repair the Premises or other parts of the building, all without
abatement of rent, and may erect scaffolding and other necessary structures in
or through the Premises where reasonably required by the character of the work
to be performed; provided, however that the business of Tenant shall be
interfered with to the least extent that is reasonably practical. Any entry to
the Premises by Landlord for the purposes provided for herein shall not under
any circumstances be construed or deemed to be a forcible or unlawful entry into
or a detainer of the Premises or an eviction, actual or constructive, of Tenant
from the Premises or any portion thereof. See Paragraph 58
19. BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar action
undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option,
constitute a breach of this Lease by Tenant. If the trustee or receiver
appointed to serve during a bankruptcy, liquidation, reorganization, insolvency
or similar action elects to reject Tenant's unexpired Lease, the trustee or
receiver shall notify Landlord in writing of its election within thirty (30)
days after an order for relief in a liquidation action or within thirty (30)
days after the commencement of any action.
Within thirty (30) days after court approval of the assumption of this Lease,
the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under said Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, as used herein, includes, but shall
not be limited to: (i) assurance of source and payment of rent, and other
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach substantially any provision, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.
Nothing contained in this section shall affect the existing right of Landlord
to refuse to accept an assignment upon commencement of or in connection with a
bankruptcy, liquidation, reorganization or insolvency action or an assignment of
Tenant for the benefit of creditors or other similar act. Nothing contained in
this Lease shall be construed as giving or granting or creating an equity in the
demised Premises to Tenant. In no event shall the leasehold estate under this
Lease, or any interest therein, be assigned by voluntary or involuntary
bankruptcy proceeding without the prior written consent of Landlord. In no event
shall this Lease or any rights or privileges hereunder be an asset of Tenant
under any bankruptcy, insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition or representation
made under this Lease shall constitute a default hereunder by Tenant upon
expiration of the appropriate grace period hereinafter provided. Tenant shall
have a period of ten (10) days from the date of written notice from Landlord
within which to cure any default in the payment of rental or adjustment thereto.
Tenant shall have a period of thirty (30) days from the date of written notice
from Landlord within which to cure any other default under this Lease. Upon an
<PAGE>
uncured default of this Lease by Tenant, Landlord shall have the following
rights and remedies in addition to any other rights or remedies available to
Landlord at law or in equity:
(a) The rights and remedies provided for by California Civil Code Section
1951.2, including but not limited to, recovery of the worth at the time of award
of the amount by which the unpaid rent for the balance of the term after the
time of award exceeds the amount of rental loss for the same period that Tenant
proves could be reasonably avoided, as computed pursuant to subsection (b) of
said Section 1951.2.
(b) The rights and remedies provided by California Civil Code Section
which allows Landlord to continue the Lease in effect and to enforce all of its
rights and remedies under this Lease, including the right to recover rent as it
becomes due, for so long as Landlord does not terminate Tenant's right to
possession; acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver upon Landlord's initiative to protect its
interest under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(d) To the extent permitted by law, the right and power, after compliance
with all statutory requirements and in any event on not less than three (3)
business days prior written notice, to enter the Premises and remove therefrom
all persons and property, to store such property in a public warehouse or
elsewhere at the cost of and for the account of Tenant, and to sell such
property and apply such proceeds therefrom pursuant to applicable California
law. Landlord, may from time to time sublet the Premises or any part thereof for
such term or terms (which may extend beyond the term of this Lease) and at such
rent and such other terms as Landlord in its reasonable sole discretion may deem
advisable, with the right to make alterations and repairs to the Premises. Upon
each subletting, (i) Tenant shall be immediately liable to pay Landlord, in
addition to indebtedness other than rent due hereunder, the reasonable cost of
such subletting, including, but not limited to, reasonable attorneys' fees, and
any real estate commissions actually paid, and the cost of such reasonable
alterations and repairs incurred by Landlord and the amount, if any, by which
the rent hereunder for the period of such subletting (to the extent such period
does not exceed the term hereof) exceeds the amount to be paid as rent for the
Premises for such period or (ii) at the option of Landlord, rents received from
such subletting shall be applied first to payment of indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the payment of any costs
of such subletting and of such alterations and repairs; third to payment of rent
due and unpaid hereunder; and the residue, if any, shall be held by Landlord and
applied in payment of future rent as the same becomes due hereunder. If Tenant
has been credited with any rent to be received by such subletting under option
(i) and such rent shall not be promptly paid to Landlord by the subtenant(s), or
if such rentals received from such subletting under option (ii) during any month
be less than that to be paid during that month by Tenant hereunder, Tenant shall
pay any such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly. No taking possession of the Premises by Landlord, shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention be given to Tenant. Notwithstanding any such subletting
without termination, Landlord may at any time hereafter elect to terminate this
Lease for such previous breach.
(e) The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply any rental collected
from the Premises and to exercise all other rights and remedies granted to
Landlord pursuant to subparagraph d. above. See Paragraph 59
20. ABANDONMENT Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease, and if Tenant shall abandon, vacate or surrender
said Premises, or be dispossessed by the process of law, or otherwise, any
personal property belonging to Tenant and left on the Premises shall be deemed
to be abandoned, at the option of Landlord, except such property as may be
mortgaged to Landlord.
21. DESTRUCTION In the event the Premises are destroyed in whole or in part from
any cause, except for routine maintenance and repairs and incidental
page 5 of 8
<PAGE>
damage and destruction caused from vandalism and accidents for which Tenant is
responsible under Paragraph 7, Landlord may, at its option:
(a) Rebuild or restore the Premises to their condition prior to the damage
or destruction, or
(b) Terminate this Lease.
If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restrore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior to
the damage or destruction. Tenant shall be entitled to a reduction in rent while
such repair is being made in the proportion that the area of the Premises
rendered untenantable by such damage bears to the total area of the Premises. If
Landlord does not complete the rebuilding or restoration within one hundred
eighty (180) days following the date of destruction (such period of time to be
extended for delays caused by the fault or neglect of Tenant or because of Acts
of God, acts of public agencies, labor disputes, strikes, fires, freight
embargos, rainy or stormy weather, inability to obtain materials, supplies or
fuels, acts of contractors or subcontractors, or delay of the contractors or
subcontractors due to such causes or other contingencies beyond the control of
Landlord), then Tenant shall have the right to terminate this Lease by giving
fifteen (15) days prior written notice to Landlord. Notwithstanding anything
herein to the contrary, Landlord's obligation to rebuild or restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixtures, equipment, merchandise, or any
improvements, alterations or additions made by Tenant to the Premises, which
Tenant shall forthwith replace of fully repair at Tenant's sole cost and expense
provided this Lease is not cancelled according to the provisions above.
Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives the
provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the
California Civil Code.
In the event that the building in which the Premises are situated is damaged
or destroyed to the extent of not less than 33-1/3% of the replacement cost
thereof, Landloard may elect to terminate this Lease, whether the Premises be
injured or not. See Paragraph 61
22. EMINENT DOMAIN If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or conveyance
in lieu thereof, this Lease shall terminate as to any portion of the Premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award, or any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business,
Tenant's personal property, moving cost or loss of goodwill, shall be and remain
the property of Tenant.
If any action or proceeding is commenced for such taking of the Premises or
any part thereof, or if Landlord is advised in writing by any entity or body
having the right or power of condemnation of its intention to condemn the
premises or any portion thereof, then Landlord shall have the right to terminate
this Lease by giving Tenant written notice thereof within sixty (60) days of the
date of receipt of said written advice, or commencement of said action or
proceeding, or taking conveyance, which termination shall take place as of the
first to occur of the last day of the calendar month next following the month in
which such notice is given or the date on which title to the Premises shall vest
in the condemmor.
In the event of such a partial taking or conveyance of the Premises, if the
portion of the Premises taken or conveyed is so substantial that the Tenant can
no longer reasonably conduct its business, Tenant shall have the privilege of
terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do, and upon
giving of such notice this Lease shall terminate on the last day of the calendar
month next following the month in which such notice is given, upon payment by
Tenant of the rent from the date of such taking or conveyance to the date of
termination.
If a portion of the Premises be taken by condemnation or conveyance in lieu
thereof and neither Landlord nor Tenant shall terminate this Lease as provided
herein, this Lease shall continue in full force and effect as to the part of the
Premises not so taken or conveyed, and the rent herein shall be apportioned as
of the date of such taking or conveyance so that thereafter the rent be paid by
Tenant shall be in the ratio that the area of the portion of the Premises not so
taken or conveyed bears to the total area of the Premises prior to such taking.
See Paragraph 62
23. SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the
Premises or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any further
liability upon any of the terms, covenants or conditions (express or implied)
herein contained in favor of Tenant, and in such event, insofar as such transfer
<PAGE>
is concerned, Tenant agrees to look soley to the responsibility of the successor
in interest of such transferor in and to the Premises and this Lease. This Lease
shall not be affected by any such sale or conveyance, and Tenant agrees to
attorn to the successor in interest of such transferor. See Paragraph 63
24. ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord in
the land and buildings in which the leased Premises are located (whether such
interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by the lender or any
third party through judicial foreclosure or by exercise of a power of sale at
private trustee's foreclosure sale, Tenant hereby agrees to attorn to the
purchaser at any such foreclosure sale and to recognize such purchaser as the
Landlord under this Lease. In the event the lien of the deed of trust securing
the loan from a Lender to Landlord is prior and paramount to the lease, this
Lease shall nonetheless continue in full force and effect for the remainder of
the unexpired term hereof, at the same rental herein reserved and upon all the
other terms, conditions and covenants herein contained.
25. HOLDING OVER Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease or
give Tenant any rights in or to the leased Premises except as expressly provided
in this Lease. Any holding over after the expiration or other termination of the
term of this Lease, with the consent of Landlord, shall be construed to be a
tenancy from month to month, on the same terms and conditions herein specified
insofar as applicable except that the monthly Basic Rent shall be increased to
an amount equal to one hundred twenty five (125%) percent of the monthly Basic
Rent required during the last month of the Lease term.
26. CERTIFICATE OF ESTOPPEL Either party shall at any time upon not less than
ten (10) days prior written notice from the other party execute, acknowledge and
deliver to the requesting party a statement in writing (i) certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not, to the best
of such party's knowledge, any uncured defaults on the part of the other party
hereunder, or specifying such defaults, if any, are claimed. Any such statement
may be conclusively relied upon by any prospective purchaser or encumbrancer of
the Premises. A party's failure to deliver such statement within such time shall
be conclusive upon the party receiving such request that this Lease is in full
force and effect, without modification except as may be represented by Landlord;
that there are no uncured defaults in the requesting party's performance, and
that not more than one month's rent has been paid in advance.
27. CONSTRUCTION CHANGES It is understood that the description of the Premises
and the location of ductwork, plumbing and other facilities therein are subject
to such minor changes as Landlord or Landlord's architect determines to be
desirable in the course of construction of the Premises, and no such changes
shall affect this Lease or entitle Tenant to any reduction of rent hereunder or
result in any liability of Landlord to Tenant. Landlord does not guarantee the
accuracy of any drawings supplied to Tenant and verification of the accuracy of
such drawings rests with the Tenant.
28. RIGHT OF LANDLORD TO PERFORM All terms, covenants and conditions of this
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at Tenant's sole cost and expense and without any reduction of rent. If
Tenant shall fail to pay any sum of money, or other rent, required to be paid by
it hereunder and such failure shall continue for five (5) days after written
notice thereof by Landlord, or shall fail to perform any other term or covenant
hereunder on its part to be performed, and such failure shall continue for
thirty (30) days after written notice thereof by Landlord, Landlord, without
waiving or releasing Tenant from any obligation of Tenant hereunder, may, but
shall not be obliged to, make any such payment or perform any such other term or
covenant on Tenant's part to be performed. All sums so paid by Landlord and all
necessary costs of such performance by Landlord together with interest thereon
at the rate of the prime rate or interest per annum as quoted by the Bank of
America from the date of such payment on performance by Landlord, shall be paid
(and Tenant covenants to make such payment) to Landlord on demand by Landlord,
and Landlord shall have (in addition to any other right or remedy of Landlord)
the same rights and remedies in the event of nonpayment by Tenant as in the case
of failure by Tenant in the payment of rent hereunder.
29. ATTORNEYS' FEES
A. In the event that either Landlord or Tenant should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease, or
because of the breach of any provision of this Lease, or for any other relief
against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees,
page 6 of 8
<PAGE>
incurred by the prevailing party therein shall be paid by the other party, which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment.
B. Should Landlord be named as a defendant in any suit brought against Tenant
in connection with or arising out of Tenant's occupancy hereunder, Tenant shall
pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.
30. WAIVER The waiver by either party of the other party's failure to perform or
observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any way
affect, the right of either party to insist upon performance and observance by
the other party in strict accordance with the terms hereof.
31. NOTICES All notices, demands, requests, advices or designations which may be
or are required to be given by either party to the other hereunder shall be in
writing. All notices, demands, requests, advices or designations by Landlord to
Tenant shall be sufficiently given, made or delivered if personally served on
Tenant by leaving the same at the Premises of if sent by United States certified
or registered mail, postage prepaid, addressed to Tenant at the Premises. All
notices, demands, requests, advices or designations by Tenant to Landlord shall
be sent by United States certified or registered mail, postage prepaid,
addressed to Landlord at its offices at Peery/Arrillaga, 2560 Mission College
Blvd., Suite 101, Santa Clara, CA 95054. Each notice, request, demand, advice or
designation referred to in this paragraph shall be deemed received on the date
of the personal service or mailing thereof in the manner herein provided, as the
case may be.
32. EXAMINATION OF LEASE Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a lease,
and this instrument is not effective as a lease or otherwise until its execution
and delivery by both Landlord and Tenant.
33. DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord fails
to perform obligations required of Landlord within a reasonable time, but in no
event earlier than (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have heretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligations; provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
34. CORPORATE AUTHORITY If Tenant is a corporation (or a partnership), each
individual executing this Lease on behalf of said corporation (or partnership)
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of said corporation (or partnership) in accordance with the
by-laws of said corporation (or partnership in accordance with the partnership
agreement) and that this Lease is binding upon said corporation (or partnership)
in accordance with its terms. If Tenant is a corporation, Tenant shall, within
thirty (30) days after execution of this Lease, deliver to Landlord a certified
copy of the resolution of the Board of Directors of said corporation authorizing
or ratifying the execution of this Lease.
35. [DELETED]
36. LIMITATION OF LIABILITY In consideration of the benefits accruing hereunder.
Tenant and all successors and assigns covenant and agree that, in the event of
any actual or alleged failure, breach or default hereunder by Landlord:
(a) the sole and exclusive remedy shall be against Landlord's interest in
the Premises leased herein;
(b) no partner of Landlord shall be sued or named as a party in any suit
or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) no service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership);
(d) no partner of Landlord shall be required to answer or otherwise plead
to any service of process;
(e) no judgment will be taken against any partner of Landlord;
(f) any judgment taken against any partner of Landlord may be vacated and
set aside at any time without hearing;
(g) no writ of execution will ever by levied against the assets of any
partner of Landlord;
(h) these covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
<PAGE>
Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.
37. SIGNS No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of Tenant. If Tenant is allowed to print or affix or in any
way place a sign in, on, or about the Premises, upon expiration or other sooner
termination of this Lease, Tenant at Tenant's sole cost and expense shall both
remove such sign and repair all damage in such a manner as to restore all
aspects of the appearance of the Premises to the condition prior to the
placement of said sign.
All approved signs or lettering on outside doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person reasonably approved of
by Landlord.
Tenant shall not place anything or allow anything to be placed near the glass
of any window, door partition or wall which may appear unsightly from outside
the Premises.
38. MISCELLANEOUS AND GENERAL PROVISIONS
A. Use of Building Name. Tenant shall not, without the written consent of
Landlord, use the name of the building for any purpose other than as the address
of the business conducted by Tenant in the Premises.
page 7 of 8
<PAGE>
B. Choice of Law; Severability. This Lease shall in all respects be governed
by and construed in accordance with the laws of the State of California. If any
provision of this Lease shall be invalid, unenforceable or ineffective for any
reason whatsoever, all other provisions hereof shall be and remain in full force
and effect.
C. Definition of Terms. The term "Premises" includes the space leased hereby
and any improvements now or hereafter installed therein or attached thereto. The
term "Landlord" or any pronoun used in place thereof includes the plural as well
as the singular and the successors and assigns of Landlord. The term "Tenant" or
any pronoun used in place thereof includes the plural as well as the singular
and individuals, firms, associations, partnerships and corporations, and their
and each of their respective heirs, executors, administrators, successors and
permitted assigns, according to the context hereof, and the provisions of this
Lease shall inure to the benefit of and bind such heirs, executors,
administrators, successors and permitted assigns.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words used in
any gender include other genders. If there be more than on Tenant the
obligations of Tenant hereunder are joint and several. The paragraph headings of
this Lease are for convenience of reference only and shall have no effect upon
the construction or interpretation of any provision hereof.
D. Time of Essence. Time is of the essence of this Lease and of each and all
of its provisions.
E. Quitclaim. At the expiration or earlier termination of this Lease, Tenant
shall execute, acknowledge and deliver to Landlord, within ten (10) days after
written demand from Landlord to Tenant, any quitclaim deed or other document
required by any reputable title company, licensed to operate in the Sate of
California, to remove the cloud or encumbrance created by this Lease from the
real property of which Tenant's Premises are a part.
F. Incorporation of Prior Agreements; Amendments. This instrument along with
any exhibits and attachments hereto constitutes the entire agreement between
Landlord and Tenant relative to the Premises and this agreement and the exhibits
and attachments may be altered, amended or revoked only by an instrument in
writing signed by both Landlord and Tenant. Landlord and Tenant agree hereby
that all prior or contemporaneous oral agreements between and among themselves
and their agents or representatives relative to the leasing of the Premises are
merged in or revoked by this agreement.
G. Recording. Landlord and Tenant shall record a short form memorandum hereof
in the form attached hereto as Exhibit C.
H. Amendments for Financing. Tenant further agrees to execute any reasonable
amendments required by a lender to enable Landlord to obtain financing, so long
as Tenant's rights hereunder are not materially affected and there is no change
in the Basic Rent, Options to Renew, Lease Term or Construction obligations of
Landlord.
I. Additional Paragraphs. Paragraphs 39 through 65 are added hereto and are
included as a part of this lease.
J. Clauses, Plats and Riders. Clauses, plats and riders, if any, signed by
Landlord and Tenant and endorsed on or affixed to this Lease are a part hereof.
K. Diminution of Light, Air or View. Tenant covenants and agrees that no
diminution or shutting off of light, air or view by any structure which may be
hereafter erected (whether or not by Landlord) shall in any way affect his
Lease, entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the day and year last written below.
LANDLORD:
JOHN ARRILLAGA SURVIVOR'S TRUST
By /s/ John Arrillaga
-------------------------------
John Arrillaga, Trustee
Date: 6/30/97
--------------------------------
RICHARD T. PEERY SEPARATE PROPERTY TRUST
By /s/ Richard T. Peery
--------------------------------
Richard T. Peery, Trustee
Date: 6/26/97
--------------------------------
<PAGE>
TENANT:
QUANTUM CORPORATION
a Delaware corporation
By /s/ Andrew Kryder
---------------------------------
Andrew Kryder,
Vice President Finance and
Corporate General Counsel
Date: June 25, 1997
---------------------------------
By /s/ Norm Claus
----------------------------------
Norm Claus,
Vice President Real Estate and
Corporate Services
Date: June 25, 1997
----------------------------------
page 8 of 8
<PAGE>
Paragraphs 39 through 65 to Lease Agreement dated April 16, 1997, By and Between
THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY,
as Landlord, and QUANTUM CORPORATION, a Delaware corporation, as Tenant for
182,355+/- Square Feet of Space Located on Sumac Drive, Milpitas, California.
39. BASIC RENT: In accordance with Paragraph 4A, and subject to the provisions
of Paragraphs 40 and 41, Basic Rent shall be payable as follows during the
indicated months of the term of the Lease based upon the gross leasable area
within the building that is part of the Premises:
Period Monthly Basic Rent
------ ------------------
Months 1-12
(plus the partial calendar month,
if any, following the Commencement Date *)
$1.60/sf
Months 13-24 $1.65/sf
Months 25-36 $1.70/sf
Months 37-48 $1.75/sf
Months 49-60 $1.80/sf
Months 61-72 $1.85/sf
Months 73-84 $1.90/sf
Months 85-96 $1.95/sf
Months 97-108 $2.00/sf
Months 109-120 $2.05/sf
Months 121-132 $2.10/sf
Months 133-144 $2.15/sf
Months 145-156 $2.20/sf
Months 157-168 $2.25/sf
Months 169-180 $2.30/sf
Example of calculation of Basic Rent per month for the period
commencing with the first through the twelfth months of said Lease:
Square footage of Building 182,355
Per square foot Basic Monthly Rent x $1.60
-----------
Basic Rent per Month $291.768.00
===========
* It is agreed in the event said Lease commences on a date other than
the first day of the month the Term of the Lease will be extended to account for
the number of days in the partial month. The Basic Rent during the resulting
partial month will be pro-rated (for the number of days in the partial month) at
the Basis Rent rate scheduled for the projected Commencement Date as shown
above.
NHC
JA
Initials: ALK
---
<PAGE>
Page 2
40. LEASE TERM AND COMMENCEMENT DATE: The following provisions relate to the
commencement and duration of the term of this Lease:
A. Lease Term: The term of this Lease shall commence on the
"Commencement Date" (as defined herein) which is projected to be May 1, 1998,
and shall continue for a period of fifteen (15) years plus the partial calendar
month, if any, in which the Commencement Date occurs, subject to the terms of
this Lease and subject to (i) earlier termination rights of Landlord in
accordance with the provisions of this Lease, and (ii) extension pursuant to the
options to renew granted by Paragraphs 41 and 42 and the provisions of this
Paragraph 40.C.
B. Commencement Date Defined: As used herein, the term "Commencement
Date" shall mean the later to occur of the following: (i) the date upon which
the "Improvements" are "Substantially Completed" or (ii) May 1, 1998, subject to
(a) delays caused by Tenant and/or Tenant's agents and (b) provided, however,
that if prior to the later of such dates Tenant's operating personnel enter into
occupancy of the Premises and commence the operation of Tenant's business within
the Premises, the Commencement Date shall be the date such personnel of Tenant
so enter into occupancy of the Premises. The term "Substantially Completed"
and/or "Substantial Completion" shall mean the date when all of the following
have occurred with respect to the Improvements in question: (i) the construction
of the Improvements in question has been substantially completed in accordance
with the approved plans therefor except for punch list items which do not
prevent Tenant from reasonably using the Premises to conduct Tenant's business;
(ii) Landlord has executed a certificate or statement representing that the
Improvements in question, for which Landlord is responsible, have been
substantially completed in accordance with the plans and specifications therefor
except for the punch list items which do not prevent Tenant from reasonably
using the Premises to conduct Tenant's business; and (iii) the Building
Department of the City of Milpitas has completed its final inspection of such
Improvements and has "signed off" the building inspection card approving such
work as complete except for punch list items which do not prevent Tenant from
reasonably using the Premises to conduct Tenant's business. Notwithstanding the
foregoing, Substantial Completion of the Interior Improvements shall not be
deemed to have occurred until Landlord has obtained final or conditional
approval from the Fire Department of the City of Milpitas that the Improvements
have been completed in accordance with such department's requirements (subject
only to conditions that do not prevent Tenant from occupying the Improvements).
C. Lease Terms Co-extensive: It is acknowledged that (i) Landlord has
granted Tenant, pursuant to a separate Option Agreement of even date herewith,
an Option to Lease an additional building on the parcel adjacent to the Premises
(the "Building 7 Lease"), and (ii) it is the intention of the parties that the
Term of this Lease be co-extensive with the term of the Building 7 Lease, such
that the terms of both leases ("the Leases") expire on the same date. In the
event Tenant exercises its Option to Lease Building 7 (pursuant to the terms and
conditions of the Option Agreement), it is hereby agreed that following the date
upon which the Commencement Date of the Building 7 Lease becomes established as
a date certain following completion of improvements and satisfaction of any
other conditions related to determining such date, the Term of this Lease shall
be extended such that the scheduled Termination Date of this Lease coincides
with the scheduled termination date of the Building 7 Lease. As soon as the
parties are able to implement the provisions of this Paragraph because the
Commencement Date of the Building 7 Lease has been determined following
completion of improvements and satisfaction of other appropriate conditions, the
parties shall execute an amendment to this Lease (i) extending the initial Term
of this Lease (if necessary) to be co-terminous with the initial termination
date of the Building 7 Lease and (ii) adjusting the Options to Extend
accordingly. The monthly Basic Rent on this Lease during the Extension Period
shall be increased by $.05 per square foot on the commencement date of said
Extension Period. For example, if the Building 7 Lease commences on May 1, 2004,
and this Lease commences the scheduled Commencement Date of May 1, 1998, the
initial Term of this Lease shall be extended by one year and the per square foot
monthly Basic Rent during the Extension Period shall be $2.35 per square foot.
The provisions of this Paragraph 40C also requires the terms of both of the
Leases to be extended accordingly if Tenant exercises its Option to Extend under
either of the Leases. The monthly Basic Rent during the extended term under each
of the Leases shall be increased by $.05 per square foot on the commencement
date of the extended term and thereafter on each and every anniversary of the
respective lease Commencement Date.
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41. FIRST FIVE-YEAR OPTION TO EXTEND: Landlord hereby grants to Tenant an option
to extend the term of this Lease for an additional five (5) year period upon the
following terms and conditions:
A. If Tenant elects to exercise the option to extend, Tenant shall give
Landlord written notice of Tenant's exercise of this option to extend at least
one hundred eighty (180) days prior to the expiration of the Basic Term hereof,
in which event the Lease shall be considered extended for an additional five (5)
year period upon the same terms and conditions as this Lease, absent this
Paragraph 41 and subject to the rental as set forth below. In the event that
Tenant fails to timely exercise Tenant's option as set forth herein in writing,
Tenant shall have no further option to extend this Lease or the Building 7
Lease, and this Lease shall continue in full force and effect for the full
remaining term hereof, absent this Paragraph 41.
B. The monthly Basic Rent for the option period shall be as follows in
the event the option is exercised:
Period Monthly Basic Rent
------ ------------------
Months 1-12 $2.35/sf
Months 13-24 $2.40/sf
Months 25-36 $2.45/sf
Months 37-48 $2.50/sf
Months 49-60 $2.55/sf
C. Notwithstanding anything contained herein, Tenant may not exercise
the option to renew granted by this Paragraph 41 at any time that Tenant is in
default (default for monetary and material default for non-monetary) of its
obligations under this Lease, if Tenant has received written notice from
Landlord that Tenant is in default, and such default has not been timely cured
within the time period provided for in this Lease; provided, however, that if
such default of Tenant is not for money due under this Lease and cannot be
cured, and if Landlord does not elect to terminate this Lease as a result of
such non-curable default by Tenant, Tenant may exercise the option to extend
granted by this Paragraph 41 notwithstanding such non-curable default.
42. SECOND FIVE-YEAR OPTION TO EXTEND: Provided Tenant has extended the Lease
for an additional five (5) year period as set forth in Paragraph 41, Landlord
hereby grants to Tenant an option to extend the Term of this Lease for an
additional five (5) year period upon the following terms and conditions:
A. Tenant shall give Landlord written notice of Tenant's exercise of
this option to extend at least one hundred eighty (180) days prior to the
expiration of the Lease term as extended pursuant to Paragraph 41, in which
event the Lease shall be considered extended for an additional five (5) year
period upon the same terms and conditions as this Lease, absent this Paragraph
42.A and subject to the Rental as set forth below. In the event that Tenant
fails to timely exercise Tenant's option as set forth herein in writing, Tenant
shall have no further option to extend this Lease or the Building 7 Lease, and
this Lease shall continue in full force and effect for the full remaining term
hereof, absent this Paragraph 42.
B. The monthly Basic Rent for the option period shall be as follows in
the event the option is exercised:
Period Monthly Basic Rent
------ ------------------
Months 1-12 $2.60/sf
Months 13-24 $2.65/sf
Months 25-36 $2.70/sf
Months 37-48 $2.75/sf
Months 49-60 $2.80/sf
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C. Notwithstanding anything contained herein, Tenant may not exercise
the option to extend granted by this Paragraph 42 at any time that Tenant is in
default (default for monetary and material default for non-monetary) of its
obligations under this Lease, if Tenant has received written notice from
Landlord that Tenant is in default, and such default has not been timely cured
within the time period provided for in this Lease; provided, however, that if
such default of Tenant is not for money due under this Lease and cannot be
cured, and if Landlord does not elect to terminate this Lease as a result of
such non-curable default by Tenant, Tenant may exercise the option to extend
granted by this Paragraph 42 notwithstanding such non-curable default.
43. ASSESSMENT CREDITS: The demised property herein is subject to a special
assessment levied by the City of Milpitas in Improvement District No. 12. As a
part of said special assessment proceedings, additional bonds were sold and
assessments levied to provide for construction contingencies and reserve funds.
Interest will be earned on such funds created for contingencies and on reserve
funds which will be credited for the benefit of said assessment district. To the
extent surpluses are created in said district through unused contingency funds,
interest earnings or reserve funds, such surpluses shall be deemed the property
of Landlord. Notwithstanding that such surpluses may be credited on assessments
otherwise due against the demised premises, Tenant shall pay to Landlord, as
additional rent if, and at the time of any such credit of surpluses, an amount
equal to all such surpluses so credited.
44. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect to
the existence or use of "Hazardous Materials" (as defined herein) on, in, under
or about the Premises and real property located beneath said Premises, which
includes the entire parcel of land on which the Premises are located as shown in
Green on Exhibit A attached hereto (hereinafter collectively referred to as the
"Property"):
A. As used herein, the term "Hazardous Materials" shall mean any
material, waste, chemical, mixture or byproduct which is or hereafter is
defined, listed or designated under Environmental Laws (defined below) as a
pollutant, or as a contaminant, or as a toxic or hazardous substance, waste or
material, or any other unwholesome, hazardous, toxic, biohazardous, or
radioactive material, waste, chemical, mixture or byproduct, or which is listed,
regulated or restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions thereof,
polychlorinated biphenyls, or asbestos). As used herein, the term "Environmental
Laws" shall mean any applicable Federal, State of California or local government
law (including common law), statute, regulation, rule, ordinance, permit,
license, order, requirement, agreement, or approval, or any determination,
judgment, directive, or order of any executive or judicial authority at any
level of Federal, State of California or local government (whether now existing
or subsequently adopted or promulgated) relating to pollution or the protection
of the environment, ecology, natural resources, or public health and safety.
B. Tenant shall notify Landlord prior to the occurrence of any Tenant's
Hazardous Materials Activities (defined below). Landlord acknowledges that
Tenant shall use, in compliance with applicable Environmental Laws, customary
household and office supplies (Tenant shall first provide Landlord with a list
of said materials use), such as mild cleaners, lubricants and copier toner. Any
and all of Tenant's Hazardous Materials Activities shall be conducted in
conformity with this Paragraph 44, Paragraph 14 of this Lease, and in compliance
with all Environmental Laws and regulations. As used herein, the term "Tenant's
Hazardous Materials Activities" shall mean any and all use, handling,
generation, storage, disposal, treatment, transportation, release, discharge, or
emission of any Hazardous Materials on, in, beneath, to, from, at or about the
Property, in connection with Tenant's use of the Property, or by Tenant or by
any of Tenant's agents, employees, contractors, vendors, invitees, visitors or
its future subtenants or assignees or other third parties (including "dumping"
by others) (or which Hazardous Materials originate on the surface of the
Premises any time after November 1, 1995, the date of the Option Agreement
related to said Lease, and before the Commencement Date of this Lease, but
excluding Hazardous Materials on the Premises prior to the Lease Commencement
Date because of the storage, use, disposal, or transportation of such materials
or waste by any of Landlord's contractors or otherwise arising out of
construction work performed by or under the direction of Landlord on the
Premises and Landlord shall be responsible for all required actions with respect
to such materials or wastes). Tenant agrees to provide Landlord with prompt
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written notice of any spill or release of Hazardous Materials at the Property
during the term of the Lease of which Tenant becomes aware, and further agrees
to provide Landlord with prompt written notice of any violation of Environmental
Laws in connection with Tenant's Hazardous Materials Activities of which Tenant
becomes aware. If Tenant's Hazardous Materials Activities involve Hazardous
Materials other than normal use of customary household and office supplies,
Tenant also agrees at Tenant's expense: (i) to install such Hazardous Materials
monitoring, storage and containment devices as may be required by Environmental
Laws, regulations and/or governing agencies; (ii) to provide Landlord with a
written inventory of such Hazardous Materials, including an update of same each
year upon the anniversary date of the Commencement Date of the Lease
("Anniversary Date"); and (iii) on each Anniversary Date to provide to Landlord
copies of all documentation and records, required by applicable Environmental
Laws to be prepared and submitted to governmental authorities, relating to use
at the Property of Hazardous Materials or to Tenant's Hazardous Materials
Activities, if any. If upon completion of Landlord's review of said
documentation and records, Landlord reasonably questions if Tenant is in
compliance with all applicable Environmental Laws with respect to Tenant's
Hazardous Materials Activities, Tenant agrees within thirty (30) days following
receipt of written notice from Landlord, to retain a qualified environmental
consultant, acceptable to Landlord, to evaluate whether Tenant is in compliance
with all applicable Environmental Laws with respect to Tenant's Hazardous
Materials Activities. Tenant, at its expense, shall submit to Landlord a report
from such environmental consultant which discusses the environmental
consultant's findings within two (2) months of each Anniversary Date. Tenant, at
its expense, shall promptly undertake and complete any and all steps necessary,
and in full compliance with applicable Environmental Laws, to fully correct any
and all problems or deficiencies identified by the environmental consultant, and
promptly provide Landlord with documentation of all such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at its
expense, shall (i) properly remove from the Property all Hazardous Materials
which come to be located at the Property in connection with Tenant's Hazardous
Materials Activities, and (ii) fully comply with and complete all facility
closure requirements of applicable Environmental Laws regarding Tenant's
Hazardous Materials Activities, including but not limited to (x) properly
restoring and repairing the Property to the extent damaged by such closure
activities, and (y) obtaining from the local Fire Department or other
appropriate governmental authority with any legal or regulatory jurisdiction a
written concurrence that closure has been completed in compliance with
applicable Environmental Laws. Tenant shall promptly provide Landlord with
copies of any claims, notices, work plans, data and reports prepared, received
or submitted in connection with any such closure activities.
D. If Landlord, upon consultation with Tenant, reasonably concludes
that the Property has become contaminated as a result of Tenant's Hazardous
Materials Activities, Landlord in addition to any other rights it may have under
this Lease or under Environmental Laws or other laws, may enter upon the
Property and conduct inspection, sampling and analysis, including but not
limited to obtaining and analyzing samples of soil and groundwater, for the
purpose of determining the nature and extent of such contamination except to the
extent that such activities may be inconsistent with Tenant's compliance with
Environmental Laws. Tenant shall promptly reimburse Landlord for the costs of
such an investigation, including but not limited to reasonable attorneys' fees
Landlord incurs with respect to such investigation to the extent, and only to
the extent, that it that discloses Hazardous Materials contamination for which
Tenant is liable under this Lease. Except as may be required of Tenant by
applicable Environmental Laws, Tenant shall not perform any sampling, testing,
or drilling to identify the presence of any Hazardous Materials at the Property,
without Landlord's prior written consent which shall not be unreasonably
withheld. Tenant shall promptly provide Landlord with copies of any claims,
notices, work plans, data and reports prepared, received or submitted in
connection with any sampling, testing or drilling performed pursuant to the
preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel acceptable to
Landlord, whose consent shall not unreasonably be withheld) and hold harmless
Landlord, its employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not limited
to third party claims from a private party or a government authority),
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's Hazardous
Materials Activities; (ii) any Hazardous Materials contamination caused by
Tenant prior to the
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Commencement Date of the Lease; or (iii) the breach of any obligation of Tenant
under this Paragraph 44 (collectively, "Tenant's Environmental
Indemnification"). Tenant's Environmental Indemnification shall include but is
not limited to the obligation to promptly and fully reimburse Landlord for
losses in or reductions to rental income, and diminution in fair market value of
the Property. Tenant's Environmental Indemnification shall further include but
is not limited to the obligation to diligently and properly implement to
completion, at Tenant's expense, any and all environmental investigation,
removal, remediation, monitoring, reporting, closure activities, or other
environmental response action as may be required by applicable Environmental
Laws, regulations or governing agencies (collectively, "Response Actions").
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
Response Actions.
F. Landlord hereby makes the following representations to Tenant, each
of which is made only to the best of Landlord's knowledge as of the date
Landlord executes this Lease, without any inquiry or investigation having been
made or required by Landlord regarding this subject, nor does Landlord have any
obligation to investigate or make inquiry regarding the subject:
(1) The soil and ground water on or under the Premises does
not contain Hazardous Materials in amounts which violate any laws to the extent
that any governmental entity could require either Landlord or Tenant to take any
remedial action with respect to such Hazardous Materials.
(2) During the time that Landlord has owned the Premises,
Landlord has received no notice of (i) any violation, or alleged violation, of
any law that has not been corrected to the satisfaction of the appropriate
authority, (ii) any pending claims relating to the presence of Hazardous
Material on the Premises, or (iii) any pending investigation by any governmental
agency concerning the Premises relating to Hazardous Materials.
G. Landlord and Tenant shall each give written notice to the other as
soon as reasonably practicable of (i) any communication received from any
governmental authority concerning Hazardous Materials which relates to the
Premises, and (ii) any contamination of the Premises by Hazardous Materials
which constitutes a violation of any law. Attached as Exhibit "D" hereto is a
list of Hazardous Materials that Tenant intends to use at the Premises. If
during the Lease Term Tenant proposes to use other Hazardous Materials at the
Premises, Tenant shall inform Landlord of such use, identifying the Hazardous
Materials and the manner of their use, storage and disposal, and shall agree (i)
to use, store and dispose of such Hazardous Materials strictly in compliance
with all laws, regulations and governing agencies and (ii) that the indemnity
set forth in Paragraph 44 shall be applicable to Tenant's use of such Hazardous
Material.
H. Landlord or Tenant may, at any time, cause testing wells to be
installed on the Premises, and may cause the ground water to be tested to detect
the presence of Hazardous Material by the use of such tests as are then
customarily used for such purposes. Testing wells installed by Tenant shall be
paid for by Tenant. If tests conducted by Landlord disclose that Tenant has
violated any Hazardous Materials laws, or Tenant or parties on the Premises
during the Term of this Lease have contaminated the Premises as determined by
regulatory agencies pursuant to Hazardous Materials laws, or that Tenant has
liability to Landlord pursuant to Paragraph 44A, then Tenant shall pay for 100
percent of the cost of the test and all related expense. Prior to the expiration
of the Lease Term, Tenant shall remove any testing wells it has installed at the
Premises, and return the Premises to the condition existing prior to the
installation of such wells, unless Landlord requests in writing that Tenant
leave all or some of the testing wells in which instance the wells requested to
be left shall not be removed.
I. If any tests performed by Tenant or Landlord prior to the
Commencement Date disclose Hazardous Materials at the Premises, Landlord at its
expense will promptly take all reasonable action required by law with respect to
the existence of such Hazardous Materials at the Premises. The Commencement Date
shall not be delayed because of such action by Landlord unless occupation of the
Premises is prohibited by law.
J. The obligations of Landlord and Tenant under this Paragraph 44 shall
survive the expiration or earlier termination of the Term of this Lease. The
rights and obligations of Landlord and Tenant with respect to issues relating to
Hazardous Materials are exclusively established by this
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Paragraph 44.
45. APPROVALS: Whenever this Lease requires the approval or consent of either
Landlord or Tenant before an action may be taken, such approval or consent shall
not be unreasonably withheld or delayed.
46. LANDLORD'S RIGHT TO TERMINATE: It is understood that the Premises to be
leased by Tenant are to be constructed by Landlord, and that Landlord is
required to obtain the necessary building permits for the building shell before
construction of said Premises can commence. Therefore, it is agreed that in the
event Landlord cannot obtain all the necessary building permits for the building
shell by December 31, 1997, then either Landlord or Tenant can terminate this
Lease by written notice to the other party given within thirty (30) days
thereafter, without any liability to the other party of any type whatsoever, and
that this Lease Agreement shall be null and void as of the date of receipt of
such notice. Landlord agrees to use its best efforts to obtain the required
permits by December 31, 1997.
47. CROSS DEFAULT: As set forth in Paragraph 40C, Landlord and Tenant have
entered an Option Agreement related to Building 7. In the event Tenant exercises
its option to lease Building 7, and as a material part of the consideration for
the execution of this Lease by Landlord, it is agreed between Landlord and
Tenant that a default under this Lease, or a default under the Building 7 Lease
may, at the option of Landlord, be considered a default under both leases, in
which event Landlord shall be entitled (but in no event required) to apply all
rights and remedies of Landlord under the terms of one lease to both of the
Leases including, but not limited to, the right to terminate the Building 7
Lease or this Lease by reason of a default under the Building 7 Lease or
hereunder.
48. ADDRESS FOR LEASED PREMISES: It is understood that the address for the
Premises will be assigned by the City of Milpitas (the "City") upon issuance of
a building permit for the Interior Improvements. Once the address has been
assigned to the Premises by the City, this Lease shall thereafter be amended to
reflect the assigned address for the Premises leased hereunder.
49. HETCH-HETCHY LAND: Landlord hereby assigns to Tenant during the Term of this
Lease, all of Landlord's right, title, and interest, in and to the property
owned by the City and County of San Francisco shown in Orange on Exhibit A
attached hereto, and Tenant hereby assumes all responsibilities and liabilities
(including, but not limited to a fee and/or tax for the right to use said
property including any use provided for in the Deed attached hereto as Exhibit
E) that may be imposed by the City and County of San Francisco pertaining to
their property and Tenant's use and occupancy thereof. Tenant's right to use the
area outlined in Orange will continue until this right to use said property is
revoked or terminated by the City and County of San Francisco, at which time
said property outlined in Orange belonging to the City and County of San
Francisco will no longer be available for Tenant's use, and this lease will
continue in full force and effect excluding Tenant's right to use the property
outlined in Orange on Exhibit A attached hereto.
Tenant's use of the property owned by the City and County of San
Francisco shall be governed by the terms and conditions of the Deed dated
February 5, 1951 between Chizu Oyama Takeda and George Shoji Takeda, as
Grantors, and the City and County of San Francisco, as Grantee (the "Deed").
Said Deed is attached hereto as Exhibit E. Among the provisions of said Deed is
the restriction that the property shall not be used for parking, and Tenant
understands that at no time during the Term of the Lease shall Tenant be allowed
to use said property for parking.
Notwithstanding the foregoing, Tenant may use the Hetch-Hetchy Land for
such additional uses as may not be permitted in the Deed provided Tenant (i)
obtains the written permission from the City and County of San Francisco to do
so in form reasonably acceptable to landlord, (ii) removes the "bridge" which is
contemplated to go over said Hetch-Hetchy Land if requested by the City and
County of San Francisco and/or if Landlord requires said "bridge" to be removed
by the Lease Termination Date, (iii) pays all costs and expenses imposed by the
City and County of San Francisco in connection with such permission and use, and
(iv) Tenant indemnifies and holds harmless Landlord from any loss.
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expense, cost, claim, or liability arising in connection with such permission or
any use pursuant to such permission of the Hetch-Hetchy Land undertaken by
Tenant, its agents, employees, contractors, invitees, visitors, subtenants
and/or assignees. Landlord and Tenant agree that if the City of Milpitas will
not issue a building permit for Building 6 in the configuration and location for
which it is designed as of the date of this Lease because of the proximity to
the Hetch-Hetchy Land or for any other reason, then Tenant shall have the option
to cause Building 6 to be relocated on the land and redesigned in a new
configuration acceptable to the City, Landlord and Tenant, provided the square
footage of the relocated and redesigned building is no less than approximately
182,355 square feet and the parking allocation is not reduced due to said
redesign and/or relocation.
50. SECURITY DEPOSIT: The following provisions shall modify Paragraph 4G:
A. Within thirty (30) days after the expiration or earlier termination
of the Lease term and after Tenant has vacated the Premises, Landlord shall
return to Tenant the entire Security Deposit except for amounts that Landlord
has deducted therefrom that are needed by Landlord to cure defaults of Tenant
under the Lease or compensate Landlord for damages for which Tenant is liable
pursuant to this Lease. The use or disposition of the Security Deposit shall be
subject to the provisions of California Civil Code Section 1950.7.
B. During the first thirty (30) days following execution of this Lease
Agreement, and only during said thirty day period, Tenant shall have the
one-time option of satisfying its obligation with respect to an amount equal to
one-half (1/2) ($355,592.25) of the $711,184.50 Security Deposit required under
Paragraph 4.G. by providing to Landlord, at Tenant's sole cost, a letter of
credit which: (i) is drawn upon an institutional lender reasonably acceptable
and accessible to Landlord in form and content reasonably satisfactory to
Landlord; (ii) is in the amount of one-half (1/2) of the Security Deposit; (iii)
is for a term of at lease twelve (12) months; (iv) with respect to any letter of
credit in effect within the six month period immediately prior to the expiration
of the Lease term, shall provide that the term of such letter of credit shall
extend at least forty five (45) days past the Lease expiration date (including
any extensions thereof); and (v) may be drawn upon by Landlord upon submission
of a declaration of Landlord that Tenant is in default (as defined in Paragraph
19 and as modified by Paragraph 59). Landlord shall not be obligated to furnish
proof of default to such institutional lender, and Landlord shall only be
required to give the institutional lender written notification that Tenant is in
default and upon receiving such written notification from Landlord the
institutional lender shall be obligated to immediately deliver cash to Landlord
equal to the amount Landlord may spend or become obligated to spend by reason of
Tenant's default or to compensate Landlord for any loss or damage which Landlord
may suffer by reason of Tenant's default up to 1/2 of the total Security Deposit
required under Paragraph 4.G. Said letter of credit shall provide that if the
letter of credit is not renewed, replaced or extended within twenty (20) days
prior to its expiration date the issuer of the credit shall automatically issue
a cashiers check payable to Landlord in the amount of the letter of credit after
the date which is twenty (20) days before the expiration date, and no later than
the expiration date, without Landlord being required to make demand upon the
letter of credit. If Tenant provides Landlord with a letter of credit, within
thirty (30) days of the execution of this Lease, meeting the foregoing
requirements, one-half (1/2) of the cash Security Deposit (i.e., $355.592.25 of
the $711.184.50 Security Deposit) shall be returned to Tenant by Landlord
inasmuch as the cash deposit remaining and the Letter of Credit equal the total
Security Deposit required in Paragraph 4G. If Tenant defaults with respect to
any provisions of this Lease, including but not limited to provisions relating
to the payment of Rent, Landlord may (but shall not be required to) draw down on
the letter of credit for payment of any sum which Landlord may spend or become
obligated to spend by reason of Tenant's default, or to compensate Landlord for
any loss or damage which Landlord may suffer by reason of Tenant's default.
Landlord and Tenant acknowledge that such letter of credit will be treated as if
it were a cash security deposit, and such letter of credit may be drawn down
upon by Landlord upon demand and presentation of evidence of the identity of
Landlord to the issuer, in the event that Tenant defaults with respect to any
provision of this Lease and such default is not cured within any applicable cure
period. Notwithstanding anything to the contrary in this Lease, Landlord shall
not be obligated to furnish proof of default to such institutional lender and
Landlord is only required to give the institutional lender written notification
that Tenant is in default and upon receiving such written notification from
Landlord the institutional lender shall be obligated to immediately deliver cash
to Landlord equal to the amount Landlord may spend or become obligated to spend
by reason of Tenant's default, or to compensate Landlord for any loss or damage
which Landlord may suffer by reason of
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Tenant's default up to 1/2 of the total Security Deposit. Landlord acknowledges
that it is not entitled to draw down such letter of credit unless Landlord would
have been entitled to draw upon the cash security deposit pursuant to the terms
of Paragraph 4G of the Lease. Concurrently with the delivery of the required
information to the issuer, Landlord shall deliver to Tenant written evidence of
the default upon which the draw down was based, together with evidence that
Landlord has provided to Tenant the written notice of such default which was
required under the applicable provision of the Lease, and evidence of the
failure of Tenant to cure such default within the applicable grace period
following receipt of such notice of default. Any proceeds received by Landlord
by drawing upon the letter of credit shall be applied in accordance with the
provisions governing the Security Deposit imposed by Paragraph 4G and this
Paragraph 50. If Landlord draws upon the letter of credit, thereafter Tenant
shall once again have the right to post a letter of credit in place of one-half
(1/2) of a cash Security Deposit so long as Tenant is not then in default. In
any event Tenant will be obligated to replenish the amount drawn to restore the
Security Deposit to its original amount as provided for in Paragraph 4G. If any
portion of the letter of credit is used or applied pursuant hereto, Tenant
shall, within ten (10) days after receipt of a written demand therefor from
Landlord, restore and replace the value of such security by either (i)
depositing cash with Landlord in the amount equal to the sum drawn down under
the letter of credit, or (ii) increasing the letter of credit to its value
immediately prior to such application. Tenant's failure to replace the value of
the security as provided in the preceding sentence shall be a material breach of
its obligation under this Lease.
51. ALTERATIONS MADE BY TENANT: The provisions of this Paragraph 51 shall modify
Paragraphs 5 and 6:
A. As used herein, the term "Alteration" shall mean any alteration,
addition or improvement made by Tenant to the Premises during the term of the
Lease, but shall not include Tenant's trade fixtures so long as such trade
fixtures are not installed in such a manner that they have become an integral
part of the building.
B. Tenant shall not construct any Alterations or otherwise alter the
Premises without Landlord's prior written approval: (i) if Tenant is in default
under this Lease or any of the Existing Leases, or (ii) if Tenant is not in
default under this Lease or the Building 7 Lease (if Tenant has exercised its
Option to lease Building 7) and if the total cost of such Alterations exceeds
$20,000 per the scope of any single remodeling job to the Premises, or if such
Alteration is structural in nature and provided Tenant gives Landlord notice of
the planned alterations and a 1/8" scale sepia reflecting said alterations ten
(10) business days prior to the commencement of construction of said
alterations. Any other non-structural Alteration of less than $20,000 for the
total cost of the remodeling job may be undertaken by Tenant without Landlord's
prior written approval, except as noted herein, but with the understanding that
Tenant shall be obligated to restore the Premises as set forth in Paragraph 5 at
the termination of this Lease, except as otherwise provided in Paragraph 51.D.
Notwithstanding the foregoing, Tenant shall have the right to reconfigure
modular freestanding walls and partitions without Landlord's prior consent,
which are not part of the original Interior Improvements shown on Exhibit B and
which have been installed by Tenant and paid for by Tenant. Notwithstanding the
above, Tenant shall not have the right, without Landlord's prior written
consent, to remove any floor-to-ceiling partitions within the Premises.
C. At all times during the Lease Term (i) Tenant shall maintain and
keep up dated "as-built" plans for all Alterations constructed by Tenant, and
(ii) Tenant shall provide to Landlord copies of such "as-built" plans as such
Alterations are made.
D. Provided Tenant is not in default under this Lease or under any of
the Existing Leases, Tenant shall have the right to remove at any time during
the Lease term or prior to the expiration thereof any process equipment such as
clean hoods, thermal cycling chambers, freon piping, high temperature furnaces,
air handlers, which equipment the parties agree for the purposes of this Lease
shall be deemed to be trade fixtures, so long as Tenant repairs all damage
caused by the installation and/or removal thereof, returns the Premises prior to
the termination of the Lease to the condition existing prior to the installation
of such item, and repairs and restores any so-called "doughnuts" or gaps in the
roof and/or floor tiles and/or ceiling and lighting resulting from such
installation and/or removal. At the time Tenant requests the consent of Landlord
to approve the installation of an Alteration requiring the consent of Landlord,
Tenant shall seek from Landlord a written statement of
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whether or not Landlord will require Tenant to remove such Alteration and
restore all or part of the Premises as required by Landlord in accordance with
this paragraph and Paragraph 5 at the expiration or earlier termination of the
term of the Lease. If Tenant does not obtain from Landlord a statement in
writing that Landlord will not require such Alteration to be removed, then at
the expiration or sooner termination of the term of the Lease, it is agreed that
Tenant may be required by Landlord to remove all or part of such Alterations,
and return the Premises to the condition existing prior to the installation of
such Alterations as provided for in Paragraph 5 above. In addition, if Tenant
has installed Alterations without Landlord's consent, if Landlord so requires,
Tenant shall also remove all or part of such Alterations so installed without
Landlord's consent as Landlord may designate and return the Premises to the
condition existing prior to the installation of such Alteration. Alterations for
which Landlord has given its written consent to Tenant that such Alteration need
not be removed, shall not be removed by Tenant at the expiration or earlier
termination of the term of the Lease.
E. At all times during the term of the Lease, Tenant shall have the
right to install and remove trade fixtures as defined in the Lease and installed
and paid for by Tenant, so long as Tenant repairs all damage caused by the
installation and removal thereof and returns the Premises to the condition
existing prior to the installation of such fixtures and repairs and restores any
so called "doughnuts" or gaps in the roof and/or floor (including floor
structure, sub-floor and appropriate floor covering for said area) and/or floor
tiles, and/or ceiling tiles, wall damage and lighting resulting from such
removal.
F. Notwithstanding anything to the contrary herein, Tenant shall be one
hundred percent (100%) responsible and liable for obtaining any and all permits
(and the cost related thereto) required by the governing agencies for any and
all alterations and/or modifications Tenant makes to the Leased Premises.
52. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL AGENCIES AFTER THE
COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR TENANT'S USES OR REMODELING
OF THE PREMISES: The provisions of this Paragraph 53 shall modify Paragraphs 7
and 14:
A. If during the last five (5) years of the term of the Lease if Tenant
has not extended the Lease as provided for in Paragraphs 41 and 42, or during
either of the five (5) year extension periods permitted by Paragraphs 41 and 42
or Paragraph 40.C., it becomes necessary (due to any governmental requirement
for continued occupancy of the Premises) to make structural improvements
required by laws enacted or legal requirements imposed by governmental agency(s)
after the Commencement Date, and the cost for each required work or improvements
exceeds $100,000, then if such legal requirement is not imposed because of
Tenant's specific use of the Premises and is not "triggered" by Tenant's
Alterations or Tenant's application for a building permit or any other
governmental approval (collectively "Tenant's Actions") in which instance Tenant
shall be responsible for 100% of the cost of such improvements, Landlord shall
be responsible for paying the cost of such improvement and constructing such
improvement, subject to a cash contribution from Tenant of a portion of the cost
thereof as provided for and calculated in Paragraph 52B.
B. When Landlord makes an improvement pursuant to Paragraph 52A, and as
a condition to Landlord's obligation to construct such improvement, Tenant shall
make the following contribution in cash to Landlord for the cost thereof prior
to the commencement of the work by Landlord. It is agreed that Tenant shall pay
to Landlord 100% of the cost of the first $100,000.00 worth of each improvement.
After the first $100,000.00, all costs above $100,000.00 shall be divided by 15
and multiplied by the time period remaining in the last five years of the Lease
term from the date work on such improvement commences.
For example, if the improvement is not required as a result of Tenant's
Actions and if the cost of such improvement was $400,000 and there was one year
and six months remaining in the Lease term when the work commenced, then Tenant
would be responsible for reimbursing Landlord in cash
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$130,000.00 computed as follows:
Total Cost of Work $4O0,000.00
Tenant Responsible for
1st $100,000 -100,000.00
-----------
Total Amount To Be Amortized $300,000.00
$300,000.00/15 = $20,000.00/yr. x 1.5 yrs = $ 30,000.00
Tenant responsible for $100,000 + $30,000.00 = $130,000.00
C. If Landlord has made improvements, for which Tenant has reimbursed
Landlord for the cost thereof pursuant to Paragraph 52B, and the term of this
Lease is subsequently extended pursuant to the exercise by Tenant of an option
to renew pursuant to Paragraph 41, or 42, upon the exercise of any such option
by Tenant, Tenant shall pay to Landlord an additional sum equal to the total
amount of said improvement less the amount previously paid for by Tenant. Using
the example in Paragraph 52B above, Tenant would owe Landlord the additional
amount of $270,000.00 ($400,000.00 - $130,000.00 = $270,000.00).
53. REAL PROPERTY TAXES: Paragraph 9 is modified by the following:
A. The term "Real Property Taxes" shall not include charges, levies or
fees directly related to the use, storage, disposal or release of Hazardous
Materials on the Premises unless directly related to Tenant's Activities at this
site or on other sites leased and/or owned by Tenant; however, Tenant shall be
responsible for general or special tax and/or assessments (related to Hazardous
Materials and/or toxic waste) imposed on the Property provided said special tax
and/or assessment is not imposed due to on-site originated contamination on the
Property (by third parties not related to Tenant) prior to the Lease
Commencement Date. Subject to the terms and conditions stated herein, Tenant
shall be responsible for paying one hundred percent (100%) of said taxes and/or
assessments allocated to the Property.
B. If any assessments for public improvements are levied against the
Premises, Landlord may elect either to pay the assessment in full or to allow
the assessment to go to bond. If Landlord pays the assessment in full, Tenant
shall pay to Landlord or any assignee or purchaser of the Premises each time
payment of Real Property Taxes is made a sum equal to that which would have been
payable (as both principal and interest) had Landlord allowed the assessment to
go to bond.
C. Tenant at its cost shall have the right, at any time, to seek a
reduction in the assessed valuation of the Premises or to contest any Real
Property Taxes that are to be paid by Tenant. If Tenant seeks a reduction or
contests such Real Property Taxes, the failure on Tenant's part to pay such Real
Property Taxes being so contested shall not constitute a default so long as
Tenant complies with the provisions of this Paragraph. Landlord shall not be
required to join in any proceeding or contest brought by Tenant unless the
provisions of any law require that the proceeding or contest be brought by or in
the name of Landlord. In that case Landlord shall join in the proceedings or
contest or permit it to be brought in Landlord's name as long as Landlord is not
required to bear any cost. Tenant, on final determination of the proceeding or
contest, shall immediately pay or discharge its share of any Real Property Taxes
determined by any decision or judgment rendered, together with all costs,
charges, interest, and penalties incidental to the decision or judgment. If
Tenant does not pay the Real Property Taxes when due pursuant to the Lease and
Tenant seeks a reduction or contests them as provided in this paragraph, before
the commencement of the proceeding or contest Tenant shall furnish to Landlord a
surety bond in form reasonably satisfactory to Landlord issued by an insurance
company qualified to do business in California. The amount of the bond shall
equal 125% of the total amount of Real Property Taxes in dispute and any such
bond shall be assignable to any lender or purchaser of the Premises. The bond
shall hold Landlord and the Premises harmless from any damage arising out of the
proceeding or contest and shall insure the payment of any judgment that may be
rendered.
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54. PROPERTY INSURANCE: Paragraph 12 is modified by the following:
A. If Tenant so elects, Tenant may obtain from a third party insurance
company the insurance required to be carried by Landlord pursuant to Paragraph
12 so long as each of the following conditions is satisfied: (i) the Landlord is
not the John Arrillaga Survivor's Trust and/or the Richard T. Peery Separate
Property Trust or an affiliated entity or entities as the case may be; (ii) the
insurance to be carried by Tenant to satisfy this requirement strictly complies
with all of the provisions of Paragraph 12; (iii) such insurance shall name
Landlord as the insured and provide that it is to be payable to Landlord in the
same manner as if such insurance had been carried by Landlord pursuant to
Paragraph 12 (subject to the rights of any lender holding a mortgage or deed of
trust encumbering the Premises); (iv) each lender holding a mortgage or deed of
trust encumbering the Premises shall have given its written consent to Tenant
carrying such insurance and such insurance shall comply with the requirements of
any such lender; (v) Tenant must notify Landlord, by certified mail, no later
than one hundred eighty (180) days prior to the expiration date of Landlord's
insurance policy (which expiration date is currently 3/13/xx of a given year and
is subject to change; Landlord shall notify Tenant in the event Landlord's
insurance year changes) that Tenant will directly obtain the required insurance
coverage for the insurance year commencing 3/14/XX through 3/13/XX and each
insurance year through the termination date of this Lease, including any
extensions thereof, or until Tenant is no longer able to comply with all of the
provisions of this paragraph 55; (vi) the annual premium must be paid in full at
the commencement of the policy; (vii) the insurance policy must be issued for a
one-year period following the expiration date of Landlord's insurance policy
(i.e., from 3/14/XX to 3/13/XX; (viii) any and all deductibles required under
the policy will be paid entirely by Tenant; (ix) the terms of the coverage must
be broad form and cover all items to be covered as set forth in Paragraph 12 of
this Lease; (x) the Building and Premises must be insured for their full
replacement cost; (xi) the insurance policy containing the required coverage in
accordance with the provisions of this paragraph must be sent to Landlord for
retention within thirty (30) days prior to the expiration date of Landlord's
insurance policy, and may not be terminated or altered without thirty (30) days
written notice to Landlord by the company providing such insurance (it is agreed
that if the insurance policy is canceled or altered, Landlord will have the
right to obtain the property insurance coverage on said building, and Landlord
will bill the Tenant for the related insurance premium); and (xii) at all times
while Tenant is so carrying such insurance, Tenant is Quantum Corporation or a
successor entity and the then net worth of such corporation is equal to or
greater than the net worth of Quantum corporation as of the date of this Lease
is executed by Landlord and Tenant. Tenant shall provide such evidence as is
required by Landlord and any lender to establish that the insurance that Tenant
carries pursuant to this Paragraph 54 has been obtained and meets the
requirement of this Paragraph 54. Such insurance carried by Tenant shall be in
form and provided by an insurance company that is reasonably acceptable to
Landlord, which must be rated "A plus" or better by Best's Insurance Service (or
an equivalent rating from another rating agency should Best's no longer provide
such service). A copy of any such policy shall be delivered to Landlord. If
Tenant elects to insure and such insurance provided by Tenant does not satisfy
the requirements of Paragraph 12, in the event of a subsequent casualty, Tenant
shall be responsible for and shall pay for that portion of the restoration cost,
in excess of the insurance proceeds actually available, that would have been
covered by insurance satisfying the requirements of Paragraph 12.
55. ASSIGNMENT AND SUBLETTING: The following modifications are made to Paragraph
16:
A. In the event that Tenant seeks to make any assignment or sublease,
then Landlord, by giving Tenant written notice of its election within fifteen
(15) days after Tenant's notice of intent to assign or sublease has been given
to Landlord, shall have the right to elect (i) to withhold its consent to such
assignment or sublease, as permitted pursuant to Paragraph 1, or (ii) to permit
Tenant to so assign the Lease or sublease such part of the Premises, in which
event Tenant may do so, but without being released of its liability for the
performance of all of its obligations under the Lease, and the following shall
apply (except the following shall not apply to a "Permitted Transfer" described
in Paragraph 56):
(1) If Tenant assigns its interest in this Lease, then in
addition to the rental provided for in this Lease, Tenant shall pay to Landlord
fifty percent (50%) of all Rent and other consideration received by Tenant over
and above (i) the assignee's agreement to assume the obligations of Tenant under
this Lease and (ii) all "Permitted Transfer Costs" (as defined herein) related
to such assignment. As used herein, the term "Permitted Transfer Costs" shall
mean all reasonable leasing commissions
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paid to third parties not affiliated with Tenant in order to obtain the
assignment or Sublease in question.
(2) If Tenant sublets all or part of the Premises, then Tenant shall
pay to Landlord in addition to the Rent provided for in this Lease fifty percent
(50%) of the positive difference, if any, between (i) all rent and other
consideration paid or provided to Tenant by the subtenant, less (ii) all Rent
paid by Tenant to Landlord pursuant to this Lease which is allocable to the area
so sublet and all Permitted Transfer Costs related to such sublease. After
Tenant has recovered all Permitted Transfer Costs Tenant shall pay to Landlord
the amount specified in the preceding sentence on the same basis, whether
periodic or in lump sum, that such rent and other consideration is paid to
Tenant by its subtenant, within seven (7) days after it is received by Tenant.
(3) Tenant's obligations under this subparagraph shall survive any
assignment or sublease. At the time Tenant makes any payment to Landlord
required by this subparagraph, Tenant shall deliver an itemized statement of the
method by which the amount to which Landlord is entitled was calculated,
certified by Tenant as true and correct. Landlord shall have the right to
inspect Tenant's books and records relating to the payments due pursuant to this
subparagraph. Upon request therefor, Tenant shall deliver to Landlord copies of
all bills, invoices or other documents upon which its calculations are based.
(4) As used herein, the term "consideration" shall mean any
consideration of any kind received, or to be received (including, but not
limited to, services rendered and/or value received) by Tenant as a result of
the assignment or sublease, if such sums are paid or provided to Tenant for
Tenant's interest in this Lease or in the Premises.
(5) This Paragraph 55.A does not apply to a "Permitted Transfer", as
provided in Paragraph 56 hereof. The parties agree that if any of the following
transactions occur and do not qualify as "Permitted Transfers", Tenant must
obtain Landlord's consent to such transaction and if Landlord consents to any of
the following transactions which do not otherwise qualify as "Permitted
Transfers", then the provisions of this Paragraph 55.A shall not apply to the
following transactions: (i) a merger, consolidation or other reorganization in
which Tenant is not the surviving corporation so long as 95% of all assets and
liabilities of Tenant are permanently transferred to such assignee; and (ii) an
assignment of this Lease to a corporation which purchases or otherwise acquires
95% or more of the assets of Tenant so long as 95% of all assets and liabilities
of Tenant are permanently transferred to such assignee and Tenant remains liable
and responsible under the Lease to the extent Tenant continues in existence
following such transaction.
56. PERMITTED ASSIGNMENTS AND SUBLEASES: Notwithstanding anything contained in
Paragraph 16, so long as Tenant otherwise complies with the provisions of
Paragraph 16 and the Permitted Transfer does not release Tenant from its
obligations hereunder, Tenant may enter into any of the following transfers (a
"Permitted Transfer") without Landlord's prior written consent, and the
provisions of Paragraph 55A shall not apply to any such Permitted Transfer:
A. Tenant may sublease all or part of the Premises or assign its
interest in this Lease to any corporation which controls, is controlled by, or
is under common control with Tenant by means of an ownership interest of more
than fifty percent (50%) providing Tenant remains liable for the payment of Rent
and full performance of the Lease;
B. Tenant may assign its interest in the Lease to a corporation which
results from a merger, consolidation or other reorganization in which Tenant is
not the surviving corporation so long as (i) 95% of all assets and liabilities
of Tenant are permanently transferred to such assignee, and (ii) immediately
prior to the merger, consolidation or other reorganization, the corporation into
which Tenant is to be merged has a net worth equal to or greater than the net
worth of Tenant at the time of Lease execution or at the time of such
assignment, merger, consolidation or reorganization (whichever is greater), or
if it does not, Landlord is provided a guaranty of the Lease (in a form
reasonably acceptable to Landlord) from a corporation (a) that is the parent of,
or is otherwise affiliated with, the corporation into which Tenant is to be
merged, and (b) which has a current net worth equal to or greater than the net
worth of Tenant at the time of Lease execution or at the time of such
assignment, merger, consolidation or reorganization (whichever is greater). In
the event there is not a permanent
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transfer of 95% or more of the assets and liabilities from Tenant to a third
party, and Tenant continues to exist as a separate entity, both companies shall
be jointly and severally liable for the full terms and conditions of the Lease;
C. Tenant may assign this Lease to a corporation which purchases or
otherwise acquires 95% or more of the assets of Tenant so long as 95% of all
assets and liabilities of Tenant are permanently transferred to such assignee
(in the event there is not a permanent transfer of 95% or more of the assets and
liabilities from Tenant to a third party and Tenant continues to exist as a
separate entity, both companies shall be jointly and severally liable for the
full terms and conditions of the Lease), and provided that immediately prior to
such assignment said corporation, has a net worth equal to or greater than the
net worth of Tenant (a) at the time of Lease execution or (b) at the time of
such assignment (whichever is greater), or if it does not, Landlord is provided
a guaranty of the Lease (in a form reasonably acceptable to Landlord) from a
corporation (a) that is the parent of, or is otherwise affiliated with, said
corporation and (b) which has a current net worth equal to or greater than the
net worth of Tenant at the time of Lease execution or at the time of such
assignment, (whichever is greater).
57. SUBORDINATION AND MORTGAGES: Paragraph 17 is modified to provide that this
Lease shall not be subordinate to a mortgage or deed of trust unless the Lender
holding such mortgage or deed of trust enters into a written subordination,
non-disturbance and attornment agreement in which the Lender agrees that
notwithstanding any subordination of this Lease to such Lender's mortgage or
deed of trust, (i) such Lender shall recognize all of Tenant's rights under this
Lease, and (ii) in the event of a foreclosure this Lease shall not be terminated
so long as Tenant is not in material default of its obligations under this
Lease, but shall continue in effect and Tenant and such Lender (or any party
acquiring the Premises through such foreclosure) shall each be bound to perform
the respective obligations of Tenant and Landlord with respect to the Premises
arising after such foreclosure.
58. LANDLORD'S RIGHT TO ENTER: Notwithstanding the provisions of Paragraph 18,
(i) except in the event of an emergency, Landlord shall give Tenant twenty-four
(24) hours notice prior to entering the Premises, agrees to comply with any
reasonably safety and/or security regulations imposed by Tenant with respect to
such entry, and shall only enter the Premises when accompanied by Tenant or its
agent (so long as Tenant makes itself reasonably available for this purpose),
and (ii) Landlord may install "for lease" signs relating to the Premises only
during the last 150 days of the Lease term. Landlord agrees to use its
reasonable, good faith efforts such that any entry by Landlord, and Landlord's
agents, employees, contractors and invitees shall be performed in a manner with
as minimal interference as possible with Tenant's business at the Premises.
Subject to the foregoing, Tenant agrees to cooperate with Landlord and
Landlord's agents, employees and contractors so that responsibilities of
Landlord under the Lease can be fulfilled in a reasonable manner during normal
business hours so that no extraordinary costs are incurred by Landlord.
59. BANKRUPTCY AND DEFAULT: Paragraph 19 is modified to provide that with
respect to nonmonetary defaults not involving Tenant's failure to pay Basic Rent
or Additional Rent, Tenant shall not be in default of any non-monetary
obligation if (i) more than thirty (30) days is required to cure such
non-monetary default, and (ii) Tenant commences cure of such default as soon as
reasonably practicable after receiving written notice of such default from
Landlord and thereafter continuously and with due diligence prosecutes such cure
to completion.
60. ABANDONMENT: Paragraph 20 is modified to provide that Tenant shall not be in
default under the Lease if it leaves all or any part of Premises vacant so long
as (i) Tenant is performing all of its other obligations under the Lease
including the obligation to pay Basic Rent and Additional Rent (ii) Tenant
provides on-site security during normal business hours for those parts of the
Premises left vacant, (iii) such vacancy does not materially and adversely
affect the validity or coverage of any policy of insurance carried by Landlord
with respect to the Premises, and (iv) the utilities and heating and ventilation
system are operated to the extent necessary to prevent damage to the Premises or
its systems.
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61. DESTRUCTION: Paragraph 21 is modified by the following:
A. Notwithstanding anything to the contrary within Paragraph 21,
Landlord may terminate this Lease in the event of an uninsured event or if
insurance proceeds, net of the deductible, are insufficient to cover one hundred
percent of the rebuilding costs; provided, however, Tenant shall have the right
to elect, in its discretion, to contribute such excess funds to permit Landlord
to repair the Premises.
B. Except as provided in Paragraph 61C, Landlord may not terminate the
Lease if the Premises are damaged by a peril whereby the cost to replace and/or
repair is one hundred percent (100%) covered by the insurance carried by
Landlord pursuant to Paragraph 12, but instead shall restore the Premises in the
manner described by Paragraph 21.
C. If the Premises are damaged by a peril covered by the insurance
carried by Landlord pursuant to Paragraph 12, Landlord shall have the option to
terminate the Lease if each of the following conditions is satisfied: (i) the
cost to repair or the damage exceeds thirty-three percent (33%) of the then
replacement cost of the Premises; and (ii) the damage occurs at a time when
there is less than five (5) years remaining in the term of the Lease.
Notwithstanding the foregoing, if such damage occurs at a time when there is
less than five (5) years remaining in the term of the Lease and Landlord
notifies Tenant of Landlord's election to terminate the Lease pursuant to the
provisions of this Paragraph 6lB, if Tenant has the right to extend the term of
this Lease pursuant to either Paragraph 41 or 42 such that the remaining term of
the Lease (including the option period) will be more than five (5) years
following the date of such damage, this Lease shall not terminate if Tenant
notifies Landlord in writing of Tenant's exercise of an option to extend granted
to Tenant by either Paragraph 41 or 42. In such event, this Lease shall not
terminate, the term shall be so extended, and Landlord shall restore the
Premises in the manner provided in Paragraph 21.
D. If Landlord fails to obtain insurance as required pursuant to
Paragraph 12, and said insurance would have been available to cover any damage
or destruction to the Premises, Landlord shall be required to rebuild, at its
cost, net of the deductible which would have been required under said insurance
policy (which deductible Tenant is required to pay).
E. If the Premises are damaged by any peril, then as soon as reasonably
practicable, Landlord shall furnish Tenant with the written opinion of
Landlord's architect or construction consultant as to when the restoration work
required of Landlord may be completed. Tenant shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Landlord of a written notice of election to
terminate within seven (7) days after Tenant receives from Landlord the estimate
of the time needed to complete such restoration:
(1) The Premises are damaged by any peril (not caused by or
resulting from an action of Tenant or Tenant's agents, employees, contractors or
invitees) and, in the reasonable opinion of Landlord's architect or construction
consultant, the restoration of the Leased Premises cannot be substantially
completed within 180 days after the date of such damage (subject to force
majeure conditions); or
(2) The Premises are damaged by any peril (not caused by or
resulting from an action of Tenant or Tenant's agents, employees, contractors or
invitees) within twelve (12) months of the last day of the Lease term and
provided Tenant has not exercised an option to renew pursuant to the provisions
of Paragraph 41 or 42, and, in the reasonable opinion of Landlord's architect or
construction consultant, the restoration of the Leased Premises cannot be
substantially completed within sixty (60) days after the date of such damage and
Tenant has not exercised its Option to Extend said Term (or Extended Term as the
case may be).
62. EMINENT DOMAIN: Paragraph 22 is modified by the following:
Landlord may not terminate the Lease if less than one third (1/3) of
the building is taken by condemnation or if a taking by condemnation is only
threatened.
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63. TRANSFER BY LANDLORD: The provisions of Paragraph 23 of the Lease to the
contrary notwithstanding, Landlord shall not be relieved of its obligations
under the Lease which may accrue after the date of a sale or other transfer
unless and until (i) the transferee agrees to assume and be bound by the terms
of this Lease and to perform all obligations of the Landlord under the Lease
which may accrue after the date of such transfer, and (ii) Landlord transfers
the cash balance of the Security Deposit (net of any offsets used to cure
defaults under the Lease) to its successor in interest (transferee) in
accordance with the provisions of California Civil Code Section 1950.7, as
amended or recodified.
64. LANDLORD'S LIEN WAIVER: Landlord, within thirty (30) days after demand from
Tenant, shall execute and deliver such lien waiver documents that are reasonably
required by any supplier, lessor, or lender in connection with the installation
in the Premises of the Tenant's personal property or trade fixtures providing
Landlord approves the form of any such waiver and Landlord's rights under this
Lease are not materially and adversely affected.
65. AUTHORITY TO EXECUTE. The parties executing this Lease Agreement hereby
warrant and represent that they are properly authorized to execute this Lease
Agreement and bind the parties on behalf of whom they execute this Lease
Agreement and to all of the terms, covenants and conditions of this Lease
Agreement as they relate to the respective parties hereto.
QUANTUM CORPORATION, JOHN ARRILLAGA SURVIVOR'S
a Delaware corporation TRUST
By John Arrillaga
By /s/ Andrew Kryder -------------------------------------
- ------------------------------------- John Arrillaga, Trustee
Andrew Kryder, Vice President Finance
and Corporate General Counsel Date: 6/30/97
-------------------------------------
Date: June 25, 1997
- -------------------------------------
RICHARD T. PEERY SEPARATE
PROPERTY TRUST
By /s/ Norm Claus
- ------------------------------------- By /s/ Richard T. Peery
Norm Claus, Vice President Real Estate -------------------------------------
and Corporate Services Richard T. Peery, Trustee
Date: June 25, 1997 Date: 6/26/97
- ------------------------------------- -------------------------------------
Initial: __________
<PAGE>
Lease 7
Building 7
OPTION AGREEMENT
THIS AGREEMENT dated April 16, 1997 by and between JOHN ARRILLAGA,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S
TRUST) as amended and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter
called "Optionor", and QUANTUM CORPORATION, a Delaware corporation, hereinafter
called "Optionee".
WHEREAS, Optionor, as Lessor, and Optionee, as Lessee, have entered
into a Lease Agreement described as Lease 6, Building 6 for 182,355+/- square
feet of space, dated April 16, 1997, hereinafter referred to as the "Building 6
Lease". Said property covered by the Lease is located on Sumac Drive, Milpitas,
California, as shown within the area outlined in Orange on Exhibit "A" attached
hereto and by reference made a part hereof. The details of said Building 6 Lease
are more particularly described and set forth in the Building 6 Lease; and
WHEREAS, Optionor is willing to grant to Optionee the exclusive right
to lease from Optionor one (1) additional building on a parcel contiguous to the
parcel on which Building 6 is 1ocated for the use and occupancy by Optionee, if
Optionee elects to exercise said option, upon the terms and conditions set forth
herein;
NOW, THEREFORE, for the option consideration to be paid, receipt of
which is hereby acknowledged, and for the other consideration referred to
herein, the parties agree as follows:
ARTICLE I
GRANT OF OPTION TO LEASE
Provided that Optionee is not in material default of its obligations
(i) under the Building 6 Lease or if in material default has received written
notice of default from Optionor and such default has not been cured within the
period provided for in the Building 6 Lease (provided, however, if a
non-monetary default by Optionee under the Building 6 Lease cannot be cured, and
if Optionor does not elect to terminate the Building 6 Lease as a result of such
nonmonetary and non-curable default, Optionee may exercise the option provided
for herein), or (ii) under any provision of this Agreement or if in material
default has received written notice from Optionor of its intent to terminate
this Agreement because of such default and Optionee has failed to cure a default
in the payment of money within three (3) days after such notice or any other
default within ten (10) days after such notice, and subject to the provisions of
Article II, Optionor hereby grants to Optionee the exclusive right to lease that
certain real property consisting of approximately 12.297 acres of land, more or
less, located in the City of Milpitas, County of Santa Clara, State of
California, and contained within the area outlined in Green on "Exhibit A"
attached hereto, and by reference made a part hereof (hereinafter referred to as
"Option Property"), on which Optionee shall have the option to lease additional
facilities from Optionor on the following terms and conditions:
A. OPTION PROPERTY: Said Option Property, consisting of approximately
12.297 acres, more or less, shall consist of one (1) separate (but not legally
subdivided) parcel of property, (APN 086-02-038) as shown on Exhibit "A", on
which a building (Building 7) of approximately 208,096+/- square feet shall be
constructed.
B. TERM OF OPTION: Optionee's option, as granted hereunder with respect
to the Option Property described above shall commence on the date of this Option
Agreement and shall terminate December 31, 1999 ("Option Period"), unless sooner
terminated, as provided for herein, and regardless of the commencement date of
the Building 6 Lease.
Initial: ALK JA NHC
------------
<PAGE>
C. PUBLIC AGENCY REQUIREMENTS: The parties understand that the proposed
construction of the building on the Option Property is subject to any and all
requirements, now or in the future, of the City of Milpitas and/or County of
Santa Clara, and/or City of San Jose, hereinafter individually and collectively
referred to as "Public Agency." It is agreed that in the event that the Public
Agency reduces the size of the option building (Building 7) and imposes land
rules and regulations affecting the Option Property to meet Public Agency
regulations and requirements, that the building to be constructed on the Option
Property shall be built as required to accommodate the requirements of the
Public Agency and the land use and/or entitlements pertaining thereto and that
this option shall be subject to all Public Agency requirements.
D. CONSIDERATION: As consideration for Optionor agreeing to the terms
hereof, Optionee agrees to pay, promptly, and prior to delinquency, all real
estate taxes and assessments assessed against the Option Property, from the
beginning of the Option Period through the termination date of this Agreement,
as they appear on the tax bills, provided, however, that if Optionee exercises
its option to lease, it is agreed that notwithstanding the foregoing, Optionee
shall continue to pay all real estate taxes and assessments attributable to the
Option Property through the commencement date of the lease of the Option
Property and will thereafter be responsible for paying all real estate taxes and
assessments as required under the new lease for the Option Property. For the
purpose of this Agreement, "real estate taxes and assessments" shall be defined
as set forth in Paragraph 9 of the Building 6 Lease. In addition, Optionee also
agrees to pay, on January 1, 1997, and on each anniversary date thereafter
during the Option Period, an amount equal to Ten Thousand and No/100 Dollars
($10,000) per acre per annum multiplied by the acreage contained within the
Option Property as additional consideration for this option. Optionee shall be
liable for the payment of the option consideration set forth above through the
termination of this option. Any payments to be made hereunder shall be prorated
accordingly to reflect the commencement and termination dates of this option.
For Example:
If the Option Property is 12.297 acres, then the additional option
consideration to be paid would be calculated as follows:
Option Property = 12.297 acres x $10,000.00/acre = $122,970.00, plus
real estate taxes and assessments
E. EXERCISE OF OPTION: Optionee shall exercise Optionee's right to
lease the Option Property by giving written notice to Optionor of Optionee's
exercise of this option at any time after execution of this Agreement by the
parties and prior to the expiration of the term of this option on December 31,
1999, unless the option is terminated earlier as provided for herein. Should
Optionee fail to timely exercise Optionee's option to lease the Option Property,
this Agreement shall be null and void, and Optionee shall have no further rights
under this Agreement, and Optionor shall be free to deal with third parties with
respect to the Option Property, without any obligation to Optionee whatsoever,
with Optionee remaining liable for payment of the option consideration as set
forth in Article I Section D above, through the termination date of this
Agreement.
F. LEASE TERMS IF OPTION TO LEASE IS TIMELY EXERCISED:
1. CONSTRUCTION OF NEW BUILDING AND INTERIOR IMPROVEMENTS: In
the event Optionee exercises its option, subject to Article I Section E on the
Option Property prior to the termination of the Option Period, Optionee will be
required to lease the entire building of approximately 208,096+/- square feet on
the Option Property, subject to any reduction as set forth in Article I Section
C above. The shell of the building to be erected by Optionor on the Option
Property in the event this option is exercised by Optionee shall be
architecturally compatible with, and of a quality of construction and type of
material used substantially the same as, the building provided for Optionee
pursuant to the Building 6 Lease.
Initial: ALK JA NHC
------------
-2-
<PAGE>
The interior improvements (i.e., heating, lighting, electrical, plumbing, vinyl
tile and/or carpeted floors, acoustical suspended ceiling, interior partitioning
and doors, and the like) of the new building on the Option Property shall be
proportionately equal to the interior improvements under the Building 6 Lease
and Optionor will provide Optionee with a $25.00 per square foot Tenant
Improvement Allowance under the same basic terms and conditions as contained
within the Construction Letter attached hereto as Exhibit "B-2".
Notwithstanding any provisions to the contrary contained in the Construction
Letter attached as Exhibit "B-2" (subject to amendment related to the size of
the building and dates where appropriate), Optionor agrees to furnish to
Optionee, within sixty (60) days after Optionee's exercise of its option to
lease the Option Property, definitive shell plans for the building to be
constructed on the Option Property. As used herein, the term "definitive shell
plans" does not mean working drawings, but means and refers to shell design
plans showing such details as columns, windows, shear structure, "K" bases and
core area. Optionee agrees, within sixty (60) days after its receipt of such
definitive shell plans, to deliver to Optionor complete plans and specifications
for the interior improvements that Optionee wishes constructed in the new
building. If Optionee wishes to later change said plans or specifications, any
such changes shall be permitted subject to the terms and conditions of Paragraph
8 of the Construction Letter set forth in Exhibit "B-2", provided that in the
event the completion date of the building is delayed by such changes requested
by Optionee, the lease commencement date of the new building and rent
commencement shall be the date the new building would have been completed in the
absence of such changes requested by Optionee. Optionor shall have a reasonable
time period after the completion of the building and commencement date of the
lease to complete the landscaping and "punch list" items pertaining to the new
building without the commencement date of the lease and rent being affected. The
building shall be completed by Optionor and ready for occupancy by Optionee
within one (1) year after the date of exercise of the option by Optionee and the
lease agreement is executed by the parties regarding the Option Property,
subject to delays caused by strikes, acts of God, governmental restrictions, or
other causes beyond Optionor's control, in which instance the time period for
Optionor's completion of the building shall be extended accordingly; provided,
however, in no event shall the building be completed later than eighteen (18)
months after the exercise of the option by Optionee.
2. LEASE AGREEMENT: Optionee and Optionor shall execute a separate
lease agreement and construction letter (as set forth respectively in Exhibit
"B-1" and Exhibit "B-2") for the Option Property within thirty (30) days from
Optionee's exercise of such option. The terms and conditions of the lease
agreement pertaining to the Option Property shall be identical to the terms and
provisions of the Building 6 Lease, including without limitation the options to
extend the term, except as modified by this Agreement and except that the
provisions of Section F.1 above relating to shell and interior improvement
plans shall be incorporated therein and the provisions of Paragraph 40 ("Lease
Term and Commencement Date") of the Lease will be deleted and the provisions
coveting the Lease Term, Rental and Hazardous Waste and Toxic Materials, shall
be determined as follows:
(a) Lease Term and Commencement of Lease: The lease term for
the Option Property shall be for a minimum period of ten (10) years, or for a
term expiring conterminously with the lease term of the Building 6 Lease
(including the option to extend that term, if exercised by Optionee), whichever
time period is the longer, but in no event shall the lease term on the Option
Property be less than ten (10) years. The term of the lease shall commence as
soon as the building and leasehold improvements have been completed by Optionor,
unless Optionee delays completion of the building, in which event the lease will
commence on the date it would have been completed in the absence of the delays
caused by Optionee.
(b) Rental:
(1) Basic Monthly Rental: The initial monthly Basic
Rental (which amount does not include the Management Fee and/or Additional Rent
charges which Optionee will be responsible for, including but not limited to
taxes, insurance, utilities,
Initial: ALK JA NHC
------------
-3-
<PAGE>
maintenance, etc., as described in Paragraph 4B of the Building 6 Lease) from
the commencement of the lease on the Option Property through the full term of
the lease (subject to the rental increases provided for in Section F.2.(b)(2)
below) shall be a sum equal to $1.60 absolute triple net per square foot per
month times the number of square feet contained within the new building to be
constructed; provided, however, that such Basic Rent shall be increased by 8%
(non-compounding) for each twelve (12) month period that commences on or after
August 1, 1998 or on or before the Commencement Date of the Lease of Building 7.
By way of example only, (i) if the Commencement Date occurred during the period
commencing on August 1, 1998 and ending on July 31, 1999, the Basic Rent of
$1.60 per square foot per month would be increased by 8%; (ii) if the
Commencement Date occurred during the period commencing on August 1, 1999 and
ending on July 31, 2000, the Basic Rent of $1.60 per square foot per month would
be increased by 16%; and (iii) if the Commencement Date occurred during the
period commencing on August 1, 2000 and ending on July 31, 2001, the Basic Rent
of $1.60 per square foot per month would be increased by 24%. By way of further
example, if the Commencement Date for the Building 7 Lease is October 1, 1999,
and the new building is 208,096 square feet, the adjusted Basic Rent would be
$386,226.18, calculated as follows:
Lease on Option Property to Commence: October 1, 1999
Size of Building was: 208,096 sq. ft.
Monthly Basic Rent Calculation:
$1.60 per sq. ft. x 208,096 sq. ft. = $332,953.60
Plus 8% annual increase per Twelve Month Period*:
(8/1/98-10/1/99) = 16% increase = $53,272.58
Adjusted Basic Rent as of Lease
Commencement Date of 10/01/99: $386,226.18
Adjusted
Number of Twelve Month Periods % Incr. Base Rent Basic Rent
- --------------------------------------------------------------------------------
* (1) 8/1/98-7/31/99 x 8% 1st period
- --------------------------------------------------------------------------------
* (2) 8/1/99-7/31/00 x 8% 2nd period
- --------------------------------------------------------------------------------
16% Total Increase x $333,953.60 = $386,226.18
- --------------------------------------------------------------------------------
Notwithstanding the foregoing, within thirty (30) days after Optionee exercises
its option to lease and Optionee has delivered the complete plans and
specifications for the Interior Improvements Optionee desires Optionor to
construct, as provided for in Section F.1 above, Optionor shall deliver to
Optionee Optionor's estimated, projected completion date for the building and
all interior improvements to be constructed by Optionor, it being agreed,
however, that such date is only an estimate and that the date the Lease shall
commence shall be as set forth in Section F.2(a) above. In the event the
completion of the building and interior improvements is delayed beyond the date
set forth in Optionor's schedule for any reason other than the acts of Optionee,
or acts of God, strikes, governmental restrictions, or other causes beyond
Optionor's control, then even if the commencement date occurs on August 1 or
later in that particular calendar year, the 8% annual increase in Basic Rent for
that particular year provided for in this Section shall be inapplicable.
(2) Annual Basic Rent Increase: It is understood and agreed
that on each and every anniversary of the lease commencement date the Basic Rent
will be increased by $.05 per square foot, including extensions of the Building
7 Lease if Optionee timely exercises either of the two five (5) year options to
extend the Lease. It is understood by the parties hereto, if Optionee exercises
its Option to Extend on either the Building 6 Lease or the Building 7 Lease, the
other Lease shall be automatically be extended, subject to the terms stated
herein and in each respective Lease.
(c) Security Deposit: The initial Security Deposit required under the
Building 7 Lease (which amount is subject to increase pursuant to Tenant's
exercise of any Option to Extend) shall be equal to the sum of the Basic Rent
for the first month in the initial
-4-
Initial: ALK JA NHC
------------
<PAGE>
Lease Term plus the Basic Rent for the last month in the initial Lease Term. For
Example: if the Building 7 Lease commences on October 1, 1999 as shown in the
example in Paragraph 2(b)(1) above, and the length of the initial Lease Term is
ten years, the Security Deposit required under the Building 7 Lease would be
calculated as follows:
Basic Rent due 10/1/99: $386,226.18 = $1.856 per square foot
Rent increase over ten year term
= $1.856 + (9 x $0.05) = $0.45 per square foot
Basic Rent due 9/1/09 $479,869.38 = $2.306 per square foot
-----------
Security Deposit: $866,095.56
===========
(d) Hazardous Materials and Toxic Wastes: The parties agree
that the provisions of Paragraph 44 of the Building 6 Lease pertaining to
hazardous materials and toxic wastes shall be incorporated into the above
referenced lease to be executed, if the option to lease is exercised by
Optionee, with the exception that notwithstanding any provisions to the contrary
in said Paragraph 44 of the Building 6 Lease, Optionee shall have those
obligations thereunder with respect to site generated contamination on the
Option Property commencing on the date this Agreement is executed by all
parties, except as more particularly set forth in Article III Section F(3) of
this Agreement, Optionee shall have no responsibility whatsoever, including any
obligation to clean up or indemnify with respect to any hazardous materials or
toxic wastes present on the Option Property because of the storage, use,
disposal or transportation of such materials by any of Optionor's contractors or
otherwise arising out of construction work performed by or under the direction
of Optionor on the Option Property.
(e) Hetch-Hetchy Land: The following language will be included
within the Building 7 Lease related to the Hetch-Hetchy Land adjacent to the
Property: "Landlord hereby assigns to Tenant during the Term of this Lease, all
of Landlord's right, title, and interest, in and to the property owned by the
City and County of San Francisco shown in Orange on Exhibit A attached hereto,
and Tenant hereby assumes all responsibilities and liabilities (including, but
not limited to a fee and/or tax for the right to use said property including any
use provided for in the Deed attached hereto as Exhibit E) that may be imposed
by the City and County of San Francisco pertaining to their property and
Tenant's use and occupancy thereof. Tenant's right to use the area outlined in
Orange will continue until this right to use said property is revoked or
terminated by the City and County of San Francisco, at which time said property
outlined in Orange belonging to the City and County of San Francisco will no
longer be available for Tenant's use, and this lease will continue in full force
and effect excluding Tenant's right to use the property outlined in Orange on
Exhibit A attached hereto.
Tenant's use of the property owned by the City and County of San
Francisco shall be governed by the terms and conditions of the Deed dated
February 5, 1951 between Chizu Oyama Takeda and George Shoji Takeda, as
Grantors, and the City and County of San Francisco, as Grantee (the "Deed").
Said Deed is attached hereto as Exhibit E. Among the provisions of said Deed is
the restriction that the property shall not be used for parking, and Tenant
understands that at no time during the Term of the Lease shall Tenant be
allowed to use said property for parking.
Notwithstanding the foregoing, Tenant may use the Hetch-Hetchy Land for
such additional uses as may not be permitted in the Deed provided Tenant (i)
obtains the written permission from the City and County of San Francisco to do
so in form reasonably acceptable to landlord, (ii) removes the "bridge" which is
contemplated to go over said Hetch-Hetchy Land if requested by the City and
County of San Francisco and/or if Landlord requires said "bridge" to be removed
by the Lease Termination Date, (iii) pays all costs and expenses imposed by the
City and County of San Francisco in connection with such permission and use, and
(iv) Tenant indemnifies and holds harmless Landlord from any loss, expense,
cost, claim, or liability arising in connection with such permission or any use
pursuant to such permission of the Hetch-Hetchy Land undertaken by Tenant, its
agents, employees, contractors, invitees, visitors, subtenants
- 5-
Initial: ALK JA NHC
------------
<PAGE>
and/or assignees. Landlord and Tenant agree that if the City of Milpitas will
not issue a building permit for Building 7 in the configuration and location for
which it is designed as of the date of this Lease because of the proximity to
the Hetch-Hetchy Land or for any other reason, then Tenant shall have the option
to cause Building 7 to be relocated on the land and redesigned in a new
configuration acceptable to the City, Landlord and Tenant, provided the square
footage of the relocated and redesigned building is no less than approximately
208,096 square feet and the parking allocation is not reduced due to said
redesign and/or relocation."
G. OPTIONEE'S RIGHT TO TERMINATE OPTION: In the event Optionee wishes
Optionor to discontinue holding the Option Property for Optionee's expansion
prior to the termination date of this Option Agreement, unless this option is
sooner terminated as provided for in this Agreement, Optionee may terminate this
Option Agreement by giving Optionor written notice of Optionee's termination of
this Option Agreement and paying to Optionor at the time of such notice of
termination the option consideration set forth in Article I Section D through
the date of Optionee's written notice of such option termination, after which
time Optionor shall be free to deal with third parties with respect to the
Option Property. In the case of early termination of this Agreement, any prepaid
consideration (including but not limited to taxes and assessments) related to
this Agreement will be prorated to the date of such early termination, and
Optionee will remain liable for payment of the option consideration, as set
forth in Article I Section D above, through the termination date of this
Agreement and for any accrued but unpaid consideration, and shall be refunded
that portion of the prepaid consideration which relates to the period after
termination.
H. TERMINATION OF OPTIONEE'S RIGHTS' In the event (i) Optionee does not
submit the complete plans and specifications for the interior improvements of
the building within the time period set forth in Article I Section F.1, and such
failure to submit plans is not remedied within thirty (30) days thereafter, or
(ii) Optionee does not execute a lease agreement with Optionor within thirty
(30) days after Optionee's exercise of Optionee's option to lease and such delay
is not unreasonably caused by Optionor, or (iii) Optionee is in default in any
of the terms, covenants or conditions of the Lease, such default has not been
cured within the period provided for in the Building 6 Lease, and Optionor has
given written notice to Optionee of its intent to terminate this Agreement
because of such default, or (iv) Optionee is in default of any other provisions
of this Agreement including, but not limited to, the consideration requirements
set forth in Article I Section D above, and (A) fails to cure such default
within three (3) days after written notice thereof, in the case of a failure to
pay any sums owing from Optionee pursuant to the terms hereof, or (B) fails to
cure a default in its performance of any other term or covenant to be kept by
Optionee hereunder, within ten (10) days after written notice of such default
from Optionor, or (v) Optionee is in material default of the Construction Letter
Agreement related to the Building 6 Lease and (A) fails to cure such default
within three (3) days after written notice of a monetary default, or (B) within
ten (10) days after written notice of any other default (provided if the default
cannot reasonably be cured within such ten (10) day period Optionee shall not be
in default if it promptly commences the cure and thereafter diligently
prosecutes the cure to completion), or (vi) if Optionee does not perform as
required under the provisions of Article II below, and (A) such failure
continues more than three (3) days after written notice from Optionor of an
intent to terminate this Option Agreement due to Optionee's default in the
payment of any sums owing thereunder, or (B) Optionee does not cure such default
within ten (10) days after written notice from Optionor that it intends to
terminate this Agreement due to Optionee's failure to perform any other term or
covenant to be kept by Optionee thereunder, then it is agreed that Optionee's
rights with respect to this Option Agreement and the Option Property shall
terminate if Optionor so elects, at Optionor's sole discretion, by giving
written notice of such termination to Optionee, with Optionor being free to deal
with third parties with respect to the Option Property and with the Building 6
Lease remaining in full force and effect in the event of such termination; in
which event, any prepaid consideration (including but not limited to taxes and
assessments) related to this Agreement will be prorated to the date of such
termination, and Optionee will remain liable for payment of the option
consideration as set forth in Article I Section D above, through the termination
date of this Agreement and shall be refunded that portion of the consideration
attributable to a period of time after termination. Optionee upon said
termination will immediately execute and record at
-6-
Initial: ALK JA NHC
------------
<PAGE>
agreement relinquishing all of Optionee's rights to the Option Property as
contained in this Agreement.
ARTICLE II
OPTIONOR'S OPTION TO NOT CONSTRUCT BUILDING
ON OPTION PROPERTY - OPTIONEE'S OPTION TO BUY
Notwithstanding anything to the contrary in Article I above, entitled
"Grant of Option to Lease," it is agreed between the parties hereto that if
Optionor does not, in Optionor's sole and absolute discretion, choose or desire
for any reason whatsoever to construct such building on the Option Property, as
provided for in Article I above, then Optionor shall have the right to be
relieved from all responsibility to build and/or lease under said Article I,
with respect to the Option Property, providing Optionor gives written notice to
Optionee within sixty (60) days after Optionee exercises Optionee's option to
lease the new facility (Building 7) as provided for in Article I above, that
Optionor elects, at Optionor's sole and absolute discretion, not to construct
the new building on the Option Property in which event, and in no other event,
Optionor agrees to sell Optionee the Option Property upon the following terms
and conditions:
A. NOTICE TO EXERCISE OPTION TO BUY - DATE FOR CLOSE OF ESCROW:
Optionee must give notice to Optionor of Optionee's desire to purchase the
aforesaid Option Property within thirty (30) days after receipt of Optionor's
written notice to Optionee of Optionor's election not to construct as set forth
above. It is agreed if Optionee timely exercises this option, that Optionee
shall be committed and obligated to close escrow on or before sixty (60) days
after Optionor has given Optionee the written notice of Optionor's election not
to build as provided for above, subject to delays related to defects in title
under Article II Section G below, upon the terms and conditions hereinafter set
forth in this Article II and as otherwise provided for in this Agreement.
B. PURCHASE PRICE: The purchase price of the Option Property shall be
an amount equivalent to TWENTY FIVE DOLLARS ($25.00) per square foot of land,
plus an eight percent (8%) annual compound interest increase in the purchase
price (which increase shall begin accruing as of August 1, 1998), lawful cash
consideration, times the number of square feet contained within the Option
Property, and shall include easements but shall be exclusive of any area that
may be acquired in fee by eminent domain or condemnation by a Public Agency
prior to the close of escrow, plus Optionee shall assume any and all assessments
on the property existing as of the date of sale as reflected on the City and
County tax bills and any supplemental taxes that may be issued at a later date
for said property or proposed to be assessed against the property without
reduction in the purchase price.
C. SITE AND PARCEL MAP SURVEY: A survey will be made by a licensed
surveyor, elected by Optionor and paid for by Optionee, to determine the exact
square footage, and an appropriate parcel map recorded of the property to be
conveyed.
D. TITLE INSURANCE: Optionee will obtain, at Optionee's expense, from
Chicago Title Company a standard California Land Title Association (CLTA) Title
commitment in an amount equal to the purchase price of the Option Property, in
favor of Optionee to insure the Option Property, subject to the permitted
exceptions of title set forth in Article II Section E below.
E. TITLE: The Option Property shall be conveyed strictly on an "as is"
basis as set forth in Article II Section F below, and Optionee agrees to take
title to the Option Property on an "as is" basis and subject to the following
"permitted exceptions":
-7-
Initial: ALK JA NHC
------------
<PAGE>
(1) All non-delinquent real property taxes and assessments,
and bonds outstanding as of the close of escrow, and all exceptions as shown in
said Chicago Title Insurance Company's preliminary title report number 771722
dated April 14, 1997, and attached hereto as Exhibit "C" and by reference made a
part of this Agreement, except for any of Optionor's current and/or future loans
against said Option Property which loans, if any, shall be discharged by
Optionor at close of escrow.
(2) Any easements, right-of-way, utility or street easement
dedications required to be made or common driveway easements, covenants,
conditions, and restrictions now of record or of record at the time Optionee
exercises its option to buy the Option Property.
(3) Any other exceptions to title that do not unreasonably
affect the marketability, financeability, or Optionee's reasonable use thereof,
and any normal exclusions and provisions of the title company's standard Title
Insurance Policy and all matters that a current and accurate survey of the
property would disclose.
(4) The Waiver and Release Agreement set forth as Exhibit "D"
attached, which Optionee agrees to execute and record at the close of escrow.
F. "AS-IS": Optionee agrees that Optionee is purchasing the
Option Property subject to the following understanding and agreement: This is a
non-contingent and unconditional offer to purchase the property on an "as is"
basis. Optionee has inspected the Option Property including acreage,
improvements (if any) thereon, environmental and economic characteristics and
conditions as of the execution of this Agreement, and acknowledges that Optionee
has observed their physical characteristics (including acreage) and conditions,
and hereby waives any and all objections to the physical characteristics
(including acreage) and condition of the Option Property which would be
disclosed by such inspection or otherwise. Optionee acknowledges that Optionor
and its employees, agents, or representatives have not made, and do not make,
any representations, warranties, or agreements by or on behalf of Optionor as to
any matters concerning the Option Property and the present or future use therof,
or the suitability of the Option Property for Optionee's intended use. Optionee
is purchasing the Option Property hereunder strictly on an "as is" basis and
regardless of the condition and repair of the improvements (if any), or the
Option Property's topography, climate, air, water rights, utilities, water,
possible toxic waste or hazardous materials, present and future zoning, soil,
subsoil, purpose to which the Option Property is suited, drainage, access to
public roads, and proposed routes or enlargement of road or extensions thereof.
Optionee further acknowledges and agrees that the Option Property is, or may be,
subject to zoning, P.U.D., or other municipal ordinance restrictions, and is to
be purchased, conveyed and accepted by Optionee in its present condition "as
is", and that no patent or latent physical condition of the building or Option
Property, whether or not known or unknown or discovered at a later date, shall
affect this transaction and the purchase price paid for the Option Property
hereunder, and Optionee shall be obligated to close escrow notwithstanding the
condition of the Option Property or any improvements thereon. Optionee
acknowledges that in the event of a purchase of the Option Property by Optionee,
Optionor shall not have any obligation to Optionee to remove, clean up or
remediate any Hazardous Materials on the Option Property now, or discovered at a
later date. As used in this Agreement, the term "Hazardous Materials" shall mean
any substance or material which has been determined or is hereafter determined
by any state, federal or local governmental authority or regulatory body to be
capable of posing a risk of injury to health, safety and/or property, including,
but not limited to, all of those materials and substances designated as
hazardous or toxic by the Environmental Protection Agency, the California Water
Quality Board, the U.S. Department of Labor, the California Department of
Industrial Relations, the U.S. Department of Transportation, the California
Department of Food & Agriculture, the Consumer Product Safety Commission, the
U.S. Department of Health and Human Services, the U.S. Food and Drug
Administration, or any other local, state, or federal governmental agency or
authority or regulatory body now or hereafter authorized to regulate materials
and substances in the environment. Without limiting the generality of the
foregoing the term 'Hazardous Materials shall include all of those materials and
substances (i) defined as
-8-
Initial: ALK JA NHC
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<PAGE>
"toxic materials" in Sections 66680 through 66685 of Title 22 of the California
Administrative Code, Division 4, Chapter 30, as the same may be amended from
time to time, or (ii) any other hazardous or toxic substance, material or waste
which is or becomes regulated by any local governmental authority, any agency of
the State of California or any agency or the United States Government, as the
above may be amended from time to time. All work in connection with preparing
the Option Property for the use intended by Optionee, all costs incident
thereto, and all other costs, fees, studies, reports, approvals, plans, surveys,
permits and expenses whatsoever necessary or desirable in connection with
Optionee's acquiring, developing, using and/or operating the Option Property,
shall be obtained and paid for by, and shall be the sole responsibility of,
Optionee. Optionee has investigated and has knowledge of operative or proposed
governmental laws and regulations including, but not limited to, Zoning,
environmental (including specifically the regulations of the Environmental
Protection Agency and the Bay Area Pollution Control District) and land use laws
and regulations to which the Option Property may be subject, and shall acquire
the Option Property subject to the foregoing and to such other laws and
regulations that pertain to the Option Property. Optionee has neither received
nor relied upon any representations concerning such laws and regulations made by
Optionor, Optionor's employees, agents or any other person acting on or in
behalf of Optionor. Optionee hereby waives, releases, acquits and forever
discharges Optionor, Optionor's employees, agents or any other persons acting on
or in behalf of Optionor, of and from any and all claims, actions, causes of
action, demands, rights, damages, costs, expenses or compensation whatsoever,
direct or indirect, known or unknown, foreseen or unforeseen, that it now has,
or which may arise in the future, on account of or in any way growing out of, or
connected with, the existence or condition of any improvements or buildings on
the Option Property; any toxic wastes or hazardous materials located thereon;
any settlement or subsidence of any fill or filled ground on the Option Property
or settlement or subsidence of construction thereon, if any; or with any
operative or proposed governmental laws and regulations, including, but not
limited to, zoning, flood, earthquake, toxic and hazardous materials,
environmental and land use laws and regulations to which the Option Property may
be subject; or with Optionee's contemplated use and development of the Option
Property, or with any other condition of the Option Property or plans.
Any agreements, warranties or representations not expressly contained
herein shall in no way bind Optionor. Optionee expressly waives any right of
rescission and all claims for damages by reason of any statement,
representation, warranty, promise or covenant, if any, not contained in this
Agreement. The provisions of this Section shall survive the close of escrow.
G. TITLE DEFECTS: If title to the Option Property shall prove to be
defective or unmerchantable, Optionor shall have a reasonable time to perfect
same providing said period of time shall not exceed one hundred twenty (120)
days from Optionee's exercise of the option to purchase the Option Property as
provided for in Article II Section A above. If Optionor, after using due
diligence and all reasonable efforts, is unable to remove any such defect in the
title, either party may terminate this Option Agreement with Optionor having no
liability or obligations to Optionee or any other third party, it being agreed,
however, that Optionee may take title subject to such defect or imperfection
then existing. All matters concerning title to the Option Property shall merge
in the Grant Deed. In the event of any defect in or other matter affecting title
to the Option Property, Optionee hereby agrees to look only to the aforesaid
title insurance policy to secure any damages incurred by Optionee as a result of
said defect or matter.
H. DEED RESTRICTIONS: COVENANTS, CONDITIONS AND RESTRICTIONS TO BE
INCORPORATED WITH THE GRANT DEED TO THE OPTION PROPERTY SOLD: It is agreed that
the following language shall be incorporated into the Grant Deed to the Option
Property sold to Optionee hereunder:
1. Grantee, prior to building any buildings or making any
material improvements on the subject property shall submit the building plans
and specifications, building colors and landscaping plans, and obtain Grantor's
written approval of the same. Said approval shall not be unreasonably withheld
and shall be promptly given, providing that: (a) the architecture of any
building(s) to be constructed on the property deeded by Grantor to Grantee
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Initial: ALK JA NHC
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<PAGE>
under this deed shall be similar and generally compatible with the architecture
of the building previously developed by Grantor for Grantee under the Building 6
Lease; (b) a landscape area is developed along the frontage of the street(s) and
will be located between the street and parking area closest to the street; and
(c) a perimeter driveway is developed in front of the building(s) which
generally runs near and parallel with the street(s).
2. Grantee shall maintain at all times and keep in first class
condition all landscaping, driveways, and the exterior of the building(s) and/or
improvements approved by Grantor in subsection (1) above, and shall not make
material changes in the landscaping, driveways and exterior of the building
without the Grantor's written consent, which shall be promptly given and not
unreasonably withheld.
3. No outside storage, change of building color, additions to
the building or signs shall be permitted without the Grantor's written approval,
which shall be promptly given and not unreasonably withheld.
4. "Grantor" as used herein shall mean and refer to the owner
of Building 6 (APN 086-02-039).
5. The restrictions contained in (1), (2), (3) and (4) above
shall be binding upon and inure to the benefit of the heirs, administrators,
successors, and assigns of the parties hereto for a period of twenty-five (25)
years from the recording of this deed.
I. COSTS: Taxes and assessments shall be paid by Optionee pursuant to
Article I Section C, and Optionee shall pay one hundred percent (100%) of the
title and title insurance costs, escrow fees, CLTA title policy, recording fees,
documentary stamps, transfer taxes, and all other normal closing costs.
J. TERMINATION OF OPTIONEE'S RIGHTS: In the event (i) Optionee does not
elect to timely purchase the Option Property as provided for above, or (ii)
Optionee does not close escrow within the prescribed period of time after
electing to purchase the Option Property, or (iii) Optionee is in default under
any of the terms, covenants or conditions of the Building 6 Lease, and such
default has not been cured within the period provided for in the Building 6
Lease, and Optionor has given written notice to Optionee of its intent to
terminate this Agreement because of such default, or (iv) Optionee is in
material default under any provisions of the Construction Letter Agreement
related to the Building 6 Lease and fails to cure such default within three (3)
days after written notice of a monetary default or within ten (10) days after
written notice of any other default (provided if the default cannot reasonably
be cured within such ten (10) day period Optionee shall not be in default, if it
promptly commences the cure and thereafter diligently prosecutes the cure to
completion), or (v) Optionee is in default of any of the terms and conditions of
this Agreement, and (A) fails to cure such default within three (3) days after
written notice thereof in the case of a failure to pay any sums owing from
Optionee hereunder, or (B) fails to cure a default in its performance of any
other term or covenant to be kept by Optionee hereunder, within ten (10) days
after written notice of such default from Optionor, then it is agreed that all
of the Optionee's rights with respect to this Option Agreement and the Option
Property shall terminate if Optionor so elects, at Optionor's sole discretion,
by giving written notice of such termination to Optionee, at which time this
option shall terminate, in which event any prepaid option consideration related
to this Agreement will be prorated to the date of such termination by Optionor,
and Optionee will remain liable for payment of the option consideration as set
forth in Article I Section C above through the termination date of this
Agreement by Optionor and shall be refunded that portion of the consideration
attributable to a period of time after termination.
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Initial: ALK JA NHC
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<PAGE>
ARTICLE III
GENERAL
A. NOTICES: Notices given hereunder shall be given either personally or
by registered or certified mail, postage prepaid, addressed to the parties as
hereinbelow set forth:
Optionor: JOHN ARRILLAGA and RICHARD T. PEERY
2560 Mission College Boulevard, Suite 101
Santa Clara, CA 95054
Copy to: RICHARD T. PEERY
2200 Cowper Street
Palo Alto, CA 94301
Optionee: QUANTUM CORPORATION
500 McCarthy Boulevard
Milpitas, CA 95035
Attention: Joe Rogers, CFO
or at such other address as either party may hereafter designate in writing to
the other.
B. ATTORNEYS FEES: In any action which may be brought to enforce the
provisions of this Agreement, the prevailing party in such action shall be
entitled to recover from the other party a reasonable attorney's fee in addition
to costs and necessary disbursements.
C. ASSIGNMENT: Optionee may not, under any circumstances, assign its
rights under this Agreement to a third party, it being understood that this
right is granted strictly to Optionee, and to no other party. Notwithstanding
the foregoing, Optionee may assign its interest in this Agreement to a
corporation which results from a merger, consolidation or other reorganization
in which Optionee is not the surviving corporation, or to a corporation which
permanently purchases or otherwise permanently acquires 95% or more of the
assets of Optionee; provided however, in the event, if in any such assignment
there is not a complete transfer of all of the assets from Optionee to such
permitted assignee, and Optionee continues to exist as a separate entity, the
permitted assignee and Optionee shall be jointly and severally liable for the
full terms and conditions of this Agreement.
D. BINDING EFFECT: This Agreement shall inure to the benefit of and
shall be binding upon the heirs, personal representatives, successors, and
assigns of the parties hereto.
E. OPTIONOR'S REPRESENTATION TO OPTIONEE AND TESTING: Regarding
Hazardous Materials or toxic wastes on the Option Property subject to this
Agreement:
(1) Optionor hereby makes the following representations to
Optionee regarding Hazardous Materials and toxic wastes on the Option Property,
each of which is made only to the best of Optionor's knowledge as of the date
Optionor executes this Agreement, without any inquiry or investigation having
been made by Optionor regarding this subject, nor does Optionor have any
obligation to investigate or make inquiry regarding the subject inasmuch as
Optionee is conducting its own soil and water investigation of the Option
Property prior to, and within thirty (30) days following its execution of this
Agreement:
(a) The soil and ground water on or under the Option
Property does not contain Hazardous Materials in amounts which violate any laws
to the extent that any governmental entity could require Optionor to take any
remedial action with respect to such Hazardous Materials.
Initial: ALK JA NHC
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<PAGE>
(b) During the time that Optionor has owned the
Option Property Optionor has received no notice of (i) any violation, or alleged
violation, of any law that has not been corrected to the satisfaction of the
appropriate authority, (ii) any pending claims relating to the presence of
Hazardous Material on the Option Property, or (iii) any pending investigation by
any governmental agency concerning the Option Property relating to Hazardous
Materials.
(2) Optionor or Optionee may, at any time, conduct soil
sampling of, and/or cause testing wells to be installed on the Option Property,
and may cause the soil and the ground water to be tested to detect the presence
of Hazardous Material by the use of such tests as are then customarily used for
such purposes. Testing wells installed by Optionee shall be paid for by
Optionee. Prior to the expiration or termination of the Option Period, Optionee
shall attempt to ascertain in writing from Optionor if Optionor wants Optionee
to remove any and/or all testing wells it has installed at the Option Property,
and return the Option Property to the condition existing prior to the
installation of such wells.
(3) If any tests performed by Optionor or Optionee during the
Option Period disclose Hazardous Materials (at or above then current action
levels as required by the governing agency) at the Option Property which are not
the responsibility of Optionee pursuant to the Building 6 Lease, prior to
Optionor and Optionee entering into a lease for the Option Property, Optionor at
its expense will promptly take all action required by law with respect to the
existence of such materials at the Option Property, except for dumping of
hazardous waste or toxic materials originating on the surface of the Option
Property after the date this Agreement is executed by all parties, which shall
be Optionee's obligation to promptly clean up and remove, and to pay for the
cost of such clean up and removal; provided, however, Optionee shall have no
responsibility whatsoever, including any obligation to clean up and remove any
Hazardous Materials or toxic wastes originating on the surface of the Option
Property because of the storage, use, disposal or transportation of such
materials or wastes by any of Optionor's contractors or otherwise arising out of
construction work performed by or under the direction of Optionor on the Option
Property, and Optionor shall be responsible for all required actions with
respect to such materials and wastes as provided above in this subsection (3).
Optionee's obligations with respect to Hazardous Materials or toxic wastes
thereafter originating on the surface of the Option Property shall terminate if
Optionee terminates its option, unless such wastes or materials originated on
the surface of the Option Property prior to such termination or originated from
the premises leased by Optionee under the Building 6 Lease or the Building
leased from Optionor by Optionee located at 1140 Technology Drive, 500 McCarthy
Blvd., 900 Sumac Drive, 1000 Sumac Drive, and 1101 Sumac Drive, in Milpitas
California. Notwithstanding the foregoing, if Optionee purchases the Option
Property, Optionor shall not be responsible for the clean up or removal of any
such toxic wastes and/or Hazardous Materials, as Optionee is buying the Option
Property "as is" and shall assume any and all responsibility for same.
(4) The obligations of Optionor and Optionee under this
Section F shall survive the expiration or earlier termination of this Agreement.
(5) If within thirty (30) days after this Agreement is signed
by Optionor and Optionee, any tests performed by Optionee disclose Hazardous
Materials or toxic wastes in material amounts which violate any laws to the
extent any governmental entity could require an owner or occupier of the Option
Property to take any remedial action with respect to such materials or wastes,
then Optionee shall have the right by written notice to Optionor, to
simultaneously terminate this Agreement and all other agreements between the
parties relative to the Option Property. Optionor may elect, at Optionor's sole
and absolute discretion, to remediate or haul away the Hazardous Materials or
toxic waste. In the event Optionor elects to remediate or haul away the
Hazardous Materials or toxic waste, Optionee will not have the option to
terminate any of the Agreements as outlined above.
F: RIGHTS AND OBLIGATIONS WITH RESPECT TO OPTION PROPERTY: Optionee
shall have the right to fence the Option Property, but except as provided in
this Section, Optionee shall not have the right to use the Option Property prior
to an exercise of the
Initial: ALK JA NHC
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-12-
<PAGE>
option. Optionee shall, for any portion of the Option Property for which the
option has not been terminated, either arrange to have such portion of the
Option Property farmed, or periodically disked to control the growth of weeds
and keep the Option Property neat and clean and free from debris of any kind and
all at Optionee's cost and expense. Optionor agrees not to grant any other
person or entity the right to use the Option Property without the prior written
consent of Optionee, which shall not be unreasonably withheld or delayed.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date last written below.
OPTIONOR:
RICHARD T. PEERY SEPARATE PROPERTY TRUST
By /s/ Richard T. Peery
--------------------------------------------------
Richard T. Peery, Trustee
Date: 6/26/97
--------------------------------------------------
JOHN ARRILLAGA SURVIVOR'S TRUST
By /s/ John Arrillaga, Trustee
--------------------------------------------------
John Arrillaga, Trustee
Dated: 6/30/97
--------------------------------------------------
OPTIONEE:
QUANTUM CORPORATION,
a Delaware corporation
By /s/ Andrew Kryder
--------------------------------------------------
Andrew Kryder, Vice President Finance and Corporate
General Counsel
Dated: June 25, 1997
--------------------------------------------------
By /s/ Norm Claus
--------------------------------------------------
Norm Claus, Vice President Real Estate and Corporate
Services
Date: June 25, 1997
--------------------------------------------------
Initial: ALK JA NHC
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<PAGE>
Quantum 5
AMENDMENT NO. 1
TO LEASE
THIS AMENDMENT NO. I is made and entered into this 16th day of April,
1997, by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated
7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) (previously known as the "John
Arrillaga Separate Property Trust") as amended, and RICHARD T. PEERY, Trustee,
or his Successor Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY
TRUST) as amended, collectively as LANDLORD, and QUANTUM CORPORATION, a Delaware
corporation, as TENANT.
RECITALS
A. WHEREAS, by Lease Agreement dated March 23, 1994 Landlord leased to
Tenant all of that certain 94,484+ square foot building located at 1101 Sumac
Drive, Milpitas, California, the details of which are more particularly set
forth in said March 23, 1994 Lease Agreement, and
B. WHEREAS, said Lease was amended by the Commencement Letter dated
December 15, 1994 which established the January 1, 1995 Commencement Date of the
Lease, and the Termination Date of September 30, 2006, and,
C. WHEREAS, it is now the desire of the parties hereto to amend the
Lease by (i) extending the Term for five (5) years pursuant to Lease Paragraph
41 ("First Five-Year Option to Extend"), (ii) amending the Basic Rent schedule
and Aggregate Rent, (iii) adding a Third Option to Extend, (vi) amending
Paragraphs 47 ("Cross Default") and 12 ("Property Insurance"), (v) replacing
Lease Paragraph 52 ("Structural Capital Costs Regulated by Governmental Agencies
After the Commencement of this Lease not Caused by Tenant or Tenant's Uses or
Remodeling of the Premises"), and (vi) amending and/or replacing certain
provisions of the Lease commencing as of the commencement of the Third Extended
Term of said Lease Agreement as hereinafter set forth.
AGREEMENT
NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:
1. TERM OF LEASE: It is agreed between the parties that Tenant has
exercised its First Five-Year Option to Extend said Lease as detailed in Lease
Paragraph 41. Pursuant to the terms of said Paragraph 41, the Term of said Lease
Agreement shall be extended for an additional five (5) year period from the
schedule Lease Termination Date of September 30, 2006; therefore the Lease
Termination Date shall be changed from September 30, 2006 to September 30, 2011.
2. CONCURRENT EXERCISE OF OPTION TO EXTEND: Pursuant to Lease Paragraph
40C ("Lease Terms Co-Extensive"), it is understood between the parties that if
Tenant exercises its Option to Extend this Lease, the terms of the Building 1,
Building 2, Building 3 and Building 4 Leases (the "Existing Leases") are to be
extended accordingly. The monthly Basic Rent during the extended term under each
of the Leases shall be increased by $.05 per square foot on the commencement
date of the extended term and thereafter on each and every anniversary of the
respective lease commencement date; therefore, concurrently with the execution
of this Amendment No. 1, Landlord and Tenant shall execute amendments to the
Existing Leases, extending the terms of each of the Existing Leases for five
years pursuant to said lease's respective First Five-Year Option to Extend. It
is also understood that in the event Tenant (i) exercises any of its Options to
Extend this Lease, or if Tenant exercises any of its Options to Extend any of
the Existing Leases, each of the five Leases shall be extended accordingly.
3. BASIC RENTAL FOR EXTENDED TERM OF LEASE: The monthly Basic Rental
for the Extended Term of Lease shall be as follows:
On October 1, 2006, the sum of ONE HUNDRED EIGHTY ONE THOUSAND FOUR
HUNDRED NINE AND 28/100 DOLLARS ($181,409.28) shall be due, and a like sum due
on the first day of each month thereafter through and including September 1,
2007.
JA
Initial: ALK
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<PAGE>
Quantum 5
On October 1, 2007, the sum of ONE HUNDRED EIGHTY SIX THOUSAND ONE
HUNDRED THIRTY THREE AND 48/100 DOLLARS ($186,133.48) shall be due, and a like
sum due on the first day of each month thereafter through and including
September I, 2008.
On October 1, 2008, the sum of ONE HUNDRED NINETY THOUSAND EIGHT
HUNDRED FIFTY SEVEN AND 68/100 DOLLARS ($190,857,68) shall be due, and a like
sum due on the first day of each month thereafter through and including
September 1, 2009.
On October 1, 2009, the sum of ONE HUNDRED NINETY FIVE THOUSAND FIVE
HUNDRED EIGHTY ONE AND 88/100 DOLLARS ($195,581.88) shall be due, and a like sum
due on the first day of each month thereafter through and including September 1,
2010.
On October 1, 2010, the sum of TWO HUNDRED THOUSAND THREE HUNDRED SIX
AND 08/100 DOLLARS ($200,306.08) shall be due, and a like sum due on the first
day of each month thereafter through and including September 1,2011.
The Aggregate Basic Rent for the Lease shall be increased by
$11,451,460.80 or from $21,171,029.88 to $32,622,490.68.
4. THIRD FIVE-YEAR OPTION TO EXTEND: Provided Tenant has extended the
Lease for an additional five (5) year period pursuant to Lease Paragraph 42
("Second Five Year Option To Extend"), Landlord hereby grants to Tenant a third
option to extend the Term of this Lease for an additional five (5) year period
upon the following terms and conditions:
A. Tenant shall give Landlord written notice of Tenant's exercise of
this option to extend at least one hundred eighty (180) days prior to the
expiration of the Lease Term as extended pursuant to Lease Paragraph 42 ("Second
Five Year Option To Extend"), in which event the Lease shall be considered
extended for an additional five (5) year period upon the same terms and
conditions as this Lease, absent this Paragraph 4 and subject to the Rental as
set forth below. In the event that Tenant fails to timely exercise Tenant's
option as set forth herein in writing, Tenant shall have no further option to
extend this Lease or the Other Leases, and this Lease shall continue in full
force and effect for the full remaining term hereof, absent this Paragraph 4.
B. The monthly Basic Rent for the option period shall be as follows in
the event the option is exercised:
Period Monthly Basic Rent
- ------ ------------------
Months 1-12 $2.42/sf
Months 13-24 $2.47/sf
Months 25-36 $2.52/sf
Months 37-48 $2.57/sf
Months 49-60 $2.62/sf
C. Notwithstanding anything contained herein, Tenant may not exercise
the option to extend granted by this Paragraph 4 at any time that Tenant is in
default (default for monetary and material default for non-monetary) of its
obligations under this Lease, if Tenant has received written notice from
Landlord that Tenant is in default, and such default has not been timely cured
within the time period provided for in this Lease; provided, however, that if
such default of Tenant is not for money due under this Lease and cannot be
cured, and if Landlord does not elect to terminate this Lease as a result of
such non-curable default by Tenant, Tenant may exercise the option to extend
granted by this Paragraph 4 notwithstanding such non-curable default.
5. CROSS DEFAULT: Notwithstanding anything to the contrary in Paragraph
47 of this Lease, said Paragraph 47 is hereby amended to include the following:
"Landlord shall have the option of considering a default under this Lease or a
default under any of the Existing Leases (i.e. the leases for Building 1,
Building 2, Building 3 and Building 4)to be a default under all such leases,
only with respect to such leases under which Landlord is also the 'Landlord' at
the time such default occurs. By way of example, if at the time a default of
Tenant occurs under this Lease, Landlord has sold the premises described in any
of the Existing Leases and is no longer the 'Landlord' thereunder, then a
JA
Initial: ALK
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<PAGE>
Quantum 5
default under this Lease shall not constitute a default under any of such
Existing Leases so sold by Landlord (unless the premises leased under this Lease
and the Existing Leases are sold to the same entity), and a default by Tenant
under any of such Existing Leases so sold by Landlord shall not constitute a
default under this Lease or any other of the Existing Leases then remaining
between Landlord and Tenant. However, if the Landlord under this Lease and the
Existing Leases is one in the same at the time of said default, said cross
default provisions shall apply."
6. PROPERTY INSURANCE: Lease Paragraph 12 ("Property Insurance") is
hereby amended to include the following: "Tenant acknowledges that as part of
the cost of insurance policies for the Premises, Tenant is responsible for the
payment of insurance deductibles on insurance claims as they relate to the
Premises subject to the limitations provided in Lease Paragraph 54 ("Property
Insurance") which limitations are applicable only during the initial Lease Term
and the First Lease Extension Period and the Second Lease Extension Period. Said
limitation provided for in Lease Paragraph 54 are null and void at the
commencement of the Third Lease Extended Term".
7. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL AGENCIES AFTER
THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR TENANT'S USES OR
REMODELING OF THE PREMISES: Lease Paragraph 52 ("Structural Capital Costs
Regulated by Governmental Agencies after the Commencement of this Lease Not
Caused by Tenant or Tenant's Uses or Remodeling of the Premises") is hereby
deleted and replaced with the following:
"52. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL
AGENCIES AFTER THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR
TENANT'S USES OR REMODELING OF THE PREMISES: The provisions of this
Paragraph 52 shall modify Paragraphs 7 and 14:
A. If (i) during the last five (5) years of the First Extended
Term of the Lease if said Lease has not been extended as provided for
in Lease Paragraph 42 ("Second Five Year Option To Extend") or in
Paragraph 4 ("Third Five Year Option to Extend") above or Lease
Paragraph 40C ("Lease Terms Co-Extensive"), or (ii) during either of
the five (5) year extension periods permitted by Lease Paragraph 42 or
Paragraph 4 above, or Lease Paragraph 40C above, it becomes necessary
(due to any governmental requirement for continued occupancy of the
Premises) to make structural improvements required by laws enacted or
legal requirements imposed by governmental agency(s) after the
Commencement Date, and the cost for each required work or improvements
exceeds $100,000, then if such legal requirement is not imposed because
of Tenant's specific use of the Premises and is not "triggered" by
Tenant's Alterations or Tenant's application for a building permit or
any other governmental approval (collectively "Tenant's Actions") in
which instance Tenant shall be responsible for 100% of the cost of such
improvements, Landlord shall be responsible for paying the cost of such
improvement and constructing such improvement, subject to a cash
contribution from Tenant of a portion of the cost thereof as provided
for and calculated in Paragraph 52B.
B. When Landlord makes an improvement pursuant to Paragraph
52A, and as a condition to Landlord's obligation to construct such
improvement, Tenant shall make the following contribution in cash to
Landlord for the cost thereof prior to the commencement of the work by
Landlord. It is agreed that Tenant shall pay to Landlord 100% of the
cost of the first $100,000.00 worth of each improvement. After the
first $100,000.00, all costs above $100,000.00 shall be divided by 15
and multiplied by the time period remaining in the last five years of
the Lease Term from the date work on such improvement commences.
For example, if the improvement is not required as a result of
Tenant's Actions and if the cost of such improvement was $400,000 and
there was one year and six months remaining in the Lease term when the
work commenced, then Tenant would be responsible for reimbursing
Landlord in cash $130,000.00 computed as follows:
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Total Cost of Work $400,000.00
Tenant Responsible for
1st $100,000 - 100,000.00
Total Amount To Be Amortized $300,000.00
$300,00,0.00/15 = $20,000.00/yr. x 1.5 yrs = $ 30,000.00
Tenant responsible for $100,000 + $30,000.00 = $130,000.00
C. If Landlord has made improvements, for which Tenant has
reimbursed Landlord for the cost thereof pursuant to Paragraph 52B, and
the term of this Lease is subsequently extended pursuant to the
exercise by Tenant of an option to renew pursuant to Lease Paragraph 42
or Paragraph 4 above, upon the exercise of any such option by Tenant,
Tenant shall pay to Landlord an additional sum equal to the total
amount of said improvement less the amount previously paid for by
Tenant. Using the example in Paragraph 52B above, Tenant would owe
Landlord the additional amount of $270,000.00 ($400,000.00 -
$130,000.00 = $270,000.00)."
8. THIRD OPTION PERIOD - LEASE PROVISION CHANGES: In the event Tenant
exercises its Third Option to Extend as provided for in Paragraph 4 above, the
following amendments (contained within Paragraphs 9 through 18) are herein made
to the Lease to be effective upon the commencement of the third option period
("Third Option Period"), or during any period following the expiration of the
Lease Term or expiration of the Lease when Tenant is in possession of the
Premises.
9. LATE CHARGE: Effective as of the first day of the Third Option
Period, the Late Charge referenced in Lease Paragraph 4.D ("Late Charge") shall
be changed from five percent (5 %) to ten percent (10%), and Lease Paragraph 49
("Limitation on Late Charge") shall be deleted in its entirety and of no further
force or effect.
10. MANAGEMENT FEE: Notwithstanding anything to the contrary in the
Lease, effective as of the first day of the Third Option Period, and on the
first day of each month thereafter, Tenant shall pay to Landlord, in addition to
the Basic Rent and Additional Rent, a fixed monthly management fee ("Management
Fee") equal to one percent (1%) of the Basic Rent due for each month during the
Lease Term.
11. HAZARDOUS MATERIALS: Effective as of the first day of the Third
Option Period, Lease Paragraph 44 ("Hazardous Materials") shall be deleted in
its entirety and replaced with the following:
"44. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows
with respect to the existence or use of "Hazardous Materials" (as
defined herein) on, in, under or about the Premises and real property
located beneath said Premises, which includes the entire parcel of land
on which the Premises are located as shown in Green on Exhibit A to the
Lease (hereinafter collectively referred to as the "Property"):
A. As used herein, the term "Hazardous Materials" shall mean
any material, waste, chemical, mixture or byproduct which is or
hereafter is defined, listed or designated under Environmental Laws
(defined below) as a pollutant, or as a contaminant, or as a toxic or
hazardous substance, waste or material, or any other unwholesome,
hazardous, toxic, biohazardous, or radioactive material, waste,
chemical, mixture or byproduct, or which is listed, regulated or
restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions
thereof, polychlorinated biphenyls, or asbestos). As used herein, the
term "Environmental Laws" shall mean any applicable Federal, State of
California or local government law (including common law), statute,
regulation, rule, ordinance, permit, license, order, requirement,
agreement, or approval, or any determination, judgment, directive, or
order of any executive or judicial authority at any level of Federal,
State of California or local government
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(whether now existing or subsequently adopted or promulgated) relating
to pollution or the protection of the environment, ecology, natural
resources, or public health and safety.
B. Tenant shall notify Landlord prior to the occurrence of any
Tenant's Hazardous Materials Activities (defined below). Landlord
acknowledges that Tenant shall use, in compliance with applicable
Environmental Laws, customary household and office supplies (Tenant
shall first provide Landlord with a list of said materials use), such
as mild cleaners, lubricants and copier toner. Any and all of Tenant's
Hazardous Materials Activities shall be conducted in conformity with
this Paragraph 44, Paragraph 14 of this Lease, and in compliance with
all Environmental Laws and regulations. As used herein, the term
"Tenant's Hazardous Materials Activities" shall mean any and all use,
handling, generation, storage, disposal, treatment, transportation,
release, discharge, or emission of any Hazardous Materials on, in,
beneath, to, from, at or about the Property, in connection with
Tenant's use of the Property, or by Tenant or by any of Tenant's
agents, employees, contractors, vendors, invitees, visitors or its
future subtenants or assignees or other third parties (including
"dumping" by others) (or which Hazardous Materials originate on the
surface of the Premises any time on or after the Commencement Date of
this Lease, but excluding Hazardous Materials on the Premises prior to
the Lease Commencement Date because of the storage, use, disposal, or
transportation of such materials or waste by any of Landlord's
contractors or otherwise arising out of construction work performed by
or under the direction of Landlord on the Premises and Landlord shall
be responsible for all required actions with respect to such materials
or wastes). Tenant agrees to provide Landlord with prompt written
notice of any spill or release of Hazardous Materials at the Property
during the term of the Lease of which Tenant becomes aware, and further
agrees to provide Landlord with prompt written notice of any violation
of Environmental Laws in connection with Tenant's Hazardous Materials
Activities of which Tenant becomes aware. If Tenant's Hazardous
Materials Activities involve Hazardous Materials other than normal use
of customary household and office supplies, Tenant also agrees at
Tenant's expense: (i) to install such Hazardous Materials monitoring,
storage and containment devices as may be required by Environmental
Laws, regulations and/or governing agencies; (ii) to provide Landlord
with a written inventory of such Hazardous Materials, including an
update of same each year upon the anniversary date of the Commencement
Date of the Lease ("Anniversary Date"); and (iii) on each Anniversary
Date to provide to Landlord copies of all documentation and records,
required by applicable Environmental Laws to be prepared and submitted
to governmental authorities, relating to use at the Property of
Hazardous Materials or to Tenant's Hazardous Materials Activities, if
any. If upon completion of Landlord's review of said documentation and
records, Landlord reasonably questions if Tenant is in compliance with
all applicable Environmental Laws with respect to Tenant's Hazardous
Materials Activities, Tenant agrees within thirty (30) days following
receipt of written notice from Landlord, to retain a qualified
environmental consultant, acceptable to Landlord, to evaluate whether
Tenant is in compliance with all applicable Environmental Laws with
respect to Tenant's Hazardous Materials Activities. Tenant, at its
expense, shall submit to Landlord a report from such environmental
consultant which discusses the environmental consultant's findings
within two (2) months of each Anniversary Date. Tenant, at its expense,
shall promptly undertake and complete any and all steps necessary, and
in full compliance with applicable Environmental Laws, to fully correct
any and all problems or deficiencies identified by the environmental
consultant, and promptly provide Landlord with documentation of all
such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at
its expense, shall (i) properly remove from the Property all Hazardous
Materials which come to be located at the Property in connection with
Tenant's Hazardous Materials Activities, and (ii) fully comply with and
complete all facility closure requirements of applicable Environmental
Laws regarding Tenant's Hazardous Materials Activities, including but
not limited to (x) properly restoring and repairing the Property to the
extent damaged by such closure activities, and (y) obtaining from the
local Fire Department or other appropriate governmental authority with
any legal or regulatory jurisdiction a written concurrence that closure
has been completed in compliance with applicable
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Enviroamental Laws. Tenant shall promptly provide Landlord with copies
of any claims, notices, work plans, data and reports prepared, received
or submitted in connection with any such closure activities.
D. If Landlord, upon consultation with Tenant, reasonably
concludes that the Property has become contaminated as a result of
Tenant's Hazardous Materials Activities, Landlord in addition to any
other rights it may have under this Lease or under Environmental Laws
or other laws, may enter upon the Property and conduct inspection,
sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of
determining the nature and extent of such contamination except to the
extent that such activities may be inconsistent with Tenant's
compliance with Environmental Laws. Tenant shall promptly reimburse
Landlord for the costs of such an investigation, including but not
limited to reasonable attorneys' fees Landlord incurs with respect to
such investigation to the extent, and only to the extent, that it that
discloses Hazardous Materials contamination for which Tenant is liable
under this Lease. Except as may be required of Tenant by applicable
Environmental Laws, Tenant shall not perform any sampling, testing, or
drilling to identify the presence of any Hazardous Materials at the
Property, without Landlord's prior written consent which shall not be
unreasonably withheld. Tenant shall promptly provide Landlord with
copies of any claims, notices, work plans, data and reports prepared,
received or submitted in connection with any sampling, testing or
drilling performed pursuant to the preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel
acceptable to Landlord, whose consent shall not unreasonably be
withheld) and hold harmless Landlord, its employees, assigns,
successors, successors-in-interest, agents and representatives from and
against any and all claims (including but not limited to third party
claims from a private party or a government authority), liabilities,
obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including
but not limited to reasonable attorneys', consultants' and other
experts' fees and costs), and damages, which arise from or relate to:
(i) Tenant's Hazardous Materials Activities; (ii) any Hazardous
Materials contamination caused by Tenant prior to the Commencement Date
of the Lease; or (iii) the breach of any obligation of Tenant under
this Paragraph 44 (collectively, "Tenant's Environmental
Indemnification"). Tenant's Environmental Indemnification shall include
but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution
in fair market value of the Property. Tenant's Environmental
Indemnification shall further include but is not limited to the
obligation to diligently and properly implement to completion, at
Tenant's expense, any and all environmental investigation, removal,
remediation, monitoring, reporting, closure activities, or other
environmental response action as may be required by applicable
Environmental Laws, regulations or governing agencies (collectively,
"Response Actions"). Tenant shall promptly provide Landlord with copies
of any claims, notices, work plans, data and reports prepared, received
or submitted in connection with any Response Actions.
F. Landlord hereby makes the following representations to
Tenant, each of which is made only to the best of Landlord's knowledge
as of the date Landlord executes this Lease, without any inquiry or
investigation having been made or required by Landlord regarding this
subject, nor does Landlord have any obligation to investigate or make
inquiry regarding the subject:
(1) The soil and ground water on or under the Premises does
not contain Hazardous Materials in amounts which violate any laws to
the extent that any governmental entity could require either Landlord
or Tenant to take any remedial action with respect to such Hazardous
Materials.
(2) During the time that Landlord has owned the Premises,
Landlord has received no notice of (i) any violation, or alleged
violation, of any law that has not been corrected to the satisfaction
of the appropriate authority, (ii) any pending claims relating to the
presence of Hazardous Material on the Premises, or (iii) any pending
investigation by any governmental agency concerning the Premises
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relating to Hazardous Materials.
G. Landlord and Tenant shall each give written notice to the
other as soon as reasonably practicable of (i) any communication
received from any governmental authority concerning Hazardous Materials
which relates to the Premises, and (ii) any contamination of the
Premises by Hazardous Materials which constitutes a violation of any
law. Attached as Exhibit "C" to the Lease is a list of Hazardous
Materials that Tenant intends to use at the Premises. If during the
Lease Term Tenant proposes to use other Hazardous Materials at the
Premises, Tenant shall inform Landlord of such use, identifying the
Hazardous Materials and the manner of their use, storage and disposal,
and shall agree (i) to use, store and dispose of such Hazardous
Materials strictly in compliance with all laws, regulations and
governing agencies and (ii) that the indemnity set forth in Paragraph
44 shall be applicable to Tenant's use of such Hazardous Material.
H. Landlord or Tenant may, at any time, cause testing wells to
be installed on the Premises, and may cause the ground water to be
tested to detect the presence of Hazardous Material by the use of such
tests as are then customarily used for such purposes. Testing wells
installed by Tenant shall be paid for by Tenant. If tests conducted by
Landlord disclose that Tenant has violated any Hazardous Materials,
laws, or Tenant or parties on the Premises during the Term of this
Lease have contaminated the Premises as determined by regulatory
agencies pursuant to Hazardous Materials laws, or that Tenant has
liability to Landlord pursuant to Paragraph 44A, then Tenant shall pay
for 100 percent of the cost of the test and all related expense. Prior
to the expiration of the Lease Term, Tenant shall remove any testing
wells it has installed at the Premises, and return the Premises to the
condition existing prior to the installation of such wells, unless
Landlord requests in writing that Tenant leave all or some of the
testing wells in which instance the wells requested to be left shall
not be removed.
I. If any tests performed by Tenant or Landlord prior to the
Commencement Date disclose Hazardous Materials at the Premises,
Landlord at its expense will promptly take all reasonable action
required by law with respect to the existence of such Hazardous
Materials at the Premises. The Commencement Date shall not be delayed
because of such action by Landlord unless occupation of the Premises is
prohibited by law.
J. The obligations of Landlord and Tenant under this Paragraph
44 shall survive the expiration or earlier termination of the Term of
this Lease. The rights and obligations of Landlord and Tenant with
respect to issues relating to Hazardous Materials are exclusively
established by this Paragraph 44."
12. REAL ESTATE TAXES: Effective as of the first day of the Third
Option Period, Lease Paragraph 53 ("Real Estate Taxes") shall be deleted in its
entirety and replaced with the following:
"53. REAL PROPERTY TAXES: Paragraph 9 is modified by the
following:
A. The term "Real Property Taxes" shall not include charges,
levies or fees directly related to the use, storage, disposal or
release of Hazardous Materials on the Premises unless directly related
to Tenant's Activities at this site or on other sites leased and/or
owned by Tenant; however, Tenant shall be responsible for general or
special tax and/or assessments (related to Hazardous Materials and/or
toxic waste) imposed on the Property provided said special tax and/or
assessment is not imposed due to on-site originated contamination on
the Property (by third parties not related to Tenant) prior to the
Lease Commencement Date. Subject to the terms and conditions stated
herein, Tenant shall be responsible for paying one hundred percent (100
%) of said taxes and/or assessments allocated to the Property.
B. If any assessments for public improvements are levied
against the Premises, Landlord may elect either to pay the assessment
in full or to allow the asessment to go to bond. If Landlord pays the
assessment in full, Tenant shall pay to Landlord or any
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assignee or purchaser of the Premises each time payment of Real
Property Taxes is made a sum equal to that which would have been
payable (as both principal and interest) had Landlord allowed the
assessment to go to bond.
C. Tenant at its cost shall have the right, at any time, to
seek a reduction in the assessed valuation of the Premises or to
contest any Real Property Taxes that are to be paid by Tenant. If
Tenant seeks a reduction or contests such Real Property Taxes, the
failure on Tenant's part to pay such Real Property Taxes being so
contested shall not constitute a default so long as Tenant complies
with the provisions of this Paragraph. Landlord shall not be required
to join in any proceeding or contest brought by Tenant unless the
provisions of any law require that the proceeding or contest be brought
by or in the name of Landlord. In that case Landlord shall join in the
proceedlngs or contest or permit it to be brought in Landlord's name as
long as Landlord is not required to bear any cost. Tenant, on final
determination of the proceeding or contest, shall immediately pay or
discharge its share of any Real Property Taxes determined by any
decision or judgment rendered, together with all costs, charges,
interest, and penalties incidental to the decision or judgment. If
Tenant does not pay the Real Property Taxes when due pursuant to the
Lease and Tenant seeks a reduction or contests them as provided in this
paragraph, before the commencement of the proceeding or contest Tenant
shall furnish to Landlord a surety bond in form reasonably satisfactory
to Landlord issued by an insurance company qualified to do business in
California. The amount of the bond shall equal 125 % of the total
amount of Real Property Taxes in dispute and any such bond shall be
assignable to any lender or purchaser of the Premises. The bond shall
hold Landlord and the Premises harmless from any damage arising out of
the proceeding or contest and shall insure the payment of any judgment
that may be rendered."
13. PROPERTY INSURANCE: Effective as of the first day of the Third
Option Period, section B of Lease Paragraph 54 ("Property Insurance") shall be
deleted in its entirety and be of no further force or effect.
14. ASSIGNMENT AND SUBLETTING: Effective as of the first day of the
Third Option Period, Lease Paragraph 55 ("Assignment and Subletting") shall be
deleted in its entirety and replaced with the following:
"55. ASSIGNMENT AND SUBLETTING: The following modifications
are made to Paragraph 16:
A. In the event that Tenant seeks to make any assignment or
sublease, then Landlord, by giving Tenant written notice of its
election within fifteen (15) days after Tenant's notice of intent to
assign or sublease has been given to Landlord, shall have the right to
elect (i) to withhold its consent to such assignment or sublease, as
permitted pursuant to Paragraph 16, or (ii) to permit Tenant to so
assign the Lease or sublease such part of the Premises, in which event
Tenant may do so, but without being released of its liability for the
performance of all of its obligations under the Lease, and the
following shall apply (except the following shall not apply to a
"Permitted Transfer" described in Paragraph 56):
(1) If Tenant assigns its interest in this Lease, then in
addition to the rental provided for in this Lease, Tenant shall pay to
Landlord fifty percent (50%) of all Rent and other consideration
received by Tenant over and above (i) the assignee's agreement to
assume the obligations of Tenant under this Lease and (ii) all
"Permitted Transfer Costs" (as defined herein) related to such
assignment. As used herein, the term "Permitted Transfer Costs" shall
mean all reasonable leasing commissions paid to third parties not
affilliated with Tenant in order to obtain the assignment or sublease
in question.
(2) If Tenant sublets all or part of the Premises, then Tenant
shall pay to Landlord in addition to the Rent provided for in this
Lease fifty percent (50%) of the positive difference, if any, between
(i) all rent and other consideration paid or provided
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to Tenant by the subtenant, less (ii) all Rent paid by Tenant to
Landlord pursuant to this Lease which is allotable to the area so
sublet and all Permitted Transfer Costs related to such sublease. After
Tenant has recovered all Permitted Transfer Cost Tenant shall pay to
Landlord the amount specified in the preceding sentence on the same
basis, whether periodic or in lump sum, that such rent and other
consideration is paid to Tenant by its subtenant, within seven (7) days
after it is received by Tenant.
3) Tenant's obligations under this subparagraph shall survive
any assignment or sublease. At the time Tenant makes any payment to
Landlord required by this subparagraph, Tenant shall deliver an
itemized statement of the method by which the amount to which Landlord
is entitled was calculated, certified by Tenant as true and correct.
Landlord shall have the right to inspect Tenant's books and records
relating to the payments due pursuant to this subparagraph. Upon
request therefor, Tenant shall deliver to Landlord copies of all bills,
invoices or other documents upon which its calculations are based.
(4) As used herein, the term "consideration" shall mean any
consideration of any kind received, or to be received (including, but
not limited to, services rendered and/or value received) by Tenant as a
result of the assignment or sublease, if such sums are paid or provided
to Tenant for Tenant's interest in this Lease or in the Premises.
(5) This Paragraph 55.A does not apply to a "Permitted
Transfer", as provided in Paragraph 56 hereof. The parties agree that
if any of the following transactions occur and do not qualify as
"Permitted Transfers", Tenant must obtain Landlord's consent to such
transaction and if Landlord consents to any of the following
transactions which do not otherwise qualify as "Permitted Transfers",
then the provisions of this Paragraph 55.A shall not apply to the
following transactions: (i) a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as 95 % of all assets and liabilities of Tenant are permanently
transferred to such assignee; and (ii) an assignment of this Lease to a
corporation which purchases or otherwise acquires 95 % or more of the
assets of Tenant so long as 95 % of all assets and liabilities of
Tenant are permanently transferred to such assignee and Tenant remains
liable and responsible under the Lease to the extent Tenant continues
in existence following such transaction."
15. PERMITtED ASSIGNMENTS AND SUBLEASES: Effective as of the first day
of the Third Option Period, Lease Paragraph 56 ("Permitted Assignments and
Subleases") shall be deleted in its entirety and replaced with the following:
"56. PERMITtED ASSIGNMENTS AND SUBLEASES: Notwithstanding
anything contained in Paragraph 16, so long as Tenant otherwise
complies with the provisions of Paragraph 16 and the Permitted Transfer
does not release Tenant from its obligations hereunder, Tenant may
enter into any of the following transfers (a "Permitted Transfer")
without Landlord's prior written consent, and the provisions of
Paragraph 55A shall not apply to any such Permitted Transfer:
A. Tenant may sublease all or part of the Premises or assign
its interest in this Lease to any corporation which controls, is
controlled by, or is under common control with Tenant by means of an
ownership interest of more than fifty percent (50 %) providing Tenant
remains liable for the payment of Rent and full performance of the
Lease;
B. Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as (i) 95 % of all assets and liabilities of Tenant are permanently
transferred to such assignee, and (ii) immediately prior to the merger,
consolidation or other reorganization, the corporation into which
Tenant is to be merged has a net worth equal to or greater than the net
worth of Tenant at the time of Lease execution or at the time of such
assignment, merger, consolidation or reorganization (whichever is
greater), or if it does not, Landlord is provided a guaranty
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of the Lease (in a form reasonably acceptable to Landlord) from a
corporation (a) that is the parent of, or is otherwise affiliated with,
the corporation into which Tenant is to be merged, and (b) which has a
current net worth equal to or greater than the net worth of Tenant at
the time of Lease execution or at the time of such assignment, merger,
consolidation or reorganization (whichever is greater). In the event
there is not a permanent transfer of 95 % or more of the assets and
liabilities from Tenant to a third party, and Tenant continues to exist
as a separate entity, both companies shall be jointly and severally
liable for the full terms and conditions of the Lease;
C. Tenant may assign this Lease to a corporation which
purchases or otherwise acquires 95 % or more of the assets of Tenant so
long as 95 % of all assets and liabilities of Tenant are permanently
transferred to such assignee (in the event there is not a permanent
transfer of 95 % or more of the assets and liabilities from Tenant to a
third party and Tenant continues to exist as a separate entity, both
companies shall be jointly and severally liable for the full terms and
conditions of the Lease), and provided that immediately prior to such
assignment said corporation, has a net worth equal to or greater than
the net worth of Tenant (a) at the time of Lease execution or (b) at
the time of such assignment (whichever is greater), or if it does not,
Landlord is provided a guaranty of the Lease (in a form reasonably
acceptable to Landlord) from a corporation (a) that is the parent of,
or is otherwise affiliated with, said corporation and (b) which has a
current net worth equal to or greater than the net worth of Tenant at
the time of Lease execution or at the time of such assignment,
(whichever is greater)."
16. DESTRUCTION: Effective as of the first day of the Third Option
Period, Lease Paragraph 61 ("Destruction") shall be deleted in its entirety and
replaced with the following:
"61. DESTRUCTION: Paragraph 21 is modified by the following:
A. Notwithstanding anything to the contrary within Paragraph
21, Landlord may terminate this Lease in the event of an uninsured
event or if insurance proceeds, net of the deductible, are insufficient
to cover one hundred percent of the rebuilding costs; provided,
however, Tenant shall have the right to elect, in its discretion, to
contribute such excess funds to permit Landlord to repair the Premises.
B. Except as provided in Paragraph 61C, Landlord may not
terminate the Lease if the Premises are damaged by a peril whereby the
cost to replace and/or repair is one hundred percent (100 %) covered by
the insurance carried by Landlord pursuant to Paragraph 12, but instead
shall restore the Premises in the manner described by Paragraph 21.
C. If the Premises are damaged by a peril covered by the
insurance carried by Landlord pursuant to Paragraph 12, Landlord shall
have the option to terminate the Lease if each of the following
conditions is satisfied: (i) the cost to repair or the damage exceeds
thirty-three percent (33 %) of the then replacement cost of the
Premises; and (ii) the damage occurs at a time when there is less than
five (5) years remaining in the term of the Lease.
D. If Landlord fails to obtain insurance as required pursuant
to Paragraph 12, and said insurance would have been available to cover
any damage or destruction to the Premises, Landlord shall be required
to rebuild, at its cost, net of the deductible which would have been
required under said insurance policy (which deductible Tenant is
required to pay).
E. If the Premises are damaged by any peril, then as soon as
reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be completed. Tenant
shall have the option to terminate this Lease in the event any of the
following occurs, which option may be exercised only by delivery to
Landlord of a written notice of election to terminate within seven (7)
days after Tenant receives from Landlord the estimate of the time
needed to complete such
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restoration:
(1) The Premises are damaged by any peril (not caused by or
resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Leased
Premises cannot be substantially completed within 180 days after the
date of such damage (subject to force majeure conditions); or
(2) The Premises are damaged by any peril (not caused by or
resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) within twelve (12) months of the last day of
the Lease term, and, in the reasonable opinion of Landlord's architect
or construction consultant, the restoration of the Leased Premises
cannot be substantially completed within sixty (60) days after the date
of such damage and Tenant has not exercised its Option to Extend said
Term (or Extended Term as the case may be)."
17. LIABILITY INSURANCE: Effective as of the first day of the Third
Option Period, the first sentence of Lease Paragraph 10 ("Liability Insurance")
shall be deleted and replaced with the following: "Tenant, at Tenant's expense,
agrees to keep in force during the Term of this Lease a policy of commercial
general liability insurance with combined single limit coverage of not less than
Two Million Dollars ($2,000,000) per occurrence for bodily injury and property
damage occurring in, on or about the Premises, including parking and landscaped
areas."
18. LIMITATION OF LIABILITY: Effective as of the first day of the Third
Option Period, Lease Paragraph 36 ("Limitation of Liability") shall be deleted
in its entirety and replaced with the following:
"36. LIMITATION OF LIABILITY In consideration of the benefits
accruing hereunder, Tenant and all successors and assigns covenant and
agree that, in the event of any actual or alleged failure, breach or
default hereunder by Landlord:
(i) the sole and exclusive remedy shall be against Landlord's interest
in the Premises leased herein;
(ii) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of
the partnership);
(iii) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the
partnership);
(iv) no partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(v) no judgment will be taken against any partner of Landlord;
(vi) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
(vii) no writ of execution will ever be levied against the assets of
any partner of Landlord;
(viii) these covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and
agreements shall be applicable to any covenant or agreement either
expressly contained in this Lease or imposed by statute or at common
law."
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions
of said March 23, 1994 Lease Agreement shall remain in full force and effect.
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Quantum 5
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
No. I to Lease as of the day and year last written below.
LANDLORD: TENANT:
JOHN ARRILLAGA SURVIVOR'S QUANTUM CORPORATION
TRUST a Delaware corporation
By /s/ John Arrillaga By /s/ Andrew Kryder
------------------ -----------------
John Arrillaga, Trustee
Andrew Kryder
Date: 6/30/97 Print or Type Name
RICHARD T. PEERY SEPARATE Title: VP FINANCE AND CORP GENERAL
PROPERTY TRUST COUNSEL
Date: 6/25/97
By /s/ Richard T. Peery
--------------------
Richard T. Peery, Trustee
Date: 6/26/97
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Quantum 4
AMENDMENT NO. 1
TO LEASE
THIS AMENDMENT NO. 1 is made and entered into this 16th day of April,
1997, by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated
7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) (previously known as the "John
Arrillaga Separate Property Trust") as amended, and RICHARD T. PEERY, Trustee,
or his Successor Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY
TRUST) as amended, collectively as LANDLORD, and QUANTUM CORPORATION, a Delaware
corporation, as TENANT.
RECITALS
A. WHEREAS, by Lease Agreement dated September 17, 1990 Landlord leased
to Tenant all of that certain 101,253+/- square foot building located at 1000
Sumac Drive, Milpitas, California, the details of which are more particularly
set forth in said September 17, 1990 Lease Agreement, and
B. WHEREAS, said Lease was amended by the Commencement Letter dated
December 6, 1991 which established the December 6, 1991 Lease Commencement Date,
and established the Termination Date of September 30, 2006, and,
C. WHEREAS, it is now the desire of the parties hereto to amend the
Lease by (i) extending the Term for five years, changing the Termination Date
from September 30, 2006 to September 30, 2011, (ii) amending the Basic Rent
schedule and Aggregate Rent accordingly, (iii) adding a third Five Year Option
to Extend, (iv) replacing Paragraphs 40C ("Lease Terms Co-extensive") and 47
("Cross Default") and 52 ("Structural Capital Costs Regulated by Governmental
Agencies After the Commencement of this Lease not Caused by Tenant or Tenant's
Uses or Remodeling of the Premises"), (v) amending Lease Paragraph 12 ("Property
Insurance") and (vi) amending and/or replacing certain provisions of the Lease
commencing as of the commencement of the Third Extended Term of said Lease as
hereinafter set forth.
AGREEMENT
NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:
1. TERM OF LEASE: It is agreed between the parties that Tenant has
exercised its First Five-Year Option to Extend the lease term of that certain
lease agreement dated March 23, 1994 for premises located at 1101 Sumac Drive,
Milpitas, California (the "Building 5 Lease"), as detailed in Paragraph 41 of
said Building 5 Lease. Paragraph 40C of said Building 5 Lease provides that in
the event the term of said Building 5 Lease is extended for any reason
whatsoever, the terms of the Existing Leases (i.e. two of said leases dated
October 31, 1989 are for Premises located at 1140 Technology Drive and 500
McCarthy Blvd., Milpitas, California (the "1989 Leases"); one of said leases
dated September 17, 1990 is for Premises located at 1000 Sumac Drive, Milpitas,
California, and one of said leases dated April 10, 1992 is for Premises located
at 900 Sumac Drive, Milpitas, California) shall also be extended so that all
five Leases expire on the same date; therefore, it is agreed between the parties
that by exercising its Option to Extend the Building 5 Lease, Tenant has in
effect exercised its Option to Extend under Lease Paragraph 41 ("First Five-Year
Option to Extend"), and that pursuant to said Lease Paragraph 41, the Term of
this Lease Agreement shall be extended for an additional five (5) year period,
and the Lease Termination Date shall be changed from September 30, 2006 to
September 30, 2011.
2. BASIC RENTAL FOR FIRST EXTENDED TERM OF LEASE: The monthly Basic
Rental for the First Extended Term of Lease shall be as follows:
On October 1, 2006, the sum of ONE HUNDRED EIGHTY FIVE THOUSAND TWO
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HUNDRED NINETY TWO AND 99/100 DOLLARS ($185,292.99) shall be due, and a like sum
due on the first day of each month thereafter through and including September 1,
2007.
On October 1, 2007, the sum of ONE HUNDRED NINETY THOUSAND THREE
HUNDRED FIFTY FIVE AND 64/100 DOLLARS ($190,355.64) shall be due, and a like sum
due on the first day of each month thereafter through and including September 1,
2008.
On October 1, 2008, the sum of ONE HUNDRED NINETY FIVE THOUSAND FOUR
HUNDRED EIGHTEEN AND 29/100 DOLLARS ($195,418.29) shall be due, and a like sum
due on the first day of each month thereafter through and including September 1,
2009.
On October 1, 2009, the sum of TWO HUNDRED THOUSAND FOUR HUNDRED EIGHTY
AND 94/100 DOLLARS ($200,480.94) shall be due, and a like sum due on the first
day of each month thereafter through and including September 1, 2010.
On October 1, 2010, the sum of TWO HUNDRED FIVE THOUSAND FIVE HUNDRED
FORTY THREE AND 59/100 DOLLARS ($205,543.59) shall be due, and a like sum due on
the first day of each month thereafter through and including September 1,2011.
The Aggregate Basic Rent for the Lease shall be increased by
$11,725,097.40 or from $25,686,182.83 to $37,411,280.23.
3. THIRD FIVE-YEAR OPTION TO EXTEND: Provided Tenant has extended the
Lease for an additional five (5) year period pursuant to Lease Paragraph 42
("Second Five Year Option To Extend"), Landlord hereby grants to Tenant a third
option to extend the Term of this Lease for an additional five (5) year period
upon the following terms and conditions:
A. Tenant shall give Landlord written notice of Tenant's exercise of
this option to extend at least one hundred eighty (180) days prior to the
expiration of the Lease Term as extended pursuant to Lease Paragraph 42 ("Second
Five Year Option To Extend"), in which event the Lease shall be considered
extended for an additional five (5) year period upon the same terms and
conditions as this Lease, absent this Paragraph 3 and subject to the Rental as
set forth below. In the event that Tenant fails to timely exercise Tenant's
option as set forth herein in writing, Tenant shall have no further option to
extend this Lease or the Other Leases, and this Lease shall continue in full
force and effect for the full remaining term hereof, absent this Paragraph 3.
B. The monthly Basic Rent for the option period shall be as follows in
the event the option is exercised:
Period Monthly Basic Rent
------ ------------------
Months 1-12 $2.33/sf
Months 13-24 $2.38/sf
Months 25-36 $2.43/sf
Months 37-48 $2.48/sf
Months 49-60 $2.53/sf
C. Notwithstanding anything contained herein, Tenant may not exercise
the option to extend granted by this Paragraph 3 at any time that Tenant is in
default (default for monetary and material default for non-monetary) of its
obligations under this Lease, if Tenant has received written notice from
Landlord that Tenant is in default, and such default has not been timely cured
within the time period provided for in this Lease; provided, however, that if
such default of Tenant is not for money due under this Lease and cannot be
cured, and if Landlord does not elect to terminate this Lease as a result of
such non-curable default by Tenant, Tenant may exercise the option to extend
granted by this Paragraph 3 notwithstanding such non-curable default.
4. LEASE TERMS CO-EXTENSIVE: Lease Paragraph 40C ("Lease Terms
Co-extensive") is hereby deleted in its entirety and replaced with the
following:
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"40C. LEASE TERMS CO-EXTENSIVE: It is acknowledged that (i)
Landlord and Tenant have previously executed four separate leases in
addition to this Lease: one of said leases dated October 31, 1989 is
for Premises located at 1140 Technology Drive, Milpitas, California
(the "Building One Lease"); one of said leases dated October 31, 1989
is for Premises located at 500 McCarthy Blvd., Milpitas, California
(the "Building Two Lease"); one of said leases dated April 10, 1992 is
for Premises located at 900 Sumac Drive, Milpitas, California (the
"Building 3 Lease"); and one of said leases dated March 23, 1994 is for
premises located at 1101 Sumac Drive, Milpitas, California (the
"Building 5 Lease") (hereinafter collectively referred to as the "Other
Leases"); and (ii) it is the intention of the parties that the term of
this Lease be co-extensive with the term of the Other Leases, such that
the terms of all five leases ("the Leases") expire on the same date.
The provisions of this Paragraph 40C also requires the terms of all the
Leases to be extended accordingly if Tenant exercises its Option to
Extend under any of the Leases. The monthly Basic Rent during the
extended term under each of the Leases shall be increased by $.05 per
square foot on the commencement date of the extended term and
thereafter on each and every anniversary of the respective lease's
commencement date of the extended term."
5. CROSS DEFAULT: Lease Paragraph 47 ("Cross Default") is hereby
deleted in its entirety and replaced with the following:
"47. CROSS DEFAULT: It is agreed between Landlord and Tenant
that a default under this Lease, or a default under any of the Other
Leases may, at the option of Landlord, be considered a default under
all Leases, in which event Landlord shall be entitled (but in no event
required) to apply all rights and remedies of Landlord under the terms
of one lease to all the Leases including, but not limited to, the right
to terminate any or all of the aforementioned Other Leases or this
Lease by reason of a default under the Leases or hereunder.
Notwithstanding the above, Landlord shall have the option of
considering a default under this Lease or a default under any of the
Other Leases to be a default under all such leases, only with respect
to such leases under which Landlord is also the 'Landlord' at the time
such default occurs. By way of example, if at the time a default of
Tenant occurs under this Lease, Landlord has sold the premises
described in any of the Other Leases and is no longer the 'Landlord'
thereunder, then a default under this Lease shall not constitute a
default under any of such Other Leases so sold by Landlord (unless the
premises leased under this Lease and the Other Leases are sold to the
same entity), and a default by Tenant under any of such Other Leases so
sold by Landlord shall not constitute a default under this Lease or any
other of the Other Leases then remaining between Landlord and Tenant.
However, if the Landlord under this Lease and the other Leases is one
in the same at the time of said default, said cross default provisions
shall apply."
6. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL AGENCIES AFTER
THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR TENANT'S USES OR
REMODELING OF THE PREMISES: Lease Paragraph 52 ("Structural Capital Costs
Regulated by Governmental Agencies after the Commencement of this Lease Not
Caused by Tenant or Tenant's Uses or Remodeling of the Premises") is hereby
deleted and replaced with the following:
"52. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL
AGENCIES AFTER THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR
TENANT'S USES OR REMODELING OF THE PREMISES: The provisions of this
Paragraph 52 shall modify Paragraphs 7 and 14:
A. If (i) during the last five (5) years of the First Extended
Term of the Lease if said Lease has not been extended as provided for
in Lease Paragraph 42 ("Second Five Year Option To Extend") or in
Paragraph 3 ("Third Five Year Option to Extend")
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or Paragraph 4 ("Lease Terms Co-Extensive") above, or (ii) during
either of the five (5) year extension periods permitted by Lease
Paragraph 42 or Paragraph 3, or Paragraph 4 above, it becomes necessary
(due to any governmental requirement for continued occupancy of the
Premises) to make structural improvements required by laws enacted or
legal requirements imposed by governmental agency(s) after the
Commencement Date, and the cost for each required work or improvements
exceeds $100,000, then if such legal requirement is not imposed because
of Tenant's specific use of the Premises and is not "triggered" by
Tenant's Alterations or Tenant's application for a building permit or
any other governmental approval (collectively "Tenant's Actions") in
which instance Tenant shall be responsible for 100% of the cost of
such improvements, Landlord shall be responsible for paying the cost of
such improvement and constructing such improvement, subject to a cash
contribution from Tenant of a portion of the cost thereof as provided
for and calculated in Paragraph 52B.
B. When Landlord makes an improvement pursuant to Paragraph
52A, and as a condition to Landlord's obligation to construct such
improvement, Tenant shall make the following contribution in cash to
Landlord for the cost thereof prior to the commencement of the work by
Landlord. It is agreed that Tenant shall pay to Landlord 100% of the
cost of the first $100,000.00 worth of each improvement. After the
first $100,000.00, all costs above $100,000.00 shall be divided by 15
and multiplied by the time period remaining in the last five years of
the Lease Term from the date work on such improvement commences.
For example, if the improvement is not required as a result of
Tenant's Actions and if the cost of such improvement was $400,000 and
there was one year and six months remaining in the Lease term when the
work commenced, then Tenant would be responsible for reimbursing
Landlord in cash $130,000.00 computed as follows:
Total Cost of Work $400,000.00
Tenant Responsible for
1st $100,000 -100,000.00
-----------
Total Amount To Be Amortized $300,000.00
$300,000.00/15 = $20,000.00/yr. x 1.5 yrs = $ 30,000.00
Tenant responsible for $100,000 + $30,000.00 = $130,000.00
C. If Landlord has made improvements, for which Tenant has
reimbursed Landlord for the cost thereof pursuant to Paragraph 52B, and
the term of this Lease is subsequently extended pursuant to the
exercise by Tenant of an option to renew pursuant to Lease Paragraph 42
or Paragraph 3 above, upon the exercise of any such option by Tenant,
Tenant shall pay to Landlord an additional sum equal to the total
amount of said improvement less the amount previously paid for by
Tenant. Using the example in Paragraph 52B above, Tenant would owe
Landlord the additional amount of $270,000.00 ($400,000.00 -
$130,000.00 = $270,000.00)."
7. PROPERTY INSURANCE: Lease Paragraph 12 ("Property Insurance") is
hereby amended to include the following: "Tenant acknowledges that as part of
the cost of insurance policies for the Premises, Tenant is responsible for the
payment of insurance deductibles on insurance claims as they relate to the
Premises subject to the limitations provided in Lease Paragraph 54 ("Property
Insurance") which limitations are applicable only during the initial Lease Term
and the First Lease Extension Period and the Second Lease Extension Period. Said
limitation provided for in Lease Paragraph 54 are null and void at the
commencement of the Third Lease Extended Term".
8. THIRD OPTION PERIOD - LEASE PROVISION CHANGES: In the event Tenant
exercises its Third Option to Extend as provided for in Paragraph 3 above, the
following amendments (contained within Paragraphs 9 through 19) are herein made
to the Lease to be effective upon the commencement of the third option period
("Third Option Period"), or during any period fo11owing the
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expiration of the Lease Term or expiration of the Lease when Tenant is in
possession of the Premises.
9. LATE CHARGE: Effective as of the first day of the Third Option
Period, the Late Charge referenced in Lease Paragraph 4.D ("Late Charge") shall
be changed from five percent (5%) to ten percent (10%), and Lease Paragraph 49
("Limitation on Late Charge") shall be deleted in its entirety and of no further
force or effect.
10. MANAGEMENT FEE: Notwithstanding anything to the contrary in the
Lease, effective as of the first day of the Third Option Period, and on the
first day of each month thereafter, Tenant shall pay to Landlord, in addition to
the Basic Rent and Additional Rent, a fixed monthly management fee ("Management
Fee") equal to one percent (1%) of the Basic Rent due for each month during the
Lease Term.
11. HAZARDOUS MATERIALS: Effective as of the first day of the Third
Option Period, Lease Paragraph 44 ("Hazardous Materials") shall be deleted in
its entirety and replaced with the following:
"44. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows
with respect to the existence or use of "Hazardous Materials" (as
defined herein) on, in, under or about the Premises and real property
located beneath said Premises, which includes the entire parcel of land
on which the Premises are located as shown in Green on Exhibit A to the
Lease (hereinafter collectively referred to as the "Property"):
A. As used herein, the term "Hazardous Materials" shall mean
any material, waste, chemical, mixture or byproduct which is or
hereafter is defined, listed or designated under Environmental Laws
(defined below) as a pollutant, or as a contaminant, or as a toxic or
hazardous substance, waste or material, or any other unwholesome,
hazardous, toxic, biohazardous, or radioactive material, waste,
chemical, mixture or byproduct, or which is listed, regulated or
restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions
thereof, polychlorinated biphenyls, or asbestos). As used herein, the
term "Environmental Laws" shall mean any applicable Federal, State of
California or local government law (including common law), statute,
regulation, rule, ordinance, permit, license, order, requirement,
agreement, or approval, or any determination, judgment, directive, or
order of any executive or judicial authority at any level of Federal,
State of California or local government (whether now existing or
subsequently adopted or promulgated) relating to pollution or the
protection of the environment, ecology, natural resources, or public
health and safety.
B. Tenant shall notify Landlord prior to the occurrence of any
Tenant's Hazardous Materials Activities (defined below). Landlord
acknowledges that Tenant shall use, in compliance with applicable
Environmental Laws, customary household and office supplies (Tenant
shall first provide Landlord with a list of said materials use), such
as mild cleaners, lubricants and copier toner. Any and all of Tenant's
Hazardous Materials Activities shall be conducted in conformity with
this Paragraph 44, Paragraph 14 of this Lease, and in compliance with
all Environmental Laws and regulations. As used herein, the term
"Tenant's Hazardous Materials Activities" shall mean any and all use,
handling, generation, storage, disposal, treatment, transportation,
release, discharge, or emission of any Hazardous Materials on, in,
beneath, to, from, at or about the Property, in connection with
Tenant's use of the Property, or by Tenant or by any of Tenant's
agents, employees, contractors, vendors, invitees, visitors or its
future subtenants or assignees or other third parties (including
"dumping" by others) (or which Hazardous Materials originate on the
surface of the Premises any time on or after the Commencement Date of
this Lease, but excluding Hazardous Materials on the Premises prior to
the Lease Commencement Date because of the storage, use, disposal, or
transportation of such materials or waste by any of Landlord's
contractors or otherwise arising out of construction work performed by
or under the direction of Landlord on the Premises and Landlord shall
be responsible for
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all required actions with respect to such materials or wastes). Tenant
agrees to provide Landlord with prompt written notice of any spill or
release of Hazardous Materials at the Property during the term of the
Lease of which Tenant becomes aware, and further agrees to provide
Landlord with prompt written notice of any violation of Environmental
Laws in connection with Tenant's Hazardous Materials Activities of
which Tenant becomes aware. If Tenant's Hazardous Materials Activities
involve Hazardous Materials other than normal use of customary
household and office supplies, Tenant also agrees at Tenant's expense:
(i) to install such Hazardous Materials monitoring, storage and
containment devices as may be required by Environmental Laws,
regulations and/or governing agencies; (ii) to provide Landlord with a
written inventory of such Hazardous Materials, including an update of
same each year upon the anniversary date of the Commencement Date of
the Lease ("Anniversary Date"); and (iii) on each Anniversary Date to
provide to Landlord copies of all documentation and records, required
by applicable Environmental Laws to be prepared and submitted to
governmental authorities, relating to use at the Property of Hazardous
Materials or to Tenant's Hazardous Materials Activities, if any. If
upon completion of Landlord's review of said documentation and records,
Landlord reasonably questions if Tenant is in compliance with all
applicable Environmental Laws with respect to Tenant's Hazardous
Materials Activities, Tenant agrees within thirty (30) days following
receipt of written notice from Landlord, to retain a qualified
environmental consultant, acceptable to Landlord, to evaluate whether
Tenant is in compliance with all applicable Environmental Laws with
respect to Tenant's Hazardous Materials Activities. Tenant, at its
expense, shall submit to Landlord a report from such environmental
consultant which discusses the environmental consultant's findings
within two (2) months of each Anniversary Date. Tenant, at its expense,
shall promptly undertake and complete any and all steps necessary, and
in full compliance with applicable Environmental Laws, to fully correct
any and all problems or deficiencies identified by the environmental
consultant, and promptly provide Landlord with documentation of all
such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at
its expense, shall (i) properly remove from the Property all Hazardous
Materials which come to be located at the Property in connection with
Tenant's Hazardous Materials Activities, and (ii) fully comply with and
complete all facility closure requirements of applicable Environmental
Laws regarding Tenant's Hazardous Materials Activities, including but
not limited to (x) properly restoring and repairing the Property to the
extent damaged by such closure activities, and (y) obtaining from the
local Fire Department or other appropriate governmental authority with
any legal or regulatory jurisdiction a written concurrence that closure
has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims,
notices, work plans, data and reports prepared, received or submitted
in connection with any such closure activities.
D. If Landlord, upon consultation with Tenant, reasonably
concludes that the Property has become contaminated as a result of
Tenant's Hazardous Materials Activities, Landlord in addition to any
other rights it may have under this Lease or under Environmental Laws
or other laws, may enter upon the Property and conduct inspection,
sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of
determining the nature and extent of such contamination except to the
extent that such activities may be inconsistent with Tenant's
compliance with Environmental Laws. Tenant shall promptly reimburse
Landlord for the costs of such an investigation, including but not
limited to reasonable attorneys' fees Landlord incurs with respect to
such investigation to the extent, and only to the extent, that it that
discloses Hazardous Materials contamination for which Tenant is liable
under this Lease. Except as may be required of Tenant by applicable
Environmental Laws, Tenant shall not perform any sampling, testing, or
drilling to identify the presence of any Hazardous Materials at the
Property, without Landlord's prior written consent which shall not be
unreasonably withheld. Tenant shall promptly provide Landlord with
copies of any claims, notices, work plans, data and reports prepared,
received or submitted in connection with any sampling, testing or
drilling performed pursuant to the preceding sentence.
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E. Tenant shall indemnify, defend (with legal counsel
acceptable to Landlord, whose consent shall not unreasonably be
withheld) and hold harmless Landlord, its employees, assigns,
successors, successors-in-interest, agents and representatives from and
against any and all claims (including but not limited to third party
claims from a private party or a government authority), liabilities,
obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including
but not limited to reasonable attorneys', consultants' and other
experts' fees and costs), and damages, which arise from or relate to:
(i) Tenant's Hazardous Materials Activities; (ii) any Hazardous
Materials contamination caused by Tenant prior to the Commencement Date
of the Lease; or (iii) the breach of any obligation of Tenant under
this Paragraph 44 (collectively, "Tenant's Environmental
Indemnification"). Tenant's Environmental Indemnification shall include
but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution
in fair market value of the Property. Tenant's Environmental
Indemnification shall further include but is not limited to the
obligation to diligently and properly implement to completion, at
Tenant's expense, any and all environmental investigation, removal,
remediation, monitoring, reporting, closure activities, or other
environmental response action as may be required by applicable
Environmental Laws, regulations or governing agencies (collectively,
"Response Actions"). Tenant shall promptly provide Landlord with copies
of any claims, notices, work plans, data and reports prepared, received
or submitted in connection with any Response Actions.
F. Landlord hereby makes the following representations to
Tenant, each of which is made only to the best of Landlord's knowledge
as of the date Landlord executes this Lease, without any inquiry or
investigation having been made or required by Landlord regarding this
subject, nor does Landlord have any obligation to investigate or make
inquiry regarding the subject:
(1) The soil and ground water on or under the
Premises does not contain Hazardous Materials in amounts which violate
any laws to the extent that any governmental entity could require
either Landlord or Tenant to take any remedial action with respect to
such Hazardous Materials.
(2) During the time that Landlord has owned the
Premises, Landlord has received no notice of (i) any violation, or
alleged violation, of any law that has not been corrected to the
satisfaction of the appropriate authority, (ii) any pending claims
relating to the presence of Hazardous Material on the Premises, or
(iii) any pending investigation by any governmental agency concerning
the Premises relating to Hazardous Materials.
G. Landlord and Tenant shall each give written notice to the
other as soon as reasonably practicable of (i) any communication
received from any governmental authority concerning Hazardous Materials
which relates to the Premises, and (ii) any contamination of the
Premises by Hazardous Materials which constitutes a violation of any
law. Attached as Exhibit "C" to the Lease is a list of Hazardous
Materials that Tenant intends to use at the Premises. If during the
Lease Term Tenant proposes to use other Hazardous Materials at the
Premises, Tenant shall inform Landlord of such use, identifying the
Hazardous Materials and the manner of their use, storage and disposal,
and shall agree (i) to use, store and dispose of such Hazardous
Materials strictly in compliance with all laws, regulations and
governing agencies and (ii) that the indemnity set forth in Paragraph
44 shall be applicable to Tenant's use of such Hazardous Material.
H. Landlord or Tenant may, at any time, cause testing wells to
be installed on the Premises, and may cause the ground water to be
tested to detect the presence of Hazardous Material by the use of such
tests as are then customarily used for such purposes. Testing wells
installed by Tenant shall be paid for by Tenant. If tests conducted by
Landlord disclose that Tenant has violated any Hazardous Materials
laws, or Tenant or parties on the Premises during the Term of this
Lease have contaminated the Premises as determined by regulatory
agencies pursuant to Hazardous Materials laws, or that Tenant has
liability to Landlord pursuant to Paragraph 44A,
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then Tenant shall pay for 100 percent of the cost of the test and all
related expense. Prior to the expiration of the Lease Term, Tenant
shall remove any testing wells it has installed at the Premises, and
return the Premises to the condition existing prior to the installation
of such wells, unless Landlord requests in writing that Tenant leave
all or some of the testing wells in which instance the wells requested
to be left shall not be removed.
I. If any tests performed by Tenant or Landlord prior to the
Commencement Date disclose Hazardous Materials at the Premises,
Landlord at its expense will promptly take all reasonable action
required by law with respect to the existence of such Hazardous
Materials at the Premises. The Commencement Date shall not be delayed
because of such action by Landlord unless occupation of the Premises is
prohibited by law.
J. The obligations of Landlord and Tenant under this Paragraph
44 shall survive the expiration or earlier termination of the Term of
this Lease. The rights and obligations of Landlord and Tenant with
respect to issues relating to Hazardous Materials are exclusively
established by this Paragraph 44."
12. SECURITY DEPOSIT: Effective as of the first day of the Third Option
Period, Lease Paragraph 50 ("Security Deposit") shall be deleted in its entirety
and replaced with the following:
"50. SECURITY DEPOSIT: The following provisions shall modify
Lease Paragraph 4F.
A. Within thirty (30) days after the expiration or earlier
termination of the Lease term and after Tenant has vacated the
Premises, Landlord shall return to Tenant the entire Security Deposit
except for amounts that Landlord has deducted therefrom that are needed
by Landlord to cure defaults of Tenant under the Lease or compensate
Landlord for damages for which Tenant is liable pursuant to this Lease.
The use or disposition of the Security Deposit shall be subject to the
provisions of California Civil Code Section 1950.7.
B. During the first thirty (30) days following Tenant's
exercise of its Third Option to Extend, and only during said thirty day
period, Tenant shall have the one-time option of satisfying its
obligation with respect to an amount equal to one-half (1/2)
($136,691.55) of the $273,383.10 Security Deposit required under Lease
Paragraph 4F by providing to Landlord, at Tenant's sole cost, a letter
of credit which: (i) is drawn upon an institutional lender reasonably
acceptable and accessible to Landlord in form and content reasonably
satisfactory to Landlord; (ii) is in the amount of one-half (1/2) of
the Security Deposit; (iii) is for a term of at least twelve (12)
months; (iv) with respect to any letter of credit in effect within the
six month period immediately prior to the expiration of the Lease term,
shall provide that the term of such letter of credit shall extend at
least forty five (45) days past the Lease expiration date (including
any extensions thereof); and (v) may be drawn upon by Landlord upon
submission of a declaration of Landlord that Tenant is in default (as
defined in Paragraph 19 and as modified by Paragraph 59). Landlord
shall not be obligated to furnish proof of default to such
institutional lender, and Landlord shall only be required to give the
institutional lender written notification that Tenant is in default and
upon receiving such written notification from Landlord the
institutional lender shall be obligated to immediately deliver cash to
Landlord equal to the amount Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any
loss or damage which Landlord may suffer by reason of Tenant's default
up to 1/2 of the total Security Deposit required under Lease Paragraph
4F. Said letter of credit shall provide that if the letter of credit is
not renewed, replaced or extended within twenty (20) days prior to its
expiration date the issuer of the credit shall automatically issue a
cashiers check payable to Landlord in the amount of the letter of
credit after the date which is twenty (20) days before the expiration
date, and no later than the expiration date, without Landlord being
required to make demand upon the letter of credit. If Tenant provides
Landlord with a letter of credit, within thirty (30) days of the
execution of this Lease, meeting the foregoing requirements, one-half
(1/2) of the
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cash Security Deposit (i.e.: $136.691.55 of the $273.383.10 Security
Deposit) shall be returned to Tenant by Landlord inasmuch as the cash
deposit remaining and the Letter of Credit equal the total Security
Deposit required in Lease Paragraph 4F. If Tenant defaults with respect
to any provisions of this Lease, including but not limited to
provisions relating to the payment of Rent, Landlord may (but shall not
be required to) draw down on the letter of credit for payment of any
sum which Landlord may spend or become obligated to spend by reason of
Tenant's default, or to compensate Landlord for any loss or damage
which Landlord may suffer by reason of Tenant's default. Landlord and
Tenant acknowledge that such letter of credit will be treated as if it
were a cash security deposit, and such letter of credit may be drawn
down upon by Landlord upon demand and presentation of evidence of the
identity of Landlord to the issuer, in the event that Tenant defaults
with respect to any provision of this Lease and such default is not
cured within any applicable cure period. Notwithstanding anything to
the contrary in this Lease, Landlord shall not be obligated to furnish
proof of default to such institutional lender and Landlord is only
required to give the institutional lender written notification that
Tenant is in default and upon receiving such written notification from
Landlord the institutional lender shall be obligated to immediately
deliver cash to Landlord equal to the amount Landlord may spend or
become obligated to spend by reason of Tenant's default, or to
compensate Landlord for any loss or damage which Landlord may suffer by
reason of Tenant's default up to 1/2 of the total Security Deposit.
Landlord acknowledges that it is not entitled to draw down such letter
of credit unless Landlord would have been entitled to draw upon the
cash security deposit pursuant to the terms of Paragraph 4F of the
Lease. Concurrently with the delivery of the required information to
the issuer, Landlord shall deliver to Tenant written evidence of the
default upon which the draw down was based, together with evidence that
Landlord has provided to Tenant the written notice of such default
which was required under the applicable provision of the Lease, and
evidence of the failure of Tenant to cure such default within the
applicable grace period following receipt of such notice of default.
Any proceeds received by Landlord by drawing upon the letter of credit
shall be applied in accordance with the provisions governing the
Security Deposit imposed by Lease Paragraph 4F and this Paragraph 50.
If Landlord draws upon the letter of credit, thereafter Tenant shall
once again have the right to post a letter of credit in place of
one-half (1/2) of a cash Security Deposit so long as Tenant is not then
in default. In any event Tenant will be obligated to replenish the
amount drawn to restore the Security Deposit to its original amount as
provided for in Paragraph 4F. If any portion of the letter of credit is
used or applied pursuant hereto, Tenant shall, within ten (10) days
after receipt of a written demand therefor from Landlord, restore and
replace the value of such security by either (i) depositing cash with
Landlord in the amount equal to the sum drawn down under the letter of
credit, or (ii) increasing the letter of credit to its value
immediately prior to such application. Tenant's failure to replace the
value of the security as provided in the preceding sentence shall be a
material breach of its obligation under this Lease."
13. REAL ESTATE TAXES: Effective as of the first day of the Third Option
Period, Lease Paragraph 53 ("Real Estate Taxes") shall be deleted in its
entirety and replaced with the following:
"53. REAL PROPERTY TAXES: Paragraph 9 is modified by the
following:
A. The term "Real Property Taxes" shall not include charges,
levies or fees directly related to the use, storage, disposal or
release of Hazardous Materials on the Premises unless directly related
to Tenant's Activities at this site or on other sites leased and/or
owned by Tenant; however, Tenant shall be responsible for general or
special tax and/or assessments (related to Hazardous Materials and/or
toxic waste) imposed on the Property provided said special tax and/or
assessment is not imposed due to on-site originated contamination on
the Property (by third parties not related to Tenant) prior to the
Lease Commencement Date. Subject to the terms and conditions stated
herein, Tenant shall be responsible for paying one hundred percent
(100%) of said taxes and/or assessments allocated to the Property.
B. If any assessments for public improvements are levied
against the Premises, Landlord may elect either to pay the assessment
in full or to allow the assessment to go
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Quantum 4
to bond. If Landlord pays the assessment in full, Tenant shall pay to
Landlord or any assignee or purchaser of the Premises each time payment
of Real Property Taxes is made a sum equal to that which would have
been payable (as both principal and interest) had Landlord allowed the
assessment to go to bond.
C. Tenant at its cost shall have the right, at any time, to
seek a reduction in the assessed valuation of the Premises or to
contest any Real Property Taxes that are to be paid by Tenant. If
Tenant seeks a reduction or contests such Real Property Taxes, the
failure on Tenant's part to pay such Real Property Taxes being so
contested shall not constitute a default so long as Tenant complies
with the provisions of this Paragraph. Landlord shall not be required
to join in any proceeding or contest brought by Tenant unless the
provisions of any law require that the proceeding or contest be brought
by or in the name of Landlord. In that case Landlord shall join in the
proceedings or contest or permit it to be brought in Landlord's name as
long as Landlord is not required to bear any cost. Tenant, on final
determination of the proceeding or contest, shall immediately pay or
discharge its share of any Real Property Taxes determined by any
decision or judgment rendered, together with all costs, charges,
interest, and penalties incidental to the decision or judgment. If
Tenant does not pay the Real Property Taxes when due pursuant to the
Lease and Tenant seeks a reduction or contests them as provided in this
paragraph, before the commencement of the proceeding or contest Tenant
shall furnish to Landlord a surety bond in form reasonably satisfactory
to Landlord issued by an insurance company qualified to do business in
California. The amount of the bond shall equal 125% of the total
amount of Real Property Taxes in dispute and any such bond shall be
assignable to any lender or purchaser of the Premises. The bond shall
hold Landlord and the Premises harmless from any damage arising out of
the proceeding or contest and shall insure the payment of any judgment
that may be rendered."
14. PROPERTY INSURANCE: Effective as of the first day of the Third
Option Period, section B of Lease Paragraph 54 ("Property Insurance") shall be
deleted in its entirety and be of no further force or effect.
15. ASSIGNMENT AND SUBLETTING: Effective as of the first day of the
Third Option Period, Lease Paragraph 55 ("Assignment and Subletting") shall be
deleted in its entirety and replaced with the following:
"55. ASSIGNMENT AND SUBLETTING: The following modifications
are made to Paragraph 16:
A. In the event that Tenant seeks to make any assignment or
sublease, then Landlord, by giving Tenant written notice of its
election within fifteen (15) days after Tenant's notice of intent to
assign or sublease has been given to Landlord, shall have the right to
elect (i) to withhold its consent to such assignment or sublease, as
permitted pursuant to Paragraph 16, or (ii) to permit Tenant to so
assign the Lease or sublease such part of the Premises, in which event
Tenant may do so, but without being released of its liability for the
performance of all of its obligations under the Lease, and the
following shall apply (except the following shall not apply to a
"Permitted Transfer" described in Paragraph 56):
(1) If Tenant assigns its interest in this Lease,
then in addition to the rental provided for in this Lease, Tenant shall
pay to Landlord fifty percent (50%) of all Rent and other consideration
received by Tenant over and above (i) the assignee's agreement to
assume the obligations of Tenant under this Lease and (ii) all
"Permitted Transfer Costs" (as defined herein) related to such
assignment. As used herein, the term "Permitted Transfer Costs" shall
mean all reasonable leasing commissions paid to third parties not
affiliated with Tenant in order to obtain the assignment or sublease in
question.
(2) If Tenant sublets all or part of the Premises,
then Tenant shall pay to Landlord in addition to the Rent provided for
in this Lease fifty percent (50%) of the
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positive difference, if any, between (i) all rent and other
consideration paid or provided to Tenant by the subtenant, less (ii)
all Rent paid by Tenant to Landlord pursuant to this Lease which is
allocable to the area so sublet and all Permitted Transfer Costs
related to such sublease. After Tenant has recovered all Permitted
Transfer Costs Tenant shall pay to Landlord the amount specified in the
preceding sentence on the same basis, whether periodic or in lump sum,
that such rent and other consideration is paid to Tenant by its
subtenant, within seven (7) days after it is received by Tenant.
3) Tenant's obligations under this subparagraph shall survive
any assignment or sublease. At the time Tenant makes any payment to
Landlord required by this subparagraph, Tenant shall deliver an
itemized statement of the method by which the amount to which Landlord
is entitled was calculated, certified by Tenant as true and correct.
Landlord shall have the right to inspect Tenant's books and records
relating to the payments due pursuant to this subparagraph. Upon
request therefor, Tenant shall deliver to Landlord copies of all bills,
invoices or other documents upon which its calculations are based.
(4) As used herein, the term "consideration" shall mean any
consideration of any kind received, or to be received (including, but
not limited to, services rendered and/or value received) by Tenant as a
result of the assignment or sublease, if such sums are paid or provided
to Tenant for Tenant's interest in this Lease or in the Premises.
(5) This Paragraph 55.A does not apply to a "Permitted
Transfer", as provided in Paragraph 56 hereof. The parties agree that
if any of the following transactions occur and do not qualify as
"Permitted Transfers", Tenant must obtain Landlord's consent to such
transaction and if Landlord consents to any of the following
transactions which do not otherwise qualify as "Permitted Transfers",
then the provisions of this Paragraph 55.A shall not apply to the
following transactions: (i) a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee; and (ii) an assignment of this Lease to a
corporation which purchases or otherwise acquires 95% or more of the
assets of Tenant so long as 95% of all assets and liabilities of
Tenant are permanently transferred to such assignee and Tenant remains
liable and responsible under the Lease to the extent Tenant continues
in existence following such transaction."
16. PERMITTED ASSIGNMENTS AND SUBLEASES: Effective as of the first day
of the Third Option Period, Lease Paragraph 56 ("Permitted Assignments and
Subleases") shall be deleted in its entirety and replaced with the following:
"56. PERMITTED ASSIGNMENTS AND SUBLEASES: Notwithstanding
anything contained in Paragraph 16, so long as Tenant otherwise
complies with the provisions of Paragraph 16 and the Permitted Transfer
does not release Tenant from its obligations hereunder, Tenant may
enter into any of the following transfers (a "Permitted Transfer")
without Landlord's prior written consent, and the provisions of
Paragraph 55A shall not apply to any such Permitted Transfer:
A. Tenant may sublease all or part of the Premises or assign
its interest in this Lease to any corporation which controls, is
controlled by, or is under common control with Tenant by means of an
ownership interest of more than fifty percent (50%) providing Tenant
remains liable for the payment of Rent and full performance of the
Lease;
B. Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as (i) 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee, and (ii) immediately prior to the merger,
consolidation or other reorganization, the corporation into which
Tenant is to be merged has a net worth equal to or greater than the net
worth of Tenant at the time of Lease execution or at the time of such
assignment, merger, consolidation or
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reorganization (whichever is greater), or if it does not, Landlord is
provided a guaranty of the Lease (in a form reasonably acceptable to
Landlord) from a corporation (a) that is the parent of, or is otherwise
affiliated with, the corporation into which Tenant is to be merged, and
(b) which has a current net worth equal to or greater than the net
worth of Tenant at the time of Lease execution or at the time of such
assignment, merger, consolidation or reorganization (whichever is
greater). In the event there is not a permanent transfer of 95% or
more of the assets and liabilities from Tenant to a third party, and
Tenant continues to exist as a separate entity, both companies shall be
jointly and severally liable for the full terms and conditions of the
Lease;
C. Tenant may assign this Lease to a corporation which
purchases or otherwise acquires 95% or more of the assets of Tenant so
long as 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee (in the event there is not a permanent
transfer of 95% or more of the assets and liabilities from Tenant to a
third party and Tenant continues to exist as a separate entity, both
companies shall be jointly and severally liable for the full terms and
conditions of the Lease), and provided that immediately prior to such
assignment said corporation, has a net worth equal to or greater than
the net worth of Tenant (a) at the time of Lease execution or (b) at
the time of such assignment (whichever is greater), or if it does not,
Landlord is provided a guaranty of the Lease (in a form reasonably
acceptable to Landlord) from a corporation (a) that is the parent of,
or is otherwise affiliated with, said corporation and (b) which has a
current net worth equal to or greater than the net worth of Tenant at
the time of Lease execution or at the time of such assignment,
(whichever is greater)."
17. DESTRUCTION: Effective as of the first day of the Third Option
Period, Lease Paragraph 61 ("Destruction") shall be deleted in its entirety and
replaced with the following:
"61. DESTRUCTION: Paragraph 21 is modified by the following:
A. Notwithstanding anything to the contrary within Paragraph
21, Landlord may terminate this Lease in the event of an uninsured
event or if insurance proceeds, net of the deductible, are insufficient
to cover one hundred percent of the rebuilding costs; provided,
however, Tenant shall have the right to elect, in its discretion, to
contribute such excess funds to permit Landlord to repair the Premises.
B. Except as provided in Paragraph 61C, Landlord may not
terminate the Lease if the Premises are damaged by a peril whereby the
cost to replace and/or repair is one hundred percent (100%) covered by
the insurance carried by Landlord pursuant to Paragraph 12, but instead
shall restore the Premises in the manner described by Paragraph 21.
C. If the Premises are damaged by a peril covered by the
insurance carried by Landlord pursuant to Paragraph 12, Landlord shall
have the option to terminate the Lease if each of the following
conditions is satisfied: (i) the cost to repair or the damage exceeds
thirty-three percent (33%) of the then replacement cost of the
Premises; and (ii) the damage occurs at a time when there is less than
five (5) years remaining in the term of the Lease.
D. If Landlord fails to obtain insurance as required pursuant
to Paragraph 12, and said insurance would have been available to cover
any damage or destruction to the Premises, Landlord shall be required
to rebuild, at its cost, net of the deductible which would have been
required under said insurance policy (which deductible Tenant is
required to pay).
E. If the Premises are damaged by any peril, then as soon as
reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be completed. Tenant
shall have the option to terminate this Lease in the event any of the
following occurs, which option may be exercised only by delivery to
Landlord of a written notice of election to terminate within seven (7)
days after
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Tenant receives from Landlord the estimate of the time needed to
complete such restoration:
(1) The Premises are damaged by any peril (not caused by or
resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Leased
Premises cannot be substantially completed within 180 days after the
date of such damage (subject to force majeure conditions); or
(2) The Premises are damaged by any peril (not caused by or
resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) within twelve (12) months of the last day of
the Lease term, and, in the reasonable opinion of Landlord's architect
or construction consultant, the restoration of the Leased Premises
cannot be substantially completed within sixty (60) days after the date
of such damage and Tenant has not exercised its Option to Extend said
Term (or Extended Term as the case may be)."
18. LIABILITY INSURANCE: Effective as of the first day of the Third
Option Period, the first sentence of Lease Paragraph 10 ("Liability Insurance")
shall be deleted and replaced with the following: "Tenant, at Tenant's expense,
agrees to keep in force during the Term of this Lease a policy of commercial
general liability insurance with combined single limit coverage of not less than
Two Million Dollars ($2,000,000) per occurrence for bodily injury and property
damage occurring in, on or about the Premises, including parking and landscaped
areas."
19. LIMITATION OF LIABILITY: Effective as of the first day of the Third
Option Period, Lease Paragraph 36 ("Limitation of Liability") shall be deleted
in its entirety and replaced with the following:
"36. LIMITATION OF LIABILITY In consideration of the benefits
accruing hereunder, Tenant and all successors and assigns covenant and
agree that, in the event of any actual or alleged failure, breach or
default hereunder by Landlord:
(i) the sole and exclusive remedy shall be against Landlord's interest
in the Premises leased herein;
(ii) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of
the partnership);
(iii) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the
partnership);
(iv) no partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(v) no judgment will be taken against any partner of Landlord;
(vi) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
(vii) no writ of execution will ever be levied against the assets of
any partner of Landlord;
(viii) these covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and
agreements shall be applicable to any covenant or agreement either
expressly contained in this Lease or imposed by statute or at common
law."
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of
said September 17, 1990 Lease Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment No.
1 to Lease as of the day and year last written below.
LANDLORD: TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST QUANTUM CORPORATION
a Delaware corporation
By /s/ John Arrillaga, By /s/ Andrew Kryder
--------------------- ---------------------
John Arrillaga, Trustee
Andrew Kryder
------------------------
Date: 6/30/97 Print or Type Name
----------
RICHARD T. PEERY SEPARATE Title: VP FINANCE AND CORP GENERAL
PROPERTY TRUST COUNSEL
By /s/ Richard T. Peery Date: 6/25/97
-------------------------- ------------
Richard T. Peery, Trustee
Date: 6/26/97
---------
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Quantum 3
AMENDMENT NO. 1
TO LEASE
THIS AMENDMENT NO. 1 is made and entered into this 16th day of April,
1997, by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated
7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) (previously known as the "John
Arrillaga Separate Property Trust") as amended, and RICHARD T. PEERY, Trustee,
or his Successor Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY
TRUST) as amended, collectively as LANDLORD, and QUANTUM CORPORATION, a Delaware
corporation, as TENANT.
RECITALS
A. WHEREAS, by Lease Agreement dated April 10, 1992 Landlord leased to
Tenant all of that certain 60,128+/- square foot building located at 900 Sumac
Drive, Milpitas, California, the details of which are more particularly set
forth in said April 10, 1992 Lease Agreement, and
B. WHEREAS, said Lease was amended by the Commencement Letter dated
April 2, 1993 which established the February 26, 1993 Lease Commencement Date,
and established the Termination Date of September 30, 2006, and,
C. WHEREAS, it is now the desire of the parties hereto to amend the
Lease by (i) extending the Term for five years, changing the Termination Date
from September 30, 2006 to September 30, 2011, (ii) amending the Basic Rent
schedule and Aggregate Rent accordingly, (iii) adding a third Five Year Option
to Extend, (iv) replacing Paragraphs 41C ("Lease Terms Co-extensive") and 48
("Cross Default") and 53 ("Structural Capital Costs Regulated by Governmental
Agencies After the Commencement of this Lease not Caused by Tenant or Tenant's
Uses or Remodeling of the Premises"), (v) amending Lease Paragraph 12 ("Property
Insurance") and (vi) amending and/or replacing certain provisions of the Lease
commencing as of the commencement of the Third Extended Term of said Lease as
hereinafter set forth.
AGREEMENT
NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:
1. TERM OF LEASE: It is agreed between the parties that Tenant has
exercised its First Five-Year Option to Extend the lease term of that certain
lease agreement dated March 23, 1994 for premises located at 1101 Sumac Drive,
Milpitas, California (the "Building 5 Lease"), as detailed in Paragraph 41 of
said Building 5 Lease. Paragraph 40C of said Building 5 Lease provides that in
the event the term of said Building 5 Lease is extended for any reason
whatsoever, the terms of the Existing Leases (i.e. two of said leases dated
October 31, 1989 are for Premises located at 1140 Technology Drive and 500
McCarthy Blvd., Milpitas, California (the "1989 Leases"); one of said leases
dated September 17, 1990 is for Premises located at 1000 Sumac Drive, Milpitas,
California, and one of said leases dated April 10, 1992 is for Premises located
at 900 Sumac Drive, Milpitas, California) shall also be extended so that all
five Leases expire on the same date; therefore, it is agreed between the parties
that by exercising its Option to Extend the Building 5 Lease, Tenant has in
effect exercised its Option to Extend under Lease Paragraph 42 ("First Five-Year
Option to Extend"), and that pursuant to said Lease Paragraph 42, the Term of
this Lease Agreement shall be extended for an additional five (5) year period,
and the Lease Termination Date shall be changed from September 30, 2006 to
September 30, 2011.
2. BASIC RENTAL FOR FIRST EXTENDED TERM OF LEASE: The monthly Basic
Rental for the First Extended Term of Lease shall be as follows:
On October 1, 2006, the sum of ONE HUNDRED ELEVEN THOUSAND EIGHT
Page 1
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Quantum 3
HUNDRED THIRTY EIGHT AND 08/100 DOLLARS ($111,838.08) shall be due, and a like
sum due on the first day of each month thereafter through and including
September l, 2007.
On October l, 2007, the sum of ONE HUNDRED FOURTEEN THOUSAND EIGHT
HUNDRED FORTY FOUR AND 48/100 DOLLARS ($114,844.48) shall be due, and a like sum
due on the first day of each month thereafter through and including September 1,
2008.
On October l, 2008, the sum of ONE HUNDRED SEVENTEEN THOUSAND EIGHT
HUNDRED FIFTY AND 88/100 DOLLARS ($117,850.88) shall be due, and a like sum due
on the first day of each month thereafter through and including September l,
2009.
On October l, 2009, the sum of ONE HUNDRED TWENTY THOUSAND EIGHT
HUNDRED FIFTY SEVEN AND 28/100 DOLLARS ($120,857.28) shall be due, and a like
sum due on the first day of each month thereafter through and including
September 1, 2010.
On October l, 2010, the sum of ONE HUNDRED TWENTY THREE THOUSAND EIGHT
HUNDRED SIXTY THREE AND 68/100 DOLLARS ($123,863.68) shall be due, and a like
sum due on the first day of each month thereafter through and including
September l, 2011.
The Aggregate Basic Rent for the Lease shall be increased by
$7,071,052.80 or from $14,463,454.34 to $21,534,507.14.
3. THIRD FIVE-YEAR OPTION TO EXTEND: Provided Tenant has extended the
Lease for an additional five (5) year period pursuant to Lease Paragraph 43
("Second Five Year Option To Extend"), Landlord hereby grants to Tenant a third
option to extend the Term of this Lease for an additional five (5) year period
upon the following terms and conditions:
A. Tenant shall give Landlord written notice of Tenant's exercise of
this option to extend at least one hundred eighty (180) days prior to the
expiration of the Lease Term as extended pursuant to Lease Paragraph 43 ("Second
Five Year Option To Extend"), in which event the Lease shall be considered
extended for an additional five (5) year period upon the same terms and
conditions as this Lease, absent this Paragraph 3 and subject to the Rental as
set forth below. In the event that Tenant fails to timely exercise Tenant's
option as set forth herein in writing, Tenant shall have no further option to
extend this Lease or the Other Leases, and this Lease shall continue in full
force and effect for the full remaining term hereof, absent this Paragraph 3.
B. The monthly Basic Rent for the option period shall be as follows in
the event the option is exercised:
Period Monthly Basic Rent
------ ------------------
Months 1-12 $2.36/sf
Months 13-24 $2.41/sf
Months 25-36 $2.46/sf
Months 37-48 $2.51/sf
Months 49-60 $2.56/sf
C. Notwithstanding anything contained herein, Tenant may not exercise
the option to extend granted by this Paragraph 3 at any time that Tenant is in
default (default for monetary and material default for non-monetary) of its
obligations under this Lease, if Tenant has received written notice from
Landlord that Tenant is in default, and such default has not been timely cured
within the time period provided for in this Lease; provided, however, that if
such default of Tenant is not for money due under this Lease and cannot be
cured, and if Landlord does not elect to terminate this Lease as a result of
such non-curable default by Tenant, Tenant may exercise the option to extend
granted by this Paragraph 3 notwithstanding such non-curable default.
4. LEASE TERMS CO-EXTENSIVE: Lease Paragraph 40C ("Lease Terms
Co-extensive") is hereby deleted in its entirety and replaced with the
following:
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"40C. LEASE TERMS CO-EXTENSIVE: It is acknowledged that (i)
Landlord and Tenant have previously executed four separate leases in
addition to this Lease: one of said leases dated October 31, 1989 is
for Premises located at 1140 Technology Drive, Milpitas, California
(the "Building One Lease"); one of said leases dated October 31, 1989
is for Premises located at 500 McCarthy Blvd., Milpitas, California
(the "Building Two Lease"); one of said leases dated September 17, 1990
is for Premises located at 1000 Sumac Drive, Milpitas, California (the
"Building Four Lease"); and one of said leases dated March 23, 1994 is
for premises located at 1101 Sumac Drive, Milpitas, California (the
"Building 5 Lease") (hereinafter collectively referred to as the "Other
Leases"); and (ii) it is the intention of the parties that the term of
this Lease be co-extensive with the term of the Other Leases, such that
the terms of all five leases ("the Leases") expire on the same date.
The provisions of this Paragraph 40C also requires the terms of all the
Leases to be extended accordingly if Tenant exercises its Option to
Extend under any of the Leases. The monthly Basic Rent during the
extended term under each of the Leases shall be increased by $.05 per
square foot on the commencement date of the extended term and
thereafter on each and every anniversary of the respective lease's
commencement date of the extended term."
5. CROSS DEFAULT: Lease Paragraph 48 ("Cross Default") is hereby
deleted in its entirety and replaced with the following:
"48. CROSS DEFAULT: It is agreed between Landlord and Tenant
that a default under this Lease, or a default under any of the Other
Leases may, at the option of Landlord, be considered a default under
all Leases, in which event Landlord shall be entitled (but in no event
required) to apply all rights and remedies of Landlord under the terms
of one lease to all the Leases including, but not limited to, the right
to terminate any or all of the aforementioned Other Leases or this
Lease by reason of a default under the Leases or hereunder.
Notwithstanding the above, Landlord shall have the option of
considering a default under this Lease or a default under any of the
Other Leases to be a default under all such leases, only with respect
to such leases under which Landlord is also the 'Landlord' at the time
such default occurs. By way of example, if at the time a default of
Tenant occurs under this Lease, Landlord has sold the premises
described in any of the Other Leases and is no longer the 'Landlord'
thereunder, then a default under this Lease shall not constitute a
default under any of such Other Leases so sold by Landlord (unless the
premises leased under this Lease and the Other Leases are sold to the
same entity), and a default by Tenant under any of such Other Leases so
sold by Landlord shall not constitute a default under this Lease or any
other of the Other Leases then remaining between Landlord and Tenant.
However, if the Landlord under this Lease and the Other Leases is one
in the same at the time of said default, said cross default provisions
shall apply."
6. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL AGENCIES AFTER THE
COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR TENANT'S USES OR REMODELING
OF THE PREMISES: Lease Paragraph 53 ("Structural Capital Costs Regulated by
Governmental Agencies after the Commencement of this Lease Not Caused by Tenant
or Tenant's Uses or Remodeling of the Premises") is hereby deleted and replaced
with the following:
"53. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL
AGENCIES AFTER THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR
TENANT'S USES OR REMODELING OF THE PREMISES: The provisions of this
Paragraph 53 shall modify Paragraphs 7 and 14:
A. If (i) during the last five (5) years of the First Extended
Term of the Lease if said Lease has not been extended as provided for
in Lease Paragraph 43 ("Second Five Year Option To Extend") or in
Paragraph 3 ("Third Five Year Option to Extend".)
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or Paragraph 4 ("Lease Terms Co-Extensive") above, or (ii) during
either of the five (5) year extension periods permitted by Lease
Paragraph 43 or Paragraph 3, or Paragraph 4 above, it becomes necessary
(due to any governmental requirement for continued occupancy of the
Premises) to make structural improvements required by laws enacted or
legal requirements imposed by governmental agency(s) after the
Commencement Date, and the cost for each required work or improvements
exceeds $100,000, then if such legal requirement is not imposed because
of Tenant's specific use of the Premises and is not "triggered" by
Tenant's Alterations or Tenant's application for a building permit or
any other governmental approval (collectively "Tenant's Actions") in
which instance Tenant shall be responsible for 100% of the cost of such
improvements, Landlord shall be responsible for paying the cost of such
improvement and constructing such improvement, subject to a cash
contribution from Tenant of a portion of the cost thereof as provided
for and calculated in Paragraph 53B.
B. When Landlord makes an improvement pursuant to Paragraph
53A, and as a condition to Landlord's obligation to construct such
improvement, Tenant shall make the following contribution in cash to
Landlord for the cost thereof prior to the commencement of the work by
Landlord. It is agreed that Tenant shall pay to Landlord 100% of the
cost of the first $100,000.00 worth of each improvement. After the
first $100,000.00, all costs above $100,000.00 shall be divided by 15
and multiplied by the time period remaining in the last five years of
the Lease Term from the date work on such improvement commences.
For example, if the improvement is not required as a result of
Tenant's Actions and if the cost of such improvement was $400,000 and
there was one year and six months remaining in the Lease term when the
work commenced, then Tenant would be responsible for reimbursing
Landlord in cash $130,000.00 computed as follows:
Total Cost of Work $400,O00.OO
Tenant Responsible for
1st $100,000 -100,000.00
-----------
Total Amount To Be Amortized $300,000.00
$300,000.00/15 = $20,000.00/yr. x 1.5 yrs = $ 30,000.00
Tenant responsible for $100,000 + $30,000.00 = $130,000.00
C. If Landlord has made improvements, for which Tenant has
reimbursed Landlord for the cost thereof pursuant to Paragraph 53B, and
the term of this Lease is subsequently extended pursuant to the
exercise by Tenant of an option to renew pursuant to Lease Paragraph 43
or Paragraph 3 above, upon the exercise of any such option by Tenant,
Tenant shall pay to Landlord an additional sum equal to the total
amount of said improvement less the amount previously paid for by
Tenant. Using the example in Paragraph 53B above, Tenant would owe
Landlord the additional amount of $270,000.00 ($400,000.00 -
$130,000.00 = $270,000.00)."
7. PROPERTY INSURANCE: Lease Paragraph 12 ("Property Insurance") is
hereby amended to include the following: "Tenant acknowledges that as part of
the cost of insurance policies for the Premises, Tenant is responsible for the
payment of insurance deductibles on insurance claims as they relate to the
Premises subject to the limitations provided in Lease Paragraph 55 ("Property
Insurance") which limitations are applicable only during the initial Lease Term
and the First Lease Extension Period and the Second Lease Extension Period. Said
limitation provided for in Lease Paragraph 55 are null and void at the
commencement of the Third Lease Extended Term".
8. THIRD OPTION PERIOD - LEASE PROVISION CHANGES: In the event Tenant
exercises its Third Option to Extend as provided for in Paragraph 3 above, the
following amendments (contained within Paragraphs 9 through 19) are herein made
to the Lease to be effective upon the commencement of the third option period
("Third Option Period"), or during any period following the expiration of the
Lease Term or expiration of the Lease when Tenant is in possession of the
Premises.
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9. LATE CHARGE: Effective as of the first day of the Third Option
Period, the Late Charge referenced in Lease Paragraph 4.D ("Late Charge") shall
be changed from five percent (5%) to ten percent (10%), and Lease Paragraph 50
("Limitation on Late Charge") shall be deleted in its entirety and of no further
force or effect.
10. MANAGEMENT FEE: Notwithstanding anything to the contrary in the
Lease, effective as of the first day of the Third Option Period, and on the
first day of each month thereafter, Tenant shall pay to Landlord, in addition to
the Basic Rent and Additional Rent, a fixed monthly management fee ("Management
Fee") equal to one percent (1%) of the Basic Rent due for each month during the
Lease Term.
11. HAZARDOUS MATERIALS: Effective as of the first day of the Third
Option Period, Lease Paragraph 45 ("Hazardous Materials") shall be deleted in
its entirety and replaced with the following:
"45. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows
with respect to the existence or use of "Hazardous Materials" (as
defined herein) on, in, under or about the Premises and real property
located beneath said Premises, which includes the entire parcel of land
on which the Premises are located as shown in Green on Exhibit A to the
Lease (hereinafter collectively referred to as the "Property"):
A. As used herein, the term "Hazardous Materials" shall mean
any material, waste, chemical, mixture or byproduct which is or
hereafter is defined, listed or designated under Environmental Laws
(defined below) as a pollutant, or as a contaminant, or as a toxic or
hazardous substance, waste or material, or any other unwholesome,
hazardous, toxic, biohazardous, or radioactive material, waste,
chemical, mixture or byproduct, or which is listed, regulated or
restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions
thereof, polychlorinated biphenyls, or asbestos). As used herein, the
term "Environmental Laws" shall mean any applicable Federal, State of
California or local government law (including common law), statute,
regulation, rule, ordinance, permit, license, order, requirement,
agreement, or approval, or any determination, judgment, directive, or
order of any executive or judicial authority at any level of Federal,
State of California or local government (whether now existing or
subsequently adopted or promulgated) relating to pollution or the
protection of the environment, ecology, natural resources, or public
health and safety.
B. Tenant shall notify Landlord prior to the occurrence of any
Tenant's Hazardous Materials Activities (defined below). Landlord
acknowledges that Tenant shall use, in compliance with applicable
Environmental Laws, customary household and office supplies (Tenant
shall first provide Landlord with a list of said materials use), such
as mild cleaners, lubricants and copier toner. Any and all of Tenant's
Hazardous Materials Activities shall be conducted in conformity with
this Paragraph 45, Paragraph 14 of this Lease, and in compliance with
all Environmental Laws and regulations. As used herein, the term
"Tenant's Hazardous Materials Activities" shall mean any and all use,
handling, generation, storage, disposal, treatment, transportation,
release, discharge, or emission of any Hazardous Materials on, in,
beneath, to, from, at or about the Property, in connection with
Tenant's use of the Property, or by Tenant or by any of Tenant's
agents, employees, contractors, vendors, invitees, visitors or its
future subtenants or assignees or other third parties (including
"dumping" by others) (or which Hazardous Materials originate on the
surface of the Premises any time on or after the Commencement Date of
this Lease, but excluding Hazardous Materials on the Premises prior to
the Lease Commencement Date because of the storage, use, disposal, or
transportation of such materials or waste by any of Landlord's
contractors or otherwise arising out of construction work performed by
or under the direction of Landlord on the Premises and Landlord shall
be responsible for all required actions with respect to such materials
or wastes). Tenant agrees to provide Landlord with prompt written
notice of any spill or release of Hazardous Materials at
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the Property during the term of the Lease of which Tenant becomes
aware, and further agrees to provide Landlord with prompt written
notice of any violation of Environmental Laws in connection with
Tenant's Hazardous Materials Activities of which Tenant becomes aware.
If Tenant's Hazardous Materials Activities involve Hazardous Materials
other than normal use of customary household and office supplies,
Tenant also agrees at Tenant's expense: (i) to install such Hazardous
Materials monitoring, storage and containment devices as may be
required by Environmental Laws, regulations and/or governing agencies;
(ii) to provide Landlord with a written inventory of such Hazardous
Materials, including an update of same each year upon the anniversary
date of the Commencement Date of the Lease ("Anniversary Date"); and
(iii) on each Anniversary Date to provide to Landlord copies of all
documentation and records, required by applicable Environmental Laws to
be prepared and submitted to governmental authorities, relating to use
at the Property of Hazardous Materials or to Tenant's Hazardous
Materials Activities, if any. If upon completion of Landlord's review
of said documentation and records, Landlord reasonably questions if
Tenant is in compliance with all applicable Environmental Laws with
respect to Tenant's Hazardous Materials Activities, Tenant agrees
within thirty (30) days following receipt of written notice from
Landlord, to retain a qualified environmental consultant, acceptable to
Landlord, to evaluate whether Tenant is in compliance with all
applicable Environmental Laws with respect to Tenant's Hazardous
Materials Activities. Tenant, at its expense, shall submit to Landlord
a report from such environmental consultant which discusses the
environmental consultant's findings within two (2) months of each
Anniversary Date. Tenant, at its expense, shall promptly undertake and
complete any and all steps necessary, and in full compliance with
applicable Environmental Laws, to fully correct any and all problems or
deficiencies identified by the environmental consultant, and promptly
provide Landlord with documentation of all such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at
its expense, shall (i) properly remove from the Property all Hazardous
Materials which come to be located at the Property in connection with
Tenant's Hazardous Materials Activities, and (ii) fully comply with and
complete all facility closure requirements of applicable Environmental
Laws regarding Tenant's Hazardous Materials Activities, including but
not limited to (x) properly restoring and repairing the Property to the
extent damaged by such closure activities, and (y) obtaining from the
local Fire Department or other appropriate governmental authority with
any legal or regulatory jurisdiction a written concurrence that closure
has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims,
notices, work plans, data and reports prepared, received or submitted
in connection with any such closure activities.
D. If Landlord, upon consultation with Tenant, reasonably
concludes that the Property has become contaminated as a result of
Tenant's Hazardous Materials Activities, Landlord in addition to any
other rights it may have under this Lease or under Environmental Laws
or other laws, may enter upon the Property and conduct inspection,
sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of
determining the nature and extent of such contamination except to the
extent that such activities may be inconsistent with Tenant's
compliance with Environmental Laws. Tenant shall promptly reimburse
Landlord for the costs of such an investigation, including but not
limited to reasonable attorneys' fees Landlord incurs with respect to
such investigation to the extent, and only to the extent, that it that
discloses Hazardous Materials contamination for which Tenant is liable
under this Lease. Except as may be required of Tenant by applicable
Environmental Laws, Tenant shall not perform any sampling, testing, or
drilling to identify the presence of any Hazardous Materials at the
Property, without Landlord's prior written consent which shall not be
unreasonably withheld. Tenant shall promptly provide Landlord with
copies of any claims, notices, work plans, data and reports prepared,
received or submitted in connection with any sampling, testing or
drilling performed pursuant to the preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel
acceptance to Landlord, whose consent shall not unreasonably be
withheld) and hold harmless Landlord, its
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employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not
limited to third party claims from a private party or a government
authority), liabilities, obligations, losses, causes of action,
demands, governmental proceedings or directives, fines, penalties,
expenses, costs (including but not limited to reasonable attorneys',
consultants' and other experts' fees and costs), and damages, which
arise from or relate to: (i) Tenant's Hazardous Materials Activities;
(ii) any Hazardous Materials contamination caused by Tenant prior to
the Commencement Date of the Lease; or (iii) the breach of any
obligation of Tenant under this Paragraph 45 (collectively, "Tenant's
Environmental Indemnification"). Tenant's Environmental Indemnification
shall include but is not limited to the obligation to promptly and
fully reimburse Landlord for losses in or reductions to rental income,
and diminution in fair market value of the Property. Tenant's
Environmental Indemnification shall further include but is not limited
to the obligation to diligently and properly implement to completion,
at Tenant's expense, any and all environmental investigation, removal,
remediation, monitoring, reporting, closure activities, or other
environmental response action as may be required by applicable
Environmental Laws, regulations or governing agencies (collectively,
"Response Actions"). Tenant shall promptly provide Landlord with copies
of any claims, notices, work plans, data and reports prepared, received
or submitted in connection with any Response Actions.
F. Landlord hereby makes the following representations to
Tenant, each of which is made only to the best of Landlord's knowledge
as of the date Landlord executes this Lease, without any inquiry or
investigation having been made or required by Landlord regarding this
subject, nor does Landlord have any obligation to investigate or make
inquiry regarding the subject:
(1) The soil and ground water on or under the
Premises does not contain Hazardous Materials in amounts which violate
any laws to the extent that any governmental entity could require
either Landlord or Tenant to take any remedial action with respect to
such Hazardous Materials.
(2) During the time that Landlord has owned the
Premises, Landlord has received no notice of (i) any violation, or
alleged violation, of any law that has not been corrected to the
satisfaction of the appropriate authority, (ii) any pending claims
relating to the presence of Hazardous Material on the Premises, or
(iii) any pending investigation by any governmental agency concerning
the Premises relating to Hazardous Materials.
G. Landlord and Tenant shall each give written notice to the
other as soon as reasonably practicable of (i) any communication
received from any governmental authority concerning Hazardous Materials
which relates to the Premises, and (ii) any contamination of the
Premises by Hazardous Materials which constitutes a violation of any
law. Attached as Exhibit "C" to the Lease is a list of Hazardous
Materials that Tenant intends to use at the Premises. If during the
Lease Term Tenant proposes to use other Hazardous Materials at the
Premises, Tenant shall inform Landlord of such use, identifying the
Hazardous Materials and the manner of their use, storage and disposal,
and shall agree (i) to use, store and dispose of such Hazardous
Materials strictly in compliance with all laws, regulations and
governing agencies and (ii) that the indemnity set forth in Paragraph
45 shall be applicable to Tenant's use of such Hazardous Material.
H. Landlord or Tenant may, at any time, cause testing
wells to be installed on the Premises, and may cause the ground water
to be tested to detect the presence of Hazardous Material by the use of
such tests as are then customarily used for such purposes. Testing
wells installed by Tenant shall be paid for by Tenant. If tests
conducted by Landlord disclose that Tenant has violated any Hazardous
Materials laws, or Tenant or parties on the Premises during the Term of
this Lease have contaminated the Premises as determined by regulatory
agencies pursuant to Hazardous Materials laws, or that Tenant has
liability to Landlord pursuant to Paragraph 45A, then Tenant shall pay
for 100 percent of the cost of the test and all related expense. Prior
to the expiration of the Lease Term, Tenant shall remove any testing
wells it has
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installed at the Premises, and return the Premises to the condition
existing prior to the installation of such wells, unless Landlord
requests in writing that Tenant leave all or some of the testing wells
in which instance the wells requested to be left shall not be removed.
I. If any tests performed by Tenant or Landlord prior to the
Commencement Date disclose Hazardous Materials at the Premises,
Landlord at its expense will promptly take all reasonable action
required by law with respect to the existence of such Hazardous
Materials at the Premises. The Commencement Date shall not be delayed
because of such action by Landlord unless occupation of the Premises is
prohibited by law.
J. The obligations of Landlord and Tenant under this Paragraph
45 shall survive the expiration or earlier termination of the Term of
this Lease. The rights and obligations of Landlord and Tenant with
respect to issues relating to Hazardous Materials are exclusively
established by this Paragraph 45."
12. SECURITY DEPOSIT: Effective as of the first day of the Third Option
Period, Lease Paragraph 51 ("Security Deposit") shall be deleted in its entirety
and replaced with the following:
"51. SECURITY DEPOSIT: The following provisions shall modify
Lease Paragraph 4F:
A. Within thirty (30) days after the expiration or earlier
termination of the Lease term and after Tenant has vacated the
Premises, Landlord shall return to Tenant the entire Security Deposit
except for amounts that Landlord has deducted therefrom that are needed
by Landlord to cure defaults of Tenant under the Lease or compensate
Landlord for damages for which Tenant is liable pursuant to this Lease.
The use or disposition of the Security Deposit shall be subject to the
provisions of California Civil Code Section 1950.7.
B. During the first thirty (30) days following Tenant's
exercise of its Third Option to Extend, and only during said thirty day
period, Tenant shall have the one-time option of satisfying its
obligation with respect to an amount equal to one-half (1/2)
($83,277.28) of the $166,554.56 Security Deposit required under Lease
Paragraph 4F by providing to Landlord, at Tenant's sole cost, a letter
of credit which: (i) is drawn upon an institutional lender reasonably
acceptable and accessible to Landlord in form and content reasonably
satisfactory to Landlord; (ii) is in the amount of one-half (1/2) of
the Security Deposit; (iii) is for a term of at lease twelve (12)
months; (iv) with respect to any letter of credit in effect within the
six month period immediately prior to the expiration of the Lease term,
shall provide that the term of such letter of credit shall extend at
least forty five (45) days past the Lease expiration date (including
any extensions thereof); and (v) may be drawn upon by Landlord upon
submission of a declaration of Landlord that Tenant is in default (as
defined in Paragraph 19 and as modified by Paragraph 60). Landlord
shall not be obligated to furnish proof of default to such
institutional lender, and Landlord shall only be required to give the
institutional lender written notification that Tenant is in default and
upon receiving such written notification from Landlord the
institutional lender shall be obligated to immediately deliver cash to
Landlord equal to the amount Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any
loss or damage which Landlord may suffer by reason of Tenant's default
up to 1/2 of the total Security Deposit required under Lease Paragraph
4F. Said letter of credit shall provide that if the letter of credit is
not renewed, replaced or extended within twenty (20) days prior to its
expiration date the issuer of the credit shall automatically issue a
cashiers check payable to Landlord in the amount of the letter of
credit after the date which is twenty (20) days before the expiration
date, and no later than the expiration date, without Landlord being
required to make demand upon the letter of credit. If Tenant provides
Landlord with a letter of credit, within thirty (30) days the execution
of this Lease, meeting the foregoing requirements one-half (1/2) of the
cash Security Deposit (i.e., $83,277.28 of the $166,554.56 Security
Deposit) shall be returned to Tenant by Landlord inasmuch deposit
remaining and the Letter
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of Credit equal the total Security Deposit required in Lease Paragraph
4F. If Tenant defaults with respect to any provisions of this Lease,
including but not limited to provisions relating to the payment of
Rent, Landlord may (but shall not be required to) draw down on the
letter of credit for payment of any sum which Landlord may spend or
become obligated to spend by reason of Tenant's default, or to
compensate Landlord for any loss or damage which Landlord may suffer by
reason of Tenant's default. Landlord and Tenant acknowledge that such
letter of credit will be treated as if it were a cash security deposit,
and such letter of credit may be drawn down upon by Landlord upon
demand and presentation of evidence of the identity of Landlord to the
issuer, in the event that Tenant defaults with respect to any provision
of this Lease and such default is not cured within any applicable cure
period. Notwithstanding anything to the contrary in this Lease,
Landlord shall not be obligated to furnish proof of default to such
institutional lender and Landlord is only required to give the
institutional lender written notification that Tenant is in default and
upon receiving such written notification from Landlord the
institutional lender shall be obligated to immediately deliver cash to
Landlord equal to the amount Landlord may spend or become obligated to
spend by reason of Tenant's default, or to compensate Landlord for any
loss or damage which Landlord may suffer by reason of Tenant's default
up to 1/2 of the total Security Deposit. Landlord acknowledges that it
is not entitled to draw down such letter of credit unless Landlord
would have been entitled to draw upon the cash security deposit
pursuant to the terms of Paragraph 4F of the Lease. Concurrently with
the delivery of the required information to the issuer, Landlord shall
deliver to Tenant written evidence of the default upon which the draw
down was based, together with evidence that Landlord has provided to
Tenant the written notice of such default which was required under the
applicable provision of the Lease, and evidence of the failure of
Tenant to cure such default within the applicable grace period
following receipt of such notice of default. Any proceeds received by
Landlord by drawing upon the letter of credit shall be applied in
accordance with the provisions governing the Security Deposit imposed
by Lease Paragraph 4F and this Paragraph 51. If Landlord draws upon the
letter of credit, thereafter Tenant shall once again have the right to
post a letter of credit in place of one-half (1/2) of a cash Security
Deposit so long as Tenant is not then in default. In any event Tenant
will be obligated to replenish the amount drawn to restore the Security
Deposit to its original amount as provided for in Paragraph 4F. If any
portion of the letter of credit is used or applied pursuant hereto,
Tenant shall, within ten (10) days after receipt of a written demand
therefor from Landlord, restore and replace the value of such security
by either (i) depositing cash with Landlord in the amount equal to the
sum drawn down under the letter of credit, or (ii) increasing the
letter of credit to its value immediately prior to such application.
Tenant's failure to replace the value of the security as provided in
the preceding sentence shall be a material breach of its obligation
under this Lease."
13. REAL ESTATE TAXES: Effective as of the first day of the Third
Option Period, Lease Paragraph 54 ("Real Estate Taxes") shall be deleted in its
entirety and replaced with the following:
"54. REAL PROPERTY TAXES: Paragraph 9 is modified by the
following:
A. The term "Real Property Taxes" shall not include charges,
levies or fees directly related to the use, storage, disposal or
release of Hazardous Materials on the Premises unless directly related
to Tenant's Activities at this site or on other sites leased and/or
owned by Tenant; however, Tenant shall be responsible for general or
special tax and/or assessments (related to Hazardous Materials and/or
toxic waste) imposed on the Property provided said special tax and/or
assessment is not imposed due to on-site originated contamination on
the Property (by third parties not related to Tenant) prior to the
Lease Commencement Date. Subject to the terms and conditions stated
herein, Tenant shall be responsible for paying one hundred percent
(100%) of said taxes and/or assessments allocated to the Property.
B. If any assessments for public improvements are levied
against the Premises, Landlord may elect either to pay the assessment
in full or to allow the assessment to go to bond. If Landlord pays the
assessment in full, Tenant shall pay to Landlord or any assignee or
purchaser of the Premises each time payment of Real Property Taxes is
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made a sum equal to that which would have been payable (as both
principal and interest) had Landlord allowed the assessment to go to
bond.
C. Tenant at its cost shall have the right, at any time, to
seek a reduction in the assessed valuation of the Premises or to
contest any Real Property Taxes that are to be paid by Tenant. If
Tenant seeks a reduction or contests such Real Property Taxes, the
failure on Tenant's part to pay such Real Property Taxes being so
contested shall not constitute a default so long as Tenant complies
with the provisions of this Paragraph. Landlord shall not be required
to join in any proceeding or contest brought by Tenant unless the
provisions of any law require that the proceeding or contest be brought
by or in the name of Landlord. In that case Landlord shall join in the
proceedings or contest or permit it to be brought in Landlord's name as
long as Landlord is not required to bear any cost. Tenant, on final
determination of the proceeding or contest, shall immediately pay or
discharge its share of any Real Property Taxes determined by any
decision or judgment rendered, together with all costs, charges,
interest, and penalties incidental to the decision or judgment. If
Tenant does not pay the Real Property Taxes when due pursuant to the
Lease and Tenant seeks a reduction or contests them as provided in this
paragraph, before the commencement of the proceeding or contest Tenant
shall furnish to Landlord a surety bond in form reasonably satisfactory
to Landlord issued by an insurance company qualified to do business in
California. The amount of the bond shall equal 125% of the total amount
of Real Property Taxes in dispute and any such bond shall be assignable
to any lender or purchaser of the Premises. The bond shall hold
Landlord and the Premises harmless from any damage arising out of the
proceeding or contest and shall insure the payment of any judgment that
may be rendered."
14. PROPERTY INSURANCE: Effective as of the first day of the Third
Option Period, section B of Lease Paragraph 55 ("Property Insurance") shall be
deleted in its entirety and be of no further force or effect.
15. ASSIGNMENT AND SUBLETTING: Effective as of the first day of the
Third Option Period, Lease Paragraph 56 ("Assignment and Subletting") shall be
deleted in its entirety and replaced with the following:
"56. ASSIGNMENT AND SUBLETTING: The following modifications
are made to Paragraph 16:
A. In the event that Tenant seeks to make any assignment or
sublease, then Landlord, by giving Tenant written notice of its
election within fifteen (15) days after Tenant's notice of intent to
assign or sublease has been given to Landlord, shall have the right to
elect (i) to withhold its consent to such assignment or sublease, as
permitted pursuant to Paragraph 16, or (ii) to permit Tenant to so
assign the Lease or sublease such part of the Premises, in which event
Tenant may do so, but without being released of its liability for the
performance of all of its obligations under the Lease, and the
following shall apply (except the following shall not apply to a
"Permitted Transfer" described in Paragraph 57):
(1) If Tenant assigns its interest in this Lease,
then in addition to the rental provided for in this Lease, Tenant shall
pay to Landlord fifty percent (50%) of all Rent and other consideration
received by Tenant over and above (i) the assignee's agreement to
assume the obligations of Tenant under this Lease and (ii) all
"Permitted Transfer Costs" (as defined herein) related to such
assignment. As used herein, the term "Permitted Transfer Costs" shall
mean all reasonable leasing commissions paid to third parties not
affiliated with Tenant in order to obtain the assignment or sublease in
question.
(2) If Tenant sublets all or part of the Premises,
then Tenant shall pay to Landlord in addition to the Rent provided for
in this Lease fifty percent (50%) of the positive difference, if any,
between (i) all rent and other consideration paid or provided to Tenant
by the subtenant, less (ii) all Rent paid by Tenant to Landlord
pursuant to
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this Lease which is allocable to the area so sublet and all Permitted
Transfer Costs related to such sublease. After Tenant has recovered all
Permitted Transfer Costs Tenant shall pay to Landlord the amount
specified in the preceding sentence on the same basis, whether periodic
or in lump sum, that such rent and other consideration is paid to
Tenant by its subtenant, within seven (7) days after it is received by
Tenant.
3) Tenant's obligations under this subparagraph shall
survive any assignment or sublease. At the time Tenant makes any
payment to Landlord required by this subparagraph, Tenant shall deliver
an itemized statement of the method by which the amount to which
Landlord is entitled was calculated, certified by Tenant as true and
correct. Landlord shall have the right to inspect Tenant's books and
records relating to the payments due pursuant to this subparagraph.
Upon request therefor, Tenant shall deliver to Landlord copies of all
bills, invoices or other documents upon which its calculations are
based.
(4) As used herein, the term "consideration" shall
mean any consideration of any kind received, or to be received
(including, but not limited to, services rendered and/or value
received) by Tenant as a result of the assignment or sublease, if such
sums are paid or provided to Tenant for Tenant's interest in this Lease
or in the Premises.
(5) This Paragraph 56.A does not apply to a
"Permitted Transfer", as provided in Paragraph 57 hereof. The parties
agree that if any of the following transactions occur and do not
qualify as "Permitted Transfers", Tenant must obtain Landlord's consent
to such transaction and if Landlord consents to any of the following
transactions which do not otherwise qualify as "Permitted Transfers",
then the provisions of this Paragraph 56.A shall not apply to the
following transactions: (i) a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee; and (ii) an assignment of this Lease to a
corporation which purchases or otherwise acquires 95% or more of the
assets of Tenant so long as 95% of all assets and liabilities of Tenant
are permanently transferred to such assignee and Tenant remains liable
and responsible under the Lease to the extent Tenant continues in
existence following such transaction."
16. PERMITTED ASSIGNMENTS AND SUBLEASES: Effective as of the first day
of the Third Option Period, Lease Paragraph 57 ("Permitted Assignments and
Subleases") shall be deleted in its entirety and replaced with the following:
"57. PERMITTED ASSIGNMENTS AND SUBLEASES: Notwithstanding
anything contained in Paragraph 16, so long as Tenant otherwise
complies with the provisions of Paragraph 16 and the Permitted Transfer
does not release Tenant from its obligations hereunder, Tenant may
enter into any of the following transfers (a "Permitted Transfer")
without Landlord's prior written consent, and the provisions of
Paragraph 56A shall not apply to any such Permitted Transfer:
A. Tenant may sublease all or part of the Premises or assign
its interest in this Lease to any corporation which controls, is
controlled by, or is under common control with Tenant by means of an
ownership interest of more than fifty percent (50%) providing Tenant
remains liable for the payment of Rent and full performance of the
Lease;
B. Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as (i) 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee, and (ii) immediately prior to the merger,
consolidation or other reorganization, the corporation into which
Tenant is to be merged has a net worth equal to or greater than the net
worth of Tenant at the time of Lease execution or at the time of such
assignment, merger, consolidation or reorganization (whichever is
greater), or if it does not, Landlord is provided a guaranty of the
Lease (in a form reasonably acceptable to Landlord) from a corporation
(a) that
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is the parent of, or is otherwise affiliated with, the corporation into
which Tenant is to be merged, and (b) which has a current net worth
equal to or greater than the net worth of Tenant at the time of Lease
execution or at the time of such assignment, merger, consolidation or
reorganization (whichever is greater). In the event there is not a
permanent transfer of 95% or more of the assets and liabilities from
Tenant to a third party, and Tenant continues to exist as a separate
entity, both companies shall be jointly and severally liable for the
full terms and conditions of the Lease;
C. Tenant may assign this Lease to a corporation which
purchases or otherwise acquires 95% or more of the assets of Tenant so
long as 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee (in the event there is not a permanent
transfer of 95% or more of the assets and liabilities from Tenant to a
third party and Tenant continues to exist as a separate entity, both
companies shall be jointly and severally liable for the full terms and
conditions of the Lease), and provided that immediately prior to such
assignment said corporation, has a net worth equal to or greater than
the net worth of Tenant (a) at the time of Lease execution or (b) at
the time of such assignment (whichever is greater), or if it does not,
Landlord is provided a guaranty of the Lease (in a form reasonably
acceptable to Landlord) from a corporation (a) that is the parent of,
or is otherwise affiliated with, said corporation and (b) which has a
current net worth equal to or greater than the net worth of Tenant at
the time of Lease execution or at the time of such assignment,
(whichever is greater)."
17. DESTRUCTION: Effective as of the first day of the Third Option
Period, Lease Paragraph 62 ("Destruction") shall be deleted in its entirety and
replaced with the following:
"62. DESTRUCTION: Paragraph 21 is modified by the following:
A. Notwithstanding anything to the contrary within Paragraph
21, Landlord may terminate this Lease in the event of an uninsured
event or if insurance proceeds, net of the deductible, are insufficient
to cover one hundred percent of the rebuilding costs; provided,
however, Tenant shall have the right to elect, in its discretion, to
contribute such excess funds to permit Landlord to repair the Premises.
B. Except as provided in Paragraph 62C, Landlord may not
terminate the Lease if the Premises are damaged by a peril whereby the
cost to replace and/or repair is one hundred percent (100%) covered by
the insurance carried by Landlord pursuant to Paragraph 12, but instead
shall restore the Premises in the manner described by Paragraph 21.
C. If the Premises are damaged by a peril covered by the
insurance carried by Landlord pursuant to Paragraph 12, Landlord shall
have the option to terminate the Lease if each of the following
conditions is satisfied: (i) the cost to repair or the damage exceeds
thirty-three percent (33%) of the then replacement cost of the
Premises; and (ii) the damage occurs at a time when there is less than
five (5) years remaining in the term of the Lease.
D. If Landlord fails to obtain insurance as required pursuant
to Paragraph 12, and said insurance would have been available to cover
any damage or destruction to the Premises, Landlord shall be required
to rebuild, at its cost, net of the deductible which would have been
required under said insurance policy (which deductible Tenant is
required to pay).
E. If the Premises are damaged by any peril, then as soon as
reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be completed. Tenant
shall have the option to terminate this Lease in the event any of the
following occurs, which option may be exercised only by delivery to
Landlord of a written notice of election to terminate within seven (7)
days after Tenant receives from Landlord the estimate of the time
needed to complete such restoration:
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(1) The Premises are damaged by any peril (not caused
by or resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Leased
Premises cannot be substantially completed within 180 days after the
date of such damage (subject to force majeure conditions); or
(2) The Premises are damaged by any peril (not caused
by or resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) within twelve (12) months of the last day of
the Lease term, and, in the reasonable opinion of Landlord's architect
or construction consultant, the restoration of the Leased Premises
cannot be substantially completed within sixty (60) days after the date
of such damage and Tenant has not exercised its Option to Extend said
Term (or Extended Term as the case may be)."
18. LIABILITY INSURANCE: Effective as of the first day of the Third
Option Period, the first sentence of Lease Paragraph 10 ("Liability Insurance")
shall be deleted and replaced with the following: "Tenant, at Tenant's expense,
agrees to keep in force during the Term of this Lease a policy of commercial
general liability insurance with combined single limit coverage of not less than
Two Million Dollars ($2,000,000) per occurrence for bodily injury and property
damage occurring in, on or about the Premises, including parking and landscaped
areas."
19. LIMITATION OF LIABILITY: Effective as of the first day of the Third
Option Period, Lease Paragraph 36 ("Limitation of Liability") shall be deleted
in its entirety and replaced with the following:
"36. LIMITATION OF LIABILITY In consideration of the benefits
accruing hereunder, Tenant and all successors and assigns covenant and
agree that, in the event of any actual or alleged failure, breach or
default hereunder by Landlord:
(i) the sole and exclusive remedy shall be against Landlord's interest
in the Premises leased herein;
(ii) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of
the partnership);
(iii) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the
partnership);
(iv) no partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(v) no judgment will be taken against any partner of Landlord;
(vi) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
(vii) no writ of execution will ever be levied against the assets of
any partner of Landlord;
(viii) these covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and
agreements shall be applicable to any covenant or agreement either
expressly contained in this Lease or imposed by statute or at common
law."
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions
of said April 10, 1992 Lease Agreement shall remain in full force and effect.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
No. 1 to Lease as of the day and year last written below.
LANDLORD: TENANT:
JOHN ARRILLAGA SURVIVOR'S QUANTUM CORPORATION
TRUST a Delaware corporation
By /s/ John Arrillaga By /s/ Andrew Kryder
------------------ -----------------
John Arrillaga, Trustee
Date: 6/30/97 Andrew Kryder
--------- ---------------------
Print or Type Name
RICHARD T. PEERY SEPARATE Title: FINANCE AND CORP GENERAL
PROPERTY TRUST COUNSEL
------------------------
By /s/ Richard T. Peery Date: June 25, 1997
------------------- ---------------
Richard T. Peery, Trustee
Date: 6/26/97
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AMENDMENT NO. 3
TO LEASE
THIS AMENDMENT NO. 3 is made and entered into this 16th day of April,
1997, by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated
7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) (previously known as the "John
Arrillaga Separate Property Trust") as amended, and RICHARD T. PEERY, Trustee,
or his Successor Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY
TRUST) as amended, collectively as LANDLORD, and QUANTUM CORPORATION, a Delaware
corporation, as TENANT.
RECITALS
A. WHEREAS, by Lease Agreement dated October 31, 1989 Landlord leased
to Tenant all of that certain 176,516+/- square foot building located at 500
McCarthy Blvd., Milpitas, California, the details of which are more particularly
set forth in said October 31, 1989 Lease Agreement, and
B. WHEREAS, said Lease was amended by Letter Agreement dated October
31, 1989 which provided for a Basic Rent Credit for the period commencing with
the Lease Commencement Date and ending on May 31, 1991, and
C. WHEREAS, said Lease was amended by Letter Agreement dated April 24,
1990 which canceled the reduction in Basic Rent Credit Letter dated October 31,
1989, and
D. WHEREAS, said Lease was amended by Amendment No. 1 dated April 24,
1990 which which delayed the Lease Commencement Date from December 15, 1990 to
April 1, 1991, and,
E. WHEREAS, said Lease was amended by the Commencement Letter dated
March 7, 1991 which changed the Commencement Date of the Lease from April 1,
1991 to April 7, 1991, and established the Termination Date of September 30,
2006, and,
E. WHEREAS, said Lease was amended by Amendment No. 2 dated June 8,
1992 which replaced Lease Exhibit A and amended the description of the Premises,
and
F. WHEREAS, it is now the desire of the parties hereto to amend the
Lease by (i) extending the Term for five years, changing the Termination Date
from September 30, 2006 to September 30, 2011, (ii) amending the Basic Rent
schedule and Aggregate Rent accordingly, (iii) adding a third Five Year Option
to Extend, (iv) replacing Paragraphs 41C ("Lease Terms Co-extensive") and 48
("Cross Default") and 53 ("Structural Capital Costs Regulated by Governmental
Agencies After the Commencement of this Lease not Caused by Tenant or Tenant's
Uses or Remodeling of the Premises"), (v) amending Lease Paragraph 12 ("Property
Insurance") and (vi) amending and/or replacing certain provisions of the Lease
commencing as of the commencement of the Third Extended Term of said Lease as
hereinafter set forth.
AGREEMENT
NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:
1. TERM OF LEASE: It is agreed between the parties that Tenant has
exercised its First Five-Year Option to Extend the lease term of that certain
lease agreement dated March 23, 1994 for premises located at 1101 Sumac Drive,
Milpitas, California (the "Building 5 Lease"), as detailed in Paragraph 41 of
said Building 5 Lease. Paragraph 40C of said Building 5 Lease provides that in
the event the term of said Building 5 Lease is extended for any reason
whatsoever, the terms of the Existing Leases (i.e. two of said leases dated
October 31, 1989 are for Premises 1ocated at 1140 Technology Drive and 500
McCarthy Blvd., Milpitas, California (the "1989 Leases"); one of said leases
dated September 17, 1990 is for Premises located at 1000 Sumac Drive, Milpitas,
California
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and one of said leases dated April 10, 1992 is for Premises located at 900 Sumac
Drive, Milpitas, California) shall also be extended so that all five Leases
expire on the same date; therefore, it is agreed between the parties that by
exercising its Option to Extend the Building 5 Lease, Tenant has in effect
exercised its Option to Extend under Lease Paragraph 42 ("First Five-Year Option
to Extend"), and that pursuant to said Lease Paragraph 42, the Term of this
Lease Agreement shall be extended for an additional five (5) year period, and
the Lease Termination Date shall be changed from September 30, 2006 to September
30, 2011.
2. BASIC RENTAL FOR FIRST EXTENDED TERM OF LEASE: The monthly Basic
Rental for the First Extended Term of Lease shall be as follows:
On October 1, 2006, the sum of THREE HUNDRED EIGHT THOUSAND NINE
HUNDRED THREE AND NO/100 DOLLARS ($308,903.00) shall be due, and a like sum due
on the first day of each month thereafter through and including September 1,
2007.
On October 1, 2007, the sum of THREE HUNDRED SEVENTEEN THOUSAND SEVEN
HUNDRED TWENTY EIGHT AND 80/100 DOLLARS ($317,728.80) shall be due, and a like
sum due on the first day of each month thereafter through and including
September 1, 2008.
On October 1, 2008, the sum of THREE HUNDRED TWENTY SIX THOUSAND FIVE
HUNDRED FIFTY FOUR AND 60/100 DOLLARS ($326,554.60) shall be due, and a like sum
due on the first day of each month thereafter through and including September 1,
2009.
On October 1, 2009, the sum of THREE HUNDRED THIRTY FIVE THOUSAND THREE
HUNDRED EIGHTY AND 40/100 DOLLARS ($335,380.40) shall be due, and a like sum due
on the first day of each month thereafter through and including September 1,
2010.
On October 1, 2010, the sum of THREE HUNDRED FORTY FOUR THOUSAND TWO
HUNDRED SIX AND 20/100 DOLLARS ($344,206.20) shall be due, and a like sum due on
the first day of each month thereafter through and including September 1, 2011.
The Aggregate Basic Rent for the Lease shall be increased by
$19,593,276.00 or from $44,409,491.18 to $64,002,767.18.
3. THIRD FIVE-YEAR OPTION TO EXTEND: Provided Tenant has extended the
Lease for an additional five (5) year period pursuant to Lease Paragraph 43
("Second Five Year Option To Extend"), Landlord hereby grants to Tenant a third
option to extend the Term of this Lease for an additional five (5) year period
upon the following terms and conditions:
A. Tenant shall give Landlord written notice of Tenant's exercise of
this option to extend at least one hundred eighty (180) days prior to the
expiration of the Lease Term as extended pursuant to Lease Paragraph 43 ("Second
Five Year Option To Extend"), in which event the Lease shall be considered
extended for an additional five (5) year period upon the same terms and
conditions as this Lease, absent this Paragraph 3 and subject to the Rental as
set forth below. In the event that Tenant fails to timely exercise Tenant's
option as set forth herein in writing, Tenant shall have no further option to
extend this Lease or the Other Leases, and this Lease shall continue in full
force and effect for the full remaining term hereof, absent this Paragraph 3.
B. The monthly Basic Rent for the option period shall be as follows in
the event the option is exercised:
Period Monthly Basic Rent
------ -----------------
Months 1-12 $2.25/sf
Months 13-24 $2.30/sf
Months 25-36 $2.35/sf
Months 37-48 $2.40/sf
Months 49-60 $2.45/sf
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C. Notwithstanding anything contained herein, Tenant may not exercise
the option to extend granted by this Paragraph 3 at any time that Tenant is in
default (default for monetary and material default for non-monetary) of its
obligations under this Lease, if Tenant has received written notice from
Landlord that Tenant is in default, and such default has not been timely cured
within the time period provided for in this Lease; provided, however, that if
such default of Tenant is not for money due under this Lease and cannot be
cured, and if Landlord does not elect to terminate this Lease as a result of
such non-curable default by Tenant, Tenant may exercise the option to extend
granted by this Paragraph 3 notwithstanding such non-curable default.
4. LEASE TERMS CO-EXTENSIVE: Lease Paragraph 40C ("Lease Terms
Co-extensive") is hereby deleted in its entirety and replaced with the
following:
"40C. LEASE TERMS CO-EXTENSIVE: It is acknowledged that (i)
Landlord and Tenant have previously executed four separate leases in
addition to this Lease: one of said leases dated October 31, 1989 is
for Premises located at 1140 Technology Drive, Milpitas, California
(the "Building One Lease"); one of said leases dated September 17, 1990
is for Premises located at 1000 Sumac Drive, Milpitas, California (the
"Building Four Lease"); one of said leases dated April 10, 1992 is for
Premises located at 900 Sumac Drive, Milpitas, California (the
"Building 3 Lease"); and one of said leases dated March 23, 1994 is for
premises located at 1101 Sumac Drive, Milpitas, California (the
"Building 5 Lease") (hereinafter collectively referred to as the "Other
Leases"); and (ii) it is the intention of the parties that the term of
this Lease be co-extensive with the term of the Other Leases, such that
the terms of all five leases ("the Leases") expire on the same date.
The provisions of this Paragraph 40C also requires the terms of all the
Leases to be extended accordingly if Tenant exercises its Option to
Extend under any of the Leases. The monthly Basic Rent during the
extended term under each of the Leases shall be increased by $.05 per
square foot on the commencement date of the extended term and
thereafter on each and every anniversary of the respective lease's
commencement date of the extended term."
5. CROSS DEFAULT: Lease Paragraph 48 ("Cross Default") is hereby
deleted in its entirety and replaced with the following:
"48. CROSS DEFAULT: It is agreed between Landlord and Tenant
that a default under this Lease, or a default under any of the Other
Leases may, at the option of Landlord, be considered a default under
all Leases, in which event Landlord shall be entitled (but in no event
required) to apply all rights and remedies of Landlord under the terms
of one lease to all the Leases including, but not limited to, the right
to terminate any or all of the aforementioned Other Leases or this
Lease by reason of a default under the Leases or hereunder.
Notwithstanding the above, Landlord shall have the option of
considering a default under this Lease or a default under any of the
Other Leases to be a default under all such leases, only with respect
to such leases under which Landlord is also the 'Landlord' at the time
such default occurs. By way of example, if at the time a default of
Tenant occurs under this Lease, Landlord has sold the premises
described in any of the Other Leases and is no longer the 'Landlord'
thereunder, then a default under this Lease shall not constitute a
default under any of such Other Leases so sold by Landlord (unless the
premises leased under this Lease and the Other Leases are sold to the
same entity), and a default by Tenant under any of such Other Leases so
sold by Landlord shall not constitute a default under this Lease or any
other of the Other Leases then remaining between Landlord and Tenant.
However, if the Landlord under this Lease and the Other Leases is one
in the same at the time of said default, said cross default provisions
shall apply."
6. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL AGENCIES AFTER
THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR TENANT'S USES OR
REMODELING OF THE PREMISES: Lease Paragraph 53 ("Structural Capital Costs
Regulated by Governmental Agencies after the Commencement of this Lease Not
Caused by Tenant or
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Tenant's Uses or Remodeling of the Premises") is hereby deleted and replaced
with the following:
"53. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL
AGENCIES AFTER THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR
TENANT'S USES OR REMODELING OF THE PREMISES: The provisions of this
Paragraph 53 shall modify Paragraphs 7 and 14:
A. If (i) during the last five (5) years of the First Extended
Term of the Lease if said Lease has not been extended as provided for
in Lease Paragraph 43 ("Second Five Year Option To Extend") or in
Paragraph 3 ("Third Five Year Option to Extend") or Paragraph 4 ("Lease
Terms Co-Extensive") above, or (ii) during either of the five (5) year
extension periods permitted by Lease Paragraph 43 or Paragraph 3, or
Paragraph 4 above, it becomes necessary (due to any governmental
requirement for continued occupancy of the Premises) to make structural
improvements required by laws enacted or legal requirements imposed by
governmental agency(s) after the Commencement Date, and the cost for
each required work or improvements exceeds $100,000, then if such legal
requirement is not imposed because of Tenant's specific use of the
Premises and is not "triggered" by Tenant's Alterations or Tenant's
application for a building permit or any other governmental approval
(collectively "Tenant's Actions") in which instance Tenant shall be
responsible for 100% of the cost of such improvements, Landlord shall
be responsible for paying the cost of such improvement and constructing
such improvement, subject to a cash contribution from Tenant of a
portion of the cost thereof as provided for and calculated in Paragraph
53B.
B. When Landlord makes an improvement pursuant to Paragraph
53A, and as a condition to Landlord's obligation to construct such
improvement, Tenant shall make the following contribution in cash to
Landlord for the cost thereof prior to the commencement of the work by
Landlord. It is agreed that Tenant shall pay to Landlord 100% of the
cost of the first $100,000.00 worth of each improvement. After the
first $100,000.00, all costs above $100,000.00 shall be divided by 15
and multiplied by the time period remaining in the last five years of
the Lease Term from the date work on such improvement commences.
For example, if the improvement is not required as a result of
Tenant's Actions and if the cost of such improvement was $400,000 and
there was one year and six months remaining in the Lease term when the
work commenced, then Tenant would be responsible for reimbursing
Landlord in cash $130,000.00 computed as follows:
Total Cost of Work $400,000.00
Tenant Responsible for
1st $100,000 -100.000.00
-----------
Total Amount To Be Amortized $300,000.00
$300,000.00/15 = $20,000.00/yr. x 1.5 yrs = $ 30,000.00
Tenant responsible for $100,000 + $30,000.00 = $130,000.00
C. If Landlord has made improvements, for which Tenant has
reimbursed Landlord for the cost thereof pursuant to Paragraph 53B, and
the term of this Lease is subsequently extended pursuant to the
exercise by Tenant of an option to renew pursuant to Lease Paragraph 43
or Paragraph 3 above, upon the exercise of any such option by Tenant,
Tenant shall pay to Landlord an additional sum equal to the total
amount of said improvement less the amount previously paid for by
Tenant. Using the example in Paragraph 53B above, Tenant would owe
Landlord the additional amount of $270,000.00 ($400,000.00 -
$130,000.00 = $270,000.00)."
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7. PROPERTY INSURANCE: Lease Paragraph 12 ("Property Insurance") is
hereby amended to include the following: "Tenant acknowledges that as part of
the cost of insurance policies for the Premises, Tenant is responsible for the
payment of insurance deductibles on insurance claims as they relate to the
Premises subject to the limitations provided in Lease Paragraph 55 ("Property
Insurance") which limitations are applicable only during the initial Lease Term
and the First Lease Extension Period and the Second Lease Extension Period. Said
limitation provided for in Lease Paragraph 55 are null and void at the
commencement of the Third Lease Extended Term".
8. THIRD OPTION PERIOD - LEASE PROVISION CHANGES: In the event Tenant
exercises its Third Option to Extend as provided for in Paragraph 3 above, the
following amendments (contained within Paragraphs 9 through 19) are herein made
to the Lease to be effective upon the commencement of the third option period
("Third Option Period"), or during any period following the expiration of the
Lease Term or expiration of the Lease when Tenant is in possession of the
Premises.
9. LATE CHARGE: Effective as of the first day of the Third Option
Period, the Late Charge referenced in Lease Paragraph 4.D ("Late Charge") shall
be changed from five percent (5%) to ten percent (10%), and Lease Paragraph 50
("Limitation on Late Charge") shall be deleted in its entirety and of no further
force or effect.
10. MANAGEMENT FEE: Notwithstanding anything to the contrary in the
Lease, effective as of the first day of the Third Option Period, and on the
first day of each month thereafter, Tenant shall pay to Landlord, in addition to
the Basic Rent and Additional Rent, a fixed monthly management fee ("Management
Fee") equal to one percent (1%) of the Basic Rent due for each month during the
Lease Term.
11. HAZARDOUS MATERIALS: Effective as of the first day of the Third
Option Period, Lease Paragraph 45 ("Hazardous Materials") shall be deleted in
its entirety and replaced with the following:
"45. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows
with respect to the existence or use of "Hazardous Materials" (as
defined herein) on, in, under or about the Premises and real property
located beneath said Premises, which includes the entire parcel of land
on which the Premises are located as shown in Green on Exhibit A to the
Lease (hereinafter collectively referred to as the "Property"): ,
A. As used herein, the term "Hazardous Materials" shall mean
any material, waste, chemical, mixture or byproduct which is or
hereafter is defined, listed or designated under Environmental Laws
(defined below) as a pollutant, or as a contaminant, or as a toxic or
hazardous substance, waste or material, or any other unwholesome,
hazardous, toxic, biohazardous, or radioactive material, waste,
chemical, mixture or byproduct, or which is listed, regulated or
restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions
thereof, polychlorinated biphenyls, or asbestos). As used herein, the
term "Environmental Laws" shall mean any applicable Federal, State of
California or local government law (including common law), statute,
regulation, rule, ordinance, permit, license, order, requirement,
agreement, or approval, or any determination, judgment, directive, or
order of any executive or judicial authority at any level of Federal,
State of California or local government (whether now existing or
subsequently adopted or promulgated) relating to pollution or the
protection of the environment, ecology, natural resources, or public
health and safety.
B. Tenant shall notify Landlord prior to the occurrence of any
Tenant's Hazardous Materials Activities (defined below). Landlord
acknowledges that Tenant shall use, in compliance with applicable
Environmental Laws, customary household and office supplies (Tenant
shall first provide Landlord with a list of said materials use), such
as mild cleaners, lubricants and copier toner. Any and all of Tenant's
Hazardous Materials Activities shall be conducted in conformity with
this Paragraph
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45, Paragraph 14 of this Lease, and in compliance with all
Environmental Laws and regulations. As used herein, the term "Tenant's
Hazardous Materials Activities" shall mean any and all use, handling,
generation, storage, disposal, treatment, transportation, release,
discharge, or emission of any Hazardous Materials on, in, beneath, to,
from, at or about the Property, in connection with Tenant's use of the
Property, or by Tenant or by any of Tenant's agents, employees,
contractors, vendors, invitees, visitors or its future subtenants or
assignees or other third parties (including "dumping" by others) (or
which Hazardous Materials originate on the surface of the Premises any
time on or after the Commencement Date of this Lease, but excluding
Hazardous Materials on the Premises prior to the Lease Commencement
Date because of the storage, use, disposal, or transportation of such
materials or waste by any of Landlord's contractors or otherwise
arising out of construction work performed by or under the direction of
Landlord on the Premises and Landlord shall be responsible for all
required actions with respect to such materials or wastes). Tenant
agrees to provide Landlord with prompt written notice of any spill or
release of Hazardous Materials at the Property during the term of the
Lease of which Tenant becomes aware, and further agrees to provide
Landlord with prompt written notice of any violation of Environmental
Laws in connection with Tenant's Hazardous Materials Activities of
which Tenant becomes aware. If Tenant's Hazardous Materials Activities
involve Hazardous Materials other than normal use of customary
household and office supplies, Tenant also agrees at Tenant's expense:
(i) to install such Hazardous Materials monitoring, storage and
containment devices as may be required by Environmental Laws,
regulations and/or governing agencies; (ii) to provide Landlord with a
written inventory of such Hazardous Materials, including an update of
same each year upon the anniversary date of the Commencement Date of
the Lease ("Anniversary Date"); and (iii) on each Anniversary Date to
provide to Landlord copies of all documentation and records, required
by applicable Environmental Laws to be prepared and submitted to
governmental authorities, relating to use at the Property of Hazardous
Materials or to Tenant's Hazardous Materials Activities, if any. If
upon completion of Landlord's review of said documentation and records,
Landlord reasonably questions if Tenant is in compliance with all
applicable Environmental Laws with respect to Tenant's Hazardous
Materials Activities, Tenant agrees within thirty (30) days following
receipt of written notice from Landlord, to retain a qualified
environmental consultant, acceptable to Landlord, to evaluate whether
Tenant is in compliance with all applicable Environmental Laws with
respect to Tenant's Hazardous Materials Activities. Tenant, at its
expense, shall submit to Landlord a report from such environmental
consultant which discusses the environmental consultant's findings
within two (2) months of each Anniversary Date. Tenant, at its expense,
shall promptly undertake and complete any and all steps necessary, and
in full compliance with applicable Environmental Laws, to fully correct
any and all problems or deficiencies identified by the environmental
consultant, and promptly provide Landlord with documentation of all
such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at
its expense, shall (i) properly remove from the Property all Hazardous
Materials which come to be located at the Property in connection with
Tenant's Hazardous Materials Activities, and (ii) fully comply with and
complete all facility closure requirements of applicable Environmental
Laws regarding Tenant's Hazardous Materials Activities, including but
not limited to (x) properly restoring and repairing the Property to the
extent damaged by such closure activities, and (y) obtaining from the
local Fire Department or other appropriate governmental authority with
any legal or regulatory jurisdiction a written concurrence that closure
has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims,
notices, work plans, data and reports prepared, received or submitted
in connection with any such closure activities.
D. If Landlord, upon consultation with Tenant, reasonably
concludes that the Property has become contaminated as a result of
Tenant's Hazardous Materials Activities, Landlord in addition to any
other rights it may have under this Lease or under Environmental Laws
or other laws, may enter upon the Property and conduct inspection,
sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of
determining the nature and extent
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of such contamination except to the extent that such activities may be
inconsistent with Tenant's compliance with Environmental Laws. Tenant
shall promptly reimburse Landlord for the costs of such an
investigation, including but not limited to reasonable attorneys' fees
Landlord incurs with respect to such investigation to the extent, and
only to the extent, that it that discloses Hazardous Materials
contamination for which Tenant is liable under this Lease. Except as
may be required of Tenant by applicable Environmental Laws, Tenant
shall not perform any sampling, testing, or drilling to identify the
presence of any Hazardous Materials at the Property, without Landlord's
prior written consent which shall not be unreasonably withheld. Tenant
shall promptly provide Landlord with copies of any claims, notices,
work plans, data and reports prepared, received or submitted in
connection with any sampling, testing or drilling performed pursuant to
the preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel
acceptable to Landlord, whose consent shall not unreasonably be
withheld) and hold harmless Landlord, its employees, assigns,
successors, successors-in-interest, agents and representatives from and
against any and all claims (including but not limited to third party
claims from a private party or a government authority), liabilities,
obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including
but not limited to reasonable attorneys', consultants' and other
experts' fees and costs), and damages, which arise from or relate to:
(i) Tenant's Hazardous Materials Activities; (ii) any Hazardous
Materials contamination caused by Tenant prior to the Commencement Date
of the Lease; or (iii) the breach of any obligation of Tenant under
this Paragraph 45 (collectively, "Tenant's Environmental
Indemnification"). Tenant's Environmental Indemnification shall include
but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution
in fair market value of the Property. Tenant's Environmental
Indemnification shall further include but is not limited to the
obligation to diligently and properly implement to completion, at
Tenant's expense, any and all environmental investigation, removal,
remediation, monitoring, reporting, closure activities, or other
environmental response action as may be required by applicable
Environmental Laws, regulations or governing agencies (collectively,
"Response Actions"). Tenant shall promptly provide Landlord with copies
of any claims, notices, work plans, data and reports prepared, received
or submitted in connection with any Response Actions.
F. Landlord hereby makes the following representations to
Tenant, each of which is made only to the best of Landlord's knowledge
as of the date Landlord executes this Lease, without any inquiry or
investigation having been made or required by Landlord regarding this
subject, nor does Landlord have any obligation to investigate or make
inquiry regarding the subject:
(1) The soil and ground water on or under the
Premises does not contain Hazardous Materials in amounts which violate
any laws to the extent that any governmental entity could require
either Landlord or Tenant to take any remedial action with respect to
such Hazardous Materials.
(2) During the time that Landlord has owned the
Premises, Landlord has received no notice of (i) any violation, or
alleged violation, of any law that has not been corrected to the
satisfaction of the appropriate authority, (ii) any pending claims
relating to the presence of Hazardous Material on the Premises, or
(iii) any pending investigation by any governmental agency concerning
the Premises relating to Hazardous Materials.
G. Landlord and Tenant shall each give written notice to the
other as soon as reasonably practicable of (i) any communication
received from any governmental authority concerning Hazardous Materials
which relates to the Premises, and (ii) any contamination of the
Premises by Hazardous Materials which constitutes a violation of any
law. Attached as Exhibit "C" to the Lease is a list of Hazardous
Materials that Tenant intends to use at the Premises. If during the
Lease Term Tenant proposes to use other Hazardous Materials at the
Premises, Tenant shall inform Landlord of such use, identifying the
Hazardous Materials and the manner of their use, storage and
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disposal, and shall agree (i) to use, store and dispose of such
Hazardous Materials strictly in compliance with all laws, regulations
and governing agencies and (ii) that the indemnity set forth in
Paragraph 45 shall be applicable to Tenant's use of such Hazardous
Material.
H. Landlord or Tenant may, at any time, cause testing wells to
be installed on the Premises, and may cause the ground water to be
tested to detect the presence of Hazardous Material by the use of such
tests as are then customarily used for such purposes. Testing wells
installed by Tenant shall be paid for by Tenant. If tests conducted by
Landlord disclose that Tenant has violated any Hazardous Materials
laws, or Tenant or parties on the Premises during the Term of this
Lease have contaminated the Premises as determined by regulatory
agencies pursuant to Hazardous Materials laws, or that Tenant has
liability to Landlord pursuant to Paragraph 45A, then Tenant shall pay
for 100 percent of the cost of the test and all related expense. Prior
to the expiration of the Lease Term, Tenant shall remove any testing
wells it has installed at the Premises, and return the Premises to the
condition existing prior to the installation of such wells, unless
Landlord requests in writing that Tenant leave all or some of the
testing wells in which instance the wells requested to be left shall
not be removed.
I. If any tests performed by Tenant or Landlord prior to the
Commencement Date disclose Hazardous Materials at the Premises,
Landlord at its expense will promptly take all reasonable action
required by law with respect to the existence of such Hazardous
Materials at the Premises. The Commencement Date shall not be delayed
because of such action by Landlord unless occupation of the Premises is
prohibited by law.
J. The obligations of Landlord and Tenant under this Paragraph
45 shall survive the expiration or earlier termination of the Term of
this Lease. The rights and obligations of Landlord and Tenant with
respect to issues relating to Hazardous Materials are exclusively
established by this Paragraph 45."
12. SECURITY DEPOSIT: Effective as of the first day of the Third Option
Period, Lease Paragraph 51 ("Security Deposit") shall be deleted in its entirety
and replaced with the following:
"51. SECURITY DEPOSIT: The following provisions shall modify
Lease Paragraph 4F:
A. Within thirty (30) days after the expiration or earlier
termination of the Lease term and after Tenant has vacated the
Premises, Landlord shall return to Tenant the entire Security Deposit
except for amounts that Landlord has deducted therefrom that are needed
by Landlord to cure defaults of Tenant under the Lease or compensate
Landlord for damages for which Tenant is liable pursuant to this Lease.
The use or disposition of the Security Deposit shall be subject to the
provisions of California Civil Code Section 1950.7.
B. During the first thirty (30) days following Tenant's
exercise of its Third Option to Extend, and only during said thirty day
period, Tenant shall have the one-time option of satisfying its
obligation with respect to an amount equal to one-half (1/2)
($238,296.60) of the $476,593.20 Security Deposit required under Lease
Paragraph 4F by providing to Landlord, at Tenant's sole cost, a letter
of credit which: (i) is drawn upon an institutional lender reasonably
acceptable and accessible to Landlord in form and content reasonably
satisfactory to Landlord; (ii) is in the amount of one-half (1/2) of
the Security Deposit; (iii) is for a term of at lease twelve (12)
months; (iv) with respect to any letter of credit in effect within the
six month period immediately prior to the expiration of the Lease term,
shall provide that the term of such letter of credit shall extend at
least forty five (45) days past the Lease expiration date (including
any extensions thereof); and (v) may be drawn upon by Landlord upon
submission of a declaration of Landlord that Tenant is in default (as
defined in Paragraph 19 and as modified by Paragraph 60). Landlord
shall not be obligated to furnish proof of default to such
institutional lender, and Landlord shall only be required to give the
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institutional lender written notification that Tenant is in default and
upon receiving such written notification from Landlord the
institutional lender shall be obligated to immediately deliver cash to
Landlord equal to the amount Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any
loss or damage which Landlord may suffer by reason of Tenant's default
up to 1/2 of the total Security Deposit required under Lease Paragraph
4F. Said letter of credit shall provide that if the letter of credit is
not renewed, replaced or extended within twenty (20) days prior to its
expiration date the issuer of the credit shall automatically issue a
cashiers check payable to Landlord in the amount of the letter of
credit after the date which is twenty (20) days before the expiration
date, and no later than the expiration date, without Landlord being
required to make demand upon the letter of credit. If Tenant provides
Landlord with a letter of credit, within thirty (30) days of the
execution of this Lease, meeting the foregoing requirements, one-half
(1/2) of the cash Security Deposit (i.e., $238.296.60 of the
$476.593.20 Security Deposit) shall be returned to Tenant by Landlord
inasmuch as the cash deposit remaining and the Letter of Credit equal
the total Security Deposit required in Lease Paragraph 4F. If Tenant
defaults with respect to any provisions of this Lease, including but
not limited to provisions relating to the payment of Rent, Landlord may
(but shall not be required to) draw down on the letter of credit for
payment of any sum which Landlord may spend or become obligated to
spend by reason of Tenant's default, or to compensate Landlord for any
loss or damage which Landlord may suffer by reason of Tenant's default.
Landlord and Tenant acknowledge that such letter of credit will be
treated as if it were a cash security deposit, and such letter of
credit may be drawn down upon by Landlord upon demand and presentation
of evidence of the identity of Landlord to the issuer, in the event
that Tenant defaults with respect to any provision of this Lease and
such default is not cured within any applicable cure period.
Notwithstanding anything to the contrary in this Lease, Landlord shall
not be obligated to furnish proof of default to such institutional
lender and Landlord is only required to give the institutional lender
written notification that Tenant is in default and upon receiving such
written notification from Landlord the institutional lender shall be
obligated to immediately deliver cash to Landlord equal to the amount
Landlord may spend or become obligated to spend by reason of Tenant's
default, or to compensate Landlord for any loss or damage which
Landlord may suffer by reason of Tenant's default up to 1/2 of the
total Security Deposit. Landlord acknowledges that it is not entitled
to draw down such letter of credit unless Landlord would have been
entitled to draw upon the cash security deposit pursuant to the terms
of Paragraph 4F of the Lease. Concurrently with the delivery of the
required information to the issuer, Landlord shall deliver to Tenant
written evidence of the default upon which the draw down was based,
together with evidence that Landlord has provided to Tenant the written
notice of such default which was required under the applicable
provision of the Lease, and evidence of the failure of Tenant to cure
such default within the applicable grace period following receipt of
such notice of default. Any proceeds received by Landlord by drawing
upon the letter of credit shall be applied in accordance with the
provisions governing the Security Deposit imposed by Lease Paragraph 4F
and this Paragraph 51. If Landlord draws upon the letter of credit,
thereafter Tenant shall once again have the right to post a letter of
credit in place of one-half (1/2) of a cash Security Deposit so long as
Tenant is not then in default. In any event Tenant will be obligated to
replenish the amount drawn to restore the Security Deposit to its
original amount as provided for in Paragraph 4F. If any portion of the
letter of credit is used or applied pursuant hereto, Tenant shall,
within ten (10) days after receipt of a written demand therefor from
Landlord, restore and replace the value of such security by either (i)
depositing cash with Landlord in the amount equal to the sum drawn down
under the letter of credit, or (ii) increasing the letter of credit to
its value immediately prior to such application. Tenant's failure to
replace the value of the security as provided in the preceding sentence
shall be a material breach of its obligation under this Lease."
13. REAL ESTATE TAXES: Effective as of the first day of the Third
Option Period, Lease Paragraph 54 ("Real Estate Taxes") shall be deleted in its
entirety and replaced with the following:
"54. REAL PROPERTY TAXES: Paragraph 9 is modified by the
following:
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A. The term "Real Property Taxes" shall not include charges,
levies or fees directly related to the use, storage, disposal or
release of Hazardous Materials on the Premises unless directly related
to Tenant's Activities at this site or on other sites leased and/or
owned by Tenant; however, Tenant shall be responsible for general or
special tax and/or assessments (related to Hazardous Materials and/or
toxic waste) imposed on the Property provided said special tax and/or
assessment is not imposed due to on-site originated contamination on
the Property (by third parties not related to Tenant) prior to the
Lease Commencement Date. Subject to the terms and conditions stated
herein, Tenant shall be responsible for paying one hundred percent
(100%) of said taxes and/or assessments allocated to the Property.
B. If any assessments for public improvements are levied
against the Premises, Landlord may elect either to pay the assessment
in full or to allow the assessment to go to bond. If Landlord pays the
assessment in full, Tenant shall pay to Landlord or any assignee or
purchaser of the Premises each time payment of Real Property Taxes is
made a sum equal to that which would have been payable (as both
principal and interest) had Landlord allowed the assessment to go to
bond.
C. Tenant at its cost shall have the right, at any time, to
seek a reduction in the assessed valuation of the Premises or to
contest any Real Property Taxes that are to be paid by Tenant. If
Tenant seeks a reduction or contests such Real Property Taxes, the
failure on Tenant's part to pay such Real Property Taxes being so
contested shall not constitute a default so long as Tenant complies
with the provisions of this Paragraph. Landlord shall not be required
to join in any proceeding or contest brought by Tenant unless the
provisions of any law require that the proceeding or contest be brought
by or in the name of Landlord. In that case Landlord shall join in the
proceedings or contest or permit it to be brought in Landlord's name as
long as Landlord is not required to bear any cost. Tenant, on final
determination of the proceeding or contest, shall immediately pay or
discharge its share of any Real Property Taxes determined by any
decision or judgment rendered, together with all costs, charges,
interest, and penalties incidental to the decision or judgment. If
Tenant does not pay the Real Property Taxes when due pursuant to the
Lease and Tenant seeks a reduction or contests them as provided in this
paragraph, before the commencement of the proceeding or contest Tenant
shall furnish to Landlord a surety bond in form reasonably satisfactory
to Landlord issued by an insurance company qualified to do business in
California. The amount of the bond shall equal 125% of the total amount
of Real Property Taxes in dispute and any such bond shall be assignable
to any lender or purchaser of the Premises. The bond shall hold
Landlord and the Premises harmless from any damage arising out of the
proceeding or contest and shall insure the payment of any judgment that
may be rendered."
14. PROPERTY INSURANCE: Effective as of the first day of the Third
Option Period, section B of Lease Paragraph 55 ("Property Insurance") shall be
deleted in its entirety and be of no further force or effect.
15. ASSIGNMENT AND SUBLETTING: Effective as of the first day of the
Third Option Period, Lease Paragraph 56 ("Assignment and Subletting") shall be
deleted in its entirety and replaced with the following:
"56. ASSIGNMENT AND SUBLETTING: The following modifications
are made to Paragraph 16:
A. In the event that Tenant seeks to make any assignment or
sublease, then Landlord, by giving Tenant written notice of its
election within fifteen (15) days after Tenant's notice of intent to
assign or sublease has been given to Landlord, shall have the right to
elect (i) to withhold its consent to such assignment or sublease, as
permitted pursuant to Paragraph 16, or (ii) to permit Tenant to so
assign the Lease or sublease such part of the Premises, in which event
Tenant may do so, but without being released of its liability for the
performance of all of its obligations under the Lease, and the
following shall apply (except the following shall not apply to a
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"Permitted Transfer" described in Paragraph 57):
(1) If Tenant assigns its interest in this Lease,
then in addition to the rental provided for in this Lease, Tenant shall
pay to Landlord fifty percent (50%) of all Rent and other consideration
received by Tenant over and above (i) the assignee's agreement to
assume the obligations of Tenant under this Lease and (ii) all
"Permitted Transfer Costs" (as defined herein) related to such
assignment. As used herein, the term "Permitted Transfer Costs" shall
mean all reasonable leasing commissions paid to third parties not
affiliated with Tenant in order to obtain the assignment or sublease in
question.
(2) If Tenant sublets all or part of the Premises,
then Tenant shall pay to Landlord in addition to the Rent provided for
in this Lease fifty percent (50%) of the positive difference, if any,
between (i) all rent and other consideration paid or provided to Tenant
by the subtenant, less (ii) all Rent paid by Tenant to Landlord
pursuant to this Lease which is allocable to the area so sublet and all
Permitted Transfer Costs related to such sublease. After Tenant has
recovered all Permitted Transfer Costs Tenant shall pay to Landlord the
amount specified in the preceding sentence on the same basis, whether
periodic or in lump sum, that such rent and other consideration is paid
to Tenant by its subtenant, within seven (7) days after it is received
by Tenant.
(3) Tenant's obligations under this subparagraph
shall survive any assignment or sublease. At the time Tenant makes any
payment to Landlord required by this subparagraph, Tenant shall deliver
an itemized statement of the method by which the amount to which
Landlord is entitled was calculated, certified by Tenant as true and
correct. Landlord shall have the right to inspect Tenant's books and
records relating to the payments due pursuant to this subparagraph.
Upon request therefor, Tenant shall deliver to Landlord copies of all
bills, invoices or other documents upon which its calculations are
based.
(4) As used herein, the term "consideration" shall
mean any consideration of any kind received, or to be received
(including, but not limited to, services rendered and/or value
received) by Tenant as a result of the assignment or sublease, if such
sums are paid or provided to Tenant for Tenant's interest in this Lease
or in the Premises.
(5) This Paragraph 56.A does not apply to a
"Permitted Transfer", as provided in Paragraph 57 hereof. The parties
agree that if any of the following transactions occur and do not
qualify as "Permitted Transfers", Tenant must obtain Landlord's consent
to such transaction and if Landlord consents to any of the following
transactions which do not otherwise qualify as "Permitted Transfers",
then the provisions of this Paragraph 56.A shall not apply to the
following transactions: (i) a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee; and (ii) an assignment of this Lease to a
corporation which purchases or otherwise acquires 95% or more of the
assets of Tenant so long as 95% of all assets and liabilities of Tenant
are permanently transferred to such assignee and Tenant remains liable
and responsible under the Lease to the extent Tenant continues in
existence following such transaction."
16. PERMITtED ASSIGNMENTS AND SUBLEASES: Effective as of the first day
of the Third Option Period, Lease Paragraph 57 ("Permitted Assignments and
Subleases") shall be deleted in its entirety and replaced with the following:
"57. PERMITTED ASSIGNMENTS AND SUBLEASES: Notwithstanding
anything contained in Paragraph 16, so long as Tenant otherwise
complies with the provisions of Paragraph 16 and the Permitted Transfer
does not release Tenant from its obligations hereunder, Tenant may
enter into any of the following transfers (a "Permitted Transfer")
without Landlord's prior written consent, and the provisions of
Paragraph 56A shall not apply to any such Permitted Transfer:
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A. Tenant may sublease all or part of the Premises or
assign its interest in this Lease to any corporation which controls, is
controlled by, or is under common control with Tenant by means of an
ownership interest of more than fifty percent (50%) providing Tenant
remains liable for the payment of Rent and full performance of the
Lease;
B. Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as (i) 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee, and (ii) immediately prior to the merger,
consolidation or other reorganization, the corporation into which
Tenant is to be merged has a net worth equal to or greater than the net
worth of Tenant at the time of Lease execution or at the time of such
assignment, merger, consolidation or reorganization (whichever is
greater), or if it does not, Landlord is provided a guaranty of the
Lease (in a form reasonably acceptable to Landlord) from a corporation
(a) that is the parent of, or is otherwise affiliated with, the
corporation into which Tenant is to be merged, and (b) which has a
current net worth equal to or greater than the net worth of Tenant at
the time of Lease execution or at the time of such assignment, merger,
consolidation or reorganization (whichever is greater). In the event
there is not a permanent transfer of 95% or more of the assets and
liabilities from Tenant to a third party, and Tenant continues to exist
as a separate entity, both companies shall be jointly and severally
liable for the full terms and conditions of the Lease;
C. Tenant may assign this Lease to a corporation which
purchases or otherwise acquires 95% or more of the assets of Tenant so
long as 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee (in the event there is not a permanent
transfer of 95% or more of the assets and liabilities from Tenant to a
third party and Tenant continues to exist as a separate entity, both
companies shall be jointly and severally liable for the full terms and
conditions of the Lease), and provided that immediately prior to such
assignment said corporation, has a net worth equal to or greater than
the net worth of Tenant (a) at the time of Lease execution or (b) at
the time of such assignment (whichever is greater), or if it does not,
Landlord is provided a guaranty of the Lease (in a form reasonably
acceptable to Landlord) from a corporation (a) that is the parent of,
or is otherwise affiliated with, said corporation and (b) which has a
current net worth equal to or greater than the net worth of Tenant at
the time of Lease execution or at the time of such assignment,
(whichever is greater)."
17. DESTRUCTION: Effective as of the first day of the Third Option
Period, Lease Paragraph 62 ("Destruction") shall be deleted in its entirety and
replaced with the following:
"62. DESTRUCTION: Paragraph 21 is modified by the following:
A. Notwithstanding anything to the contrary within Paragraph
21, Landlord may terminate this Lease in the event of an uninsured
event or if insurance proceeds, net of the deductible, are insufficient
to cover one hundred percent of the rebuilding costs; provided,
however, Tenant shall have the right to elect, in its discretion, to
contribute such excess funds to permit Landlord to repair the Premises.
B. Except as provided in Paragraph 62C, Landlord may not
terminate the Lease if the Premises are damaged by a peril whereby the
cost to replace and/or repair is one hundred percent (100%) covered by
the insurance carried by Landlord pursuant to Paragraph 12, but instead
shall restore the Premises in the manner described by Paragraph 21.
C. If the Premises are damaged by a peril covered by the
insurance carried by Landlord pursuant to Paragraph 12, Landlord shall
have the option to terminate the Lease if each of the following
conditions is satisfied: (i) the cost to repair or the damage exceeds
thirty-three percent (33%) of the then replacement cost of the
Premises; and (ii) the damage occurs at a time when there is less than
five (5) years remaining in the term of the Lease.
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D. If Landlord fails to obtain insurance as required pursuant
to Paragraph 12, and said insurance would have been available to cover
any damage or destruction to the Premises, Landlord shall be required
to rebuild, at its cost, net of the deductible which would have been
required under said insurance policy (which deductible Tenant is
required to pay).
E. If the Premises are damaged by any peril, then as soon as
reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be completed. Tenant
shall have the option to terminate this Lease in the event any of the
following occurs, which option may be exercised only by delivery to
Landlord of a written notice of election to terminate within seven (7)
days after Tenant receives from Landlord the estimate of the time
needed to complete such restoration:
(1) The Premises are damaged by any peril (not caused
by or resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Leased
Premises cannot be substantially completed within 180 days after the
date of such damage (subject to force majeure conditions); or
(2) The Premises are damaged by any peril (not caused
by or resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) within twelve (12) months of the last day of
the Lease term, and, in the reasonable opinion of Landlord's architect
or construction consultant, the restoration of the Leased Premises
cannot be substantially completed within sixty (60) days after the date
of such damage and Tenant has not exercised its Option to Extend said
Term (or Extended Term as the case may be)."
18. LIABILITY INSURANCE: Effective as of the first day of the Third
Option Period, the first sentence of Lease Paragraph 10 ("Liability Insurance")
shall be deleted and replaced with the following' "Tenant, at Tenant's expense,
agrees to keep in force during the Term of this Lease a policy of commercial
general liability insurance with combined single limit coverage of not less than
Two Million Dollars ($2,000,000) per occurrence for bodily injury and property
damage occurring in, on or about the Premises, including parking and landscaped
areas."
19. LIMITATION OF LIABILITY: Effective as of the first day of the Third
Option Period, Lease Paragraph 36 ("Limitation of Liability") shall be deleted
in its entirety and replaced with the following:
"36. LIMITATION OF LIABILITY In consideration of the benefits
accruing hereunder, Tenant and all successors and assigns covenant and
agree that, in the event of any actual or alleged failure, breach or
default hereunder by Landlord:
(i) the sole and exclusive remedy shall be against Landlord's interest
in the Premises leased herein;
(ii) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of
the partnership);
(iii) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the
partnership);
(iv) no partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(v) no judgment will be taken against any partner of Landlord;
(vi) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
(vii) no writ of execution will ever be levied against the assets of
any partner of Landlord;
(viii) these covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
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Tenant agrees that each of the foregoing covenants and
agreements shall be applicable to any covenant or agreement either
expressly contained in this Lease or imposed by statute or at common
law."
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of
said October 31, 1989 Lease Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment No.
3 to Lease as of the day and year last written below.
LANDLORD: TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST QUANTUM CORPORATION
a Delaware corporation
By /s/ John Arrillaga, Trustee By /s/ Andrew Kryder
------------------------------ -------------------------------
John Arrillaga, Trustee
Andrew Kryder
-----------------------------------
Date: 6/30/97 Print or Type Name
------------
Title: FINANCE AND CORPORATE GENERAL
-----------------------------
COUNSEL
-----------------------------
RICHARD T. PEERY SEPARATE
PROPERTY TRUST Date: June 25, 1997
----------------
By /s/ Richard T. Peery
----------------------
Richard T. Peery, Trustee
Date: 6/26/97
-------------------
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AMENDMENT NO. 3
TO LEASE
THIS AMENDMENT NO. 3 is made and entered into this 16th day of April,
1997, by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee UTA dated
7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) (previously known as the "John
Arrillaga Separate Property Trust") as amended, and RICHARD T. PEERY, Trustee,
or his Successor Trustee UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY
TRUST) as amended, collectively as LANDLORD, and QUANTUM CORPORATION, a Delaware
corporation, as TENANT.
RECITALS
A. WHEREAS, by Lease Agreement dated October 31, 1989 Landlord leased
to Tenant all of that certain 155,734+/- square foot building located at 1140
Technology Drive, Milpitas, California, the details of which are more
particularly set forth in said October 31, 1989 Lease Agreement, and
B. WHEREAS, said Lease was amended by Letter Agreement dated October
31, 1989 which provided for a Basic Rent Credit for the period commencing with
the Lease Commencement Date and ending on May 31, 1991, and
C. WHEREAS, said Lease was amended by Amendment No. 1 dated April 24,
1990 which canceled the reduction in Basic Rent Credit Letter dated October 31,
1989, and which delayed the Lease Commencement Date from December 15, 1990 to
April 1, 1991, and,
D. WHEREAS, said Lease was amended by the Commencement Letter dated
March 4, 1991 which changed the Commencement Date of the Lease from April 1,
1991 to March 1, 1991, and established the Termination Date of July 31, 2006,
and,
E. WHEREAS, said Lease was amended by Amendment No. 2 dated June 26,
1991 which extended the Term of the Lease for an additional two month period,
amended the Basic Rent schedule and Aggregate Rent accordingly, and amended the
deadlines in which Tenant could exercise its Option to Extend pursuant to Lease
Paragraphs 42 and 43, and
F. WHEREAS, it is now the desire of the parties hereto to amend the
Lease by (i) extending the Term for five years, changing the Termination Date
from September 30, 2006 to September 30, 2011, (ii) amending the Basic Rent
schedule and Aggregate Rent accordingly, (iii) adding a third Five Year Option
to Extend, (iv) replacing Paragraphs 41C ("Lease Terms Co-extensive") and 48
("Cross Default") and 53 ("Structural Capital Costs Regulated by Governmental
Agencies After thee Commencement of this Lease not Caused by Tenant or Tenant's
Uses or Remodeling of the Premises"), (v) amending Lease Paragraph 12 ("Property
Insurance") and (vi) amending and/or replacing certain provisions of the Lease
commencing as of the commencement of the Third Extended Term of said Lease as
hereinafter set forth.
AGREEMENT
NOW THEREFORE, for valuable consideration, receipt of which is hereby
acknowledged, and in consideration of the hereinafter mutual promises, the
parties hereto do agree as follows:
1. TERM OF LEASE: It is agreed between the parties that Tenant has
exercised its First Five-Year Option to Extend the lease term of that certain
lease agreement dated March 23, 1994 for premises located at 1101 Sumac Drive,
Milpitas, California (the "Building 5 Lease"), as detailed in Paragraph 41 of
said Building 5 Lease. Paragraph 40C of said Building 5 Lease provides that in
the event the term of said Building 5 Lease is extended for any reason
whatsoever, the terms of the Existing Leases (i.e. two of said leases dated
October 31, 1989 are for Premises located at 1140 Technology Drive and 500
McCarthy Blvd., Milpitas, California (the "1989 Leases"); one of said leases
dated September 17, 1990 is for Premises located at 1000 Sumac Drive, Milpitas,
California,
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and one of said leases dated April 10, 1992 is for Premises located at 900 Sumac
Drive, Milpitas, California) shall also be extended so that all five Leases
expire on the same date; therefore, it is agreed between the parties that by
exercising its Option to Extend the Building 5 Lease, Tenant has in effect
exercised its Option to Extend under Lease Paragraph 42 ("First Five-Year Option
to Extend"), and that pursuant to said Lease Paragraph 42, the Term of this
Lease Agreement shall be extended for an additional five (5) year period, and
the Lease Termination Date shall be changed from September 30, 2006 to September
30, 2011.
2. BASIC RENTAL FOR FIRST EXTENDED TERM OF LEASE: The monthly Basic
Rental for the First Extended Term of Lease shall be as follows:
On October 1, 2006, the sum of TWO HUNDRED SEVENTY TWO THOUSAND FIVE
HUNDRED THIRTY FOUR AND 50/100 DOLLARS ($272,534.50) shall be due, and a like
sum due on the first day of each month thereafter through and including
September 1, 2007.
On October 1, 2007, the sum of TWO HUNDRED EIGHTY THOUSAND THREE
HUNDRED TWENTY ONE AND 20/100 DOLLARS ($280,321.20) shall be due, and a like sum
due on the first day of each month thereafter through and including September 1,
2008.
On October 1, 2008, the sum of TWO HUNDRED EIGHTY EIGHT THOUSAND ONE
HUNDRED SEVEN AND 90/100 DOLLARS ($288,107.90) shall be due, and a like sum due
on the first day of each month thereafter through and including September 1,
2009.
On October 1, 2009, the sum of TWO HUNDRED NINETY FIVE THOUSAND EIGHT
HUNDRED NINETY FOUR AND 60/100 DOLLARS ($295,894.60) shall be due, and a like
sum due on the first day of each month thereafter through and including
September 1, 2010.
On October 1, 2010, the sum of THREE HUNDRED THREE THOUSAND SIX HUNDRED
EIGHTY ONE AND 30/100 DOLLARS ($303,681.30) shall be due, and a like sum due on
the first day of each month thereafter through and including September 1, 2011.
The Aggregate Basic Rent for the Lease shall be increased by
$17,286,474.00 or from $39,587,582.80 to $56,874,056.80.
3. THIRD FIVE-YEAR OPTION TO EXTEND: Provided Tenant has extended the
Lease for an additional five (5) year period pursuant to Lease Paragraph 43
("Second Five Year Option To Extend"), Landlord hereby grants to Tenant a third
option to extend the Term of this Lease for an additional five (5) year period
upon the following terms and conditions:
A. Tenant shall give Landlord written notice of Tenant's exercise of
this option to extend at least one hundred eighty (180) days prior to the
expiration of the Lease Term as extended pursuant to Lease Paragraph 43 ("Second
Five Year Option To Extend"), in which event the Lease shall be considered
extended for an additional five (5) year period upon the same terms and
conditions as this Lease, absent this Paragraph 3 and subject to the Rental as
set forth below. In the event that Tenant fails to timely exercise Tenant's
option as set forth herein in writing, Tenant shall have no further option to
extend this Lease or the Other Leases, and this Lease shall continue in full
force and effect for the full remaining term hereof, absent this Paragraph 3.
B. The monthly Basic Rent for the option period shall be as follows in
the event the option is
Period Monthly Basic Rent
------ ------------------
Months 1-12 $2.25/sf
Months 13-24 $2.30/sf
Months 25-36 $2.35/sf
Months 37-48 $2.40/sf
Months 49-60 $2.45/sf
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C. Notwithstanding anything contained herein, Tenant may not exercise
the option to extend granted by this Paragraph 3 at any time that Tenant is in
default (default for monetary and material default for non-monetary) of its
obligations under this Lease, if Tenant has received written notice from
Landlord that Tenant is in default, and such default has not been timely cured
within the time period provided for in this Lease; provided, however, that if
such default of Tenant is not for money due under this Lease and cannot be
cured, and if Landlord does not elect to terminate this Lease as a result of
such non-curable default by Tenant, Tenant may exercise the option to extend
granted by this Paragraph 3 notwithstanding such non-curable default.
4. LEASE TERMS CO-EXTENSIVE: Lease Paragraph 40C ("Lease Terms
Co-extensive") is hereby deleted in its entirety and replaced with the
following:
"40C. LEASE TERMS CO-EXTENSIVE: It is acknowledged that (i)
Landlord and Tenant have previously executed four separate leases in
addition to this Lease: one of said leases dated October 31, 1989 is
for Premises located at 500 McCarthy Blvd., Milpitas, California (the
"Building Two Lease"); one of said leases dated September 17, 1990 is
for Premises located at 1000 Sumac Drive, Milpitas, California (the
"Building Four Lease"); one of said leases dated April 10, 1992 is for
Premises located at 900 Sumac Drive, Milpitas, California (the
"Building 3 Lease"); and one of said leases dated March 23, 1994 is for
premises located at 1101 Sumac Drive, Milpitas, California (the
"Building 5 Lease") (hereinafter collectively referred to as the "Other
Leases"); and (ii) it is the intention of the parties that the term of
this Lease be co-extensive with the term of the Other Leases, such that
the terms of all five leases ("the Leases") expire on the same date.
The provisions of this Paragraph 40C also requires the terms of all the
Leases to be extended accordingly if Tenant exercises its Option to
Extend under any of the Leases. The monthly Basic Rent during the
extended term under each of the Leases shall be increased by $.05 per
square foot on the commencement date of the extended term and
thereafter on each and every anniversary of the respective lease's
commencement date of the extended term."
5. CROSS DEFAULT: Lease Paragraph 48 ("Cross Default") is hereby
deleted in its entirety and replaced with the following:
"48. CROSS DEFAULT: It is agreed between Landlord and Tenant
that a default under this Lease, or a default under any of the Other
Leases may, at the option of Landlord, be considered a default under
all Leases, in which event Landlord shall be entitled (but in no event
required) to apply all rights and remedies of Landlord under the terms
of one lease to all the Leases including, but not limited to, the right
to terminate any or all of the aforementioned Other Leases or this
Lease by reason of a default under the Leases or hereunder.
Notwithstanding the above, Landlord shall have the option of
considering a default under this Lease or a default under any of the
Other Leases to be a default under all such leases, only with respect
to such leases under which Landlord is also the 'Landlord' at the time
such default occurs. By way of example, if at the time a default of
Tenant occurs under this Lease, Landlord has sold the premises
described in any of the Other Leases and is no longer the 'Landlord'
thereunder, then a default under this Lease shall not constitute a
default under any of such Other Leases so sold by Landlord (unless the
premises leased under this Lease and the Other Leases are sold to the
same entity), and a default by Tenant under any of such Other Leases so
sold by Landlord shall not constitute a default under this Lease or any
other of the Other Leases then remaining between Landlord and Tenant.
However, if the Landlord under this Lease and the Other Leases is one
in the same at the time of said default, said cross default provisions
shall apply."
6. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL AGENCIES AFTER
THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR TENANT'S USES OR
REMODELING OF THE PREMISES: Lease Paragraph 53 ("Structural Capital Costs
Regulated by Governmental Agencies after the Commencement of this Lease Not
Caused by Tenant or
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Tenant's Uses or Remodeling of the Premises") is hereby deleted and replaced
with the following:
"53. STRUCTURAL CAPITAL COSTS REGULATED BY GOVERNMENTAL
AGENCIES AFTER THE COMMENCEMENT OF THIS LEASE NOT CAUSED BY TENANT OR
TENANT'S USES OR REMODELING OF THE PREMISES: The provisions of this
Paragraph 53 shall modify Paragraphs 7 and 14:
A. If (i) during the last five (5) years of the First Extended
Term of the Lease if said Lease has not been extended as provided for
in Lease Paragraph 43 ("Second Five Year Option To Extend") or in
Paragraph 3 ("Third Five Year Option to Extend") or Paragraph 4 ("Lease
Terms Co-Extensive") above, or (ii) during either of the five (5) year
extension periods permitted by Lease Paragraph 43 or Paragraph 3, or
Paragraph 4 above, it becomes necessary (due to any governmental
requirement for continued occupancy of the Premises) to make structural
improvements required by laws enacted or legal requirements imposed by
governmental agency(s) after the Commencement Date, and the cost for
each required work or improvements exceeds $100,000, then if such legal
requirement is not imposed because of Tenant's specific use of the
Premises and is not "triggered" by Tenant's Alterations or Tenant's
application for a building permit or any other governmental approval
(collectively "Tenant's Actions") in which instance Tenant shall be
responsible for 100% of the cost of such improvements, Landlord shall
be responsible for paying the cost of such improvement and constructing
such improvement, subject to a cash contribution from Tenant of a
portion of the cost thereof as provided for and calculated in Paragraph
53B.
B. When Landlord makes an improvement pursuant to Paragraph
53A, and as a condition to Landlord's obligation to construct such
improvement, Tenant shall make the following contribution in cash to
Landlord for the cost thereof prior to the commencement of the work by
Landlord. It is agreed that Tenant shall pay to Landlord 100% of the
cost of the first $100,000.00 worth of each improvement. After the
first $100,000.00, all costs above $100,000.00 shall be divided by 15
and multiplied by the time period remaining in the last five years of
the Lease Term from the date work on such improvement commences.
For example, if the improvement is not required as a result of
Tenant's Actions and if the cost of such improvement was $400,000 and
there was one year and six months remaining in the Lease term when the
work commenced, then Tenant would be responsible for reimbursing
Landlord in cash $130,000.00 computed as follows:
Total Cost of Work $400,000.00
Tenant Responsible for
1st $100,000 -100,000.00
----------
Total Amount To Be Amortized $300,000.00
$300,000.00/15 = $20,000.00/yr. x 1.5 yrs = $ 30,000.00
Tenant responsible for $100,000 + $30,000.00 = $130,000.00
C. If Landlord has made improvements, for which Tenant has
reimbursed Landlord for the cost thereof pursuant to Paragraph 53B, and
the term of this Lease is subsequently extended pursuant to the
exercise by Tenant of an option to renew pursuant to Lease Paragraph 43
or Paragraph 3 above, upon the exercise of any such option by Tenant,
Tenant shall pay to Landlord an additional sum equal to the total
amount of said improvement less the amount previously paid for by
Tenant. Using the example in Paragraph 53B above, Tenant would owe
Landlord the additional amount of $270,000.00 ($400,000.00 -
$130,000.00 = $270,000.00)."
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7. PROPERTY INSURANCE: Lease Paragraph 12 ("Property Insurance") is
hereby amended to include the following: "Tenant acknowledges that as part of
the cost of insurance policies for the Premises, Tenant is responsible for the
payment of insurance deductibles on insurance claims as they relate to the
Premises subject to the limitations provided in Lease Paragraph 55 ("Property
Insurance") which limitations are applicable only during the initial Lease Term
and the First Lease Extension Period and the Second Lease Extension Period. Said
limitation provided for in Lease Paragraph 55 are null and void at the
commencement of the "Third Lease Extended Term".
8. THIRD OPTION PERIOD - LEASE PROVISION CHANGES: In the event Tenant
exercises its Third Option to Extend as provided for in Paragraph 3 above, the
following amendments (contained within Paragraphs 9 through 19) are herein made
to the Lease to be effective upon the commencement of the third option period
("Third Option Period"), or during any period following the expiration of the
Lease Term or expiration of the Lease when Tenant is in possession of the
Premises.
9. LATE CHARGE: Effective as of the first day of the Third Option
Period, the Late Charge referenced in Lease Paragraph 4.D ("Late Charge") shall
be changed from five percent (5%) to ten percent (10%), and Lease Paragraph 50
("Limitation on Late Charge") shall be deleted in its entirety and of no further
force or effect.
10. MANAGEMENT FEE: Notwithstanding anything to the contrary in the
Lease, effective as of the first day of the Third Option Period, and on the
first day of each month thereafter, Tenant shall pay to Landlord, in addition to
the Basic Rent and Additional Rent, a fixed monthly management fee ("Management
Fee") equal to one percent (1%) of the Basic Rent due for each month during the
Lease Term.
11. HAZARDOUS MATERIALS: Effective as of the first day of the Third
Option Period, Lease Paragraph 45 ("Hazardous Materials") shall be deleted in
its entirety and replaced with the following:
"45. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows
with respect to the existence or use of "Hazardous Materials" (as
defined herein) on, in, under or about the Premises and real property
located beneath said Premises, which includes the entire parcel of land
on which the Premises are located as shown in Green on Exhibit A to the
Lease (hereinafter collectively referred to as the "Property"):
A. As used herein, the term "Hazardous Materials" shall mean
any material, waste, chemical, mixture or byproduct which is or
hereafter is defined, listed or designated under Environmental Laws
(defined below) as a pollutant, or as a contaminant, or as a toxic or
hazardous substance, waste or material, or any other unwholesome,
hazardous, toxic, biohazardous, or radioactive material, waste,
chemical, mixture or byproduct, or which is listed, regulated or
restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions
thereof, polychlorinated biphenyls, or asbestos). As used herein, the
term "Environmental Laws" shall mean any applicable Federal, State of
California or local government law (including common law), statute,
regulation, rule, ordinance, permit, license, order, requirement,
agreement, or approval, or any determination, judgment, directive, or
order of any executive or judicial authority at any level of Federal,
State of California or local government (whether now existing or
subsequently adopted or promulgated) relating to pollution or the
protection of the environment, ecology, natural resources, or public
health and safety.
B. Tenant shall notify Landlord prior to the occurrence of any
Tenant's Hazardous Materials Activities (defined below). Landlord
acknowledges that Tenant shall use, in compliance with applicable
Environmental Laws, customary household and office supplies (Tenant
shall first provide Landlord with a list of said materials use), such
as mild cleaners, lubricants and copier toner. Any and all of Tenant's
Hazardous Materials Activities shall be conducted in conformity with
this Paragraph
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45, Paragraph 14 of this Lease, and in compliance with all Environmental Laws
and regulations. As used herein, the term "Tenant's Hazardous Materials
Activities" shall mean any and all use, handling, generation, storage, disposal,
treatment, transportation, release, discharge, or emission of any Hazardous
Materials on, in, beneath, to, from, at or about the Property, in connection
with Tenant's use of the Property, or by Tenant or by any of Tenant's agents,
employees, contractors, vendors, invitees, visitors or its future subtenants or
assignees or other third parties (including "dumping" by others) (or which
Hazardous Materials originate on the surface of the Premises any time on or
after the Commencement Date of this Lease, but excluding Hazardous Materials on
the Premises prior to the Lease Commencement Date because of the storage, use,
disposal, or transportation of such materials or waste by any of Landlord's
contractors or otherwise arising out of construction work performed by or under
the direction of Landlord on the Premises and Landlord shall be responsible for
all required actions with respect to such materials or wastes). Tenant agrees to
provide Landlord with prompt written notice of any spill or release of Hazardous
Materials at the Property during the term of the Lease of which Tenant becomes
aware, and further agrees to provide Landlord with prompt written notice of any
violation of Environmental Laws in connection with Tenant's Hazardous Materials
Activities of which Tenant becomes aware. If Tenant's Hazardous Materials
Activities involve Hazardous Materials other than normal use of customary
household and office supplies, Tenant also agrees at Tenant's expense: (i) to
install such Hazardous Materials monitoring, storage and containment devices as
may be required by Environmental Laws, regulations and/or governing agencies;
(ii) to provide Landlord with a written inventory of such Hazardous Materials,
including an update of same each year upon the anniversary date of the
Commencement Date of the Lease ("Anniversary Date"); and (iii) on each
Anniversary Date to provide to Landlord copies of all documentation and records,
required by applicable Environmental Laws to be prepared and submitted to
governmental authorities, relating to use at the Property of Hazardous Materials
or to Tenant's Hazardous Materials Activities, if any. If upon completion of
Landlord's review of said documentation and records, Landlord reasonably
questions if Tenant is in compliance with all applicable Environmental Laws with
respect to Tenant's Hazardous Materials Activities, Tenant agrees within thirty
(30) days following receipt of written notice from Landlord, to retain a
qualified environmental consultant, acceptable to Landlord, to evaluate whether
Tenant is in compliance with all applicable Environmental Laws with respect to
Tenant's Hazardous Materials Activities. Tenant, at its expense, shall submit to
Landlord a report from such environmental consultant which discusses the
environmental consultant's findings within two (2) months of each Anniversary
Date. Tenant, at its expense, shall promptly undertake and complete any and all
steps necessary, and in full compliance with applicable Environmental Laws, to
fully correct any and all problems or deficiencies identified by the
environmental consultant, and promptly provide Landlord with documentation of
all such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at
its expense, shall (i) properly remove from the Property all Hazardous
Materials which come to be located at the Property in connection with
Tenant's Hazardous Materials Activities, and (ii) fully comply with and
complete all facility closure requirements of applicable Environmental
Laws regarding Tenant's Hazardous Materials Activities, including but
not limited to (x) properly restoring and repairing the Property to the
extent damaged by such closure activities, and (y) obtaining from the
local Fire Department or other appropriate governmental authority with
any legal or regulatory jurisdiction a written concurrence that closure
has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims,
notices, work plans, data and reports prepared, received or submitted
in connection with any such closure activities.
D. If Landlord, upon consultation with Tenant, reasonably
concludes that the Property has become contaminated as a result of
Tenant's Hazardous Materials Activities, Landlord in addition to any
other rights it may have under this Lease or under Environmental Laws
or other laws, may enter upon the Property and conduct inspection,
sampling and analysis, including but not limited to obtaining and
analyzing samples of soil and groundwater, for the purpose of
determining the nature and extent
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of such contamination except to the extent that such activities may be
inconsistent with Tenant's compliance with Environmental Laws. Tenant
shall promptly reimburse Landlord for the costs of such an
investigation, including but not limited to reasonable attorneys' fees
Landlord incurs with respect to such investigation to the extent, and
only to the extent, that it that discloses Hazardous Materials
contamination for which Tenant is liable under this Lease. Except as
may be required of Tenant by applicable Environmental Laws, Tenant
shall not perform any sampling, testing, or drilling to identify the
presence of any Hazardous Materials at the Property, without Landlord's
prior written consent which shall not be unreasonably withheld. Tenant
shall promptly provide Landlord with copies of any claims, notices,
work plans, data and reports prepared, received or submitted in
connection with any sampling, testing or drilling performed pursuant to
the preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel
acceptable to Landlord, whose consent shall not unreasonably be
withheld) and hold harmless Landlord, its employees, assigns,
successors, successors-in-interest, agents and representatives from and
against any and all claims (including but not limited to third party
claims from a private party or a government authority), liabilities,
obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including
but not limited to reasonable attorneys', consultants' and other
experts' fees and costs), and damages, which arise from or relate to:
(i) Tenant's Hazardous Materials Activities; (ii) any Hazardous
Materials contamination caused by Tenant prior to the Commencement Date
of the Lease; or (iii) the breach of any obligation of Tenant under
this Paragraph 45 (collectively, "Tenant's Environmental
Indemnification"). Tenant's Environmental Indemnification shall include
but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution
in fair market value of the Property. Tenant's Environmental
Indemnification shall further include but is not limited to the
obligation to diligently and properly implement to completion, at
Tenant's expense, any and all environmental investigation, removal,
remediation, monitoring, reporting, closure activities, or other
environmental response action as may be required by applicable
Environmental Laws, regulations or governing agencies (collectively,
"Response Actions"). Tenant shall promptly provide Landlord with copies
of any claims, notices, work plans, data and reports prepared, received
or submitted in connection with any Response Actions.
F. Landlord hereby makes the following representations to
Tenant, each of which is made only to the best of Landlord's knowledge
as of the date Landlord executes this Lease, without any inquiry or
investigation having been made or required by Landlord regarding this
subject, nor does Landlord have any obligation to investigate or make
inquiry regarding the subject:
(1) The soil and ground water on or under the
Premises does not contain Hazardous Materials in amounts which violate
any laws to the extent that any governmental entity could require
either Landlord or Tenant to take any remedial action with respect to
such Hazardous Materials.
(2) During the time that Landlord has owned the
Premises, Landlord has received no notice of (i) any violation, or
alleged violation, of any law that has not been corrected to the
satisfaction of the appropriate authority, (ii) any pending claims
relating to the presence of Hazardous Material on the Premises, or
(iii) any pending investigation by any governmental agency concerning
the Premises relating to Hazardous Materials.
G. Landlord and Tenant shall each give written notice to the
other as soon as reasonably practicable of (i) any communication
received from any governmental authority concerning Hazardous Materials
which relates to the Premises, and (ii) any contamination of the
Premises by Hazardous Materials which constitutes a violation of any
law. Attached as Exhibit "C' to the Lease is a list of Hazardous
Materials that Tenant intends to use at the Premises. If during the
Lease Term Tenant proposes to use other Hazardous Materials at the
Premises, Tenant shall inform Landlord of such use, identifying the
Hazardous Materials and the manner of their use, storage and
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disposal, and shall agree (i) to use, store and dispose of such
Hazardous Materials strictly in compliance with all laws, regulations
and governing agencies and (ii) that the indemnity set forth in
Paragraph 45 shall be applicable to Tenant's use of such Hazardous
Material.
H. Landlord or Tenant may, at any time, cause testing wells to
be installed on the Premises, and may cause the ground water to be
tested to detect the presence of Hazardous Material by the use of such
tests as are then customarily used for such purposes. Testing wells
installed by Tenant shall be paid for by Tenant. If tests conducted by
Landlord disclose that Tenant has violated any Hazardous Materials
laws, or Tenant or parties on the Premises during the Term of this
Lease have contaminated the Premises as determined by regulatory
agencies pursuant to Hazardous Materials laws, or that Tenant has
liability to Landlord pursuant to Paragraph 45A, then Tenant shall pay
for 100 percent of the cost of the test and all related expense. Prior
to the expiration of the Lease Term, Tenant shall remove any testing
wells it has installed at the Premises, and return the Premises to the
condition existing prior to the installation of such wells, unless
Landlord requests in writing that Tenant leave all or some of the
testing wells in which instance the wells requested to be left shall
not be removed.
I. If any tests performed by Tenant or Landlord prior to the
Commencement Date disclose Hazardous Materials at the Premises,
Landlord at its expense will promptly take all reasonable action
required by law with respect to the existence of such Hazardous
Materials at the Premises. The Commencement Date shall not be delayed
because of such action by Landlord unless occupation of the Premises is
prohibited by law.
J. The obligations of Landlord and Tenant under this Paragraph
45 shall survive the expiration or earlier termination of the Term of
this Lease. The rights and obligations of Landlord and Tenant with
respect to issues relating to Hazardous Materials are exclusively
established by this Paragraph 45."
12. SECURITY DEPOSIT: Effective as of the first day of the Third Option
Period, Lease Paragraph 51 ("Security Deposit") shall be deleted in its entirety
and replaced with the following:
"51. SECURITY DEPOSIT: The following provisions shall modify
Lease Paragraph 4F:
A. Within thirty (30) days after the expiration or earlier
termination of the Lease term and after Tenant has vacated the
Premises, Landlord shall return to Tenant the entire Security Deposit
except for amounts that Landlord has deducted therefrom that are needed
by Landlord to cure defaults of Tenant under the Lease or compensate
Landlord for damages for which Tenant is liable pursuant to this Lease.
The use or disposition of the Security Deposit shall be subject to the
provisions of California Civil Code Section 1950.7.
B. During the first thirty (30) days following Tenant's
exercise of its Third Option to Extend, and only during said thirty day
period, Tenant shall have the one-time option of satisfying its
obligation with respect to an amount equal to one-half (1/2)
($210,240.90) of the $420,481.80 Security Deposit required under Lease
Paragraph 4F by providing to Landlord, at Tenant's sole cost, a letter
of credit which: (i) is drawn upon an institutional lender reasonably
acceptable and accessible to Landlord in form and content reasonably
satisfactory to Landlord; (ii) is in the amount of one-half (1/2) of
the Security Deposit; (iii) is for a term of at least twelve (12)
months; (iv) with respect to any letter of credit in effect within the
six month period immediately prior to the expiration of the Lease term,
shall provide that the term of such letter of credit shall extend at
least forty five (45) days past the Lease expiration date (including
any extensions thereof); and (v) may be drawn upon by Landlord upon
submission of a declaration of Landlord that Tenant is in default (as
defined in Paragraph 19 and as modified by Paragraph 60). Landlord
shall not be obligated to furnish proof of default to such
institutional lender, and Landlord shall only be required to give the
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institutional lender written notification that Tenant is in default and
upon receiving such written notification from Landlord the
institutional lender shall be obligated to immediately deliver cash to
Landlord equal to the amount Landlord may spend or become obligated to
spend by reason of Tenant's default or to compensate Landlord for any
loss or damage which Landlord may suffer by reason of Tenant's default
up to 1/2 of the total Security Deposit required under Lease Paragraph
4F. Said letter of credit shall provide that if the letter of credit is
not renewed, replaced or extended within twenty (20) days prior to its
expiration date the issuer of the credit shall automatically issue a
cashiers check payable to Landlord in the amount of the letter of
credit after the date which is twenty (20) days before the expiration
date, and no later than the expiration date, without Landlord being
required to make demand upon the letter of credit. If Tenant provides
Landlord with a letter of credit, within thirty (30) days of the
execution of this Lease, meeting the foregoing requirements, one-half
(1/2) of the cash Security Deposit (i.e., $210,240.90 of the
$420,481.80 Security Deposit) shall be returned to Tenant by Landlord
inasmuch as the cash deposit remaining and the Letter of Credit equal
the total Security Deposit required in Lease Paragraph 4F. If Tenant
defaults with respect to any provisions of this Lease, including but
not limited to provisions relating to the payment of Rent, Landlord may
(but shall not be required to) draw down on the letter of credit for
payment of any sum which Landlord may spend or become obligated to
spend by reason of Tenant's default, or to compensate Landlord for any
loss or damage which Landlord may suffer by reason of Tenant's default.
Landlord and Tenant acknowledge that such letter of credit will be
treated as if it were a cash security deposit, and such letter of
credit may be drawn down upon by Landlord upon demand and presentation
of evidence of the identity of Landlord to the issuer, in the event
that Tenant defaults with respect to any provision of this Lease and
such default is not cured within any applicable cure period.
Notwithstanding anything to the contrary in this Lease, Landlord shall
not be obligated to furnish proof of default to such institutional
lender and Landlord is only required to give the institutional lender
written notification that Tenant is in default and upon receiving such
written notification from Landlord the institutional lender shall be
obligated to immediately deliver cash to Landlord equal to the amount
Landlord may spend or become obligated to spend by reason of Tenant's
default, or to compensate Landlord for any loss or damage which
Landlord may suffer by reason of Tenant's default up to 1/2 of the
total Security Deposit. Landlord acknowledges that it is not entitled
to draw down such letter of credit unless Landlord would have been
entitled to draw upon the cash security deposit pursuant to the terms
of Paragraph 4F of the Lease. Concurrently with the delivery of the
required information to the issuer, Landlord shall deliver to Tenant
written evidence of the default upon which the draw down was based,
together with evidence that Landlord has provided to Tenant the written
notice of such default which was required under the applicable
provision of the Lease, and evidence of the failure of Tenant to cure
such default within the applicable grace period following receipt of
such notice of default. Any proceeds received by Landlord by drawing
upon the letter of credit shall be applied in accordance with the
provisions governing the Security Deposit imposed by Lease Paragraph 4F
and this Paragraph 51. If Landlord draws upon the letter of credit,
thereafter Tenant shall once again have the right to post a letter of
credit in place of one-half (1/2) of a cash Security Deposit so long as
Tenant is not then in default. In any event Tenant will be obligated to
replenish the amount drawn to restore the Security Deposit to its
original amount as provided for in Paragraph 4F. If any portion of the
letter of credit is used or applied pursuant hereto, Tenant shall,
within ten (10) days after receipt of a written demand therefor from
Landlord, restore and replace the value of such security by either (i)
depositing cash with Landlord in the amount equal to the sum drawn down
under the letter of credit, or (ii) increasing the letter of credit to
its value immediately prior to such application. Tenant's failure to
replace the value of the security as provided in the preceding sentence
shall be a material breach of its obligation under this Lease."
13. REAL ESTATE TAXES: Effective as of the first day of the Third
Option Period, Lease Paragraph 54 ("Real Estate Taxes") shall be deleted in its
entirety and replaced with the following:
"54. REAL PROPERTY TAXES: Paragraph 9 is modified by the
following:
A. The term "Real Property Taxes" shall not include charges,
levies or fees
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directly related to the use, storage, disposal or release of Hazardous
Materials on the Premises unless directly related to Tenant's
Activities at this site or on other sites leased and/or owned by
Tenant; however, Tenant shall be responsible for general or special tax
and/or assessments (related to Hazardous Materials and/or toxic waste)
imposed on the Property provided said special tax and/or assessment is
not imposed due to on-site originated contamination on the Property (by
third parties not related to Tenant) prior to the Lease Commencement
Date. Subject to the terms and conditions stated herein, Tenant shall
be responsible for paying one hundred percent (100%) of said taxes
and/or assessments allocated to the Property.
B. If any assessments for public improvements are levied
against the Premises, Landlord may elect either to pay the assessment
in full or to allow the assessment to go to bond. If Landlord pays the
assessment in full, Tenant shall pay to Landlord or any assignee or
purchaser of the Premises each time payment of Real Property Taxes is
made a sum equal to that which would have been payable (as both
principal and interest) had Landlord allowed the assessment to go to
bond.
C. Tenant at its cost shall have the right, at any time, to
seek a reduction in the assessed valuation of the Premises or to
contest any Real Property Taxes that are to be paid by Tenant. If
Tenant seeks a reduction or contests such Real Property Taxes, the
failure on Tenant's part to pay such Real Property Taxes being so
contested shall not constitute a default so long as Tenant complies
with the provisions of this Paragraph. Landlord shall not be required
to join in any proceeding or contest brought by Tenant unless the
provisions of any law require that the proceeding or contest be brought
by or in the name of Landlord. In that case Landlord shall join in the
proceedings or contest or permit it to be brought in Landlord's name as
long as Landlord is not required to bear any cost. Tenant, on final
determination of the proceeding or contest, shall immediately pay or
discharge its share of any Real Property Taxes determined by any
decision or judgment rendered, together with all costs, charges,
interest, and penalties incidental to the decision or judgment. If
Tenant does not pay the Real Property Taxes when due pursuant to the
Lease and Tenant seeks a reduction or contests them as provided in this
paragraph, before the commencement of the proceeding or contest Tenant
shall furnish to Landlord a surety bond in form reasonably satisfactory
to Landlord issued by an insurance company qualified to do business in
California. The amount of the bond shall equal 125% of the total amount
of Real Property Taxes in dispute and any such bond shall be assignable
to any lender or purchaser of the Premises. The bond shall hold
Landlord and the Premises harmless from any damage arising out of the
proceeding or contest and shall insure the payment of any judgment that
may be rendered."
14. PROPERTY INSURANCE: Effective as of the first day of the Third
Option Period, section B of Lease Paragraph 55 ("Property Insurance") shall be
deleted in its entirety and be of no further force or effect.
15. ASSIGNMENT AND SUBLETTING: Effective as of the first day of the
Third Option Period, Lease Paragraph 56 ("Assignment and Subletting") shall be
deleted in its entirety and replaced with the following:
"56. ASSIGNMENT AND SUBLETTING' The following modifications
are made to Paragraph 16:
A. In the event that Tenant seeks to make any assignment or
sublease, then Landlord, by giving Tenant written notice of its
election within fifteen (15) days after Tenant's notice of intent to
assign or sublease has been given to Landlord, shall have the right to
elect (i) to withhold its consent to such assignment or sublease, as
permitted pursuant to Paragraph 16, or (ii) to permit Tenant to so
assign the Lease or sublease such part of the Premises, in which event
Tenant may do so, but without being released of its liability for the
performance of all of its obligations under the Lease, and the
following shall apply (except the following shall not apply to a
"Permitted Transfer" described in Paragraph 57):
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(1) If Tenant assigns its interest in this Lease,
then in addition to the rental provided for in this Lease, Tenant shall
pay to Landlord fifty percent (50%) of all Rent and other consideration
received by Tenant over and above (i) the assignee's agreement to
assume the obligations of Tenant under this Lease and (ii) all
"Permitted Transfer Costs" (as defined herein) related to such
assignment. As used herein, the term "Permitted Transfer Costs" shall
mean all reasonable leasing commissions paid to third parties not
affiliated with Tenant in order to obtain the assignment or sublease in
question.
(2) If Tenant sublets all or part of the Premises,
then Tenant shall pay to Landlord in addition to the Rent provided for
in this Lease fifty percent (50%) of the positive difference, if any,
between (i) all rent and other consideration paid or provided to Tenant
by the subtenant, less (ii) all Rent paid by Tenant to Landlord
pursuant to this Lease which is allocable to the area so sublet and all
Permitted Transfer Costs related to such sublease. After Tenant has
recovered all Permitted Transfer Costs Tenant shall pay to Landlord the
amount specified in the preceding sentence on the same basis, whether
periodic or in lump sum, that such rent and other consideration is paid
to Tenant by its subtenant, within seven (7) days after it is received
by Tenant.
(3) Tenant's obligations under this subparagraph shall
survive any assignment or sublease. At the time Tenant makes any
payment to Landlord required by this subparagraph, Tenant shall deliver
an itemized statement of the method by which the amount to which
Landlord is entitled was calculated, certified by Tenant as true and
correct. Landlord shall have the right to inspect Tenant's books and
records relating to the payments due pursuant to this subparagraph.
Upon request therefor, Tenant shall deliver to Landlord copies of all
bills, invoices or other documents upon which its calculations are
based.
(4) As used herein, the term "consideration" shall
mean any consideration of any kind received, or to be received
(including, but not limited to, services rendered and/or value
received) by Tenant as a result of the assignment or sublease, if such
sums are paid or provided to Tenant for Tenant's interest in this Lease
or in the Premises.
(5) This Paragraph 56.A does not apply to a
"Permitted Transfer", as provided in Paragraph 57 hereof. The parties
agree that if any of the following transactions occur and do not
qualify as "Permitted Transfers", Tenant must obtain Landlord's consent
to such transaction and if Landlord consents to any of the following
transactions which do not otherwise qualify as "Permitted Transfers",
then the provisions of this Paragraph 56.A shall not apply to the
following transactions: (i) a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee; and (ii) an assignment of this Lease to a
corporation which purchases or otherwise acquires 95% or more of the
assets of Tenant so long as 95% of all assets and liabilities of Tenant
are permanently transferred to such assignee and Tenant remains liable
and responsible under the Lease to the extent Tenant continues in
existence following such transaction."
16. PERMITTED ASSIGNMENTS AND SUBLEASES: Effective as of the first day
of the Third Option Period, Lease Paragraph 57 ("Permitted Assignments and
Subleases") shall be deleted in its entirety and replaced with the following:
"57. PERMITTED ASSIGNMENTS AND SUBLEASES: Notwithstanding
anything contained in Paragraph 16, so long as Tenant otherwise
complies with the provisions of Paragraph 16 and the Permitted Transfer
does not release Tenant from its obligations hereunder, Tenant may
enter into any of the following transfers (a "Permitted Transfer")
without Landlord's prior written consent, and the provisions of
Paragraph 56A shall not apply to any such Permitted Transfer:
A. Tenant may sublease all or part of the Premises or assign
its interest in this Lease to any corporation which controls, is
controlled by, or is under common control
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with Tenant by means of an ownership interest of more than fifty
percent (50%) providing Tenant remains liable for the payment of Rent
and full performance of the Lease;
B. Tenant may assign its interest in the Lease to a
corporation which results from a merger, consolidation or other
reorganization in which Tenant is not the surviving corporation so long
as (i) 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee, and (ii) immediately prior to the merger,
consolidation or other reorganization, the corporation into which
Tenant is to be merged has a net worth equal to or greater than the net
worth of Tenant at the time of Lease execution or at the time of such
assignment, merger, consolidation or reorganization (whichever is
greater), or if it does not, Landlord is provided a guaranty of the
Lease (in a form reasonably acceptable to Landlord) from a corporation
(a) that is the parent of, or is otherwise affiliated with, the
corporation into which Tenant is to be merged, and (b) which has a
current net worth equal to or greater than the net worth of Tenant at
the time of Lease execution or at the time of such assignment, merger,
consolidation or reorganization (whichever is greater). In the event
there is not a permanent transfer of 95% or more of the assets and
liabilities from Tenant to a third party, and Tenant continues to exist
as a separate entity, both companies shall be jointly and severally
liable for the full terms and conditions of the Lease;
C. Tenant may assign this Lease to a corporation which
purchases or otherwise acquires 95% or more of the assets of Tenant so
long as 95% of all assets and liabilities of Tenant are permanently
transferred to such assignee (in the event there is not a permanent
transfer of 95% or more of the assets and liabilities from Tenant to a
third party and Tenant continues to exist as a separate entity, both
companies shall be jointly and severally liable for the full terms and
conditions of the Lease), and provided that immediately prior to such
assignment said corporation, has a net worth equal to or greater than
the net worth of Tenant (a) at the time of Lease execution or (b) at
the time of such assignment (whichever is greater), or if it does not,
Landlord is provided a guaranty of the Lease (in a form reasonably
acceptable to Landlord) from a corporation (a) that is the parent of,
or is otherwise affiliated with, said corporation and (b) which has a
current net worth equal to or greater than the net worth of Tenant at
the time of Lease execution or at the time of such assignment,
(whichever is greater)."
17. DESTRUCTION: Effective as of the first day of the Third Option
Period, Lease Paragraph 62 ("Destruction") shall be deleted in its entirety and
replaced with the following:
"62. DESTRUCTION: Paragraph 21 is modified by the following:
A. Notwithstanding anything to the contrary within Paragraph
21, Landlord may terminate this Lease in the event of an uninsured
event or if insurance proceeds, net of the deductible, are insufficient
to cover one hundred percent of the rebuilding costs; provided,
however, Tenant shall have the right to elect, in its discretion, to
contribute such excess funds to permit Landlord to repair the Premises.
B. Except as provided in Paragraph 62C, Landlord may not
terminate the Lease if the Premises are damaged by a peril whereby the
cost to replace and/or repair is one hundred percent (100%) covered by
the insurance carried by Landlord pursuant to Paragraph 12, but instead
shall restore the Premises in the manner described by Paragraph 21.
C. If the Premises are damaged by a peril covered by the
insurance carried by Landlord pursuant to Paragraph 12, Landlord shall
have the option to terminate the Lease if each of the following
conditions is satisfied: (i) the cost to repair or the damage exceeds
thirty-three percent (33%) of the then replacement cost of the
Premises; and (ii) the damage occurs at a time when there is less than
five (5) years remaining in the term of the Lease.
D. If Landlord fails to obtain insurance as required pursuant
to Paragraph 12,
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and said insurance would have been available to cover any damage or
destruction to the Premises, Landlord shall be required to rebuild, at
its cost, net of the deductible which would have been required under
said insurance policy (which deductible Tenant is required to pay).
E. If the Premises are damaged by any peril, then as soon as
reasonably practicable, Landlord shall furnish Tenant with the written
opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be completed. Tenant
shall have the option to terminate this Lease in the event any of the
following occurs, which option may be exercised only by delivery to
Landlord of a written notice of election to terminate within seven (7)
days after Tenant receives from Landlord the estimate of the time
needed to complete such restoration:
(1) The Premises are damaged by any peril (not caused
by or resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Leased
Premises cannot be substantially completed within 180 days after the
date of such damage (subject to force majeure conditions); or
(2) The Premises are damaged by any peril (not caused
by or resulting from an action of Tenant or Tenant's agents, employees,
contractors or invitees) within twelve (12) months of the last day of
the Lease term, and, in the reasonable opinion of Landlord's architect
or construction consultant, the restoration of the Leased Premises
cannot be substantially completed within sixty (60) days after the date
of such damage and Tenant has not exercised its Option to Extend said
Term (or Extended Term as the case may be)."
18. LIABILITY INSURANCE: Effective as of the first day of the Third
Option Period, the first sentence of Lease Paragraph 10 ("Liability Insurance")
shall be deleted and replaced with the following: "Tenant, at Tenant's expense,
agrees to keep in force during the Term of this Lease a policy of commercial
general liability insurance with combined single limit coverage of not less than
Two Million Dollars ($2,000,000) per occurrence for bodily injury and property
damage occurring in, on or about the Premises, including parking and landscaped
areas."
19. LIMITATION OF LIABILITY: Effective as of the first day of the Third
Option Period, Lease Paragraph 36 ("Limitation of Liability") shall be deleted
in its entirety and replaced with the following:
"36. LIMITATION OF LIABILITY: In consideration of the benefits
accruing hereunder, Tenant and all successors and assigns covenant and
agree that, in the event of any actual or alleged failure, breach or
default hereunder by Landlord:
(i) the sole and exclusive remedy shall be against Landlord's interest
in the Premises leased herein;
(ii) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of
the partnership);
(iii) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the
partnership);
(iv) no partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(v) no judgment will be taken against any partner of Landlord;
(vi) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
(vii) no writ of execution will ever be levied against the assets of
any partner of Landlord;
(viii) these covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and
agreements shall be
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applicable to any covenant or agreement either expressly contained in
this Lease or imposed by statute or at common law."
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and conditions of
said October 31, 1989 Lease Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment No.
3 to Lease as of the day and year last written below.
LANDLORD: TENANT:
JOHN ARRILLAGA SURVIVOR'S QUANTUM CORPORATION
TRUST a Delaware corporation
By /s/ John Arrillaga, By /s/ Andrew Kryder
------------------- -------------------
John Arrillaga, Trustee
Andrew Kryder
-----------------
Date: 6/30/97 Print or Type Name
---------
RICHARD T. PEERY SEPARATE Title: FINANCE AND CORP GENERAL
PROPERTY TRUST COUNSEL
------------------------
Date: 6/25/97
--------
By /s/ Richard T. Peery
-----------------------
Richard T. Peery, Trustee
Date: 6/26/97
---------
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Lease 6
Building 6
QUANTUM CORPORATION
500 McCarthy Blvd.
Milpitas, CA 95035
Attention: Norm Claus
RE: CONSTRUCTION AGREEMENT RELATED TO LEASE AGREEMENT DATED APRIL 16, 1997,
BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T.
PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND QUANTUM CORPORATION, A
DELAWARE CORPORATION, AS TENANT, FOR ALL OF THAT CERTAIN 182,355+/-
SQUARE FOOT BUILDING TO BE CONSTRUCTED BY LANDLORD FOR TENANT, LOCATED
ON SUMAC DRIVE, IN MILPITAS, CALIFORNIA.
Gentlemen:
This letter will confirm our agreement relative to the shell of the
building and interior improvements related thereto to be constructed by Landlord
on the property leased under the lease referenced above, hereinafter referred to
as the "Lease", and shall be considered a part of the Lease.
1. DEFINITIONS: As used in this construction letter, the following
terms shall have the following meanings, and terms which are not defined below,
but which are defined in the Lease which are used in this construction letter,
shall have the meanings ascribed to them by the Lease:
A. Design Criteria: The term "Design Criteria" shall mean
those plans and specifications for the Improvements to be constructed by
Landlord and/or Tenant (as the case may be) as hereinafter set forth and (i) the
building elevations to be depicted on Exhibit "A" to the Lease and (ii) the
building shell design criteria described on Exhibit "A" to the Lease, and shall
include the other plans for the Improvements when completed by the parties as
provided for in this Agreement.
B. Shell Improvements: The term "Shell Improvements" shall
mean the following which are to be constructed by Landlord in accordance with
the Design Criteria: (i) the shell of a two story industrial building containing
approximately +/- 182,355 square feet, consisting of foundation, first and
second story floor slab and second story floor deck, load bearing walls, roof
system, roof membrane, standard width interior stairways, exterior doors and
exterior door hardware; and (ii) all paving and parking areas, striping,
sidewalks, parking curbs, gutters, irrigation system, landscaping, storm sewer,
and main utility service conduits (excluding electrical panel which is part of
Interior Improvements) from the street to the building perimeter, transformer
pad, the main plumbing line into the building, water and sewer connection fees
including cost to hook up to Milpitas sewer system, but excluding roof screens,
building connectors, parking lot lighting, and utility pads including exterior
walls and all other construction elements of any such utility pads and
electrical panels.
C. Interior Improvements: The term "Interior Improvements"
shall mean all improvements to be constructed by Landlord and paid for by the
parties as hereinafter set forth, within the building shell and/or not included
in the Shell Improvements set forth in Paragraph lB above e.g., by way of
example interior improvements shall include and not be limited to the fire
sprinkler system, elevators (if any), loading docks (if any), roof screens,
building connectors,
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drop ceilings, interior plumbing, heating and air conditioning system,
electrical system, parking lot lighting, carpeting, vinyl floor covering,
painting, interior walls and movable floor to ceiling partitioning, utility pads
(including all construction elements of subject utility pads, including but not
limited to, the exterior walls), normal contractor's fees, architect's fees,
engineer's fees and any City or governmental fees for connection to utilities.
D. Improvements: The term "Improvements" shall mean the Shell
Improvements and the Interior Improvements.
E. Performance Schedule: The term "Performance Schedule" shall
mean the estimated times for commencement and performance of construction
obligations contained in Paragraph 2 of this Agreement.
F. Architect: The term "Architect" shall mean (i) Hoover
Associates and/or Peery/Arrillaga or such other licensed architect as is
approved by Landlord with respect to the Shell Improvements, and (ii) such
licensed architect as is approved by Landlord and Tenant with respect to the
Interior Improvements.
G. Prime Contractor(s): The term "Prime Contractor" shall mean
(i) Vance M. Brown & Sons, Inc., or such other contractor selected by Landlord
for the construction of the Shell Improvements and (ii) such licensed general
contractor as is approved by Landlord and Tenant with respect to the Interior
Improvements.
H. Substantial Completion: The term "Substantial Completion"
(and "Substantially Completed") shall mean the date when all of the following
have occurred with respect to the Improvements in question: (i) the construction
of the Improvements in question has been substantially completed in accordance
with the approved plans therefor except for punch list items which do not
prevent Tenant from reasonably using the Premises to conduct Tenant's business;
(ii) Landlord has executed a certificate or statement representing that such
Improvements that Landlord is responsible for completing have been substantially
completed in accordance with the plans and specifications therefor except for
punch list items which do not prevent Tenant from reasonably using the Premises
to conduct Tenant's business and incomplete items related to delays caused
directly and/or indirectly by Tenant; and (iii) if applicable, the Building
Department of the City of Milpitas has completed its final inspection of such
Improvements and has "signed off" the building inspection card approving such
work as complete except for punch list items which do not prevent Tenant from
reasonably using the Premises to conduct Tenant's business.
I. Target Commencement Date: The term "Target Commencement
Date" shall mean May 1, 1998, subject to delays caused by (i) by the governing
agency(ies) approval and/or (ii) strikes, acts of God, governmental
restrictions, or other causes beyond Landlord's control, in which instance the
time period for Landlord's completion of the building shall be extended
accordingly.
2. Performance Schedule: Landlord and Tenant desire to cause the
Improvements to be Substantially Completed by the Target Commencement Date. The
Target Commencement Date is based upon information gathered and estimates made
by Landlord, which are reflected in the Construction Schedule. Achieving
Substantial Completion of the Improvements by the Target Commencement Date
requires that certain objectives be met within certain time periods. Set forth
in this paragraph is a schedule of certain critical dates relating to Landlord's
and Tenant's respective obligations regarding the construction of the Shell
Improvements and the Interior Improvements (the "Performance Schedule") that
must be adhered to in order to achieve Substantial Completion of all
Improvements by the Target Commencement Date. Landlord and Tenant shall each be
obligated to use reasonable efforts to perform their respective obligations
within the time periods set forth in the Performance Schedule and elsewhere in
this Improvement Agreement. Subject to the provisions of Paragraph 8 hereof, the
parties acknowledge that the Performance Schedule is only an estimate of the
time needed to complete certain stages of the
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construction process, and the failure of either party to accomplish any step in
the process set forth in the Performance Schedule within the applicable time
period shall not constitute a default by either party unless such failure
constitutes a breach of the obligation of a party to use reasonable efforts to
perform its obligations within the time periods set forth in the Performance
Schedule and elsewhere in this construction letter and appropriate notice has
been given and any applicable cure period has expired. The Performance Schedule
is as follows:
Action Responsible
Items Due Date Party,
A. Delivery of Provided to Tenant by Landlord Landlord
Definitive Shell on January 30, 1997 (Shell
Plans to Tenant Plans showing columns,
windows, shear structure, "K"
bases and core area(s)).
B. Approval of Provided to Landlord by Tenant Tenant
Definitive Shell on March 3, 1997
Plans by Tenant and
Delivery of Tenant's
Shell Requirements
C. Delivery of Final April 30, 1997 Landlord
Shell Plans to
Tenant
D. Approval of Final Within 5 days after Tenant Tenant
Shell Plans by receives final shell working
Tenant drawings
E. Obtain Building July 7, 1997 Landlord
Permit for Shell
Improvements
F. Delivery to Landlord May 23, 1997 Tenant
of Preliminary
Interior Improvement
Plans
G. Approval of Within 5 days after Landlord Landlord
Preliminary Interior receives Preliminary Interior
Improvement Plans by Improvement Plans
Landlord
H. Delivery of Final August 5, 1997 Tenant
Interior Improvement
Plans to Landlord
I. Approval by Landlord Within 5 days after Landlord Landlord
of Final Interior receives Final Interior Plans
Plans
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J. Commencement of As soon as reasonably possible Landlord
Construction of after receipt of
Improvements building permit
K. Substantial May 1, 1998 Landlord
Completion of
Improvements
3. DEVELOPMENT OF PLANS FOR IMPROVEMENTS' Plans for the Shell
Improvements shall be developed in accordance with the following:
A. Development of Definitive Shell Plans: Tenant and Landlord
have agreed to the basic architectural design and areas to contain landscaping
and parking relating to the Premises as shown on Exhibit "A" to the Lease. On or
before the due date specified in the Performance Schedule, Landlord shall cause
Architect to prepare and deliver to Tenant for its review and approval
definitive plans for the Shell Improvements which are the logical and reasonable
development of the Design Criteria and Exhibit "A" and show such details as
columns, windows, shear structure, "K" bases and core area(s) (the "Definitive
Shell Plans"). On or before the due date specified in the Performance Schedule,
Tenant shall either approve such plans or notify Landlord in writing or its
specific objections to the Definitive Shell Plans. With regard to such approval
the parties agree as follows: (i) the Basic Rent and the amount of Landlord's
Interior Improvement allowance pursuant to paragraph 6B hereof are based upon
the gross leasable area of the building; (ii) the gross leasable area of the
building shall be measured from the outside of exterior walls and shall include
any atriums, covered entrances or egresses, and covered loading areas; (iii)
that part of the gross leasable area of the building occupied by indentations,
building overhangs, covered entrances, and covered loading areas shall not
consist of more than five percent (5%) of the total gross leasable area; and
(iv) the Definitive Shell Plans shall be modified to conform with the intent and
restfictions set forth in phrases (i), (ii) and (iii) above and in this
sentence; and (v) Tenant's Shell Requirements (as hereinafter defined) shall not
affect the exterior appearance or structural integrity or cost of the Premises,
and it is agreed that any increased cost in the Shell Improvements as a result
of any of Tenant's Shell or Interior Requirements shall be a cost to be paid for
by Tenant. If Tenant reasonably objects to the Definitive Shell Plans, Landlord
shall cause Architect to revise the Definitive Shell Plans to address such
objections in a manner consistent with the parameters for the Shell Improvements
set forth in this construction letter and the Design Criteria and shall resubmit
such revised Definitive Shell Plans as soon as reasonably practicable to Tenant
for its approval. When such revised Definitive Shell Plans are resubmitted to
Tenant, it shall either approve such plans or notify Landlord of any further
objections in writing within five (5) business days after receipt thereof. If
Tenant has further objections to the revised Definitive Shell Plans, Landlord
and Tenant shall immediately cause Architect to meet and confer with Tenant's
construction consultant and the Prime Contractor, who together and (by majority
vote of Landlord, Tenant, Architect, Tenant's construction consultant, and Prime
Contractor) shall apply the standards set forth in this construction letter and
the Design Criteria to resolve Tenant's objections and incorporate such
resolution into the Definitive Shell Plans, which process Landlord and Tenant
shall cause to be completed within five (5) business days after the conclusion
of the five (5) business day referred to the immediately preceding sentence, and
the decision of the majority of the parties set forth above shall be binding on
Tenant and Landlord. Tenant furnished to Landlord on April 18, 1997 schematic
plans and specifications for plumbing, electrical, heating and air conditioning
that affect the construction of the Shell Improvements as well as other items
that were required to be constructed as part of the Shell Improvements without
modification being required at a later time ("Tenant's Shell Requirements").
B. Development of Final Shell Plans: Landlord shall cause
Architect to complete and submit to Tenant for its approval final working
drawings for the Shell Improvements by the due date specified in the Performance
Schedule which are the logical and
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reasonable development of the Design Criteria and the Definitive Shell Plans and
which incorporate and are consistent with Tenant's reasonable Shell
Requirements. Tenant shall approve the final plans for the Shell Improvements or
notify Landlord in writing of its specific objections by the due date specified
in the Performance Schedule. If Tenant so objects, the parties shall confer and
reach agreement upon final working drawings for the Shell Improvements within
five (5) business days after Tenant has notified Landlord of its objections. In
the event Tenant and Landlord do not resolve all of Tenant's objections within
such five (5) business day time period, Landlord and Tenant shall immediately
cause Architect to meet and confer with Tenant's construction consultant and the
Prime Contractor, who together and (by majority vote of Landlord, Tenant,
Architect, Tenant's construction consultant, and Prime Contractor) shall apply
the standards set forth in this construction letter to resolve Tenant's
objections and incorporate such resolution into the final working drawings for
the Shell Improvements, which process Landlord and Tenant shall cause to be
completed within five (5) business days after the conclusion of the five (5)
business day period referred to in the immediately preceding sentence and the
decision of the majority of the parties set forth above shall be binding on
Tenant and Landlord. The final working drawings so approved by Landlord and
Tenant or by majority vote as set forth above (including all changes made to
resolve Tenant's objections approved by the majority of the parties pursuant to
the immediately preceding sentence) are referred to herein as the "Final Shell
Plans".
C. Governmental Approvals: As soon as the Final Shell Plans
have been approved by Landlord and Tenant, Landlord shall apply for site
development approval and a building permit for the Shell Improvements, and shall
diligently prosecute to completion such approval process.
D. Commencement of Shell Improvements: As soon as reasonably
possible after receipt of a building permit for the Shell Improvements (acts of
God and delays beyond Landlord's control excepted), Landlord shall commence
construction of the Shell Improvements and shall diligently prosecute such
construction to completion, using all reasonable efforts to achieve Substantial
Completion of the Shell Improvements by the due date specified in the
Performance Schedule.
4. DEVELOPMENT OF PLANS FOR INTERIOR IMPROVEMENTS: Plans for the Interior
Improvements shall be developed in accordance with the following:
A. Development of Preliminary Interior Plans: On or before the
due date specified in the Performance Schedule, Tenant shall prepare and deliver
to Landlord for its review and approval preliminary plans for the Interior
Improvements (the "Preliminary Interior Plans"). On or before the due date
specified in the Performance Schedule, Landlord shall either approve such plans
in writing or notify Tenant in writing of its specific objections to the
Preliminary Interior Plans. If Landlord so objects, Tenant shall revise the
Preliminary Interior Plans to address such objections in a manner consistent
with the parameters for the Interior Improvements set forth in this construction
letter and shall resubmit such revised Preliminary Interior Plans as soon as
reasonably practicable (but in no event later than 10 days) to Landlord for its
approval. It is agreed that Tenant's Preliminary Interior Improvement plans
shall not affect the exterior appearance or structural integrity or cost of the
Shell Improvements, and it is further agreed that Landlord will not object to
reasonable structural changes (subject to the provisions of Paragraph 8) as long
as Tenant agrees to pay for any additional cost for same and the exterior
appearance of the Shell Improvements is not altered. When the revised
Preliminary Interior Plans are resubmitted to Landlord, it shall either approve
such plans in writing or notify Tenant of any further objections in writing
within three (3) business days after receipt thereof. If Landlord has further
objections to the revised Preliminary Interior Plans, Landlord and Tenant shall
immediately meet and confer and together shall apply the standards set forth in
this construction letter to resolve Landlord's objections and incorporate such
resolution into the Preliminary Interior Plans, which process Landlord and
Tenant shall cause to be completed within three (3) business days after the
conclusion of the three (3) business day period referred to
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in the immediately preceding sentence. In resolving Landlord's objections, the
parties agree to act reasonably so as to promptly finalize the Preliminary
Interior Plans. Paragraph 8 hereof shall apply to any failure of Tenant to
promptly and reasonably work with Landlord in this regard.
B. Development of Final Interior Plans: Within 90 days after
Tenant's receipt of the Definitive Shell Plans (which date shall be extended by
one day for each day in excess of 10 days that Landlord fails to approve the
Preliminary Interior Plans), Tenant shall cause Architect to complete and submit
to Landlord for its approval final working drawings for the Interior
Improvements which are the logical and reasonable development of the Preliminary
Interior Plans. Landlord shall approve in writing the final plans for the
Interior Improvements or notify Tenant in writing of its specific objections by
the due date specified in the Performance Schedule. It is agreed that Tenant's
final interior plans shall not affect the exterior appearance or structural
integrity or cost of the Shell Improvements, and it is further agreed that
Landlord will not object to reasonable structural changes (subject to the
provisions of Paragraph 8) as long as Tenant agrees to pay for any additional
cost for same and the exterior appearance of the Shell Improvements is not
altered. If Landlord so objects, the parties shall confer and use, their best
efforts to reach agreement upon final working drawings for the Interior
Improvements and together shall apply the standards set forth in this
construction letter to resolve Landlord's objections and incorporate such
resolution into the final working drawings for the Shell Improvements, which
process Landlord and Tenant shall cause to be completed within six (6) business
days after Landlord has notified Tenant of its objections. In resolving
Landlord's objections, the parties agree to act reasonably so as to promptly
finalize the final interior plans, it being agreed that the provisions of
paragraph 8 of this Agreement shall apply to any failure of Tenant to promptly
and reasonably finalize the interior plans. The final working drawings so
approved by Landlord and Tenant (including all changes made to resolve
Landlord's objections approved by Landlord and Tenant pursuant to the above) are
referred to herein as the "Final Interior Plans' and shall be considered a part
of Exhibit "B" to the Lease.
C. Building Permit: As soon as the Final Interior Plans have
been approved by Landlord and Tenant, Landlord shall apply for a building permit
for the Interior Improvements, and shall diligently prosecute to completion such
approval process.
D. Commencement of Interior Improvements: On or before the due
date specified in the Performance Schedule (acts of God and delays beyond
Landlord's control excepted), Landlord shall commence construction of the
Interior Improvements and shall diligently prosecute such construction to
completion, using all reasonable efforts to achieve Substantial Completion of
the Interior Improvements by the date specified in the Performance Schedule.
5. CONSTRUCTION OF IMPROVEMENTS: The Improvements to be constructed as
part of the Premises in connection with the Lease shall be paid for by the
parties as hereinafter set forth in Paragraph 6 and constructed in the following
manner:
A. Construction of Improvements by Landlord: The Shell
Improvements and Interior Improvements shall be constructed by Landlord in
accordance with the Final Shell Plans and the Final Interior Plans; it being
agreed, however, that if the Shell Improvements and/or Interior Improvements, as
finally constructed, do not conform exactly to the plans and specifications as
set forth in the Final Shell Plans and Final Interior Plans and as provided for
in the Lease, and the general appearance, structural integrity, and Tenant's use
and occupancy of the Premises and/or the building and the interior improvements
relating thereto are not unreasonably affected by such deviation, it is agreed
that the Commencement Date of the Lease, and Tenant's obligation to pay rental
thereunder, shall not be affected, and Tenant hereby agrees, in such event, to
accept the Premises and/or building and interior improvements in their
configuration as constructed by Landlord.
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B. Construction Contract for Interior Improvements: The
Interior Improvements shall be constructed, in conformance (except as provided
above) with the Final Interior Plans approved by Landlord and Tenant. Landlord
and Tenant shall participate equally in the negotiations with Prime Contractor
to establish the Prime Contractor's fee, or profit, overhead, and the general
conditions of a contract with Prime Contractor for the construction of the
Interior Improvements. The final Interior Improvements contract with the Prime
Contractor shall be subject to the prior approval of both Landlord and Tenant.
Tenant agrees not to unreasonably object to and to promptly execute such final
contract with the Prime Contractor so long as the Prime Contractor's fees,
general conditions, and overhead are reasonable when compared to industry
standards for comparable sized jobs. In the event Tenant unreasonably objects to
such contract and does not timely execute the same, Tenant agrees to be liable
for the delay as set forth in paragraph 8 and the Lease will commence on the
scheduled Lease commencement date regardless of whether or not the building is
ready for Tenant's occupancy. It is agreed that all subcontractors for the
Interior Improvements shall be chosen by a competitive bid process where (i)
Tenant shall have the right to approve subcontractors who bid on specific parts
of the job, (ii) unless otherwise approved by Tenant, the job shall be awarded
to the lowest responsible bidder, (iii) Tenant shall have the right to cause a
subcontract to be rebid (one time only without Tenant being liable for delay) if
Tenant does not approve the low bid (as provided below). Landlord shall submit
the proposed list of sub-contractors who shall be asked to bid for the project
to Tenant. Tenant shall have three (3) business days from its receipt of the
proposed bid list within which to approve the bid list or to add additional
bidders. Failure of Tenant to disapprove any name included on such bid list in
writing within such three (3) business day period or to add additional bidders
shall be deemed to be approval by Tenant of the bid list as so presented. As
soon as the bid of the Prime Contractor (and all subcontractors) is obtained,
Landlord shall submit it to Tenant for review and approval. Any Prime Contractor
or subcontractor bid not specifically disapproved in writing by Tenant within
three (3) business days after Tenant's receipt of the bid shall be deemed to
constitute approval thereof by Tenant and any original bid of Prime Contractor
or subcontractor disapproved shall be rebid again and Tenant shall not have the
right to object to the revised bid as long as the revised bid is not greater
than the original bid in which event Tenant shall accept the original bid. Once
the bids of the Prime Contractor and subcontractors and the contract terms have
been approved as set forth above, Landlord shall enter into a fixed price
construction contract for the Interior Improvements. However, if the final bid
of the Prime Contractor (including all subcontractors' bids) to construct the
Interior Improvements in accordance with the Final Interior Plans would result
in Interior Improvement Costs which exceed Landlord's Interior Improvement
allowance, then (and only one time) the following shall apply: Tenant shall have
ten (10) business days from the day it receives notice of the final bid from
Landlord within which to revise the plans for the Interior Improvements and
resubmit same to Landlord and Prime Contractor and in the event Tenant fails to
revise the plans for the Interior Improvements and submit same to Landlord and
Prime Contractor within said ten (10) day period then it is agreed that Tenant
has elected to accept the Prime Contractor's and all subcontractors' bids and to
pay the entire excess amount pursuant to the provisions of subparagraph 6B,
below. (Notwithstanding the foregoing, however, if, after Tenant has revised the
plans, the Interior Improvements Costs will still exceed Landlord's Interior
Improvement allowance, Tenant shall pay such excess amount as provided in
subparagraph 6B below.) Tenant's election to revise the plans for the Interior
Improvements (one time only) in the event the bid exceeds the amount of
Landlord's Interior Improvement allowance, as set forth above, shall not be
deemed to be a delay on Tenant's part which would result in a change of the
commencement of Tenant's obligation to pay rent pursuant to paragraph 8 hereof,
provided that such revision shall be completed within said ten (10) business day
period and the provisions of paragraph 8 hereof shall apply to any subsequent
revision. In the event Landlord's Interior Improvement allowance is exceeded for
the construction contract for the Interior Improvements, then it is agreed that
Landlord and Tenant shall enter into a fixed price contract with Prime
Contractor for the Interior Improvements which by its terms provides that each
party is obligated to pay only for its respective share of the fixed costs
thereof as set forth in Paragraph 6, and as stated in such contract.
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It is expressly acknowledged and agreed by Tenant that the
opportunity set forth above, whereby Tenant may revise the plans, is a one time
opportunity and, if Tenant so elects to revise the plans, thereafter Tenant
shall be subject to the provisions of Paragraph 8 of this Agreement and the bid
received by Landlord based on such revised plans shall be considered final,
shall be accepted by Tenant and construction shall proceed without any further
changes except as permitted by Paragraph 7.
C. Inspection on Following Completion: As soon as the Interior
Improvements are Substantially Completed (as that term is defined herein),
Landlord and Tenant shall conduct a joint walk-through of the Premises, and
inspect such Interior Improvements, using their best efforts to discover all
incomplete or defective construction. After such inspection has been completed,
Landlord shall prepare, and both parties shall sign, a list of all "punch list"
items which the parties agree are to be corrected by Landlord (but which shall
exclude any damage or defects caused by Tenant, its employees, agents or parties
Tenant has contracted with to work on the Premises). It is agreed that the Lease
will commence on the Commencement Date regardless of whether or not a "punch
list" exists. Landlord shall use reasonable efforts to complete and/or repair
such "punch list" items within thirty (30) days after executing such list, it
being agreed however, that the existence of any "punch list" items will not
result in any delay of the Commencement Date and will not result in any right of
rent reduction. Tenant shall have the right to occupy the Premises and the Lease
and Tenant's obligation to pay rent shall commence as soon as the Improvements
are Substantially Completed, subject to performance by Tenant of its obligations
under this subparagraph and the Lease. Tenant's taking possession of any part of
the Premises shall be deemed to be an acceptance by Tenant of Landlord's work of
improvement, in accordance with the terms of the Lease, except for the "punch
list" items noted and latent defects that could not reasonably have been
discovered by Tenant during its inspection of the Interior Improvements prior to
completion of the list of "punch list" items. With regard to any such latent
defects or other defects in construction, Tenant shall promptly give written
notice to Landlord when any such defect becomes reasonably apparent specifically
describing such defect, and Landlord shall repair such defect as soon thereafter
as practical; provided, however, the provisions of the immediately preceding
sentence regarding such latent defects, and of this sentence, shall be of no
force and effect if Tenant shall fail to give any such written notice to
Landlord within ninety (90) days after commencement of the term of the Lease
after which time Tenant shall be responsible for all latent and construction
defects not specified in said ninety (90) day period regardless if additional
defects are discovered at a later date and Landlord shall have no obligation for
same. Notwithstanding anything contained herein or in the Lease, Tenant's
obligation to pay rent under the Lease shall commence on the Commencement Date
as specified in the Lease, regardless of whether Tenant completes such
walk-through inspection or has executed and/or completed such list of the "punch
list" items, unless the Lease term has previously commenced, and Tenant's
obligation to pay rent under the Lease has begun, prior to the date of delivery
of possession because of a Tenant delay in the course of construction, as
provided in paragraph 8 hereof.
6. PAYMENT OF CONSTRUCTION COSTS:
A. Shell Improvements: Landlord agrees to furnish the Shell
Improvements at its cost, including the paving and parking areas, striping,
curbs, and gutters as shown on Exhibit "A" of the Lease, the main plumbing line
into the building and landscaping and irrigation system for the building.
Stubbing of the actual plumbing fixtures will be an Interior Improvement Cost,
and not considered a part of the Shell Improvements.
B. Landlord's Interior Improvements Allowance: Landlord agrees
to furnish Tenant with an Interior Improvement allowance of Twenty-Five Dollars
($25.00) per square foot of gross leasable area within the building to be
constructed as part of the Shell Improvements (e.g,, Four Million Five Hundred
Fifty Eight Thousand Eight Hundred Seventy Five Dollars ($4,558,875.00) if the
gross leasable area of the building is 182,355 square feet). This allowance
shall be considered Landlord's total monetary contribution with respect to tthe
Interior
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Improvements, which allowance shall be used for the payment of the direct cost
of constructing the Interior Improvements including, but not limited to, the
fire sprinkler system, loading docks (if any), roof screens, building
connectors, elevators (if any), drop ceilings, interior plumbing, heating and
air conditioning system, electrical system, parking lot lighting, carpeting,
vinyl floor covering, painting, interior walls and movable floor to ceiling
partitioning, utility pads (including all construction elements of subject
utility pads including, but not limited to, the exterior walls), normal
contractor's fees, architect's fees, engineer's fees, and any City or
governmental fees for connection to utilities (the "Interior Improvement
Costs"). Notwithstanding the foregoing, the term "Interior Improvement Costs"
shall not include any of the following: (i) real property taxes and assessments
accruing prior to the Commencement Date; (ii) interest on funds borrowed or
imputed interest on funds reserved by Landlord to fund the construction; (iii)
any administrative or development fee paid to Landlord or any affiliate.
C. Proportionate Allocation of Interior Improvements: Tenant
hereby specifically agrees that the Interior Improvements to be constructed in
the Premises leased hereunder shall be spread proportionately throughout the
building.
D. Liability for Interior Improvement Costs Above Landlord's
Allowance: It is further agreed that Tenant shall be responsible for and pay one
hundred percent (100 %) of the Interior Improvement Costs relating to the
Interior Improvements in excess of those that are paid for with Landlord's
allowance as set forth in subparagraph 6B above. In addition, Tenant shall be
responsible for and pay any additional construction costs and expenses related
to the Shell Improvements occasioned by changes or modifications in the
Preliminary or Final Shell Plans made by Tenant pursuant to paragraph 7 or that
are necessary to accommodate Interior Improvements.
E. Manner of Reimbursement by Tenant: If the total Interior
Improvement Costs exceeds Landlord's allowance, Tenant shall pay a proportionate
share of each progress payment due to the contractor constructing the Interior
Improvements, which bears the same relationship to the total amount of the
progress payment in question as the amount Tenant is obligated to pay for the
Cost of constructing the Interior Improvements. For purposes of illustration
only, if the total cost of constructing the Interior Improvements is $5,000,000
then Tenant's share thereof would be $441,125.00 (the excess over Landlord's
total allowance of $4,558,875.00 assuming the area of the building is 182,355
square feet), or 8.823% of the total cost. If the first progress payment due the
contractor is $500,000 then Tenant's share of such progress payment would be
$44,115.00 (or 8.823% of such progress payment). For each succeeding progress
payment, Tenant would likewise be obligated for 8.823% thereof, with the
exception that Landlord, at its option, may retain a pro rata share of the final
ten percent (10%) of the interior contract until 62 days after recordation of a
Notice of Completion on the Premises. Tenant shall pay its share of any progress
payment to Landlord within ten (10) business days after receipt of a written
statement therefor from Landlord, together with reasonable documentation
substantiating the amount set forth in such statement. If Tenant fails to pay
any such amount when due, then Landlord may (but without the obligation to do
so) advance such funds on Tenant's behalf, and Tenant shall be obligated to
reimburse Landlord for the amount of the funds so advanced on its behalf and all
costs incurred by Landlord in so doing, including interest thereon at a rate
equal to the borrowing rate then charged by Landlord's bank, whether or not
Landlord has actually borrowed such moneys or merely advanced them from its own
funds. Any amounts paid to Landlord by Tenant pursuant to this paragraph shall
be held by Landlord only for disbursement to the contractor in payment of any
such excess Interior Improvement Costs.
7. CHANGES, MODIFICATIONS, OR ADDITIONS TO THE PLANS, SPECIFICATIONS
AND/OR PREMISES: Once the Final Shell Plans and Final Interior Plans have been
finally approved by Landlord and Tenant, then thereafter neither party shall
have the right to order extra work or change orders (except for de minimis
changes which will not materially or substantially impact or affect Tenant's use
of the Premises) with respect to the construction of the Improvements without
the prior written consent of the other party, which consent shall not be
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unreasonably withheld or delayed, provided there is a reasonable basis for such
change. Tenant shall not, however, make any such changes without Landlord's
prior written approval. All extra work or change orders requested by either
Landlord or Tenant shall be made in writing, shall specify the amount of delay
or the time saved resulting therefrom, and shall become effective and a part of
the approved plans once approved in writing by both parties. If any such change
or extra work will result in the cost of the Interior Improvements being in
excess of Landlord's allowance, as set forth in subparagraph 6D, above, Tenant
shall pay the entire amount of such excess, as provided in subparagraph 6D,
above.
8. TENANT DELAYS: Landlord and Tenant acknowledge that the date on
which Tenant's obligation to pay rent under the Lease would otherwise commence
may be delayed because of a delay in completion of construction of the
Improvements due to (i) Tenant's failure to submit to Landlord plans and
specifications for the Improvements by the due date set in the Performance
Schedule, (ii) Tenant's failure to give any necessary approval or consent by the
dates set forth herein, (iii) any act by Tenant which interferes with or delays
construction of the Improvements, including Tenant's entry to install trade
fixtures pursuant to paragraph 10 hereof, (iv) any changes, modifications and/or
additions in the Improvements requested by Tenant and approved by Landlord, or
(v) special materials or equipment ordered or specified by Tenant that cannot be
obtained by Landlord at normal cost within a reasonable period of time because
of limited availability. It is the intent of the parties hereto that the
commencement of Tenant's obligation to pay rent under the Lease not be delayed
by any of such causes or by any other act of Tenant (except as expressly
provided herein) and, in the event it is so delayed, Tenant's obligation to pay
rent under the Lease shall commence as of the date it would otherwise have
commenced absent delay caused by Tenant, provided that within a reasonable
period of time after learning of the occurrence of the cause of any such delay,
Landlord notifies Tenant in writing of the fact that such delay has occurred and
the known or anticipated extent of any such delay.
9. ACCOUNTING: When the Interior Improvements are Substantially
Completed, Landlord shall submit to Tenant a final and detailed written
accounting of all Interior Improvement Costs paid by Landlord, which shall be
true and correct, to the best of Landlord's knowledge. Tenant shall have the
right to audit the books, records and supporting documents of the Landlord or if
Landlord directs, of the Prime Contractor to the extent reasonably necessary to
determine the accuracy of such accounting, related to the Interior Improvements,
during normal business hours, after giving Landlord at least five (5) business
days prior notice. Tenant shall bear the cost of such audit. Any such audit
shall be conducted, if at all, within sixty (60) days after Landlord delivers
such accounting to Tenant.
10. TENANT'S RIGHT TO INSTALL TRADE FIXTURES: When the construction of
the Interior Improvements has proceeded to the point where Tenant's work of
installing its fixtures and equipment (including modular furniture systems,
telephone systems, cabling, communications systems, security systems, antennas
and signs) in the Premises can be commenced in accordance with good construction
practices and will not interfere with the completion of the Improvements by
Landlord, Landlord shall notify Tenant to that effect and shall permit Tenant,
and its authorized representatives and contractors, to have access to the
Premises for the purpose of installing Tenant's trade fixtures and equipment;
provided, however, that Landlord shall permit Tenant to enter the Premises for
the foregoing purposes at least fifteen (15) days prior to the estimated
Commencement Date. Landlord and Prime Contractor shall use reasonable efforts to
cooperate fully with Tenant and its representatives and contractors in
connection with such installation work by Tenant. Any such installation work by
Tenant, or its authorized representatives and contractors, shall be undertaken
at their sole risk, free from Rent, and upon the following conditions:
A. If the entry into the Premises by Tenant, or its
representatives or contractors, unreasonably interferes with or delays
Landlord's construction work notwithstanding Landlord's reasonable efforts to
cooperate, after eight (8) hours notice of such fact to Tenant (i) Tenant shall
cause the party responsible for such interference or delay to leave the
Premises, or
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(ii) Tenant shall cause to be taken such steps as may be necessary in the Prime
Contractor's reasonable opinion to alleviate such interference or delay. If
either (i) or (ii) have not been completed, then Tenant shall be responsible for
delay of the job and subject to the provisions of Paragraph 8;
B. Any contractor used by Tenant in connection with such entry
and installation shall be subject to Landlord's approval, but which may be
withheld if such contractor is nonunion and its entry on the Premises would
unreasonably interfere with Landlord's work;
C. All of the terms of the Lease shall apply to any entry by
Tenant pursuant to this paragraph (including provisions of the Lease regarding
indemnification and insurance), except that, subject to the provisions of
Paragraphs 8 and 10A and B above, Tenant shall not be obligated as a result of
such entry to pay any Base Monthly Rent or Additional Rent;
D. It is agreed that Landlord shall not be required to fix any
defects caused to the Improvements made by Tenant, Tenant's employees, agents or
parties Tenant has contracted with or to work on the Premises;
E. Subject to the provisions of Paragraph 8, Tenant and its
agents and contractors shall be permitted to enter the Premises prior to the
Commencement Date for the purpose of installing Tenant's trade fixtures and
equipment as listed above. Any entry or installation work by Tenant and its
agents in the Premises pursuant to Paragraph 10 shall (i) be undertaken at
Tenant's sole risk, (ii) not interfere with or delay Landlord's work in the
Premises, and (iii) not be deemed occupancy or possession of the Premises for
purposes of the Lease. Tenant shall indemnify, defend, and hold Landlord
harmless from any and all loss, damage, liability, expense (including reasonable
attorneys fees), claim or demand of whatsoever character direct or
consequential, including, but without limiting thereby the generality of the
foregoing, injury to or death of persons and damage to or loss of property
arising out of the exercise by Tenant of any early entry right granted
hereunder.
11. DELIVERY OF DOCUMENTS: Landlord shall within thirty (30) days after
the same is obtained by Landlord, deliver to Tenant any temporary or permanent
certificate of occupancy issued by the City of Milpitas with respect to any of
the Improvements.
12. TAX INCREASES DURING CONSTRUCTION PERIOD: In the event prior to the
Commencement Date there is an interim or supplemental reassessment of the
Premises based upon the added value of the Improvements, then when Tenant
accepts occupancy of the Premises Tenant shall pay any interim or supplemental
taxes (but no penalties or interest in connection therewith) that have been
levied against the Premises and are attributable to the added value of the
Improvements during the period prior to Tenant's occupancy of the Premises.
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<PAGE>
Please execute this agreement in the space provided below, indicating
your agreement with the above, and return all copies. A fully executed copy will
be returned to you for your records after execution by the Landlord.
AGREED: Respectfully yours,
QUANTUM CORPORATION, JOHN ARRILLAGA SURVIVOR TRUST
A Delaware corporation
By /s/ Andrew Kryder By /s/ John Arrillaga
------------------- ---------------------
Andrew Kryder, Vice President Finance John Arrillaga, Trustee
and Corporate General Counsel
Date: 6/30/97
Date: June 25, 1997 ---------
-------------
RICHARD T. PEERY SEPARATE
By /s/ Norm Claus PROPERTY TRUST
------------------
Norm Claus, Vice President Real Estate
and Corporate Services By /s/ Richard T. Peery
-----------------------
Richard T. Peery, Trustee
Date: June 25, 1997
------------- Date: 6/29/97
---------
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================================================================================
CREDIT AGREEMENT
among
QUANTUM CORPORATION
and
THE BANKS NAMED HEREIN
and
ABN AMRO BANK N.V., San Francisco International Branch
and
CIBC INC.,
as Co-Arrangers for the Banks
and
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent for the Banks
and
ABN AMRO BANK N.V., San Francisco International Branch,
as Syndication Agent for the Banks
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
as Documentation Agent for the Banks
June 6, 1997
================================================================================
<PAGE>
CREDIT AGREEMENT
Table of Contents
Page
----
SECTION I. INTERPRETATION.................................... 1
1.01. Definitions....................................... 1
1.02. GAAP.............................................. 22
1.03. Headings.......................................... 23
1.04. Plural Terms...................................... 23
1.05. Time.............................................. 23
1.06. Governing Law..................................... 23
1.07. Construction...................................... 23
1.08. Entire Agreement.................................. 23
1.09. Calculation of Interest and Fees.................. 23
1.10. Other Interpretive Provisions..................... 23
SECTION II. CREDIT FACILITIES................................. 24
2.01. Revolving Loan Facility........................... 24
2.02. Letter of Credit Facility......................... 28
2.03. Amount Limitations, Commitment Reductions, Etc. .. 33
2.04. Fees.............................................. 34
2.05. Prepayments....................................... 36
2.06. Other Payment Terms............................... 37
2.07. Notes and Interest Account........................ 38
2.08. Revolving Loan Funding, Etc....................... 38
2.09. Pro Rata Treatment................................ 39
2.10. Change of Circumstances........................... 41
2.11. Taxes on Payments................................. 44
2.12. Funding Loss Indemnification...................... 46
2.13. Replacement of Banks.............................. 47
SECTION III. CONDITIONS PRECEDENT.............................. 47
3.01. Initial Conditions Precedent...................... 47
3.02. Conditions Precedent to Each Credit Event......... 48
3.03. Conditions Precedent to Each Conversion or
Each Selection of Interest Period................. 48
SECTION IV. REPRESENTATIONS AND WARRANTIES.................... 49
4.01. Borrower's Representations and Warranties......... 49
4.02. Reaffirmation..................................... 54
SECTION V. COVENANTS......................................... 55
5.01. Affirmative Covenants............................. 55
5.02. Negative Covenants................................ 59
SECTION VI. DEFAULT........................................... 73
6.01. Events of Default................................. 73
6.02. Remedies.......................................... 75
i
<PAGE>
Page
----
SECTION VII. AGENTS AND RELATIONS AMONG BANKS.................. 76
7.01. Appointment, Powers and Immunities................ 76
7.02. Reliance by Agents................................ 76
7.03. Defaults.......................................... 77
7.04. Indemnification................................... 77
7.05. Non-Reliance...................................... 78
7.06. Resignation or Removal of Administrative
Agent............................................. 78
7.07. Removal of Co-Arrangers........................... 79
7.08. Authorization..................................... 79
7.09. Agents in Their Individual Capacities............. 80
7.10. Agents' Communications Binding Upon Banks......... 80
7.11. No Obligations of Borrower........................ 80
7.12. Co-Agents......................................... 80
SECTION VIII. MISCELLANEOUS................................................. 81
8.01. Notices........................................... 81
8.02. Expenses.......................................... 82
8.03. Indemnification................................... 82
8.04. Waivers; Amendments............................... 83
8.05. Successors and Assigns............................ 84
8.06. Setoff; Security Interest......................... 88
8.07. No Third Party Rights............................. 89
8.08. Partial Invalidity................................ 89
8.09. Jury Trial........................................ 89
8.10. Counterparts...................................... 89
8.11. Confidentiality................................... 89
ii
<PAGE>
SCHEDULES
I Banks
II Pricing Grid
3.01 Initial Conditions Precedent
4.01(p) Borrower's Subsidiaries
5.02(a) Permitted Financial Covenants
EXHIBITS
A Notice of Borrowing (2.01(b))
B Notice of Conversion (2.01(d))
C Notice of Interest Period Selection (2.01(e))
D Note (2.07(a))
E Compliance Certificate (5.01(a))
F Subordinated Debt Terms (5.02(a))
G Assignment Agreement (8.05(c))
iii
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of June 6, 1997, is entered into by and
among:
(1) QUANTUM CORPORATION, a Delaware corporation ("Borrower");
(2) Each of the financial institutions from time to time
listed in Schedule I hereto, as amended from time to time (such
financial institutions to be referred to herein collectively as the
"Banks");
(3) ABN AMRO BANK N.V., San Francisco International Branch
("ABN") and CIBC INC. ("CIBC"), as co-arrangers for the Banks
(collectively in such capacity, the "Co- Arrangers");
(4) CANADIAN IMPERIAL BANK OF COMMERCE, as administrative
agent for the Banks (in such capacity, the "Administrative Agent");
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as
documentation agent for the Banks; and ABN, as syndication agent for
the Banks; and
(5) BANKBOSTON, N.A., THE BANK OF NOVA SCOTIA, FLEET NATIONAL
BANK, and THE INDUSTRIAL BANK OF JAPAN, LIMITED, as co-agents for the
Banks.
RECITALS
A. Borrower has requested that the Banks provide certain credit
facilities to Borrower on an unsecured basis.
B. The Banks are willing to provide such credit facilities upon the
terms and subject to the conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION I. INTERPRETATION.
1.01. Definitions. Unless otherwise indicated in this Agreement or any
other Credit Document, each term set forth below, when used in this Agreement or
any other Credit Document, shall have the respective meaning given to that term
below or in
<PAGE>
the provision of this Agreement or other Credit Document referenced below:
"ABN" shall have the meaning given to that term in clause (3)
of the introductory paragraph hereof.
"Administrative Agent" shall have the meaning given to that
term in clause (4) of the introductory paragraph hereof.
"Administrative Agent's Fee Letter" shall mean the letter
agreement dated the date of this Agreement between Borrower and
Administrative Agent.
"Affiliate" shall mean, with respect to any Person, (a) each
Person that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, ten percent
(10%) or more of the Equity Securities of such Person having voting
power, (b) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person or (c)
each of such Person's officers and directors; provided, however, that
in no case shall any Agent or any Bank Party be deemed to be an
Affiliate of Borrower, any of Borrower's Subsidiaries or MKE-Quantum
for purposes of this Agreement. For the purpose of this definition,
"control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agents" shall mean Administrative Agent and the Co-
Arrangers.
"Agents' Fee Letters" shall mean the Administrative Agent's
Fee Letter and the Co-Arrangers' Fee Letter.
"Agreement" shall mean this Credit Agreement.
"Applicable Lending Office" shall mean, with respect to any
Bank, (a) initially, its office designated as such in Schedule I (or,
in the case of any Bank which becomes a Bank by an assignment pursuant
to Subparagraph 8.05(c), its office designated as such in the
applicable Assignment Agreement) and (b) subsequently, such other
office or offices as such Bank may designate to Administrative Agent as
the office at which such Bank's Revolving Loans will thereafter be
maintained and for the account of which all payments of principal of,
and interest on, such Bank's Revolving Loans will thereafter be made.
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<PAGE>
"Applicable Margin" shall mean, with respect to any LIBOR Loan
at any time, the per annum margin which is determined pursuant to the
Pricing Grid and added to the LIBO Rate for such LIBOR Loan; provided,
however, that each Applicable Margin determined pursuant to the Pricing
Grid shall be increased by two percent (2.00%) (a) on the date an Event
of Default of the type referred to in Subparagraph 6.01(a), 6.01(f) or
6.01(g) occurs and (b) on the date Administrative Agent provides
written notice to Borrower of the occurrence of any Event of Default
other than of the type referred to in Subparagraph 6.01(a), 6.01(f) or
6.01(g), and in each case shall continue at such increased rate unless
and until such Event of Default is waived in accordance with this
Agreement. The Applicable Margins shall be determined as provided in
the Pricing Grid and may change for each Pricing Period.
"Assignee Bank" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Assignment" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Assignment Agreement" shall have the meaning given to that
term in Subparagraph 8.05(c).
"Assignment Effective Date" shall have, with respect to each
Assignment Agreement, the meaning set forth therein.
"Assignor Bank" shall have the meaning given to that term in
Subparagraph 8.05(c).
"Attorney Costs" of any Person shall mean and include all
reasonable fees and disbursements of any law firm or other external
counsel for such Person and, to the extent such services are not
redundant to those provided in the matter by external counsel for such
Person, the allocated cost of internal legal services and all
disbursements of internal counsel.
"Authorized Financial Officer" shall mean, with respect to
Borrower, the Chief Financial Officer or Treasurer of Borrower or any
Vice President of Finance of Borrower.
"Bank Parties" shall mean, collectively, the Banks and Issuing
Bank. Unless otherwise indicated, the term "Bank Parties" shall include
any Bank acting as Issuing Bank but not in its capacity as such.
"Banks" shall have the meaning given to that term in clause
(2) of the introductory paragraph hereof. Unless
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<PAGE>
otherwise indicated, the term "Banks" shall include any Bank acting as
Issuing Bank but not in its capacity as such.
"Base Rate" shall mean, on any day, the greater of (a) the
Prime Rate in effect on such date and (b) the Federal Funds Rate for
such day plus one-half percent (0.50%); provided, however, that the
Base Rate shall be increased by two percent (2.00%) (a) on the date an
Event of Default of the type referred to in Subparagraph 6.01(a),
6.01(f) or 6.01(g) occurs and (b) on the date Administrative Agent
provides written notice to Borrower of the occurrence of any Event of
Default other than of the type referred to in Subparagraph 6.01(a),
6.01(f) or 6.01(g), and in each case shall continue at such increased
rate unless and until such Event of Default is waived in accordance
with this Agreement.
"Base Rate Loan" shall mean, at any time, a Revolving Loan
which then bears interest as provided in clause (i) of Subparagraph
2.01(c).
"Borrower" shall have the meaning given to that term in clause
(1) of the introductory paragraph hereof.
"Borrowing" shall mean a borrowing by Borrower consisting of
the Revolving Loans made by each of the Banks on the same date and of
the same Type pursuant to a single Notice of Borrowing.
"Business Day" shall mean any day other than Saturday and
Sunday on which (a) commercial banks are not authorized or required to
close in San Francisco, California or New York, New York and (b) if
such Business Day is related to a Revolving Loan which bears or is to
bear interest based on a LIBO Rate, dealings in Dollar deposits are
carried out in the London or other applicable interbank eurodollar
market.
"Capital Adequacy Requirement" shall have the meaning given to
that term in Subparagraph 2.10(d).
"Capital Leases" shall mean any and all lease obligations
that, in accordance with GAAP, are required to be capitalized on the
books of a lessee.
"Cash Equivalents" shall mean Investments of the type
permitted pursuant to clauses (i) through (iv), (vi), (viii) and
(xviii) in Subparagraph 5.02(e).
"Change of Control" shall mean with respect to Borrower, the
occurrence of any of the following events: (i) any person or group of
persons (within the meaning of Section 13 or 14 of the Securities
Exchange Act of 1934, as
4
<PAGE>
amended) shall (A) acquire beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended) of forty percent (40%)
or more of the outstanding Equity Securities of Borrower entitled to
vote for members of the board of directors, or (B) acquire all or
substantially all of the assets of Borrower and its Subsidiaries taken
as a whole, or (ii) during any period of fifteen (15) consecutive
calendar months, individuals who are directors of Borrower on the first
day of such period ("Initial Directors") and any directors of Borrower
who are specifically approved by two-thirds of the directors of
Borrower who are Initial Directors or previously-approved Approved
Directors ("Approved Directors") shall cease to constitute a majority
of the Board of Directors of Borrower before the end of such period.
"Change of Law" shall have the meaning given to that term in
Subparagraph 2.10(b).
"CIBC" shall have the meaning given to that term in clause (3)
of the introductory paragraph hereof.
"Closing Date" shall mean the date when the initial Revolving
Loan is made or the initial Letter of Credit is issued.
"Co-Arrangers" shall have the meaning given to that term in
clause (3) of the introductory paragraph hereof.
"Co-Arrangers' Fee Letter" shall mean the letter agreement
dated the date of this Agreement among Borrower and the Co-Arrangers.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Commitment" shall mean, with respect to any Bank at any time,
such Lender's Proportionate Share at such time of the Total Commitment
at such time.
"Commitment Fee Percentage" shall mean, with respect to the
Unused Commitment at any time, a per annum rate which is determined
pursuant to the Pricing Grid.
"Commitment Fees" shall have the meaning given to that term in
Subparagraph 2.04(c).
"Compliance Certificate" shall have the meaning given to that
term in Subparagraph 5.01(a).
5
<PAGE>
"Contingent Obligation" shall mean, with respect to any Person
without duplication, (a) any Guaranty Obligation of that Person; and
(b) any direct or indirect monetary obligation or liability, contingent
or otherwise, of that Person (i) in respect of any letter of credit or
similar instrument issued for the account of that Person or as to which
that Person is otherwise liable for reimbursement of drawings, (ii) to
purchase any materials, supplies or other property from, or to obtain
the services of, another Person if the relevant contract or other
related document or obligation requires that payment for such
materials, supplies or other property, or for such services, shall be
made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever
performed or tendered if and to the extent such obligations are not
designated as accounts payable in accordance with GAAP, or (iii)
incurred pursuant to any interest rate swap, cap or collar agreements,
interest rate future or option contracts, currency swap agreements,
currency future or option contracts or other similar agreements
relating to interest rates or currencies. The amount of any Contingent
Obligation shall be deemed equal to the liability in respect thereof
reasonably anticipated in accordance with GAAP.
"Contractual Obligation" of any Person shall mean, any
indenture, note, lease, loan agreement, security, deed of trust,
mortgage, security agreement, guaranty, instrument, contract, agreement
or other form of contractual obligation or undertaking to which such
Person is a party or by which such Person or any of its property is
bound.
"Convertible Subordinated Debentures" shall mean the 5%
Convertible Subordinated Notes due 2003 in the original principal
amount of $241,350,000 issued by Borrower pursuant to the Indenture
dated February 15, 1996 between Borrower and LaSalle National Trust
Company, N.A., as Trustee.
"Credit Documents" shall mean and include the Loan Documents;
all documents, instruments and agreements delivered to any Agent or any
Bank Party pursuant to Paragraph 3.01; and all other documents,
instruments and agreements delivered by Borrower or any of its
Subsidiaries to any Agent or Bank Party in connection with this
Agreement on or after the date of this Agreement.
"Credit Event" shall mean the making of any Revolving Loan,
the issuance of any Letter of Credit or any amendment of any Letter of
Credit which increases its stated amount or extends its expiration
date.
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<PAGE>
"Default" shall have the meaning given to that term in
Paragraph 6.01.
"Defaulting Bank" shall mean a Bank which has failed to fund
its portion of any Borrowing which it is required to fund under this
Agreement and has continued in such failure for three (3) Business Days
after written notice from Administrative Agent.
"Disclosure Letter" shall mean the letter from Borrower to
Administrative Agent, dated the date of this Agreement, which
identifies itself as the "Disclosure Letter" under this Agreement.
"Dollars" and "$" shall mean the lawful currency of the United
States of America.
"Domestic Subsidiary" shall mean, with respect to any Person,
any Subsidiary of such Person which is created or organized in the
United States or under the laws of the United States or any state of
the United States.
"Drawing Payment" shall have the meaning given to that term in
Subparagraph 2.02(c).
"EBITDA" shall mean, with respect to any Person for any
period, the sum of the following, determined on a consolidated basis in
accordance with GAAP where applicable:
(a) The net income or net loss of such Person and its
Subsidiaries for such period before provision for income
taxes;
plus
(b) The sum (to the extent deducted in calculating
net income or loss in clause (a) above) of (i) all Interest
Expenses of such Person and its Subsidiaries accruing during
such period and (ii) all depreciation and amortization of such
Person and its Subsidiaries accruing during such period.
"Employee Benefit Plan" shall mean any employee benefit plan
within the meaning of section 3(3) of ERISA maintained or contributed
to by Borrower or any ERISA Affiliate, other than a Multiemployer Plan.
"Environmental Laws" shall mean all Requirements of Law
relating to the protection of human health and the environment,
including, without limitation, all Requirements of Law, pertaining to
reporting, licensing, permitting, transportation, storage, disposal,
investigation, and
7
<PAGE>
remediation of emissions, discharges, releases, or threatened releases
of hazardous materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes, whether solid,
liquid, or gaseous in nature, into the air, surface water, groundwater,
or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature.
"Equity Securities" of any Person shall mean (a) all common
stock, preferred stock, participations, shares, partnership interests
or other equity interests in such Person (regardless of how designated
and whether or not voting or non-voting) and (b) all warrants, options
and other rights to acquire any of the foregoing, other than
convertible debt securities which have not been converted into common
stock, preferred stock, participations, shares, partnership interests
or other equity interests in any such Person.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be amended or supplemented,
including any rules or regulations issued in connection therewith.
"ERISA Affiliate" shall mean any Person which is treated as a
single employer with Borrower under Section 414 of the Code.
"Event of Default" shall have the meaning given to that term
in Paragraph 6.01.
"Executive Officer" shall mean, with respect to Borrower, the
Chairman, Chief Executive Officer, Chief Operating Officer, President,
Chief Financial Officer, Treasurer, General Counsel or Vice President
of Corporate Development and Planning of Borrower or any division
President or Executive Vice President of Borrower (or, if the titles
are changed, the persons having similar responsibilities for Borrower).
"External LC Agreement" shall mean the Credit Agreement dated
as of September 22, 1995 among Borrower, The Sumitomo Bank, Limited and
other banks from time to time parties thereto (as amended, modified and
supplemented from time to time in accordance with this Agreement), or
such other agreement between or among Borrower and any other financial
institution or financial institutions pursuant to which Borrower may
incur Indebtedness under letters of credit of
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the type permitted under clause (vi) of Subparagraph 5.01(a).
"Federal Funds Rate" shall mean, for any day, the Federal
funds effective rate as set forth in the weekly statistical release
designated as H.15(519) published by the Federal Reserve Bank of New
York for such day, or in any successor publication (or, if such rate is
not so published for any day, the average rate quoted to Administrative
Agent on and for such day by three (3) Federal funds brokers of
recognized standing selected by Administrative Agent).
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System.
"Financial Statements" shall mean, with respect to any
accounting period for any Person, consolidated statements of income,
shareholders' equity and cash flows of such Person for such period, and
a balance sheet of such Person as of the end of such period, setting
forth in each case in comparative form figures for the corresponding
period in the preceding fiscal year if such period is less than a full
fiscal year or, if such period is a full fiscal year, corresponding
figures from the preceding annual audit, all prepared in reasonable
detail and in accordance with GAAP.
"Funded Debt" of any Person shall mean, without duplication,
Indebtedness of the type set forth in clauses (a) - (f) of the
definition of "Indebtedness" less Cash or Cash Equivalents used as
collateral to secure any such Indebtedness.
"Funding Losses" shall mean, with respect to any repayment,
prepayment or conversion of any LIBOR Loan as set forth in clause (a)
of Paragraph 2.12, any failure to borrow any LIBOR Loan as set forth in
clause (b) of Paragraph 2.12 or any failure to convert into any LIBOR
Loan as set forth in clause (c) of Paragraph 2.12, the amount (which
shall not be less than zero) computed in accordance with the following
formula:
Funding Losses = (R-T) x P x D
--------------
360
where R = the interest rate that was or would have
been applicable to such LIBOR Loan;
T = the LIBO Rate for the date of such
repayment, prepayment, conversion, failure
to borrow or failure to convert for new
LIBOR Loans, of the same principal amount
made for an assumed Interest Period (the
"Remaining Period")
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which begins on the date of such repayment,
prepayment, conversion, failure to borrow or
failure to convert and ends on the last day
of the actual Interest Period that was or
would have been applicable to the LIBOR Loan
that was repaid, prepaid or converted or
that was not borrowed or converted;
P = the principal amount of the LIBOR Loan that
was repaid, prepaid or converted or that was
not borrowed or converted; and
D = the number of days in the Remaining Period.
"GAAP" shall mean generally accepted accounting principles and
practices as in effect in the United States of America from time to
time, consistently applied.
"Governmental Authority" shall mean any domestic or foreign
national, state or local government, any political subdivision thereof,
any department, agency, authority or bureau of any of the foregoing, or
any other entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
including, without limitation, the Federal Deposit Insurance
Corporation, the Federal Reserve Board, the Comptroller of the
Currency, any central bank or any comparable authority.
"Governmental Charges" shall mean, with respect to any Person,
all levies, assessments, fees, claims or other charges imposed by any
Governmental Authority upon such Person or any of its property or
otherwise payable by such Person.
"Governmental Rule" shall mean any law, rule, regulation,
ordinance, order, code interpretation, judgment, decree, directive,
guidelines, policy or similar form of decision of any Governmental
Authority.
"Guaranty Obligation" shall mean, with respect to any Person,
any direct or indirect liability of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation
(the "primary obligations") of another Person (the "primary obligor"),
including any obligation of that Person, whether or not contingent, (a)
to purchase, repurchase or otherwise acquire such primary obligations
or any property constituting direct or indirect security therefor, or
(b) to advance or provide funds (i) for the payment or discharge of any
such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of
10
<PAGE>
income or financial condition of the primary obligor, or (c) 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 (except to
the extent of the fair market value of such property, securities or
services to be purchased), or (d) otherwise to assure or hold harmless
the holder of any such primary obligation against loss in respect
thereof. The amount of any Guaranty Obligation shall be deemed equal to
the liability in respect thereof reasonably anticipated under GAAP.
"Hazardous Materials" shall mean all materials, substances and
wastes which are classified or regulated as "hazardous," "toxic" or
similar descriptions under any Environmental Law or which are
hazardous, toxic, harmful or dangerous to human health.
"Indebtedness" of any Person shall mean, without duplication
(in each case, measured in accordance with GAAP):
(a) All monetary obligations of such Person evidenced
by notes, bonds, debentures or other similar instruments and
all other obligations of such Person for borrowed money;
(b) All monetary obligations of such Person for the
deferred purchase price of property or services (including
obligations under letters of credit and other credit
facilities which secured or financed such purchase price),
other than trade payables incurred by such Person in the
ordinary course of its business on ordinary terms;
(c) All monetary obligations of such Person under
conditional sale or other title retention agreements with
respect to property acquired by such Person other than
pursuant to leases classified as operating leases under GAAP
(to the extent of the value of such property if the rights and
remedies of the seller or lender under such agreement in the
event of default are limited solely to repossession or sale of
such property);
(d) All monetary obligations of such Person as lessee
with respect to the capitalized portion of Capital Leases of
such Person (other than capitalized interest) calculated in
accordance with GAAP;
(e) all monetary obligations of such Person (other
than inchoate indemnity obligations) with
11
<PAGE>
respect to any Synthetic Leases; provided, however, that the
amount of monetary obligations for the purpose of this clause
(e) shall be equal to the aggregate present value of scheduled
rental payments under each such Synthetic Lease (excluding any
component thereof in the nature of operating expenses, taxes
or similar obligations), together with the purchase price
payable by such Person at the end of such Synthetic Lease,
discounted by the interest rate implicit in such Synthetic
Lease;
(f) all monetary obligations of such Person (other
than inchoate indemnity obligations) with respect to any sale,
transfer or assignment of accounts receivable and related
rights and property by such Person with recourse to such
Person;
(g) All monetary obligations of such Person,
contingent or otherwise, under or with respect to letters of
credit, banker's acceptances or other similar facilities;
(h) All monetary obligations of such Person,
contingent or otherwise, under or with respect to interest
rate swap, cap or collar agreements, interest rate future or
option contracts, currency swap agreements, currency future or
option contracts or other similar agreements relating to
interest rates or currencies;
(i) All Contingent Obligations of such Person with
respect to the obligations of such Person or other Persons of
the types described in clauses (a) - (h) above; and
(j) All obligations of other Persons of the types
described in clauses (a) - (h) above to the extent secured by
(or for which any holder of such obligations has an existing
right, contingent or otherwise, to be secured by) any Lien in
any property (including accounts and contract rights) owned by
such Person, even though such person has not assumed or become
liable for the payment of such obligations; provided, however,
that the amount of such Indebtedness under this clause (j)
shall be the lesser of (i) the fair market value of the
property subject to such Lien and (ii) the amount of the
monetary obligations of such other Person.
"Interest Account" shall have the meaning given to that term
in Subparagraph 2.07(b).
12
<PAGE>
"Interest Expenses" shall mean, with respect to any Person for
any period, the sum, determined on a consolidated basis in accordance
with GAAP, of (a) all interest accruing on the indebtedness of such
Person during such period (including interest attributable to Capital
Leases and financing charges attributable to Synthetic Leases whether
calculated as interest expenses or rental expenses), (b) all letter of
credit fees payable by such Person accruing during such period and (c)
interest or discount associated with Permitted Receivables Facilities
not otherwise included in clause (a) above.
"Interest Period" shall mean, with respect to any LIBOR Loan,
the time periods selected by Borrower pursuant to Subparagraph 2.01(b)
or Subparagraph 2.01(d) which commences on the first day of such
Revolving Loan or the effective date of any conversion and ends on the
last day of such time period, and thereafter, each subsequent time
period selected by Borrower pursuant to Subparagraph 2.01(e) which
commences on the last day of the immediately preceding time period and
ends on the last day of that time period.
"Investment" of any Person shall mean any loan or advance of
funds by such Person to any other Person (other than advances to
employees of such Person for moving and travel expenses, drawing
accounts and similar expenditures in the ordinary course of business or
the purchase by such Person in the ordinary course of business of
residences for employees in connection with the relocation by such
Person of such employees), any purchase or other acquisition of any
Equity Securities or Indebtedness of any other Person, any capital
contribution by such Person to or any other investment by such Person
in any other Person (including any Guaranty Obligations of such Person
and any Indebtedness of such Person of the type described in clause (j)
of the definition of "Indebtedness" on behalf of any other Person);
provided, however, that Investments shall not include (a) accounts
receivable or other indebtedness owed by customers of such Person which
are current assets and arose from sales of inventory or the performance
of services in the ordinary course of such Person's business or (b)
prepaid expenses of such Person incurred and prepaid in the ordinary
course of business.
"Issuing Bank" shall mean a Bank selected by Borrower and
approved by Administrative Agent and the Co-Arrangers in their
reasonable discretion that has agreed to act as issuing bank hereunder
and issue one or more Letters of Credit pursuant to Paragraph 2.02.
"LC Application" shall have the meaning given to that term in
Subparagraph 2.02(b).
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<PAGE>
"LC Availability Date" shall mean the day on or after the
Closing Date that an Issuing Bank has been selected by Borrower and
approved by Administrative Agent and the Co- Arrangers in accordance
with this Agreement.
"LC Commitment" shall have the meaning given to that term in
Subparagraph 2.02(a).
"LC Facility Expiration Date" shall have the meaning given to
that term in Subparagraph 2.02(a).
"LC Issuance Fees" shall have the meaning given to that term
in Subparagraph 2.04(d).
"LC Usage Fee" shall have the meaning given to that term in
Subparagraph 2.04(d).
"LC Usage Fee Rate" shall mean, with respect to Letters of
Credit, the per annum rate which is determined pursuant to the Pricing
Grid and used to calculate the LC Usage Fee.
"Letter of Credit" shall have the meaning given to that term
in Subparagraph 2.02(a).
"LIBO Rate" shall mean, with respect to any Interest Period
for the LIBOR Loans in any Borrowing, a rate per annum equal to the
quotient of (a) the arithmetic mean (rounded upward if necessary to the
nearest 1/16 of one percent) of the rates per annum appearing on the
Reuters screen LIBO page (or any successor publication) on the second
Business Day prior to the first day of such Interest Period at or about
11:00 A.M. (London time) (for delivery on the first day of such
Interest Period) for a term comparable to such Interest Period, divided
by (b) one minus the Reserve Requirement for such Revolving Loans in
effect from time to time. If for any reason rates are not available as
provided in clause (a) of the preceding sentence, the rate to be used
in clause (a) shall be, at the Administrative Agent's discretion, (i)
the rate per annum at which Dollar deposits are offered to the
Administrative Agent in the London interbank eurodollar currency market
or (ii) the rate at which Dollar deposits are offered to the
Administrative Agent in, or by the Administrative Agent to major banks
in, any offshore interbank eurodollar market selected by the
Administrative Agent, in each case on the second Business Day prior to
the commencement of such Interest Period at or about 10:00 A.M. (New
York time) (for delivery on the first day of such Interest Period) for
a term comparable to such Interest Period and in an amount
approximately equal to the amount of the Revolving Loan to be made or
funded by the Administrative Agent as part of such Borrowing.
14
<PAGE>
"LIBOR Loan" shall mean, at any time, a Revolving Loan which
then bears interest as provided in clause (ii) of Subparagraph 2.01(c).
"Lien" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien or other encumbrance in, of, or on
such property or the income therefrom, including, without limitation,
the interest of a vendor or lessor under a conditional sale agreement,
Capital Lease or other title retention agreement.
"Loan Documents" shall mean this Agreement, the Notes, the
Agents' Fee Letter, the LC Applications, each Notice of Borrowing, each
Compliance Certificate and each additional certificate delivered by
Borrower or any of its Subsidiaries from time to time pursuant to the
terms of this Agreement or any such other Loan Documents.
"Majority Banks" shall mean (a) at any time Revolving Loans
are outstanding and the Banks are obligated to make Revolving Loans
pursuant to their Commitments, Banks holding more than fifty-one
percent (51%) of the aggregate principal amount of all Revolving Loans
outstanding, calculated as if Revolving Loans in the full amount of the
Banks' Commitments were outstanding, (b) at any time Revolving Loans
are outstanding and the Banks are not obligated to make Revolving Loans
pursuant to their Commitments, Banks holding more than fifty-one
percent (51%) of the aggregate principal amount of all Revolving Loans
outstanding and (c) at any time no Revolving Loans are outstanding,
Banks whose aggregate Commitments exceed fifty-one percent (51%) of the
Total Commitment at such time.
"Margin Stock" shall have the meaning given to that term in
Regulation U issued by the Federal Reserve Board, as amended from time
to time, and any successor regulation thereto.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the business, assets, operations or financial or other condition
of Borrower and its Subsidiaries taken as a whole; (b) the ability of
Borrower to pay or perform the Obligations in accordance with the terms
of this Agreement and the other Credit Documents; or (c) the rights and
remedies of the Agents and the Bank Parties under this Agreement or any
other Credit Documents taken as a whole.
"Material Subsidiaries" shall mean each Subsidiary of Borrower
which has assets with a total book value greater than ten percent (10%)
of the consolidated total assets of Borrower and its Subsidiaries, each
determined as of the end
15
<PAGE>
of the fiscal quarter immediately preceding the date of determination.
"Maturity" shall mean, with respect to any Revolving Loan,
Reimbursement Obligation, interest, fee or other amount payable by
Borrower under this Agreement or the other Credit Documents, the date
such Revolving Loan, interest, Reimbursement Obligation, fee or other
amount becomes due, whether upon the stated maturity or due date, upon
acceleration or otherwise.
"Maturity Date" shall have the meaning given to that term in
Subparagraph 2.01(a).
"MKE" shall mean Matsushita-Kotobuki Electronics Industries,
Ltd., a Japanese corporation.
"MKE-Quantum" shall mean MKE-Quantum Components, L.L.C., a
Delaware limited liability company.
"Moody's" means Moody's Investors Service, Inc. and any
successor thereto that is a nationally-recognized rating agency.
"Multiemployer Plan" shall mean any multiemployer plan within
the meaning of section 3(37) of ERISA maintained or contributed to by
Borrower or any ERISA Affiliate.
"Net Proceeds" shall mean with respect to any sale or issuance
of any Equity Security or other security by any Person (including in
the case of Borrower, any sale or issuance of any Subordinated Debt),
the aggregate consideration received by such Person from such sale or
issuance less the actual amount of fees and commissions payable to
Persons other than such Person or any Affiliate of such Person.
"Note" shall have the meaning given to that term in
Subparagraph 2.07(a).
"Notice of Borrowing" shall have the meaning given to that
term in Subparagraph 2.01(b).
"Notice of Conversion" shall have the meaning given to that
term in Subparagraph 2.01(d).
"Notice of Interest Period Selection" shall have the meaning
given to that term in Subparagraph 2.01(e).
"Obligations" shall mean and include, with respect to
Borrower, all loans, advances, debts, liabilities, and obligations,
howsoever arising, owed by Borrower to any
16
<PAGE>
Agent or any Bank Party of every kind and description (whether or not
evidenced by any note or instrument and whether or not for the payment
of money), direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising pursuant to the terms of this
Agreement or any of the other Credit Documents, including without
limitation all interest, fees, charges, expenses, attorneys' fees and
accountants' fees chargeable to Borrower or payable by Borrower
hereunder or thereunder.
"Origination Fees" shall have the meaning given to that term
in Subparagraph 2.04(b).
"Outstanding Facilities Credit" shall have the meaning given
to that term in Subparagraph 2.03(a).
"Participant" shall have the meaning given to that term in
Subparagraph 8.05(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or
any successor thereto.
"Permitted Indebtedness" shall have the meaning given to that
term in Subparagraph 5.02(a).
"Permitted Investments" shall have the meaning given to that
term in Subparagraph 5.02(e).
"Permitted Liens" shall have the meaning given to that term in
Subparagraph 5.02(b).
"Permitted Receivables Facility" shall mean one or more
accounts receivable financing arrangements including (a) the sale of
accounts receivables and any related property by Borrower and/or any of
its Subsidiaries to a financing party or a special purpose vehicle,
and/or (b) the granting of a security interest in accounts receivable
and any related property by Borrower and/or any of its Subsidiaries;
provided, however, that the aggregate outstanding advances under such
accounts receivables financing arrangements shall not exceed
$200,000,000 at any one time.
"Person" shall mean and include an individual, a partnership,
a corporation (including a business trust), a limited liability
company, a joint stock company, an unincorporated association, a joint
venture, a trust or other entity or a Governmental Authority.
"Pricing Grid" shall mean Schedule II.
"Pricing Period" shall mean (a) the period commencing on the
date of this Agreement and ending on September 30,
17
<PAGE>
1997, (b) the period commencing on October 1, 1997 and ending on
November 30, 1997, and (c) each consecutive three-calendar month
period, four-calendar month period, two-calendar month period or
three-calendar month period (as applicable) thereafter which commences
on the day following the last day of the immediately preceding
three-calendar month period, four-calendar month period, two-calendar
month period or three-calendar month period (as applicable) and ends on
the last day of that time period as follows:
(i) December 1st through February 28th or February
29th (as applicable);
(ii) March 1st through June 30th;
(iii) July 1st through August 31st; and
(iv) September 1st through November 30th.
"Prime Rate" shall mean the per annum rate publicly announced
by the Administrative Agent from time to time at its New York Branch.
The Prime Rate is determined by the Administrative Agent from time to
time as a means of pricing credit extensions to some customers and is
neither directly tied to any external rate of interest or index nor
necessarily the lowest rate of interest charged by the Administrative
Agent at any given time for any particular class of customers or credit
extensions. Any change in the Base Rate resulting from a change in the
Prime Rate shall become effective on the Business Day on which each
change in the Prime Rate occurs.
"Prior Credit Agreement" shall have that certain Credit
Agreement, dated as of October 4, 1994, as amended, among Borrower, the
banks named therein, ABN, Barclays Bank PLC and CIBC, as managing
agents for the banks, and Canadian Imperial Bank of Commerce, as
administrative agent for the banks.
"Proportionate Share" shall mean, with respect to each Bank,
the percentage set forth under the caption "Proportionate Share"
opposite such Bank's name on Schedule I, or, if changed, such
percentage as may be set forth for such Bank in the Register.
"Quick Ratio" shall mean, with respect to Borrower at any
time, the ratio, determined on a consolidated basis in accordance with
GAAP, of:
(a) The sum at such time of all (i) cash and Cash
Equivalents of Borrower and its Subsidiaries (excluding
restricted cash) and (ii) accounts receivable of
18
<PAGE>
Borrower and its Subsidiaries, less all reserves therefor;
to
(b) The sum at such time of (i) the current
liabilities of Borrower and its Subsidiaries plus (ii)
long-term Indebtedness secured by account receivables of
Borrower or its Subsidiaries measured at the lesser of the
amount of such long-term Indebtedness and the book value of
the accounts receivable so encumbered.
"Register" shall have the meaning given to that term in
Subparagraph 8.05(d).
"Reimbursement Obligation" shall have the meaning given to
that term in Subparagraph 2.02(c).
"Reimbursement Payment" shall have the meaning given to that
term in Subparagraph 2.02(c).
"Reportable Event" shall have the meaning given to that term
in ERISA and applicable regulations thereunder.
"Requirement of Law" applicable to any Person shall mean (a)
the Articles or Certificate of Incorporation and By-laws, Partnership
Agreement, Operating Agreement or other organizational or governing
documents of such Person, (b) any Governmental Rule binding upon such
Person, (c) any license, permit, approval or other authorization
granted by any Governmental Authority to or for the benefit of such
Person or (d) any final judgment, decision or determination of any
Governmental Authority or arbitrator, 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.
"Reserve Requirement" shall mean, with respect to any day in
an Interest Period for a LIBOR Loan, the aggregate of the reserve
requirement rates (expressed as a decimal) in effect on such day for
eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of the Federal Reserve Board) maintained
by a member bank of the Federal Reserve System. As used herein, the
term "reserve requirement" shall include, without limitation, any
basic, supplemental or emergency reserve requirements imposed on Bank
by any Governmental Authority.
"Revolving Loan" shall have the meaning given to that term in
Subparagraph 2.01(a).
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<PAGE>
"S&P" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., and any successor thereto that is a
nationally-recognized rating agency.
"Senior Funded Debt" of any Person shall mean any Funded Debt
which is not Subordinated Debt.
"Senior Funded Debt Ratio" shall mean, with respect to any
Person at any time, the ratio, determined on a consolidated basis in
accordance with GAAP, of:
(a) The total Senior Funded Debt of such Person and
its Subsidiaries at such time;
to
(b) The sum at such time of (i) the total Senior
Funded Debt and Subordinated Debt of such Person and its
Subsidiaries at such time plus (ii) the total Tangible Net
Worth of such Person and its Subsidiaries at such time.
"Senior Indebtedness" shall mean, with respect to any Person
at any time, all Indebtedness of such Person other than Subordinated
Debt.
"Solvent" shall mean, with respect to any Person on any date,
that on such date (a) the fair value of the assets of such Person is
greater than the fair value of the liabilities (including, without
limitation, contingent liabilities) of such Person, as such value is
established and liabilities evaluated for purposes of Section 101(31)
of the Federal Bankruptcy Reform Act of 1978 (12 U.S.C. ss.101, et
seq.) and, in the alternative, the California Uniform Fraudulent
Transfer Act, (b) such Person does not intend to, and does not believe
that it will, incur debts or liabilities beyond such Person's ability
to pay as such debts and liabilities mature and (c) such Person is not
engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute an unreasonably small capital.
"Subordinated Debt" shall mean the Convertible Subordinated
Debentures and any other subordinated debt permitted by Subparagraph
5.02(a).
"Subsidiary" of any Person shall mean (a) any corporation of
which 50% or more of the issued and outstanding Equity Securities
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital
20
<PAGE>
stock of any other class or classes of such corporation shall or might
have voting power upon the occurrence of any contingency) is at the
time directly or indirectly owned or controlled by such Person, by such
Person and one or more of its other Subsidiaries or by one or more of
such Person's other Subsidiaries or (b) any partnership, joint venture,
or other association of which 50% or more of the equity interest having
the power to vote, direct or control the management of such
partnership, joint venture or other association is at the time owned
and controlled by such Person, by such Person and one or more of the
other Subsidiaries or by one or more of such Person's other
Subsidiaries and in each case, only if such Person is included in the
Financial Statements of such Person on a consolidated basis.
"Synthetic Lease" shall mean an off-balance sheet financing
arrangement for equipment or real estate which is treated as an
operating lease under GAAP but pursuant to which the lessee of such
equipment or real estate has the benefits and burdens of ownership of
the leased equipment or real estate for U.S. tax purposes.
"Tangible Net Worth" shall mean, with respect to Borrower and
its Subsidiaries at any time, the remainder at such time, determined on
a consolidated basis in accordance with GAAP, of (a) the total assets
of Borrower and its Subsidiaries minus (b) the sum (without limitation
and without duplication of deductions) of (i) the total liabilities of
Borrower and its Subsidiaries, (ii) all reserves established by
Borrower and its Subsidiaries for anticipated losses and expenses (to
the extent not deducted in calculating total assets in clause (a)
above), and (iii) all intangible assets of Borrower and its
Subsidiaries (to the extent included in calculating total assets in
clause (a) above), including, without limitation, goodwill (including
any amounts, however designated on the balance sheet, representing the
cost of acquisition of businesses and investments in excess of
underlying tangible assets), trademarks, trademark rights, trade name
rights, copyrights, patents, patent rights, licenses, unamortized debt
discount, marketing expenses, organizational expenses, non-compete
agreements and deferred research and development.
"Taxes" shall have the meaning given to such term in
Subparagraph 2.11(a).
"Total Commitment" shall have the meaning given to that term
in Subparagraph 2.01(a).
"Total Funded Debt Ratio" shall mean, with respect to
Borrower, as of the last day of any quarter, the ratio,
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<PAGE>
determined on a consolidated basis in accordance with GAAP, of (a) the
aggregate amount of all Funded Debt of Borrower then outstanding on
such day to (b) EBITDA of Borrower for the consecutive four quarter
period ending on such day.
"Transfers" shall mean, with respect to any assets or
property, any sale, lease, transfer or other disposition thereof.
"Type" shall mean, with respect to any Revolving Loan or
Borrowing at any time, the classification of such Revolving Loan or
Borrowing by the type of interest rate it then bears, whether an
interest rate based on the Base Rate or the LIBO Rate.
"UCP" shall have the meaning given to that term in
Subparagraph 2.02(a).
"Unused Commitment" shall mean, at any time after this
Agreement is executed by Borrower, the Agents and Banks, the remainder
of (a) the Total Commitment at such time minus (b) the sum of the
aggregate principal amount of all Revolving Loans then outstanding and
the aggregate stated amount of all Letters of Credit then outstanding.
"Wholly-Owned Subsidiary" shall mean any Subsidiary in which
(other than directors' qualifying or local ownership shares required by
law) 100% of the issued and outstanding Equity Securities or equity
interest (as applicable) having ordinary voting power to elect a
majority of the Board of Directors of such Subsidiary or direct or
control the management of such Subsidiary (as applicable) is at the
time owned and controlled by a Person, by such Person and one or more
of the other Subsidiaries or by one or more of such Person's other
Subsidiaries.
1.02. GAAP. Unless otherwise indicated in this Agreement or any other
Credit Document, all accounting terms used in this Agreement or any other Credit
Document shall be construed, and all accounting and financial computations
hereunder or thereunder shall be computed, in accordance with GAAP. If GAAP
changes in any material respect during the term of this Agreement such that any
covenants contained herein would then be calculated in a different manner or
with different components, Borrower, the Banks and Agents agree to negotiate in
good faith to amend this Agreement in such respects as are necessary to conform
those covenants as criteria for evaluating Borrower's financial condition to
substantially the same criteria as were effective prior to such change in GAAP;
provided, however, that, until Borrower, the Banks and Agents so amend this
Agreement, all such covenants shall be calculated in accordance with GAAP as in
effect immediately prior to such change.
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1.03. Headings. Headings in this Agreement and each of the other Credit
Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.04. Plural Terms. All terms defined in this Agreement or any other
Credit Document in the singular form shall have comparable meanings when used in
the plural form and vice versa.
1.05. Time. All references in this Agreement and each of the other
Credit Documents to a time of day shall mean New York time unless otherwise
indicated.
1.06. Governing Law. This Agreement and each of the other Credit
Documents (unless otherwise provided in such other Credit Documents) shall be
governed by and construed in accordance with the laws of the State of California
without reference to conflicts of law rules.
1.07. Construction. This Agreement is the result of negotiations among,
and has been reviewed by, Borrower, each Bank, each Agent and their respective
counsel. Accordingly, this Agreement shall be deemed to be the product of all
parties hereto, and no ambiguity shall be construed in favor of or against
Borrower, any Bank or any Agent.
1.08. Entire Agreement. This Agreement, the Agents' Fee Letters and
each of the other Credit Documents, taken together, constitute and contain the
entire agreement of Borrower, the Banks and Agents and supersede any and all
prior agreements, negotiations, correspondence, understandings and
communications among the parties, whether written or oral, respecting the
subject matter hereof.
1.09. Calculation of Interest and Fees. All calculations of interest
and fees under this Agreement and the other Credit Documents for any period (a)
shall include the first day of such period and exclude the last day of such
period and (b) shall be calculated on the basis of a year of 360 days for actual
days elapsed, except that during any period any Revolving Loan bears interest
based upon the Base Rate, such interest shall be calculated on the basis of a
year of 365 or 366 days, as appropriate, for actual days elapsed.
1.10. Other Interpretive Provisions. References in this Agreement to
"Recitals," "Sections," "Paragraphs," "Subparagraphs," "Exhibits" and
"Schedules" are to recitals, sections, paragraphs, subparagraphs, exhibits and
schedules herein and hereto unless otherwise indicated. References in this
Agreement and each of the other Credit Documents to any document, instrument or
agreement (a) shall include all exhibits, schedules and other attachments
thereto, (b) shall include all documents, instruments or agreements issued or
executed in replacement
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thereof and (c) shall mean such document, instrument or agreement, or
replacement or predecessor thereto, as amended, modified and supplemented from
time to time and in effect at any given time. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement or any other
Credit Document shall refer to this Agreement or such other Credit Document, as
the case may be, as a whole and not to any particular provision of this
Agreement or such other Credit Document, as the case may be. The words "include"
and "including" and words of similar import when used in this Agreement or any
other Credit Document shall not be construed to be limiting or exclusive. In the
event of any inconsistency between the terms of this Agreement and the terms of
any other Credit Document, the terms of this Agreement shall govern.
SECTION II. CREDIT FACILITIES.
2.01. Revolving Loan Facility.
(a) Revolving Loan Availability. Subject to the terms and
conditions of this Agreement (including the amount limitations set
forth in Paragraph 2.03), each Bank severally agrees to advance to
Borrower from time to time during the period beginning on the Closing
Date and ending on June 6, 2000 (the "Maturity Date") such revolving
loans as Borrower may request under this Paragraph 2.01 (individually,
a "Revolving Loan"); provided, however, that (i) the aggregate
principal amount of all Revolving Loans made by such Bank at any time
outstanding shall not exceed such Bank's Commitment at such time and
(ii) the aggregate principal amount of all Revolving Loans made by all
Banks at any time outstanding shall not exceed Five Hundred Million
Dollars ($500,000,000) (such amount, as reduced from time to time
pursuant to this Agreement, to be referred to herein as the "Total
Commitment"). All Revolving Loans shall be made on a pro rata basis by
the Banks in accordance with their respective Proportionate Shares,
with each Borrowing to be comprised of a Revolving Loan by each Bank
equal to such Bank's Proportionate Share of such Borrowing. Except as
otherwise provided herein, Borrower may borrow, repay and reborrow
Revolving Loans until the Maturity Date.
(b) Notice of Borrowing. Borrower shall request each Borrowing
by delivering to Administrative Agent an irrevocable written notice in
the form of Exhibit A, appropriately completed (a "Notice of
Borrowing"), which specifies, among other things:
(i) The principal amount of the requested Borrowing,
which shall be in the amount of (A) $1,000,000 or an integral
multiple of $500,000 in
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excess thereof in the case of a Borrowing consisting of Base
Rate Loans or (B) $10,000,000 or an integral multiple of
$500,000 in excess thereof in the case of a Borrowing
consisting of LIBOR Loans;
(ii) Whether the requested Borrowing is to consist of
Base Rate Loans or LIBOR Loans;
(iii) If the requested Borrowing is to consist of
LIBOR Loans, the initial Interest Period selected by Borrower
for such LIBOR Loans in accordance with Subparagraph 2.01(e);
and
(iv) The date of the requested Borrowing, which shall
be a Business Day.
Borrower shall give each Notice of Borrowing to Administrative Agent at
least three (3) Business Days before the date of the requested
Borrowing in the case of a Borrowing consisting of LIBOR Loans and at
least one (1) Business Day before the date of the requested Borrowing
in the case of a Borrowing consisting of Base Rate Loans. Each Notice
of Borrowing shall be delivered by first-class mail or facsimile to
Administrative Agent at the office or facsimile number and during the
hours specified in Paragraph 8.01; provided, however, that Borrower
shall promptly deliver to Administrative Agent the original of any
Notice of Borrowing initially delivered by facsimile. Borrower may
request that one or more Borrowings be made on the same day.
Administrative Agent shall promptly notify each Bank of the contents of
each Notice of Borrowing and of the amount and Type of (and, if
applicable, the Interest Period for) each Revolving Loan to be made by
such Bank as part of the requested Borrowing.
(c) Interest Rates. Borrower shall pay interest on the unpaid
principal amount of each Revolving Loan from the date of such Revolving
Loan until the maturity thereof, at one of the following rates per
annum:
(i) During such periods as such Revolving Loan is a
Base Rate Loan, at a rate per annum equal to the Base Rate,
such rate to change from time to time as the Base Rate shall
change; and
(ii) During such periods as such Revolving Loan is a
LIBOR Loan, at a rate per annum equal at all times during each
Interest Period for such LIBOR Loan to the LIBO Rate for such
Interest Period plus the Applicable Margin therefor, such rate
to change from time to time during such Interest Period as the
Applicable Margin shall change;
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Provided, however, that all Revolving Loans outstanding during the
period commencing on the Closing Date and ending three (3) Business
Days after the Closing Date shall be Base Rate Loans. All Revolving
Loans in each Borrowing shall, at any given time prior to maturity,
bear interest at one, and only one, of the above rates. The number of
Borrowings consisting of LIBOR Loans shall not exceed twenty (20) at
any time.
(d) Conversion of Revolving Loans. Borrower may convert any
Borrowing from one Type of Borrowing to the other Type. Borrower shall
request such a conversion by an irrevocable written notice to
Administrative Agent in the form of Exhibit B, appropriately completed
(a "Notice of Conversion"), which specifies, among other things:
(i) The Borrowing which is to be converted;
(ii) The Type of Revolving Loans into which such
Revolving Loans are to be converted;
(iii) If such Borrowing is to be converted into a
Borrowing consisting of LIBOR Loans, the initial Interest
Period selected by Borrower for such Revolving Loans in
accordance with Subparagraph 2.01(e); and
(iv) The date of the requested conversion, which
shall be a Business Day.
Borrower shall give each Notice of Conversion to Administrative Agent
at least three (3) Business Days before the date of the requested
conversion in the case of a conversion into a Revolving Loan consisting
of LIBOR Loans. If Borrower fails to give such Notice of Conversion at
least three (3) Business Days before the date of the requested
conversion, such Revolving Loan shall automatically convert into a
Revolving Loan consisting of Base Rate Loans. Each Notice of Conversion
shall be delivered by first-class mail or facsimile to Administrative
Agent at the office or to the facsimile number and during the hours
specified in Paragraph 8.01; provided, however, that Borrower shall
promptly deliver to Administrative Agent the original of any Notice of
Conversion initially delivered by facsimile. Administrative Agent shall
promptly notify each Bank of the contents of each Notice of Conversion.
(e) LIBOR Loan Interest Periods.
(i) The initial and each subsequent Interest Period
selected by Borrower for a LIBOR Loan shall be one (1), two
(2), three (3) or six (6) months as Borrower may specify;
provided, however, that (A) any
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Interest Period which would otherwise end on a day which is
not a Business Day shall be extended to the next succeeding
Business Day unless such next Business Day falls in another
calendar month, in which case such Interest Period shall end
on the immediately preceding Business Day; (B) any Interest
Period which begins on the last Business Day of a calendar
month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a
calendar month; and (C) no Interest Period shall end after the
Maturity Date.
(ii) Borrower shall notify Administrative Agent by an
irrevocable written notice in the form of Exhibit C,
appropriately completed (a "Notice of Interest Period
Selection"), at least three (3) Business Days prior to the
last day of each Interest Period for LIBOR Loans of the
Interest Period selected by Borrower for the next succeeding
Interest Period for such Revolving Loans. Each Notice of
Interest Period Selection shall be given by first-class mail
or facsimile to the office or the facsimile number and during
the hours specified in Paragraph 8.01; provided, however, that
Borrower shall promptly deliver to Administrative Agent the
original of any Notice of Interest Period Selection initially
delivered by facsimile. If Borrower fails to notify
Administrative Agent of the next Interest Period for LIBOR
Loans in accordance with this Subparagraph 2.01(e), such LIBOR
Loans shall automatically convert to Base Rate Loans on the
last day of the current Interest Period therefor.
(f) Scheduled Revolving Loan Payments. Borrower shall repay
the unpaid principal amount of all Revolving Loans on the Maturity
Date. Borrower shall pay accrued interest on the unpaid principal
amount of the Revolving Loans in arrears (i) in the case of Base Rate
Loans, on the last Business Day in each calendar quarter; (ii) in the
case of LIBOR Loans, on the last day of each Interest Period therefor
(and, if any such Interest Period is longer than three (3) months,
every three (3) months after the first day of such Interest Period);
and (iii) in the case of all Revolving Loans, at maturity.
(g) Purpose. Borrower shall use the proceeds of the Revolving
Loans (i) to refinance the loans outstanding under the Prior Credit
Agreement on the Closing Date and (ii) to finance Borrower's working
capital and general corporate needs.
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2.02. Letter of Credit Facility.
(a) Letter of Credit Availability. Subject to the terms and
conditions of this Agreement (including the amount limitations set
forth in Paragraph 2.03, Issuing Bank shall issue on behalf of Borrower
from time to time during the period beginning on the LC Availability
Date and ending on the date which is fifteen (15) days prior to the
Maturity Date (the "LC Facility Expiration Date") such letters of
credit as Borrower may request under this Paragraph 2.02 (individually,
a "Letter of Credit"); provided, however, as follows:
(i) The aggregate amount available for drawing under
all Letters of Credit at any time outstanding shall not exceed
One Hundred Million Dollars ($100,000,000) (such amount, as
reduced from time to time pursuant to this Agreement, to be
referred to herein as the "LC Commitment").
(ii) Each Letter of Credit shall be an irrevocable
performance standby Letter of Credit.
(iii) Each Letter of Credit shall expire on or prior
to the LC Facility Expiration Date.
(iv) Each Letter of Credit shall be governed by the
Uniform Customs and Practices for Documentary Credits as most
recently published by the International Chamber of Commerce
(the "UCP") prior to the date of issuance of such Letter of
Credit and the terms of the UCP are hereby incorporated by
reference with respect to each Letter of Credit.
(v) Each Letter of Credit shall be in a form
reasonably acceptable to Issuing Bank.
Except as otherwise provided herein, Borrower may request Letters of
Credit, cause or allow Letters of Credit to expire and request
additional Letters of Credit until the LC Facility Expiration Date.
(b) LC Application. Borrower shall request each Letter of
Credit by delivering to Administrative Agent and Issuing Bank an
irrevocable written application in a form reasonably acceptable to
Issuing Bank (it being understood that such form shall not contain
terms inconsistent with the terms set forth in this Agreement),
appropriately completed (an "LC Application"), which specifies, among
other things:
(i) The stated amount of the requested Letter of
Credit;
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(ii) The name and address of the beneficiary of the
requested Letter of Credit;
(iii) The expiration date of the requested Letter of
Credit;
(iv) The documentary conditions for drawing under the
requested Letter of Credit;
(v) The date of issuance for the requested Letter of
Credit, which shall be a Business Day; and
(vi) The aggregate amount available for drawing under
all Letters of Credit then outstanding.
Borrower shall give each LC Application to Issuing Bank at least five
(5) Business Days before the proposed date of issuance of the requested
Letter of Credit. Each LC Application shall be delivered by an
established express courier service, first-class mail or facsimile to
Administrative Agent and Issuing Bank at their respective offices or
facsimile numbers and during the hours specified in Paragraph 8.01;
provided, however, that Borrower shall promptly deliver to Issuing Bank
the original of any LC Application initially delivered by facsimile.
Administrative Agent shall promptly notify each Bank of the contents of
each LC Application. In the event of any conflict between the terms of
this Agreement and the terms of any LC Application, the terms of this
Agreement shall control.
(c) Disbursement and Reimbursement.
(i) Disbursement. Issuing Bank will notify Borrower
by facsimile forthwith upon receipt of the presentment of any
demand for payment under any Letter of Credit, together with
notice of the amount of such payment and the date such payment
shall be made. Subject to the terms and provisions of such
Letter of Credit, Issuing Bank shall make such payment (a
"Drawing Payment") to the appropriate beneficiary.
(ii) Time of Reimbursement. Not later than 11:00 a.m.
on the day each Drawing Payment is to be made by Issuing Bank,
Borrower shall make or cause to be made to Issuing Bank a
payment in the amount of such Drawing Payment (a
"Reimbursement Payment"); provided, however, that Borrower
shall make such Reimbursement Payment to, or cause such
Reimbursement Payment to be made to, Administrative Agent for
the benefit of the Banks if, prior to the time such
Reimbursement Payment is made, Issuing Bank has notified
Borrower that it has
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requested the Banks pursuant to clause (ii) of Subparagraph
2.02(d) to pay to Issuing Bank their respective Proportionate
Shares of the Drawing Payment made by Issuing Bank. If any
such Reimbursement Payment is made to Administrative Agent,
Administrative Agent shall promptly pay to each Bank which has
paid its Proportionate Share of the Drawing Payment, such
Bank's Proportionate Share of the Reimbursement Payment and
shall promptly pay to Issuing Bank the balance of such
Reimbursement Payment.
(iii) Reimbursement Obligation Absolute. The
obligation of Borrower to reimburse Issuing Bank or the Banks,
as the case may be, for Drawing Payments (such obligation to
be referred to herein collectively as a "Reimbursement
Obligation") shall be absolute, unconditional and irrevocable,
and shall be performed strictly in accordance with the terms
of this Agreement under and without regard to any
circumstances, including, without limitation (A) any lack of
validity or enforceability of any of the Credit Documents, (B)
the existence of any claim, setoff, defense or other right
which Borrower may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Persons for
whom any such beneficiary or transferee may be acting),
Issuing Bank, any Agent, any Bank Party or any other Person,
whether in connection with this Agreement, the transactions
contemplated herein or in the other Credit Documents, or in
any unrelated transaction, (C) any breach of contract or
dispute between Borrower, any beneficiary or any transferee of
any Letter of Credit (or any Persons for whom any such
beneficiary or transferee may be acting), Issuing Bank, any
Agent, any Bank Party or any other Person, (D) any demand,
statement or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being
untrue or inaccurate in any respect, (E) payment by Issuing
Bank under any Letter of Credit against presentation of a
demand for payment which does not comply with the terms of
such Letter of Credit, (F) any non-application or
misapplication by any beneficiary or any transferee of any
Letter of Credit (or any Persons for whom any such beneficiary
or transferee may be acting) of the proceeds of any drawing
under such Letter of Credit or (G) any delay, extension of
time, renewal, compromise or other indulgence or modification
granted or agreed to by Issuing Bank, any Agent or any Bank
Party, with or without notice to or approval by Borrower, with
respect to Borrower's indebtedness under this Agreement;
provided, that this Subparagraph 2.02(b)
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shall not abrogate any right which Borrower may have to seek
to enjoin any drawing under any Letter of Credit or to recover
damages from Issuing Bank pursuant to Subparagraph 2.02(e).
(d) Bank Participations; Revolving Loan Funding.
(i) Participation Agreement. Each Bank severally,
unconditionally and irrevocably agrees with Issuing Bank to
participate in the extension of credit arising from the
issuance of each Letter of Credit in an amount equal to such
Bank's Proportionate Share of the stated amount of such Letter
of Credit from time to time, and the issuance of each Letter
of Credit shall be deemed a confirmation by Issuing Bank of
such participation in such amount.
(ii) Participation Funding. Issuing Bank may request
the Banks to fund their participations in Letters of Credit by
paying to Issuing Bank all or any portion of any Drawing
Payment made or to be made by Issuing Bank under any Letter of
Credit. Issuing Bank shall make such a request by delivering
to Administrative Agent (with a copy to Borrower), at any time
after the drawing for which such payment is requested has been
made upon Issuing Bank, a written request for such payment
which specifies the amount of such Drawing Payment and the
date on which such Drawing Payment is to be made or was made;
provided, however, that Issuing Bank shall not request the
Banks to make any payment under this Subparagraph 2.02(d) in
connection with any portion of a Drawing Payment for which
Issuing Bank has been reimbursed from a Reimbursement Payment
by Borrower unless such Reimbursement Payment has been
thereafter recovered by Borrower. Administrative Agent shall
promptly notify each Bank of the contents of each such request
and of such Bank's Proportionate Share of the applicable
portion of such Drawing Payment. Promptly following receipt of
such notice from Administrative Agent, each Bank shall pay to
Administrative Agent, for the benefit of Issuing Bank, such
Bank's Proportionate Share of the applicable portion of such
Drawing Payment.
(iii) Funding Through Revolving Loans. At any time
any Reimbursement Obligations are outstanding, Administrative
Agent may or, upon the written request of Issuing Bank (if
Borrower is not then the subject of a bankruptcy proceeding),
shall (subject to the terms and conditions of this
Subparagraph 2.02(d)), initiate a Borrowing in an amount not
exceeding the aggregate amount of such outstanding
Reimbursement Obligations
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and use the proceeds of such Revolving Loan to repay all or a
portion of such Reimbursement Obligations. Administrative
Agent shall initiate such a Borrowing by delivering to each
Bank (with a copy to Borrower) a written notice which
specifies the aggregate amount of outstanding Reimbursement
Obligations, the amount of the Borrowing, the date of such
Borrowing and the amount of the Revolving Loan to be made by
such Bank as part of such Borrowing. Each Bank shall make
available to Administrative Agent funds in the amount of its
Proportionate Share of such Revolving Loan as provided in
Subparagraph 2.08(a). After receipt of such funds,
Administrative Agent shall promptly disburse such funds to
Issuing Bank and the Banks, as appropriate, in payment of the
outstanding Reimbursement Obligations.
(iv) Obligations Absolute. Each Bank's obligations to
fund its participations under this Subparagraph 2.02(d) shall
be absolute, unconditional and irrevocable and shall not be
affected by (A) the occurrence or existence of any Default or
Event of Default, (B) any failure to satisfy any condition set
forth in Section III, (C) any event or condition which might
have a Material Adverse Effect, (D) the failure of any other
Bank to make any payment under this Subparagraph 2.02(d), (E)
any right of offset, abatement, withholding or reduction which
such Bank may have against Issuing Bank, any Agent, any other
Bank Party or Borrower, (F) any event, circumstance or
condition set forth in Subparagraph 2.02(c) or Subparagraph
2.02(e), or (G) any other event, circumstance or condition
whatsoever, whether or not similar to any of the foregoing;
provided, that nothing in this Paragraph 2.02 shall prejudice
any right which any Bank may have against Issuing Bank for any
action by Issuing Bank which constitutes gross negligence or
willful misconduct.
(e) Liability of Issuing Bank, Etc. Borrower agrees that none
of Issuing Bank, any Agent or any other Bank Party (nor any of their
respective directors, officers or employees) shall be liable or
responsible for (i) the use which may be made of any Letter of Credit
or for any acts or omissions of any beneficiary or transferee thereof
in connection therewith; (ii) any reference which may be made to this
Agreement or to any Letter of Credit in any agreements, instruments or
other documents relating to obligations secured by such Letter of
Credit; (iii) the validity, sufficiency or genuineness of documents, or
of any endorsement(s) thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or
forged or any statement therein
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prove to be untrue or inaccurate in any respect whatsoever; (iv)
payment by Issuing Bank against presentation of documents which do not
comply with the terms of any Letter of Credit, including failure of any
documents to bear any reference or adequate reference to any Letter of
Credit; or (v) any other circumstances whatsoever in making or failing
to make payment under any Letter of Credit, except only that Issuing
Bank shall be liable to Borrower for acts or events described in
clauses (i) through (v) above, to the extent, but only to the extent,
of any damages suffered by Borrower (excluding consequential damages)
which Borrower proves were caused by (A) Issuing Bank's willful
misconduct, bad faith or gross negligence in determining whether a
drawing made under any Letter of Credit complies with the terms and
conditions therefor stated in such Letter of Credit or (B) Issuing
Bank's willful misconduct, bad faith or gross negligence in failing to
pay under any Letter of Credit after a drawing by the beneficiary
thereof strictly complying with the terms and conditions of such Letter
of Credit. Without limiting the foregoing, Issuing Bank may accept a
drawing that appears on its face to be in order, without responsibility
for further investigation. The determination of whether a drawing has
been made under any Letter of Credit prior to its expiration or whether
a drawing made under any Letter of Credit is in proper and sufficient
form shall be made by Issuing Bank in its sole discretion, which
determination shall be conclusive and binding upon Borrower to the
extent permitted by law. Borrower hereby waives any right to object to
any payment made under any Letter of Credit with regard to a drawing
that is in the form provided in such Letter of Credit but which varies
with respect to punctuation, capitalization, spelling or similar
matters of form.
(f) Reports of Issuing Bank. While any Letter of Credit is
outstanding, Issuing Bank shall on a monthly basis provide to
Administrative Agent or any Bank such information regarding the Letters
of Credit as Administrative Agent or such Bank may reasonably request,
including the Letters of Credit outstanding, the stated amounts of
outstanding Letters of Credit, the expiration dates of outstanding
Letters of Credit, the names of the beneficiaries of outstanding
Letters of Credit, the amounts of unpaid Reimbursement Obligations and
the amounts and times of Drawing Payments and Reimbursement Payments.
(g) Purpose. Borrower shall use the Letters of Credit solely
as provided in clause (ii) of Subparagraph 2.02(a).
2.03. Amount Limitations, Commitment Reductions, Etc.
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(a) Total Commitments. The sum of the aggregate principal
amount of all Revolving Loans outstanding, the aggregate amount
available for drawing under all Letters of Credit then outstanding and
the aggregate amount of all Reimbursement Obligations then outstanding
(such sum to be referred to herein as the "Outstanding Facilities
Credit") shall not exceed the Total Commitment at such time.
(b) Optional Reduction or Cancellation of Commitments.
Borrower may, upon three (3) Business Days written notice to
Administrative Agent (and, in the case of the LC Commitment, to Issuing
Bank), permanently reduce the Total Commitment by the amount of
$5,000,000 or integral multiples of $1,000,000 in excess thereof or
cancel the Total Commitment in its entirety; provided, however, that:
(i) Borrower may not reduce the Total Commitment if,
after giving effect to such reduction, the Outstanding
Facilities Credit would exceed the Total Commitment as so
reduced; and
(ii) Borrower may not cancel the Total Commitment if,
after giving effect to such cancellation, any Revolving Loan
or Letter of Credit would remain outstanding.
(c) Effect of Commitment Reductions. From the effective date
of any reduction of the Total Commitment, the Commitment Fees payable
pursuant to Subparagraph 2.04(c) shall be computed on the basis of the
Total Commitment as so reduced. Any reduction of the Total Commitment
pursuant to this Paragraph 2.03 shall be applied ratably to reduce each
Bank's Commitment in accordance with clause (i) of Subparagraph
2.09(a).
2.04. Fees.
(a) Agents' Fees. Borrower shall pay to Agents, for their own
accounts, the fees in the amounts and at the times set forth in the
Agents' Fee Letters.
(b) Origination Fees. Borrower shall pay to Administrative
Agent, for the ratable benefit of the Banks as provided in this
Subparagraph 2.04(b), nonrefundable origination fees (the "Origination
Fees") in amounts equal to:
(i) For each Bank which committed to provide
Commitments hereunder of Fifteen Million Dollars ($15,000,000)
or more but less than Twenty-Five Million Dollars
($25,000,000), seven point five one
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hundredths of one percent (.075%) of the sum of such Bank's
Commitment on the Closing Date;
(ii) For each Bank which committed to provide
Commitments hereunder of Twenty-Five Million Dollars
($25,000,000) or more but less than Forty Million Dollars
($40,000,000), twelve point five one hundredths of one percent
(.125%) of the sum of such Bank's Commitment on the Closing
Date; and
(iii) For each Bank which committed to provide
Commitments hereunder of Forty Million Dollars ($40,000,000)
or more, fifteen one hundredths of one percent (.150%) of the
sum of such Bank's Commitment on the Closing Date.
(c) Commitment Fees. Borrower shall pay to Administrative
Agent, for the ratable benefit of the Banks as provided in clause (v)
of Subparagraph 2.09(a), nonrefundable commitment fees (the "Commitment
Fees") equal to the Commitment Fee Percentage on the daily average
Unused Commitment for the period beginning on the date of this
Agreement and ending on the Maturity Date. The Commitment Fee
Percentage shall be determined as provided in the Pricing Grid and may
change for each Pricing Period. Borrower shall pay the Commitment Fees
quarterly in arrears on the last day in each calendar quarter
(commencing June 30, 1997) and on the Maturity Date (or if the Total
Commitment is cancelled on a date prior to the Maturity Date, on such
prior date).
(d) Letter of Credit Fees.
(i) Letter of Credit Usage Fees. Borrower shall pay
to Administrative Agent, for the ratable benefit of the Banks
as provided in clause (v) of Subparagraph 2.09(a),
nonrefundable usage fees for the Letters of Credit (the "LC
Usage Fees") equal to the LC Usage Fee Rate on the daily
average available amount of each Letter of Credit for the
period beginning on the date such Letter of Credit is issued
and ending on the date such Letter of Credit expires. The LC
Usage Fee Rate shall be determined as provided in the Pricing
Grid and may change for each calendar quarter. Borrower shall
pay the LC Usage Fees quarterly in arrears on the last day in
each calendar quarter (commencing at the end of the first
calendar quarter after the issuance of the initial Letter of
Credit) and on the Maturity Date.
(ii) Letter of Credit Issuance Fees. Borrower shall
either pay to Administrative Agent, for the sole benefit of
Issuing Bank, or directly to Issuing Bank,
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nonrefundable issuance fees for the Letters of Credit (the "LC
Issuance Fees") as agreed to between Borrower and Issuing Bank
(and, if paid to Administrative Agent, in such amount as
Administrative Agent has been notified by Issuing Bank is then
due).
(iii) Other Letter of Credit Fees. In addition to the
LC Issuance Fees, Borrower shall either pay to Administrative
Agent, for the sole benefit of Issuing Bank, or directly to
Issuing Bank, other standard reasonable fees of Issuing Bank
for drawings under, transfers of and amendments to any Letter
of Credit and other administrative actions performed by
Issuing Bank in connection with any Letter of Credit, payable
at such times and in such amounts as are consistent with
Issuing Bank's standard fee policy at the time of such
amendment or other action (and, if paid to Administrative
Agent, in such amount as Administrative Agent has been
notified by Issuing Bank is then due).
2.05. Prepayments.
(a) Terms of all Prepayments. Upon the prepayment of any
Revolving Loan (whether such prepayment is an optional prepayment under
Subparagraph 2.05(b), a mandatory prepayment required by Subparagraph
2.05(c) or a mandatory prepayment required by any other provision of
this Agreement or the other Credit Documents, including, without
limitation, a prepayment upon acceleration), Borrower shall pay to the
Administrative Agent for the benefit of the Bank Party which made such
Revolving Loan (i) if such prepayment is the prepayment of a LIBOR
Loan, all accrued interest to the date of such prepayment on the amount
prepaid and (ii) if such prepayment is the prepayment of a LIBOR Loan
on a day other than the last day of an Interest Period for such
Revolving Loan, all amounts payable to such Bank Party pursuant to
Paragraph 2.12.
(b) Optional Prepayments. At its option, Borrower may, upon
three (3) Business Days notice to Administrative Agent for LIBOR Loans
and one (1) Business Day notice to Administrative Agent for Base Rate
Loans, prepay any Borrowing in part, in an aggregate principal amount
of $500,000 or more, or in whole.
(c) Mandatory Prepayments. If, at any time, the Outstanding
Facilities Credit exceeds the Total Commitment at such time, Borrower
shall immediately prepay Revolving Loans in an aggregate principal
amount equal to such excess.
(d) Application of Revolving Loan Prepayments. All prepayments
of the Revolving Loans shall, to the extent
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possible, be first applied to prepay Base Rate Loans and then, if any
funds remain, to prepay LIBOR Loans.
2.06. Other Payment Terms.
(a) Place and Manner. Except as otherwise expressly provided
herein, Borrower shall make all payments due to each Bank Party
hereunder by payments to Administrative Agent, for the account of such
Bank Party and such Bank Party's Applicable Lending Office, at
Administrative Agent's office, located at the address specified in
Paragraph 8.01, in lawful money of the United States and in same day or
immediately available funds not later than 11:00 A.M. on the date due.
Administrative Agent shall promptly disburse to each Bank Party each
such payment received by Administrative Agent for such Bank Party.
(b) Date. Whenever any payment due hereunder shall fall due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included
in the computation of interest or fees, as the case may be.
(c) Late Payments. If any amounts required to be paid by
Borrower under this Agreement or the other Credit Documents (including,
without limitation, principal or interest payable on any Revolving Loan
or interest thereon, any fees or other amounts) remain unpaid after
such amounts are due, Borrower shall pay interest on the aggregate,
outstanding balance of such amounts from the date due until those
amounts are paid in full at a per annum rate equal to the Base Rate
plus two percent (2.00%), such rate to change from time to time as the
Base Rate shall change.
(d) Application of Payments. All payments hereunder shall be
applied first to unpaid fees, costs and expenses then past due under
this Agreement or the other Credit Documents, second to accrued
interest then due and payable under this Agreement or the other Credit
Documents and finally to reduce the principal amount of outstanding
Revolving Loans.
(e) Failure to Pay Administrative Agent. Unless Administrative
Agent shall have received notice from Borrower prior to the date on
which any payment is due to any Bank Parties hereunder that Borrower
will not make such payment in full, Administrative Agent may assume
that Borrower has made such payment in full to Administrative Agent on
such date and Administrative Agent may, in reliance upon such
assumption, cause to be distributed to the appropriate Bank Parties on
such due date an amount equal to the amount then due such Bank Parties.
If and to the extent
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Borrower shall not have so made such payment in full to Administrative
Agent, each such Bank Party shall repay to Administrative Agent
forthwith on demand such amount distributed to such Bank Party together
with interest thereon, for each day from the date such amount is
distributed to such Bank Party until the date such Bank Party repays
such amount to Administrative Agent, at (i) the Federal Funds Rate for
the first three (3) days and (ii) the Base Rate thereafter. A
certificate of Administrative Agent submitted to any Bank Party with
respect to any amounts owing by such Bank Party under this Subparagraph
2.06(e) shall be conclusive absent manifest error.
2.07. Notes and Interest Account.
(a) Notes. The obligation of Borrower to repay the Revolving
Loans made by each Bank and to pay interest thereon at the rates
provided herein shall be evidenced by a promissory note in the form of
Exhibit D (individually, a "Note") which note shall be (i) payable to
the order of such Bank, (ii) in the amount of such Bank's Commitment,
(iii) dated the Closing Date and (iv) otherwise appropriately
completed. Borrower authorizes each Bank to record on the schedule
annexed to such Bank's Note the date and amount of each Revolving Loan
made by such Bank and of each payment or prepayment of principal
thereon made by Borrower, and agrees that all such notations shall
constitute prima facie evidence of the matters noted. Borrower further
authorizes each Bank to attach to and make a part of such Bank's Note
continuations of the schedule attached thereto as necessary.
(b) Interest Account. Borrower authorizes Administrative Agent
to record in an account or accounts maintained by Administrative Agent
on its books (the "Interest Account") (i) the interest rates applicable
to all Revolving Loans and the effective dates of all changes thereto,
(ii) the Interest Period for each LIBOR Loan, (iii) the date and amount
of each principal and interest payment on each Revolving Loan and (iv)
such other information as Administrative Agent may determine is
necessary for the computation of interest payable by Borrower
hereunder.
2.08. Revolving Loan Funding, Etc.
(a) Bank Funding and Disbursement to Borrower. Each Bank
shall, before 12:00 P.M. on the date of each Borrowing, make available
to Administrative Agent at its office specified in Paragraph 8.01, in
same day or immediately available funds, such Bank's pro rata share of
such Borrowing. After Administrative Agent's receipt of such
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funds and upon fulfillment of the applicable conditions set forth in
Section III, Administrative Agent will promptly disburse such funds in
same day or immediately available funds to Borrower. Unless otherwise
directed by Borrower, Administrative Agent shall disburse the proceeds
of each Borrowing to Borrower by disbursement to the account or
accounts specified in the applicable Notice of Borrowing.
(b) Bank Failure to Fund. Unless Administrative Agent shall
have received notice from a Bank prior to the date of any Borrowing
that such Bank will not make available to Administrative Agent such
Bank's pro rata share of such Borrowing, Administrative Agent may
assume that such Bank has made such portion available to Administrative
Agent on the date of such Borrowing in accordance with Subparagraph
2.08(a), and Administrative Agent may, in reliance upon such
assumption, make available to Borrower (or otherwise disburse) on such
date a corresponding amount. If any Bank does not make the amount of
its pro rata share of any Borrowing available to Administrative Agent
on or prior to the date of such Borrowing, such Bank shall pay to
Administrative Agent, on demand, interest which shall accrue on such
amount until made available to Administrative Agent at rates equal to
(i) the daily Federal Funds Rate during the period from the date of
such Borrowing through the third Business Day thereafter and (ii) the
Base Rate thereafter. A certificate of Administrative Agent submitted
to any Bank with respect to any amounts owing under this Subparagraph
2.08(b) shall be conclusive absent manifest error. If any Bank's pro
rata share of any Borrowing is not in fact made available to
Administrative Agent by such Bank within three (3) Business Days after
the date of such Borrowing, Borrower shall pay to Administrative Agent,
on demand, an amount equal to such pro rata share together with
interest thereon, for each day from the date such amount was made
available to Borrower until the date such amount is repaid to
Administrative Agent, at the interest rate applicable at the time to
the Revolving Loans comprising such Borrowing.
(c) Banks' Obligations Several. The failure of any Bank to
make the Revolving Loan to be made by it as part of any Borrowing shall
not relieve any other Bank of its obligation hereunder to make its
Revolving Loan on the date of such Borrowing, but no Bank shall be
responsible for the failure of any other Bank to make the Revolving
Loan to be made by such other Bank on the date of any Borrowing.
2.09. Pro Rata Treatment.
(a) Borrowings, Commitment Reductions, Etc. Except as
otherwise provided herein:
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(i) Each Borrowing, each reduction of the Total
Commitment and participations in each Letter of Credit shall
be made by or shared among the Banks pro rata according to
their respective Proportionate Shares;
(ii) Each payment of principal of Revolving Loans in
any Borrowing shall be shared among the Banks which made or
funded the Revolving Loans in such Borrowing pro rata
according to the respective unpaid principal amounts of such
Revolving Loans so made or funded by such Banks;
(iii) Each payment of interest on Revolving Loans in
any Borrowing shall be shared among the Banks which made or
funded the Revolving Loans in such Borrowing pro rata
according to (A) the respective unpaid principal amounts of
such Revolving Loans so made or funded by such Banks and (B)
the dates on which such Banks so made or funded such Revolving
Loans or is deemed to have made or funded such Revolving Loans
to the extent such Bank otherwise paid interest to
Administrative Agent on such Revolving Loans in accordance
with Subparagraph 2.08(b);
(iv) Each Reimbursement Payment and interest payable
by Borrower thereon shall be shared among the Banks (including
Issuing Bank) which made or funded the applicable Drawing
Payment pro rata according to the respective amounts of such
Drawing Payment so made or funded by such Banks;
(v) Each payment of Commitment Fees shall be shared
among the Banks pro rata according to (A) their respective
Proportionate Share and (B) in the case of each Bank which
becomes a Bank hereunder after the date hereof, the date upon
which such Bank so became a Bank;
(vi) Each payment of LC Usage Fees shall be shared
among the Banks (including Issuing Bank in its capacity as a
Bank) pro rata according to (A) their respective Proportionate
Share and (B) in the case of each Bank which becomes a Bank
hereunder after the date hereof, the date upon which such Bank
so became a Bank;
(vii) Each payment of interest (other than interest
on Revolving Loans) shall be shared among the Bank Parties and
Agents owed the amount upon which such interest accrues pro
rata according to (A) the respective amounts so owed such Bank
Parties and (B) the dates on which such amounts became owing
to such Bank Parties; and
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(viii) All other payments under this Agreement and
the other Credit Documents shall be for the benefit of the
Person or Persons specified.
(b) Sharing of Payments, Etc. If any Bank Party shall obtain
any payment (whether voluntary, involuntary, through the exercise of
any right of setoff, or otherwise) on account of Revolving Loans owed
to it in excess of its ratable share of payments on account of such
Revolving Loans obtained by all Banks entitled to such payments, such
Bank Party shall forthwith purchase from the other Bank Parties
entitled to such payments such participations in the Revolving Loans or
Reimbursement Obligations as shall be necessary to cause such
purchasing Bank Party to share the excess payment ratably with each of
them; provided, however, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Bank Party, such
purchase shall be rescinded and each other Bank Party shall repay to
the purchasing Bank Party the purchase price to the extent of such
recovery together with an amount equal to such other Bank Party's
ratable share (according to the proportion of (i) the amount of such
other Bank Party's required repayment to (ii) the total amount so
recovered from the purchasing Bank) of any interest or other amount
paid or payable by the purchasing Bank Party in respect of the total
amount so recovered. Borrower agrees that any Bank Party so purchasing
a participation from another Bank Party pursuant to this Subparagraph
2.09(b) may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of setoff, but only as provided
in Paragraph 8.06) with respect to such participation as fully as if
such Bank Party were the direct creditor of Borrower in the amount of
such participation.
2.10. Change of Circumstances.
(a) Inability to Determine Rates. If, on or before the first
day of any Interest Period for any LIBOR Loan, Agents shall determine
that (i) the LIBO Rate for such Interest Period cannot be adequately
and reasonably determined due to the unavailability of funds in or
other circumstances affecting the London interbank market or (ii) the
rates of interest for such LIBOR Loans do not adequately and fairly
reflect the cost to the Banks of making or maintaining such LIBOR
Loans, Administrative Agent shall immediately give notice of such
condition to Borrower and the Banks. After the giving of any such
notice and until Administrative Agent shall otherwise notify Borrower
that the circumstances giving rise to such condition no longer exist,
Borrower's right to request the making of or conversion to, and the
Banks' obligations to make or convert to LIBOR Loans shall be
suspended. Any LIBOR Loans
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outstanding at the commencement of any such suspension shall, unless
fully repaid, be converted at the end of the then current Interest
Period for such LIBOR Loans into Base Rate Loans unless such suspension
has then ended.
(b) Illegality. If, after the date of this Agreement, the
adoption of any Governmental Rule, any change in any Governmental Rule
or the application or requirements thereof (whether such change occurs
in accordance with the terms of such Governmental Rule as enacted, as a
result of amendment or otherwise), any change in the interpretation or
administration of any Governmental Rule by any Governmental Authority,
or compliance by any Bank with any request or directive (whether or not
having the force of law) of any Governmental Authority (a "Change of
Law") shall make it unlawful or impossible for any Bank to make or
maintain any LIBOR Loan, such Bank shall immediately notify
Administrative Agent and Borrower of such Change of Law. Upon receipt
of such notice, (i) Borrower's right to request the making of or
conversion to, and such Bank's obligation to make or convert to, LIBOR
Loans shall be terminated, and (ii) Borrower shall, at the request of
such Bank, either (A) pursuant to Subparagraph 2.01(d), convert any
such then outstanding LIBOR Loans of such Bank into Base Rate Loans at
the end of the current Interest Period for such LIBOR Loans, or (B)
immediately repay or convert any such LIBOR Loans if such Bank shall
notify Borrower that such Bank may not lawfully continue to fund and
maintain such LIBOR Loans. Any conversion or prepayment of LIBOR Loans
made pursuant to the preceding sentence prior to the last day of an
Interest Period for such LIBOR Loans shall be deemed a prepayment
thereof for purposes of Paragraph 2.12. After any Bank notifies
Administrative Agent and Borrower of such a Change of Law and until
such Bank notifies Administrative Agent and Borrower that it is no
longer unlawful or impossible for such Bank to make or maintain any
LIBOR Loan, all Revolving Loans of such Bank shall be Base Rate Loans.
(c) Increased Costs. If, after the date of this Agreement, any
Change of Law:
(i) Shall subject any Bank to any tax, duty or other
charge with respect to any LIBOR Loan, or shall change the
basis of taxation of payments by Borrower to any Bank on such
a LIBOR Loan or in respect to such a LIBOR Loan under this
Agreement (except for changes in the rate of taxation on the
overall net income of any Bank imposed by its jurisdiction of
incorporation or the jurisdiction in which such Bank maintains
a lending office); or
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(ii) Shall impose, modify or hold applicable any
reserve (excluding any Reserve Requirement or other reserve to
the extent included in the calculation of the LIBO Rate for
any LIBOR Loans), special deposit or similar requirement
against assets held by, deposits or other liabilities in or
for the account of, advances or loans by, or any other
acquisition of funds by any Bank for any LIBOR Loan; or
(iii) Shall impose on any Bank any other condition
related to any LIBOR Loan or such Bank's Commitments;
and the effect of any of the foregoing is to increase the cost to such
Bank of making, renewing, or maintaining any such LIBOR Loan or such
Bank's Commitments or to reduce any amount receivable by such Bank
hereunder, then Borrower shall from time to time, within five (5) days
after demand by such Bank (which demand shall be accompanied by a
statement setting forth in reasonable detail the basis for the
calculation of the amount demanded), pay to such Bank additional
amounts sufficient to reimburse such Bank for such increased costs or
to compensate such Bank for such reduced amounts; provided, however,
that Borrower shall not be obligated to pay any Bank for any such
increased costs or reduced amounts incurred more than sixty (60) days
prior to the date of such Bank's demand for payment if such demand was
made more than sixty (60) days after the latest of (A) the date such
Bank received actual notice of such increased cost or reduced amount,
(B) the effective date of such Change in Law, or (C) the date such
Change in Law occurred or was enacted. A certificate as to the amount
of such increased costs or reduced amounts submitted by such Bank to
Borrower shall constitute prima facie evidence of such increased costs
or reduced amounts. The obligations of Borrower under this Subparagraph
2.10(c) shall survive the payment and performance of the Obligations
and the termination of this Agreement.
(d) Capital Requirements. If, after the date of this
Agreement, any Bank Party determines that (i) any Change of Law affects
the amount of capital required or expected to be maintained by such
Bank Party or any Person controlling such Bank Party (a "Capital
Adequacy Requirement") and (ii) the amount of capital maintained by
such Bank Party or such Person which is reasonably attributable to or
based upon the Revolving Loans, the Letters of Credit, the Commitments
or this Agreement must be increased as a result of such Capital
Adequacy Requirement (taking into account such Bank Party's or such
Person's policies with respect to capital adequacy), Borrower shall pay
to such Bank Party or such Person, within five (5) days after demand of
such Bank Party (which demand shall be accompanied by a statement
setting forth in
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reasonable detail the basis for the calculation of the amount
demanded), such amounts as such Bank Party or such Person shall
reasonably determine are necessary to compensate such Bank Party or
such Person for the increased costs to such Bank Party or such Person
of such increased capital. A certificate of any Bank Party setting
forth in reasonable detail the computation of any such increased costs
delivered by such Bank Party to Borrower shall constitute prima facie
evidence of such increased costs. The obligations of Borrower under
this Subparagraph 2.10(d) shall survive the payment and performance of
the Obligations and the termination of this Agreement.
(e) Mitigation. As promptly as practical after any Bank
becomes aware of (i) any Change of Law which will make it unlawful or
impossible for such Bank to make or maintain any LIBOR Loan or (ii) any
obligation by Borrower to pay any amount pursuant to Subparagraph
2.10(c) or Subparagraph 2.10(d), such Bank shall notify Borrower and
Administrative Agent (and, if any Bank has given notice of any such
event described in clause (i) or (ii) above and thereafter such event
ceases to exist, such Bank shall promptly so notify Borrower and
Administrative Agent). Each Bank affected by any Change of Law which
makes it unlawful or impossible for such Bank to make or maintain any
LIBOR Loan or to which Borrower is obligated to pay any amount pursuant
to Subparagraph 2.10(c) or Subparagraph 2.10(d) shall use reasonable
commercial efforts (including changing the jurisdiction of its
Applicable Lending Office) to avoid the effect of such Change of Law or
to avoid or materially reduce any amounts which Borrower is obligated
to pay pursuant to Subparagraph 2.10(c) or Subparagraph 2.10(d) if, in
the reasonable opinion of such Bank, such efforts would not be
disadvantageous to such Bank or contrary to such Bank's normal banking
practices.
2.11. Taxes on Payments.
(a) Payments Free of Taxes. All payments made by Borrower
under this Agreement and the other Credit Documents 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 (except (i) net income taxes and franchise taxes
in lieu of net income taxes imposed on any Agent or Bank Party by its
jurisdiction of incorporation or any jurisdiction in which it maintains
a lending office and (ii) withholding taxes required to be paid for
Bank Parties who do not comply with Subparagraph 2.11(b) at the time
they first become Bank Parties hereunder) (all such non-excluded
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taxes, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). Subject to Subparagraph
2.11(c), if any Taxes are required to be withheld from any amounts
payable to any Agent or any Bank Party hereunder or under the other
Credit Documents, the amounts so payable to such Agent or such Bank
Party shall be increased to the extent necessary to yield to such Agent
or such Bank Party (after payment of all Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the other Credit Documents. Whenever
any Taxes are payable by Borrower, as promptly as possible thereafter,
Borrower shall send to Administrative Agent for its own account or for
the account of such other Agent or such Bank Party, as the case may be,
a certified copy of an original official receipt received by Borrower
showing payment thereof. If Borrower fails to pay any Taxes when due to
the appropriate taxing authority or fails to remit to Administrative
Agent the required receipts or other required documentary evidence,
Borrower shall indemnify Agents and the Bank Parties for any
incremental taxes, interest or penalties that may become payable by any
Agent or any Bank Party as a result of any such failure. The
obligations of Borrower under this Subparagraph 2.11(a) shall survive
the payment and performance of the Obligations and the termination of
this Agreement.
(b) Withholding Exemption Certificates. On or prior to the
Closing Date, each Bank which is not incorporated under the laws of the
United States of America or a state thereof shall deliver to Borrower
and Administrative Agent either two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 (or successor
applicable form), as the case may be, certifying in each case that such
Bank is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal taxes. Each Bank
which delivers to Borrower and Administrative Agent a Form 1001 or 4224
pursuant to the immediately preceding sentence further undertakes to
deliver to Borrower and Administrative Agent two further copies of Form
1001 or 4224, or successor applicable forms, or other manner of
certification or procedure, as the case may be, on or before the date
that any such letter or form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent letter
and form previously delivered by it to Borrower and Administrative
Agent, and such extensions or renewals thereof as may reasonably be
requested by Borrower or Administrative Agent, certifying in the case
of a Form 1001 or 4224 that such Bank is entitled to receive payments
under this Agreement without deduction or withholding of any United
States federal taxes, unless in any such cases an event (including
without limitation any change in treaty, law or regulation) has
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occurred prior to the date on which any such delivery would otherwise
be required which renders all such forms inapplicable or which would
prevent a Bank from duly completing and delivering any such letter or
form with respect to it and such Bank advises Borrower and
Administrative Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income
tax.
(c) Mitigation. Any Agent or Bank Party claiming any
additional amounts payable pursuant to this Paragraph 2.11 shall use
reasonable commercial efforts to file any certificate or document
requested in writing by Borrower (including without limitation copies
of Internal Revenue Service Form 1001, or successor forms, reflecting a
reduced rate of withholding) or to change the jurisdiction of its
Applicable Lending Office if the making of such a filing or such change
in the jurisdiction of its Applicable Lending Office would avoid the
need for or materially reduce the amount of any such additional amounts
which may thereafter accrue and if, in the reasonable opinion of such
Agent or Bank Party in the case of a change in the jurisdiction of its
Applicable Lending Office, such change would not be disadvantageous to
such Agent or Bank Party or contrary to such Agent's or Bank Party's
normal banking practices.
(d) Tax Returns. Nothing contained in this Paragraph 2.11
shall require any Agent or Bank Party to make available any of its tax
returns (or any other information relating to its taxes which it deems
to be confidential).
2.12. Funding Loss Indemnification. If Borrower shall (a) repay, prepay
or convert any LIBOR Loan on any day other than the last day of an Interest
Period therefor (whether a scheduled payment, an optional prepayment or
conversion, a mandatory prepayment or conversion, a payment upon acceleration or
otherwise), (b) fail to borrow any LIBOR Loan for which a Notice of Borrowing
has been delivered to Administrative Agent (whether as a result of the failure
to satisfy any applicable conditions or otherwise) or (c) fail to convert any
Revolving Loans into LIBOR Loans in accordance with a Notice of Conversion
delivered to Administrative Agent (whether as a result of the failure to satisfy
any applicable conditions or otherwise), Borrower shall, upon demand by any
Bank, reimburse such Bank for and hold such Bank harmless from all Funding
Losses and all related incidental costs and expenses (such as administrative
costs and expenses) incurred by such Bank as a result of such repayment,
prepayment or failure. Each Bank demanding payment under this Paragraph 2.12
shall deliver to Borrower, with a copy to Administrative Agent, a certificate
setting forth the amount of Funding Losses and related incidental costs and
expenses for which demand is made, which certificate shall set forth in
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reasonable detail the calculation of the amount demanded. Such a certificate so
delivered to Borrower shall constitute prima facie evidence of such Funding
Losses and related incidental costs and expenses. The obligations of Borrower
under this Paragraph 2.12 shall survive the payment and performance of the
Obligations and the termination of this Agreement for a period of one year from
the date of termination.
2.13. Replacement of Banks. If any Bank shall (a) become a Defaulting
Bank more than two (2) times in a period of twelve (12) consecutive months, (b)
continue as a Defaulting Bank for more than five (5) Business Days at any time,
(c) suspend its obligation to make or maintain LIBOR Loans pursuant to
Subparagraph 2.10(b) for a reason which is not applicable to the Banks (or a
material number of the Banks) generally, or (d) demand any payment under
Subparagraph 2.10(c), 2.10(d) or 2.11(a) for a reason which is not applicable to
the Banks (or a material number of Banks) generally, then Administrative Agent
may (or upon the written request of Borrower or Agents, shall) replace such Bank
(the "affected Bank"), or cause such affected Bank to be replaced, with another
bank (the "replacement bank") satisfying the requirements of an Assignee Bank
under Subparagraph 8.05(c), by having the affected Bank sell and assign all of
its rights and obligations under this Agreement and the other Credit Documents
to the replacement bank pursuant to Subparagraph 8.05(c); provided, however,
that if Borrower seeks to exercise such right, it must do so within one hundred
twenty (120) days after it first knows or should have known of the occurrence of
the event or events giving rise to such right, and neither Administrative Agent
nor any Agent nor any Bank shall have any obligation to identify or locate a
replacement bank for Borrower. Upon receipt by any affected Bank of a written
notice from Administrative Agent stating that Administrative Agent is exercising
the replacement right set forth in this Paragraph 2.14, such affected Bank shall
sell and assign all of its rights and obligations under this Agreement and the
other Credit Documents to the replacement bank pursuant to an Assignment
Agreement and Subparagraph 8.05(c) for a purchase price equal to the sum of the
principal amount of the affected Bank's Revolving Loans so sold and assigned,
all accrued and unpaid interest thereon and its ratable share of all fees to
which it is entitled.
SECTION III. CONDITIONS PRECEDENT.
3.01. Initial Conditions Precedent. The obligations of the Bank Parties
to make the Revolving Loans comprising the initial Borrowing or of Issuing Bank
to issue the initial Letter of Credit are subject to receipt by Administrative
Agent, on or prior to the Closing Date, of each item listed in Schedule 3.01,
each in form and substance reasonably satisfactory to the Banks,
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and with sufficient copies for, Administrative Agent and each Bank.
3.02. Conditions Precedent to Each Credit Event. The occurrence of each
Credit Event (including the initial Borrowing and the initial Letter of Credit)
is subject to the further conditions that:
(a) Borrower shall have delivered to Administrative Agent (and
Issuing Bank, in the case of an LC Application) the Notice of Borrowing
for such Credit Event in accordance with this Agreement;
(b) On the date such Credit Event is to occur and after giving
effect to such Credit Event, the following shall be true and correct:
(i) The representations and warranties of Borrower
and its Subsidiaries set forth in Paragraph 4.01 and in the
other Credit Documents are true and correct in all material
respects as if made on such date (except for representations
and warranties expressly made as of a specified date, which
shall be true as of such date); and
(ii) No Default or Event of Default has occurred and
is continuing or will result from such Credit Event; and
(c) On the date such Credit Event is to occur and after giving
effect to such Credit Event, all of the Credit Documents are in full
force and effect.
The submission by Borrower to Administrative Agent of each Notice of Borrowing
and each LC Application shall be deemed to be a representation and warranty by
Borrower as of the date thereon as to the above.
3.03. Conditions Precedent to Each Conversion or Each Selection of
Interest Period. The occurrence of the conversion of any Base Rate Loan into a
LIBOR Loan or the selection of a new Interest Period for any LIBOR Loan is
subject to the further conditions that:
(a) Borrower shall have delivered to Administrative Agent the
Notice of Conversion or Notice of Interest Period Selection, as the
case may be, for such conversion or selection of an Interest Period in
accordance with this Agreement;
(b) On the date such conversion or selection of an Interest
Period is to occur and after giving effect to such
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conversion or selection of an Interest Period, no Default or Event of
Default has occurred and is continuing or will result from such
conversion or selection of an Interest Period; and
(c) On the date such conversion or selection of an Interest
Period is to occur and after giving effect to such conversion or
selection of an Interest Period, all of the Credit Documents are in
full force and effect.
The submission by Borrower to Administrative Agent of each Notice of Conversion
and each Notice of Interest Period Selection shall be deemed to be a
representation and warranty by Borrower as of the date thereon as to the above.
SECTION IV. REPRESENTATIONS AND WARRANTIES.
4.01. Borrower's Representations and Warranties. In order to induce the
Agents and Bank Parties to enter into this Agreement, Borrower hereby represents
and warranties to the Agents and Bank Parties as follows:
(a) Due Incorporation, Qualification, etc. Each of Borrower
and Borrower's Subsidiaries (i) is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation; (ii) has the power and authority to own,
lease and operate its properties and carry on its business as now
conducted; and (iii) is duly qualified, licensed to do business and in
good standing as a foreign corporation in each jurisdiction where the
failure to be so qualified or licensed is reasonably likely to have a
Material Adverse Effect.
(b) Authority. The execution, delivery and performance by
Borrower of each Credit Document executed, or to be executed, by
Borrower and the consummation of the transactions contemplated thereby
(i) are within the corporate power of Borrower and (ii) have been duly
authorized by all necessary corporate actions on the part of Borrower.
(c) Enforceability. Each Loan Document in the nature of an
agreement executed, or to be executed, by Borrower has been, or will
be, duly executed and delivered by Borrower and constitutes, or will
constitute, a legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms, except as
limited by bankruptcy, insolvency or other laws of general application
relating to or affecting the enforcement of creditors' rights generally
and general principles of equity
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(regardless of whether considered in a proceeding in equity or at law).
(d) Non-Contravention. The execution and delivery by Borrower
of the Loan Documents and the performance and consummation of the
transactions contemplated thereby do not (i) violate any Requirement of
Law applicable to Borrower; (ii) violate any provision of, or result in
the breach or the acceleration of, or entitle any other Person to
accelerate (whether after the giving of notice or lapse of time or
both), any Contractual Obligations of Borrower which could reasonably
be expected to have a Material Adverse Effect; or (iii) result in the
creation or imposition of any Lien (or the obligation to create or
impose any Lien) upon any property, asset or revenue of Borrower
(except such Liens as may be created in favor of Administrative Agent
pursuant to this Agreement or the other Credit Documents).
(e) Approvals. No material consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Authority or other Person having jurisdiction over
Borrower or any of Borrower's Subsidiaries (including the shareholders
of any Person) is required in connection with the execution and
delivery of the Loan Documents executed by Borrower or the performance
and consummation of the transactions contemplated thereby except for
consents, approvals, orders, authorizations, registrations,
declarations or filings required to be obtained or made in accordance
with the Loan Documents.
(f) No Violation or Default. Neither Borrower nor any of
Borrower's Subsidiaries is in violation of or in default with respect
to (i) any Requirement of Law applicable to such Person or (ii) any
Contractual Obligation of such Person, where, in each case, such
violation or default is reasonably likely to have a Material Adverse
Effect. Without limiting the generality of the foregoing, neither
Borrower nor any of Borrower's Subsidiaries (A) is in violation of any
Environmental Laws, (B) to the best of Borrower's knowledge, has any
liability or potential liability under any Environmental Laws or (C)
has received written notice or other written communication of an
investigation or is under investigation by any Governmental Authority
having jurisdiction over Borrower or any of Borrower's Subsidiaries
having authority to enforce Environmental Laws, where, in each case,
such violation, liability or investigation could reasonably be expected
to have a Material Adverse Effect, nor, to the best of Borrower's
knowledge, have any Hazardous Materials been released or disposed of on
any of the properties owned by Borrower or Borrower's Subsidiaries
which, either individually or in the aggregate, could reasonably be
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expected to have a Material Adverse Effect. No Event of Default or
Default has occurred and is continuing.
(g) Litigation. Except as set forth in the Disclosure Letter,
no actions (including, without limitation, derivative actions), suits,
proceedings or investigations are pending or, to the knowledge of
Borrower, threatened against Borrower or any of Borrower's Subsidiaries
at law or in equity in any court or before any other Governmental
Authority having jurisdiction over Borrower or any of Borrower's
Subsidiaries which (i) is reasonably likely (alone or in the aggregate)
to have a Material Adverse Effect or (ii) seeks to enjoin, either
directly or indirectly, the execution, delivery or performance of the
Loan Documents or the transactions contemplated thereby.
(h) Title; Possession Under Leases. Borrower and Borrower's
Subsidiaries (i) own and have good title (without regard to minor
defects of title) to all their other respective properties and assets
which are material to the business of Borrower and its Subsidiaries
taken as a whole, as reflected in the most recent Financial Statements
delivered to Administrative Agent (except those assets and properties
disposed of since the date of such Financial Statements in compliance
with this Agreement) and (ii) own and have good title (without regard
to minor defects of title) to all respective properties and assets
acquired by Borrower and Borrower's Subsidiaries since such date which
are material to the business of Borrower and its Subsidiaries taken as
a whole (except those assets and properties disposed of in compliance
with this Agreement). Such assets and properties are subject to no
Lien, except for Permitted Liens.
(i) Financial Statements. The Financial Statements of Borrower
which have been delivered to Administrative Agent in connection with
this Agreement, (i) are in accordance with the books and records of
Borrower, which have been maintained in accordance with good business
practice; (ii) have been prepared in conformity with GAAP; and (iii)
fairly present in all material respects the financial condition and
results of operations of Borrower as of the date thereof and for the
periods covered thereby.
(j) No Agreements to Sell Assets; Etc. As of the Closing Date,
neither Borrower nor any of Borrower's Material Subsidiaries has any
legal obligation, absolute or contingent, to any Person to sell all or
any material part of the assets of Borrower or any of Borrower's
Material Subsidiaries (other than Transfers permitted pursuant to
Subparagraph 5.02(c)), or to effect any merger, consolidation or other
reorganization of Borrower or any of
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Borrower's Subsidiaries or to enter into any agreement with respect
thereto.
(k) Employee Benefit Plans.
(i) Based on the latest valuation of each Employee
Benefit Plan that either Borrower or any ERISA Affiliate
maintains or contributes to, or has any obligation under
(which occurred within twelve months of the date of this
representation), the aggregate benefit liabilities of such
plan within the meaning of ss. 4001 of ERISA did not exceed
the aggregate value of the assets of such plan. Neither
Borrower nor any ERISA Affiliate has any liability with
respect to any post-retirement benefit under any Employee
Benefit Plan which is a welfare plan (as defined in section
3(1) of ERISA), other than liability for health plan
continuation coverage described in Part 6 of Title I(B) of
ERISA, which liability for health plan contribution coverage
is not reasonably likely to have a Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both
form and operation, in all material respects, with its terms,
ERISA and the Code, and no condition exists or event has
occurred with respect to any such plan which would result in
the incurrence by either Borrower or any ERISA Affiliate of
any material liability, fine or penalty. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of
Borrower or any ERISA Affiliate is legally valid and binding
and in full force and effect. No Employee Benefit Plan is
being audited or investigated by any government agency or is
subject to any pending or threatened claim or suit. Neither
Borrower nor any ERISA Affiliate has nor, to the knowledge of
Borrower or any ERISA Affiliate, has any fiduciary of any
Employee Benefit Plan engaged in a prohibited transaction
under section 406 of ERISA or section 4975 of the Code.
(iii) Neither Borrower nor any ERISA Affiliate has
any material contingent obligations to any Multiemployer Plan.
Neither Borrower nor any ERISA Affiliate has incurred any
material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan under Section 4201 of
ERISA or as a result of a sale of assets described in Section
4204 of ERISA. Neither Borrower nor any ERISA Affiliate has
been notified that any Multiemployer Plan is in reorganization
or insolvent under and within the meaning of Section 4241 or
Section 4245 of ERISA or
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that any Multiemployer Plan intends to terminate or has been
terminated under Section 4041A of ERISA.
(l) Other Regulations. Neither Borrower nor any of its
Subsidiaries is subject to regulation under the Investment Company Act
of 1940, the Public Utility Holding Company Act of 1935, the Federal
Power Act, any state public utilities code or to any other Governmental
Rule limiting its ability to incur indebtedness.
(m) Patent and Other Rights. Borrower and Borrower's
Subsidiaries own or license under validly existing agreements (or could
obtain such ownership, possession or license on terms not materially
adverse to Borrower and its Subsidiaries, taken as a whole, and under
circumstances that could not reasonably be expected to have a Material
Adverse Effect), and have the full right to license without the consent
of any other Person, all patents, licenses, trademarks, trade names,
trade secrets, service marks, copyrights and all rights with respect
thereto, which are material to conduct the businesses of Borrower and
its Subsidiaries (taken as a whole) as now conducted.
(n) Governmental Charges. Borrower and Borrower's Subsidiaries
have filed or caused to be filed all material tax returns which are
required by law to be filed by them. Borrower and Borrower's
Subsidiaries have paid, or made provision for the payment of, all taxes
and other Governmental Charges which have become due pursuant to said
returns or otherwise, except such Governmental Charges, if any, which
are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided or which are
not reasonably likely to have a Material Adverse Effect if unpaid.
(o) Margin Stock. Borrower owns no Margin Stock which, in the
aggregate, would constitute a substantial part of the assets of
Borrower, and no proceeds of any Revolving Loan and no Letter of Credit
will be used to purchase or carry, directly or indirectly, any Margin
Stock or to extend credit, directly or indirectly, to any Person for
the purpose of purchasing or carrying any Margin Stock.
(p) Subsidiaries, etc. Set forth in Schedule 4.01(p) (as
supplemented by Borrower on or immediately prior to each anniversary of
the Closing Date in a written notice to Administrative Agent) is a
complete list of all of Borrower's Subsidiaries, the jurisdiction of
incorporation of each, the asset value of each and the percentage of
Borrower's consolidated total assets represented by each. Except for
such Subsidiaries, Borrower has no Subsidiaries, is not a partner in
any partnership or a joint venturer in
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any joint venture except the joint venture with MKE in MKE-Quantum.
(q) Solvency, Etc. Borrower and each of its Material
Subsidiaries is Solvent and, after the execution and delivery of the
Loan Documents and the consummation of the transactions contemplated
thereby, will be Solvent.
(r) Catastrophic Events. Neither Borrower nor any of
Borrower's Subsidiaries and none of their properties is affected by any
fire, explosion, strike, lockout or other labor dispute, earthquake,
embargo or other casualty that is reasonably likely to have a Material
Adverse Effect. As of the Closing Date, there are no disputes presently
subject to grievance procedure, arbitration or litigation under any of
the collective bargaining agreements, employment contracts or employee
welfare or incentive plans to which Borrower or any of Borrower's
Subsidiaries is a party, and there are no strikes, lockouts, work
stoppages or slowdowns, or, to the best knowledge of Borrower,
jurisdictional disputes or organizing activities occurring or
threatened which alone or in the aggregate are reasonably likely to
have a Material Adverse Effect.
(s) No Material Adverse Effect. No event has occurred and no
condition exists which could reasonably be expected to have a Material
Adverse Effect.
(t) Accuracy of Information Furnished. None of the Credit
Documents and none of the other certificates, statements or information
furnished to Bank Party by or on behalf of Borrower or any of its
Subsidiaries in connection with the Credit Documents or the
transactions contemplated thereby (taken together with all such Credit
Documents, certificates, statements or information) contains or will
contain any untrue statement of a material fact or omits or will omit
to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading
(it being understood by the Bank Parties that the projections and
forecasts provided by Borrower are not to be viewed as facts and that
actual results during the period or periods covered by such projections
and forecasts may differ from the projected or forecasted results).
4.02. Reaffirmation. Borrower shall be deemed to have reaffirmed, for
the benefit of the Agents and Bank Parties, each representation and warranty
contained in Paragraph 4.01 on and as of the date of each Credit Event (except
for representations and warranties expressly made as of a specified date, which
shall be true as of such date).
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SECTION V. COVENANTS.
5.01. Affirmative Covenants. Until the termination of this Agreement
and the satisfaction in full by Borrower of all Obligations (other than inchoate
indemnity obligations of Borrower), Borrower will comply, and will cause
compliance, with the following affirmative covenants, unless Majority Banks
shall otherwise consent in writing:
(a) Financial Statements, Reports, etc. Borrower shall furnish
to Administrative Agent (and Administrative Agent shall promptly
thereupon furnish to each Bank) the following, each in such form and
such detail as Administrative Agent shall reasonably request:
(i) As soon as available and in no event later than
forty-five (45) days after the last day of each fiscal quarter
of Borrower which is not a fiscal year end, a copy of the
unaudited Financial Statements of Borrower for such quarter
and for the fiscal year to date (excluding statements of
shareholders' equity), certified by an Executive Officer of
Borrower to present fairly the financial condition, results of
operations and other information reflected therein and to have
been prepared in accordance with GAAP (subject to normal
year-end audit adjustments);
(ii) As soon as available and in no event later than
ninety (90) days after the close of each fiscal year of
Borrower, (A) copies of the audited consolidated Financial
Statements of Borrower for such fiscal year, audited by a
nationally recognized accounting firm and (B) copies of the
unqualified opinions (or qualified opinions reasonably
acceptable to Agents);
(iii) Contemporaneously with the quarterly and
year-end Financial Statements required by the foregoing
clauses (i) and (ii), (A) a certificate of an Executive
Officer of Borrower in the form of Exhibit E, appropriately
completed, together with such financial computations as Agents
may reasonably request to determine compliance with the terms
of this Agreement (a "Compliance Certificate") and (B)
management's discussion of Borrower's operations for the
period covered by such Financial Statements in the form
supplied to Borrower's stockholders, including a comparison
with Borrower's operations for the corresponding quarter in
the immediately preceding fiscal year or with the immediately
preceding fiscal year, as the case may be, as set forth in
Borrower's 10-K and 10-Q reports filed by Borrower or any of
its
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Subsidiaries with the Securities and Exchange Commission;
(iv) As soon as possible and in no event later than
five (5) Business Days after any Executive Officer of Borrower
or any Vice President of Human Resources of Borrower knows of
the occurrence or existence of (A) any Reportable Event under
any Employee Benefit Plan or Multiemployer Plan, (B) any
litigation, suits or claims against Borrower or its
Subsidiaries involving claimed monetary damages payable by
Borrower or any of its Subsidiaries of $25,000,000 or more not
covered by insurance, (C) any other event or condition which
is reasonably likely to have a Material Adverse Effect, or (D)
any Default or Event of Default; the statement of an Executive
Officer of Borrower setting forth details of such event,
condition, Default or Event of Default and the action which
Borrower proposes to take with respect thereto;
(v) As soon as available and in no event later than
five (5) Business Days after they are sent, made available or
filed, copies of (A) all registration statements filed on
forms S-1, S-2, S-3 or S-4 and 8-K, 10-K and 10-Q reports and
such additional material reports filed by Borrower or any of
its Subsidiaries with any securities exchange or the
Securities and Exchange Commission; (B) all reports, proxy
statements and financial statements sent or made available by
Borrower or any of its Subsidiaries to its public security
holders generally; and (C) all press releases and other
similar public statements concerning any material developments
in the business of Borrower or any of Borrower's Subsidiaries
made available by Borrower or any of Borrower's Subsidiaries
to the public generally; and
(vi) Such other certificates, opinions, statements,
documents and information relating to the operations or
condition (financial or otherwise) of Borrower or any of its
Subsidiaries, and compliance by Borrower with the terms of
this Agreement and the other Credit Documents as any Bank
Party through Administrative Agent may from time to time
reasonably request.
Notwithstanding the foregoing, it is understood and agreed that to the
extent Borrower files Forms 10-K and 10-Q (or any successor forms) with
the Securities and Exchange Commission (or any successor agency) and
such forms are required to contain the same information as required by
clauses (i), (ii) and (iii) (B) of Subparagraph 5.01(a),
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Borrower may deliver copies of such forms with respect to the relevant
time periods in lieu of the deliveries specified in clauses (i), (ii)
and (iii) (B) of Subparagraph 5.01(a) when such reports are required to
be filed with the Securities and Exchange Commission.
(b) Books and Records. Borrower and its Subsidiaries shall at
all times keep proper books of record and account in accordance with
good business practices and GAAP (and, in the case of Foreign
Subsidiaries, local accounting rules or GAAP to the extent required).
(c) Inspections. Borrower and its Subsidiaries shall permit
personnel of Administrative Agent and, if no Default or Event of
Default has occurred and is continuing, with the consent of Borrower
(which consent shall not be unreasonably withheld or delayed), any
Person designated by Administrative Agent, upon reasonable notice and
during normal business hours, to visit and inspect any of the
properties and offices of Borrower and its Subsidiaries, to examine the
books and records of Borrower and its Subsidiaries and make copies
thereof and to discuss the affairs, finances and accounts of Borrower
and its Subsidiaries with, and to be advised as to the same by, their
officers, auditors and accountants, all at such times and intervals as
Administrative Agent may reasonably request. Notwithstanding any
provision of this Agreement to the contrary, so long as no Default or
Event of Default shall have occurred and be continuing, neither
Borrower nor any of its Subsidiaries shall be required to disclose,
permit the inspection, examination, photocopying or making extracts of,
or discuss, any document, information or other matter that (i)
constitutes non-financial trade secrets or non-financial proprietary
information or (ii) the disclosure of which to any Bank Party, or their
designated representative, is then prohibited by law or any agreement
binding on Borrower or any of its Subsidiaries that was not entered
into by Borrower or any such Subsidiary for the purpose of concealing
information from the Bank Parties.
(d) Insurance. Borrower and its Subsidiaries shall:
(i) Carry and maintain insurance of the types and in
the amounts customarily carried from time to time during the
term of this Agreement by others engaged in substantially the
same business as such Person and operating in the same
geographic area as such Person, including, but not limited to,
fire, public liability, property damage and worker's
compensation; and
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(ii) Deliver to Administrative Agent from time to
time, as Administrative Agent may request, schedules setting
forth all insurance then in effect.
(iii) Notwithstanding clauses (i) and (ii) above,
Borrower and any of its Subsidiaries may self-insure in lieu
of maintaining all or a portion of the insurance required to
be maintained pursuant to this Subsection 5.01(d) to the
extent determined by Borrower's Board of Directors to be
appropriate and in the best interests of Borrower and its
Subsidiaries taken as a whole.
(e) Governmental Charges. Borrower and its Subsidiaries shall
promptly pay and discharge when due all taxes and other Governmental
Charges prior to the date upon which penalties accrue thereon which, if
unpaid, are reasonably likely to have a Material Adverse Effect, except
such taxes and other Governmental Charges as may in good faith be
contested or disputed, or for which arrangements for deferred payment
have been made, provided that in each such case appropriate reserves
are maintained in accordance with GAAP.
(f) Use of Proceeds. Borrower shall use the proceeds of the
Revolving Loans and the Letters of Credit only for the respective
purposes set forth in Subparagraph 2.01(g) and Subparagraph 2.02(g).
Borrower shall not use any part of the proceeds of any Revolving Loan
or any Letter of Credit, directly or indirectly, for the purpose of
purchasing or carrying any Margin Stock or for the purpose of
purchasing or carrying or trading in any securities under such
circumstances as to involve Borrower, any Bank Party or any Agent in a
violation of Regulations G, T, U or X issued by the Federal Reserve
Board.
(g) General Business Operations. Each of Borrower and its
Subsidiaries shall (i) subject to Subparagraph 5.02(c) and 5.02(d),
preserve and maintain its corporate existence and all of its material
rights, privileges and franchises reasonably necessary to the conduct
of its business, (ii) conduct its business activities in compliance
with all Requirements of Law and Contractual Obligations applicable to
such Person, the violation of which is reasonably likely to have a
Material Adverse Effect, (iii) keep all property useful and necessary
in its business in good working order and condition, ordinary wear and
tear excepted in accordance with prudent business practices, and (iv)
pay and perform all Contractual Obligations as and when due (except to
the extent disputed in good faith by Borrower or the appropriate
Subsidiary and where non-payment would not be reasonably expected to
have a Material Adverse Effect). Borrower shall maintain its chief
executive office and principal
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place of business in the United States and shall not relocate its chief
executive office or principal place of business outside of California
without providing Administrative Agent with prior written notice.
5.02. Negative Covenants. Until the termination of this Agreement and
the satisfaction in full by Borrower of all Obligations (other than inchoate
indemnity obligations of Borrower), Borrower will comply, and will cause
compliance, with the following negative covenants, unless Majority Banks shall
otherwise consent in writing:
(a) Indebtedness. Neither Borrower nor any of its Subsidiaries
shall create, incur, assume or permit to exist any Indebtedness or any
Guaranty Obligations except for the following ("Permitted
Indebtedness"):
(i) The Obligations of Borrower under the Credit
Documents;
(ii) Indebtedness listed in the Disclosure Letter
existing on the date of this Agreement;
(iii) Indebtedness of Borrower and its Subsidiaries
under loans and Capital Leases incurred by Borrower or any of
its Subsidiaries to finance the acquisition by such Person of
real property, fixtures, equipment or other fixed assets
provided that in each case, (A) such Indebtedness is incurred
by such Person at the time of, or not later than six (6)
months after, the acquisition by such Person of the property
so financed and (B) such Indebtedness does not exceed the
purchase price of the property so financed;
(iv) Indebtedness arising from the endorsement of
instruments for collection in the ordinary course of
Borrower's or a Subsidiary's business;
(v) Indebtedness of Borrower under the Convertible
Subordinated Debentures;
(vi) Indebtedness of Borrower under the External LC
Agreement, provided that (A) the only credit extended to
Borrower pursuant to the External LC Agreement consists of
letters of credit issued for the benefit of MKE or its
affiliates to secure obligations owed by Borrower to the
beneficiaries for the purchase price of inventory; (B) the sum
at any time of the aggregate face amount of all letters of
credit issued and outstanding under the External LC Agreement
plus the aggregate amount of all unreimbursed drawings under
such letters of credit does not exceed eighty-five
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million Dollars ($85,000,000); (C) the Indebtedness of
Borrower under the External LC Agreement is at all times
either unsecured or secured by Liens permitted pursuant to
clause (xvii) of Subparagraph 5.02(b); and (D) the financial
covenants of Borrower set forth in the External LC Agreement
are less restrictive than the financial covenants set forth on
Schedule 5.02(a);
(vii) Subordinated Indebtedness of Borrower to any
Person, provided that (A) such Indebtedness contains
subordination provisions no less favorable to the Agents and
Banks than those set forth on Exhibit F or as otherwise
approved by the Majority Banks; and (B) the aggregate
principal amount of all Subordinated Debt of Borrower
outstanding (including the Convertible Subordinated
Debentures), measured at the time of issuance of such
Subordinated Debt, does not exceed $700,000,000;
(viii) Indebtedness of the type described in clause
(h) of the definition of "Indebtedness" or clause (iii) of the
definition of "Contingent Obligations";
(ix) Indebtedness of Borrower and its Subsidiaries
with respect to surety, appeal, indemnity, performance or
other similar bonds in the ordinary course of business;
(x) Indebtedness of Borrower and its Subsidiaries
under initial or successive refinancings of any Indebtedness
permitted by clause (ii), (iii) or (vi) above, provided that
the principal amount of any such refinancing does not exceed
the principal amount of the Indebtedness being refinanced;
(xi) Indebtedness of Borrower and its Subsidiaries
for trade accounts payable, provided that (A) such accounts
arise in the ordinary course of business and (B) no material
part of such account is more than ninety (90) days past due
(unless subject to a bona fide dispute and for which adequate
reserves have been established);
(xii) Indebtedness of Borrower and its Subsidiaries
for expense accruals in the ordinary course of business;
(xiii) Guaranty Obligations or Contingent Obligations
of Borrower in respect of Permitted Indebtedness of its
Subsidiaries or Guaranty Obligations or Contingent Obligations
of any Subsidiary of Borrower of the Permitted Indebtedness of
one or
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more other Subsidiaries of Borrower or of Permitted
Indebtedness of Borrower;
(xiv) Indebtedness of Borrower to any of Borrower's
Subsidiaries, Indebtedness of any of Borrower's Subsidiaries
to Borrower or Indebtedness of any of Borrower's Subsidiaries
to any of Borrower's other Subsidiaries;
(xv) Indebtedness of Borrower and its Subsidiaries in
respect of any Permitted Receivables Facility;
(xvi) Indebtedness of Borrower and its Subsidiaries
under Synthetic Leases;
(xvii) Indebtedness of Borrower and its Subsidiaries
incurred in connection with MKE-Quantum and constituting a
Permitted Investment; and
(xviii) Indebtedness of Borrower and its Subsidiaries
not otherwise permitted hereunder, provided that the aggregate
principal amount of all such Indebtedness does not exceed at
any time ten percent (10%) of the total assets of Borrower and
its Subsidiaries determined as of the end of the fiscal
quarter immediately preceding the date of determination.
(b) Liens. Neither Borrower nor any of its Subsidiaries shall
create, incur, assume or permit to exist any Lien on or with respect to
any of its assets or property of any character, whether now owned or
hereafter acquired, except for the following ("Permitted Liens"):
(i) Liens in favor of any Agent or any Bank securing
the Obligations;
(ii) Liens listed in Disclosure Letter existing on
the date of this Agreement;
(iii) Liens for taxes or other governmental charges
not at the time delinquent or thereafter payable without
penalty or being contested in good faith, provided that
adequate reserves for the payment thereof have been
established in accordance with GAAP;
(iv) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords and other similar Liens
imposed by law incurred in the ordinary course of business for
sums (A) not overdue or (B) being contested in good faith
provided that adequate reserves for the payment thereof have
been established in accordance with GAAP;
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(v) Deposits under workers' compensation,
unemployment insurance and social security laws or to secure
the performance of bids, tenders, contracts (other than for
the repayment of borrowed money) or leases, or to secure
statutory obligations of surety or appeal bonds or to secure
indemnity, performance or other similar bonds in the ordinary
course of business;
(vi) Zoning restrictions, easements, rights-of-way,
title irregularities and other similar encumbrances, which
alone or in the aggregate are not substantial in amount and do
not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business
of Borrower or any of its Subsidiaries;
(vii) Liens securing Indebtedness which constitutes
Permitted Indebtedness under clause (iii) of Subparagraph
5.02(a) provided that, in each case, such Lien (A) covers only
those assets, the acquisition of which was financed by such
Permitted Indebtedness (together with accessions, additions,
replacements and proceeds thereof), and (B) secures only such
Permitted Indebtedness and any related obligations of Borrower
or any of its Subsidiaries;
(viii) Liens on the property or assets of any
Subsidiary of Borrower in favor of Borrower or any other
Subsidiary of Borrower;
(ix) Banker's Liens and similar Liens (including
set-off rights) in respect of bank deposits;
(x) Liens incurred in connection with the extension,
renewal or refinancing of the Indebtedness secured by the
Liens described in clause (ii) or (vii) above, provided that
any extension, renewal or replacement Lien (A) is limited to
the property covered by the terms of the existing Lien and (B)
secures Indebtedness which is no greater in amount and has
material terms no less favorable to the Banks than the
Indebtedness secured by the existing Lien;
(xi) Liens on property or assets of any corporation
which becomes a Subsidiary of Borrower after the date of this
Agreement, provided that (A) such Liens exist at the time the
stock of such corporation is acquired by Borrower and (B) such
Liens were not created in contemplation of such acquisition by
Borrower;
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(xii) Judgement Liens, provided that such Liens do
not have a value in excess of $10,000,000 or such Liens are
released, stayed, vacated or otherwise dismissed within thirty
(30) days after issue or levy and, if so stayed, such stay is
not thereafter removed;
(xiii) Rights of vendors or lessors under conditional
sale agreements, Capital Leases or other title retention
agreements, provided that, in each case, (A) such rights
secure or otherwise relate to Permitted Indebtedness, (B) such
rights do not extend to any property other than property
acquired with the proceeds of such Permitted Indebtedness
(together with accessions, additions, replacements and
proceeds thereof) and (C) such rights do not secure any
Indebtedness other than such Permitted Indebtedness;
(xiv) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of
customs duties and in connection with the importation of goods
in the ordinary course of Borrower's and its Subsidiaries'
businesses;
(xv) Liens on insurance proceeds in favor of
insurance companies with respect to the financing of insurance
premiums;
(xvi) Liens in respect of any Permitted Receivables
Facility;
(xvii) Liens on cash or Cash Equivalents securing
reimbursement obligations of Borrower under letters of credit
(other than any Letters of Credit) in an aggregate amount of
all such cash and Cash Equivalents does not exceed
$100,000,000;
(xviii) Liens securing Indebtedness and any related
obligations of Borrower or any of its Subsidiaries which
constitutes Permitted Indebtedness under clause (xvi) of
Subparagraph 5.02(a) (or refinancings of such Indebtedness
under clause (x) of Subparagraph 5.02(a)), provided that such
Lien covers only those assets subject to such Synthetic Leases
(together with accessions, additions, replacements and
proceeds thereof);
(xix) Liens securing any obligations of Borrower or
any of its Subsidiaries under the Prior Credit Agreement or
any security agreements, pledge agreements, charges,
debentures, agreements, documents, certificates or
undertakings entered into in connection therewith or pursuant
thereto; provided that Borrower,
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its Subsidiaries and the agents and the banks that are a party
to the Prior Credit Agreement shall use their best efforts to
terminate any such Liens within three (3) months of the
Closing Date;
(xx) Liens incurred in connection with leases,
subleases, licenses and sublicenses granted to Persons not
interfering in any material respect with the business of
Borrower and its Subsidiaries and any interest or title of a
lessee or licensee under any such leases, subleases, licenses
or sublicenses;
(xxi) Liens securing Indebtedness and any related
obligations which constitute Permitted Indebtedness under
clause (xvii) of Subparagraph 5.02(a) or Investments
constituting Permitted Investments under clause (ix) of
Subparagraph 5.02(d); and
(xxii) Liens on the property or assets of Borrower
and its Subsidiaries not otherwise permitted hereunder,
provided that (A) the aggregate principal amount of all
Indebtedness secured by such Liens does not exceed at any time
ten percent (10%) of the total assets of Borrower and its
Subsidiaries determined as of the end of the fiscal quarter
immediately preceding the date of determination and (B) such
Liens do not encumber current assets of Borrower and its
Subsidiaries in excess of $50,000,000.
(c) Asset Dispositions. Neither Borrower nor any of its
Subsidiaries shall Transfer all or any of its assets or property,
whether now owned or hereafter acquired, except for the following:
(i) Transfers by Borrower and its Subsidiaries in the
ordinary course of their businesses;
(ii) Transfers of surplus, damaged, worn or obsolete
assets or properties or Transfers of other assets or
properties which are promptly being replaced;
(iii) Transfers of assets on commercially reasonable
terms or account receivables in connection with a Permitted
Receivables Facility by Borrower and its Subsidiaries (it
being understood that any determination as to whether a
particular Transfer is on commercially reasonable terms shall
take into consideration any larger business transaction to
which such particular Transfer is related);
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(iv) Transfers by Borrower to any of Borrower's
Subsidiaries or by any of Borrower's Subsidiaries to Borrower
or any of Borrower's other Subsidiaries;
(v) Transfers which constitute the making of or
liquidation of Permitted Investments;
(vi) Transfers in connection with Indebtedness
permitted pursuant to clause (iii) of Subparagraph 5.02(a);
and
(vii) Transfers of assets and property not otherwise
permitted hereunder, provided that the aggregate value of all
such assets and property (based upon the greater of the fair
market or book value of such assets and property) so
transferred in any period of four consecutive fiscal quarters
does not exceed twenty percent (20%) of Tangible Net Worth as
determined as of the end of the fiscal quarter immediately
preceding the date of determination.
(d) Mergers, Acquisitions, Etc. Neither Borrower nor any of
its Subsidiaries shall consolidate with or merge into any other Person
or permit any other Person to merge into it, except that:
(i) Any Subsidiary of Borrower may merge into or
consolidate with any other Subsidiary of Borrower;
(ii) Any Subsidiary of Borrower may merge into or
consolidate with Borrower provided that Borrower is the
surviving corporation;
(iii) Borrower may merge into or consolidate with any
other Person, provided that (A) Borrower is the surviving
corporation and (B) immediately after giving effect to such
merger or consolidation no Default or Event of Default shall
have occurred and be continuing; and
(iv) Any Subsidiary of Borrower may merge into or
consolidate with any other Person to the extent such
transaction is a Transfer otherwise permitted under
Subparagraph 5.02(c) or an Investment otherwise permitted
under Subparagraph 5.02(e) and immediately after giving effect
to such merger or consolidation no Default or Event of Default
shall have occurred and be continuing.
(e) Investments. Neither Borrower nor any of its Subsidiaries
shall make any Investment except the following ("Permitted
Investments"):
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(i) Direct obligations of, or obligations the
principal and interest on which are unconditionally guaranteed
by, the United States of America or obligations of any agency
of the United States of America to the extent such obligations
are backed by the full faith and credit of the United States
of America, in each case maturing within one year from the
date of acquisition thereof;
(ii) Certificates of deposit maturing within one year
from the date of acquisition thereof issued by a commercial
bank or trust company organized under the laws of the United
States of America or a state thereof or that is a Bank,
provided that (A) such deposits are denominated in Dollars,
(B) such bank or trust company has capital, surplus and
undivided profits of not less than $100,000,000 and (C) such
bank or trust company has certificates of deposit or other
debt obligations rated at least A-1 (or its equivalent) by S&P
or P-1 (or its equivalent) by Moody's;
(iii) Open market commercial paper maturing within
270 days from the date of acquisition thereof issued by a
corporation organized under the laws of the United States of
America or a state thereof, provided such commercial paper is
rated at least A-1 (or its equivalent) by S&P or P-1 (or its
equivalent) by Moody's;
(iv) Any repurchase agreement entered into with a
commercial bank or trust company organized under the laws of
the United States of America or a state thereof or that is a
Bank, provided that (A) such bank or trust company has
capital, surplus and undivided profits of not less than
$100,000,000, (B) such bank or trust company has certificates
of deposit or other debt obligations rated at least A-1 (or
its equivalent) by S&P or P-1 (or its equivalent) by Moody's,
(C) the repurchase obligations of such bank or trust company
under such repurchase agreement are fully secured by a
perfected security interest in a security or instrument of the
type described in clause (i), (ii) or (iii) above and (D) such
security or instrument so securing the repurchase obligations
has a fair market value at the time such repurchase agreement
is entered into of not less than one hundred percent (100%) of
such repurchase obligations;
(v) Any transaction permitted by Subparagraph 5.02(a)
or Subparagraph 5.02(d);
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(vi) Money market mutual funds registered with the
Securities and Exchange Commission, meeting the requirements
of Rule 2a-7 promulgated under the Investment Company Act of
1940;
(vii) Investments listed in the Disclosure Letter
existing on the date of this Agreement;
(viii) Investments in other assets properly
classified as "marketable securities" or "cash" or "cash
equivalents" under GAAP, and which conform to the investment
policies adopted by the Board of Directors of Borrower from
time to time;
(ix) (A) Investments in MKE-Quantum in the form of
(w) non-exclusive licenses of technology to MKE-Quantum, (x)
tax or other indemnity obligations of Borrower or any of its
Subsidiaries in favor of MKE-Quantum, (y) advances against
product to be purchased by Borrower or any of its Subsidiaries
from MKE-Quantum within a period of one year from the date of
the making of the advance, and (z) (1) the value of any
property transferred or leased to MKE-Quantum, (2) employee
benefit obligations of Borrower or any of its Subsidiaries in
favor of any employees of MKE-Quantum, (3) the value of the
administrative services provided by Borrower or any of its
Subsidiaries in favor of MKE-Quantum, (4) the value of any
personnel services provided by Borrower or any of its
Subsidiaries in favor of MKE-Quantum, and (5) the value of the
use and occupancy of any facilities provided by Borrower or
any of its Subsidiaries, in the case of each of (1) through
(5) above, to the extent Borrower or any of its Subsidiaries
is, or expects to be, reimbursed therefor, within one year of
when such value is provided to MKE-Quantum, and (B)
additional Investments in MKE-Quantum, provided that the
aggregate amount of all such Investments made or incurred
after the Closing Date pursuant to the subclause (B) of this
clause (ix) in any rolling four fiscal quarter period of
Borrower does not exceed the sum of $100,000,000 plus any
amounts actually received by Borrower or any of its
Subsidiaries as a return of Investments in MKE-Quantum during
such rolling four quarter period plus any reductions in the
primary obligations in underlying Investments constituting
Guaranty Obligations during such rolling four fiscal quarter
period; provided further that for purposes hereof, Investments
constituting Indebtedness of MKE-Quantum acquired by Borrower
or any of its Subsidiaries shall be deemed to be in an amount
equal to such Indebtedness and to be made when such
Indebtedness is acquired (unless such
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Investment is a primary obligation underlying a Guaranty
Obligation previously counted as an Investment) and
Investments constituting Guaranty Obligations shall be deemed
to be in an amount equal to the corresponding primary
obligations and to be made at the time such primary
obligations are incurred;
(x) Investments received by Borrower and its
Subsidiaries in connection with the bankruptcy or
reorganization of customers and suppliers and in settlement of
delinquent obligations of, and other disputes with, customers
and suppliers arising in the ordinary course of business;
(xi) Investments arising from rights received by
Borrower and its Subsidiaries upon the required payment of any
permitted Contingent Obligations of Borrower and its
Subsidiaries;
(xii) Investments in or to Borrower or any Wholly-
Owned Subsidiary of Borrower;
(xiii) Investments of any Subsidiary of Borrower
existing at the time it becomes a Subsidiary of Borrower
provided that such Investments were not made in anticipation
of such Person becoming a Subsidiary of Borrower;
(xiv) Investments received by Borrower or any of its
Subsidiaries as consideration in connection with Transfers
otherwise permitted under Subparagraph 5.02(c);
(xv) Investments in the nature of acquisitions
provided that the aggregate amount of such acquisitions in any
period of four consecutive fiscal quarters does not exceed
twenty percent (20%) of Tangible Net Worth as determined as of
the fiscal quarter immediately preceding the date of
determination;
(xvi) Investments consisting of loans to employees,
officers and directors, the proceeds of which shall be used to
purchase equity securities of Borrower or its Subsidiaries and
other loans to employees, officers and directors;
(xvii) Investments of Borrower and its Subsidiaries
in interest rate protection, currency swap and foreign
exchange arrangements, provided that all such arrangements are
entered into in connection with bona fide hedging operations
and not for speculation;
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(xviii) Deposit accounts; and
(xix) Investments (other than of the type set forth
in clause (xiv) above) not otherwise permitted hereunder,
provided that the aggregate amount of such other Investments
made after the Closing Date (less any return of such
Investment) does not exceed twenty percent (20%) of Tangible
Net Worth as determined as of the fiscal quarter immediately
preceding the date of determination.
(f) Dividends, Redemptions, Etc. Neither Borrower nor any of
its Subsidiaries shall pay any dividends or make any distributions on
its Equity Securities; purchase, redeem, retire, defease or otherwise
acquire for value any of its Equity Securities; return any capital to
any holder of its Equity Securities as such; make any distribution of
assets, Equity Securities, obligations or securities to any holder of
its Equity Securities as such; or set apart any sum for any such
purpose, except as follows:
(i) Borrower may pay dividends on its Equity
Securities payable solely in Borrower's own Equity Securities;
(ii) Borrower may purchase, redeem, retire, defease
or otherwise acquire for value Equity Securities in connection
with or pursuant to any of its Employee Benefit Plans or in
connection with the employment or compensation of officers or
directors;
(iii) Borrower may purchase, redeem, retire, defease
or otherwise acquire for value Equity Securities with the
proceeds received from a substantially concurrent issue of new
Equity Securities or with other Equity Securities;
(iv) Borrower may purchase Equity Securities pursuant
to stock repurchase programs provided that the aggregate
payments under such programs do not exceed ten percent (10%)
of Tangible Net Worth in any fiscal year as determined as of
the fiscal quarter immediately preceding the date of
determination;
(v) Borrower may distribute rights pursuant to a
shareholder rights plan or redeem such rights provided such
redemption is in accordance with the terms of such shareholder
rights plan;
(vi) Any Subsidiary of Borrower may pay dividends or
make distributions to Borrower or any Wholly-Owned Subsidiary
of Borrower;
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(vii) Any Subsidiary of Borrower may purchase and
redeem shares of their own Equity Securities from Borrower or
any Wholly-Owned Subsidiary of Borrower; or
(viii) Any Subsidiary of Borrower may declare or pay
any dividends in respect of its Equity Securities or purchase
or redeem shares of its Equity Securities or make
distributions to shareholders not otherwise permitted
hereunder provided that the aggregate amount paid or
distributed in any period of four consecutive quarters
(excluding any amounts covered by clauses (vi) or (vii) above)
does not exceed five percent (5%) of Tangible Net Worth as
determined as of the fiscal quarter immediately preceding the
date of determination.
(g) Change in Business. Neither Borrower nor any of its
Subsidiaries shall engage, either directly or indirectly through
Affiliates, in any line of business other than the digital storage
business, any other business incidental or reasonably related thereto,
or any businesses that are, as determined by the Board of Directors of
Borrower, appropriate extensions thereof.
(h) Certain Indebtedness Payments, Etc. Neither Borrower nor
any of its Subsidiaries shall pay, prepay, redeem, purchase, defease or
otherwise satisfy in any manner prior to the scheduled payment thereof
any Subordinated Debt except as otherwise permitted under this
Subparagraph 5.02(h); amend, modify or otherwise change the terms of
any document, instrument or agreement evidencing Subordinated Debt such
that such amendment, modification or change would (i) cause the
outstanding aggregate principal amount of all such Subordinated Debt so
amended, modified or changed to be increased as a consequence of such
amendment, modification or change, (ii) cause the subordination
provisions applicable to such Subordinated Debt to be less favorable to
the Agents and the Bank Parties than those set forth on Exhibit F,
(iii) increase the interest rate applicable thereto or (iv) accelerate
the scheduled payment thereof, except that Borrower may call for
redemption the entire outstanding amount of the Convertible
Subordinated Debentures and, to the extent such Convertible
Subordinated Debentures are not converted prior to the redemption date,
redeem such Convertible Subordinated Debentures, provided that (A) no
Default or Event of Default has occurred and is continuing or would
result from such call for redemption or redemption and (B) the closing
price of the common stock shall have exceeded one hundred twenty
percent (120%) of the then applicable conversion price for twenty (20)
trading days within a period of thirty (30) consecutive trading days
ending within five (5) trading days prior to the notice of
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redemption. Borrower shall not cause or permit any of its obligations,
except the obligations constituting Senior Indebtedness to constitute
"Designated Senior Indebtedness" under the Indenture governing the
Convertible Subordinated Debentures (it being understood that the
Obligations of Borrower under this Agreement shall at all times
constitute "Designated Senior Indebtedness").
(i) ERISA. Neither Borrower nor any ERISA Affiliate shall (i)
adopt or institute any defined benefit Employee Benefit Plan that is an
employee pension benefit plan within the meaning of Section 3(2) of
ERISA, (ii) take any action which will result in the partial or
complete withdrawal, within the meanings of sections 4203 and 4205 of
ERISA, from a Multiemployer Plan, (iii) engage or permit any Person to
engage in any transaction prohibited by section 406 of ERISA or section
4975 of the Code involving any Employee Benefit Plan or Multiemployer
Plan which would subject either Borrower or any ERISA Affiliate to any
tax, penalty or other liability including a liability to indemnify,
(iv) incur or allow to exist any accumulated funding deficiency (within
the meaning of section 412 of the Code or section 302 of ERISA),
excluding all extensions permitted by law or contract, (v) fail to make
full payment when due of all amounts due as contributions to any
Employee Benefit Plan or Multiemployer Plan, (vi) fail to comply with
the requirements of section 4980B of the Code or Part 6 of Title I(B)
of ERISA, or (vii) adopt any amendment to any Employee Benefit Plan
which would require the posting of security pursuant to section
401(a)(29) of the Code, if any of such actions or inactions described
in clauses (i) - (vii), either individually or cumulatively, would have
a Material Adverse Effect.
(j) Transactions With Affiliates. Neither Borrower nor any of
its Subsidiaries shall enter into any Contractual Obligation with any
Affiliate or engage in any other transaction with any Affiliate except
upon terms at least as favorable to Borrower or such Subsidiary as an
arms-length transaction with unaffiliated Persons.
(k) Accounting Changes. Neither Borrower nor any of its
Subsidiaries shall change (i) its fiscal year (currently April 1 -
March 31) or (ii) its accounting practices except as permitted by GAAP.
(l) Financial Covenants.
(i) Borrower shall not permit its Quick Ratio to be
less than 1.00 to 1.00 on the last day of each fiscal quarter.
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(ii) Borrower shall not permit its Tangible Net Worth
on any date of determination (such date to be referred to
herein as a "determination date") which occurs after March 31,
1997 (such date to be referred to herein as the "base date")
to be less than the sum on such determination date of the
following:
(A) $760,000,000;
plus
(B) Seventy-five percent (75%) of the sum of
Borrower's consolidated quarterly net income
(ignoring any quarterly losses) for each quarter
after the base date through and including the quarter
ending immediately prior to the determination date;
plus
(C) Seventy-Five percent (75%) of the Net
Proceeds of all Equity Securities issued by Borrower
and its Subsidiaries (excluding any issuance where
the total proceeds are less than $10,000,000) during
the period commencing on the base date and ending on
the determination date;
plus
(D) Ninety percent (90%) of the Net Proceeds
derived from the conversion of the Convertible
Subordinated Debentures;
minus
(E) the lesser of (1) the aggregate amount
paid by Borrower to repurchase its capital stock and
(2) $50,000,000.
(iii) In any consecutive four-quarter period,
Borrower shall not permit (A) more than two quarterly net
losses aggregating to more than five percent (5%) of its
Tangible Net Worth as determined as of the fiscal quarter
immediately preceding the date of determination or (B) its
cumulative net income for any consecutive four-quarter period
to be less than one Dollar.
(iv) Borrower shall not permit its Senior Funded Debt
Ratio on the last day of any fiscal quarter to exceed
thirty-five percent (35%).
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SECTION VI. DEFAULT.
6.01. Events of Default. The occurrence or existence of any one or more
of the following shall constitute an "Event of Default" hereunder:
(a) Borrower (i) shall fail to pay when due any principal
payment on the Revolving Loans or any Reimbursement Payment, (ii) shall
fail to pay within three (3) Business Days when due any interest, or
(iii) shall fail to pay when due any other payment required under the
terms of this Agreement or any of the other Loan Documents and such
failure shall continue for five (5) Business Days after notice thereof
has been given to Borrower by any Agent; or
(b) Borrower shall fail to observe or perform any covenant,
obligation, condition or agreement set forth in Paragraph 5.02; or
(c) Borrower shall fail to observe or perform any other
covenant, obligation, condition or agreement contained in this
Agreement or the other Loan Documents and such failure shall continue
for twenty (20) Business Days after the earlier of the date that an
Executive Officer of Borrower first obtains knowledge or notice of such
failure or the date Administrative Agent gives Borrower notice of such
failure; or
(d) Any written representation or warranty by the Borrower
made or deemed made herein or in any Loan Document shall prove to have
been false, incorrect or inaccurate in any material respect on or as of
the date made or deemed made; or
(e) (i) Borrower or any of Borrower's Subsidiaries (A) shall
fail to make a payment or payments in an aggregate amount of $2,500,000
or more when due under the terms of any Funded Debt to be paid by such
Person (excluding this Agreement and the other Credit Documents or any
intercompany Indebtedness between Borrower and any of its Subsidiaries,
but including any other evidence of indebtedness of Borrower or any of
its Subsidiaries to any Bank) and such failure shall continue beyond
any period of grace provided with respect thereto, or (B) shall fail to
make any other payment or payments when due under or otherwise default
in the observance or performance of any other agreement, term or
condition contained in any such Funded Debt, and the effect of such
failure or default is to cause, or permit the holder or holders thereof
to cause, indebtedness in an aggregate amount of $10,000,000 or more to
become due prior to its stated date of maturity; or (ii) there shall
occur or exist any other event or condition which causes, or permits
the
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holder or holders of such indebtedness to cause, indebtedness in an
aggregate amount of $10,000,000 or more to become due prior to its
stated date of maturity (whether through holder puts, mandatory
redemptions or prepayments or otherwise); or
(f) Borrower or any of Borrower's Material Subsidiaries
(except with respect to clause (v) below) shall (i) apply for or
consent to the appointment of a receiver, trustee, liquidator or
custodian of itself or of all or a substantial part of its property,
(ii) be unable, or admit in writing its inability, to pay its debts
generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated
in full or in part, (v) no longer be Solvent, (vi) commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or consent
to any such relief or to the appointment of or taking possession of its
property by any official in an involuntary case or other proceeding
commenced against it, or (vii) take any action for the purpose of
effecting any of the foregoing; or
(g) Proceedings for the appointment of a receiver, trustee,
liquidator or custodian of Borrower or any of Borrower's Material
Subsidiaries or of all or a substantial part of the property thereof,
or an involuntary case or other proceedings seeking liquidation,
reorganization or other relief with respect to Borrower or any of
Borrower's Material Subsidiaries or the debts thereof under any
bankruptcy, insolvency or other similar law now or hereafter in effect
shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within sixty (60) days of
commencement; or
(h) A final nonappealable judgment or order for the payment of
money in excess of $10,000,000 (exclusive of amounts which are covered
by insurance issued by an insurer satisfying the requirements set forth
in Subparagraph 5.01(d)) shall be rendered against Borrower or any of
its Subsidiaries and the same shall remain undischarged and unpaid for
a period of thirty (30) days during which execution shall not be
effectively stayed; or
(i) Any Credit Document or any material term thereof shall
cease to be, or be asserted by Borrower not to be, a legal, valid and
binding obligation of Borrower enforceable in accordance with its
terms, the effect of which is or could reasonably be expected to be to
interfere with, hinder or impair in any material respect the practical
or effective realization of the rights, benefits or remedies of the
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Agents or the Banks under any Credit Documents taken as a whole; or
(j) Any Reportable Event occurs which constitutes grounds for
the termination of any Employee Benefit Plan by the PBGC or for the
appointment of a trustee by the PBGC to administer any Employee Benefit
Plan, or any Employee Benefit Plan shall be terminated with unfunded
liabilities within the meaning of Title IV of ERISA or a trustee shall
be appointed by the PBGC to administer any Employee Benefit Plan, in
each case which could reasonably be expected to have a Material Adverse
Effect; or
(k) Any Change of Control shall occur.
(Any of the events or conditions set forth in Subparagraphs 6.01(a)-(k), prior
to the giving of any required notice or the expiration of any specified grace
period, shall constitute a "Default" hereunder.)
6.02. Remedies. Upon the occurrence or existence of any Event of
Default (other than an Event of Default referred to in Subparagraph 6.01(f) or
6.01(g)) and at any time thereafter during the continuance of such Event of
Default, Administrative Agent may, with the consent of the Majority Banks, or
shall, upon instructions from the Majority Banks, by written notice to Borrower,
(a) terminate the Commitments and the obligations of the Lender Parties to make
Revolving Loans or issue Letters of Credit (b) declare all outstanding
Obligations payable by Borrower to be immediately due and payable without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Notes to the
contrary notwithstanding, and/or (c) direct Borrower to deliver to
Administrative Agent funds in an amount equal to the aggregate stated amount of
all outstanding Letters of Credit. Upon the occurrence or existence of any Event
of Default described in Subparagraph 6.01(f) or 6.01(g), immediately and without
notice, (1) the Commitments and the obligations of the Lender Parties to make
Revolving Loans or issue Letters of Credit shall automatically terminate and (2)
all outstanding Obligations payable by Borrower hereunder shall automatically
become immediately due and payable, without presentment, demand, protest or any
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Notes to the contrary notwithstanding. In addition to
the foregoing remedies, upon the occurrence or existence of any Event of
Default, Administrative Agent may exercise any right, power or remedy permitted
to it by law, either by suit in equity or by action at law, or both. Immediately
after taking any action under this Paragraph 6.02, Administrative Agent shall
notify each Bank Party of such action.
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SECTION VII. AGENTS AND RELATIONS AMONG BANKS.
7.01. Appointment, Powers and Immunities. Each Bank Party hereby
appoints and authorizes Administrative Agent and the Co-Arrangers to act as its
agents hereunder and under the other Credit Documents with such powers as are
expressly delegated to Administrative Agent and the Co-Arrangers by the terms of
this Agreement and the other Credit Documents, together with such other powers
as are reasonably incidental thereto. Neither Administrative Agent nor any
Co-Arranger shall have any duties or responsibilities except those expressly set
forth in this Agreement or in any other Credit Document, be a trustee for any
Bank Party or have any fiduciary duty to any Bank Party. Notwithstanding
anything to the contrary contained herein, neither Administrative Agent nor any
Co-Arranger shall be required to take any action which is contrary to this
Agreement or any other Credit Document or applicable law. Neither Administrative
Agent nor any Co-Arranger nor any Bank Party shall be responsible to any other
Agent or Bank Party for any recitals, statements, representations or warranties
made by Borrower contained in this Agreement or in any other Credit Document,
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement, or any other Credit Document or for any failure
by Borrower to perform its obligations hereunder or thereunder. Administrative
Agent and the Co-Arrangers may employ agents and attorneys-in-fact and shall not
be responsible to any Bank Party for the negligence or misconduct of any such
agents or attorneys-in-fact selected by them with reasonable care. None of the
Administrative Agent, the Co-Arrangers or their directors, officers, employees
or agents shall be responsible to any Bank Party for any action taken or omitted
to be taken by it or them hereunder or under any other Credit Document or in
connection herewith or therewith, except for its or their own gross negligence
or willful misconduct. Except as otherwise provided under this Agreement,
Administrative Agent shall take such action with respect to the Credit Documents
as shall be directed by the Majority Banks. Administrative Agent shall promptly
furnish to each Bank Party copies of all material documents, reports,
certificates, financial statements and notices furnished to Administrative Agent
by Borrower; provided, however, that Administrative Agent shall not be liable to
any Bank Party for its failure to provide copies of such material documents,
reports, certificates, financial statements and notices unless such failure
constitutes gross negligence or willful misconduct by Administrative Agent.
7.02. Reliance by Agents. Administrative Agent and the Co-Arrangers
shall be entitled to rely upon any certificate, notice or other document
(including any cable, telegram, facsimile or telex) believed by them in good
faith to be genuine and correct and to have been signed or sent by or on behalf
of the proper Person or Persons, and upon advice and statements of
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legal counsel, independent accountants and other experts selected by
Administrative Agent and the Co-Arrangers with reasonable care. As to any other
matters not expressly provided for by this Agreement, neither Administrative
Agent nor any Co-Arranger shall be required to take any action or exercise any
discretion, but Administrative Agent shall be required to act or to refrain from
acting upon instructions of the Majority Banks and shall in all cases be fully
protected by the Bank Parties in acting, or in refraining from acting, hereunder
or under any other Credit Document in accordance with the instructions of the
Majority Banks, and such instructions of the Majority Banks and any action taken
or failure to act pursuant thereto shall be binding on the Administrative Agent
and all of the Co-Arrangers and Bank Parties.
7.03. Defaults. Neither Administrative Agent nor any Co-Arranger shall
be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default unless Administrative Agent and the Co-Arrangers have received a
notice from a Bank Party or Borrower, referring to this Agreement, describing
such Default or Event of Default and stating that such notice is a "Notice of
Default". If Administrative Agent receives such a notice of the occurrence of a
Default or Event of Default, Administrative Agent shall give prompt notice
thereof to the Co-Arrangers and the Bank Parties. Administrative Agent shall
take such action with respect to such Default or Event of Default as shall be
reasonably directed by the Majority Banks; provided, however, that until
Administrative Agent shall have received such directions, Administrative Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interest of the Bank Parties.
7.04. Indemnification. Without limiting the Obligations of Borrower
hereunder, each Bank agrees to indemnify Administrative Agent and the
Co-Arrangers, ratably in accordance with such Bank's Proportionate Share, for
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against
Administrative Agent and the Co-Arrangers in any way relating to or arising out
of this Agreement or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or the enforcement of
any of the terms hereof or thereof or of any such other documents; provided,
however, that no Bank shall be liable for any of the foregoing to the extent
they arise from Administrative Agent and/or the Co-Arrangers' gross negligence
or willful misconduct. Administrative Agent and the Co-Arrangers shall be fully
justified in refusing to take or to continue to take any action hereunder unless
it shall first be indemnified to its satisfaction by the Banks against any and
all liability and
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expense which may be incurred by it by reason of taking or continuing to take
any such action. The obligations of each Bank under this Paragraph 7.04 shall
survive the payment and performance of the Obligations, the termination of this
Agreement and any Bank ceasing to be a party to this Agreement.
7.05. Non-Reliance. Each Bank Party represents that it has,
independently and without reliance on Administrative Agent, any Co-Arranger or
any other Bank Party, and based on such documents and information as it has
deemed appropriate, made its own appraisal of the financial condition and
affairs of Borrower and the Subsidiaries and its own decision to enter into this
Agreement and agrees that it will, independently and without reliance upon
Administrative Agent, any Co-Arranger or any Bank Party, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own appraisals and decisions in taking or not taking action under this
Agreement. Neither Administrative Agent nor any Co-Arranger nor any Bank Party
shall be required to keep any other Agent or Bank Party informed as to the
performance or observance by Borrower or its Subsidiaries of the obligations
under this Agreement or any other document referred to or provided for herein or
to make inquiry of, or to inspect the properties or books of Borrower. Except
for notices, reports and other documents and information expressly required to
be furnished to the Bank Parties by Administrative Agent hereunder, neither
Administrative Agent nor any Co-Arranger nor any Bank Party shall have any duty
or responsibility to provide any Agent or Bank Party with any credit or other
information concerning Borrower or its Subsidiaries, which may come into the
possession of any Agent or Bank Party or any of its or their Affiliates.
7.06. Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, Administrative Agent may resign at any time by giving notice thereof to
the Banks, and Administrative Agent may be removed at any time with or without
cause by the Majority Banks. Upon any such resignation or removal, the Majority
Banks shall have the right to appoint a successor Administrative Agent, which
Administrative Agent shall be reasonably acceptable to Borrower. If no successor
Administrative Agent shall have been appointed by the Majority Banks and shall
have accepted such appointment within thirty (30) days after the retiring
Administrative Agent's giving of notice of resignation or the Majority Banks'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Bank Parties, appoint a successor Administrative
Agent, which shall be (a) a bank having a combined capital, surplus and retained
earnings of not less than U.S. $500,000,000 and (b) shall be reasonably
acceptable to Borrower; provided, however, that Borrower shall have no right to
approve a successor Agent which is a Bank if an Event of Default has occurred
and is
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continuing. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent, such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section VII shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.
7.07. Removal of Co-Arrangers. If, at any time, any Co-Arranger's share
of the total credit facilities provided by all Banks hereunder is less than six
and one-quarter percent (6.25%), such Co-Arranger may be removed by Borrower
upon thirty (30) days prior written notice from Borrower to Administrative Agent
and such Co-Arranger. Upon any such removal, Borrower shall, at its election,
have the right to appoint another Bank as successor to such removed Co-Arranger,
which successor Co-Arranger shall be reasonably acceptable to the Majority
Banks. If no successor Co-Arranger is appointed for any removed Co-Arranger, all
rights, powers and privileges vested in the Agents hereunder shall be exercised
by Administrative Agent and the remaining Co-Arranger(s) or, if no Co-Arranger
remains, by Administrative Agent alone. Upon the acceptance of any appointment
as a Co-Arranger hereunder by a successor Co-Arranger, such successor
Co-Arranger shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the removed Co-Arranger, and the removed
Co-Arranger shall be discharged from its duties and obligations hereunder. After
any Co-Arranger's removal hereunder as a Co-Arranger, the provisions of this
Section VII shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as a Co-Arranger. For the
purposes of this Paragraph 7.07, a Co-Arranger's share of the total credit
facilities provided by all Banks hereunder at any time shall be (a) if Revolving
Loans are then outstanding, (i) the aggregate principal amount of all Revolving
Loans then outstanding, together with the aggregate stated amount of all Letters
of Credit then outstanding, which are held by such Co-Arranger and its
Affiliates as a Bank or as Banks hereunder, divided by (ii) the aggregate
principal amount of all Revolving Loans then outstanding, together with the
aggregate stated amount of all Letters of Credit then outstanding, held by all
Banks or (b) if no Revolving Loans are then outstanding, the aggregate
Proportionate Share at such time of such Co-Arranger and its Affiliates as a
Bank or as Banks hereunder.
7.08. Authorization. Administrative Agent is hereby authorized by the
Bank Parties to execute, deliver and perform,
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each of the Credit Documents to which Administrative Agent is or is intended to
be a party and each Bank Party agrees, subject to the terms of this Agreement,
to be bound by all of the agreements of Administrative Agent contained in the
Credit Documents.
7.09. Agents in Their Individual Capacities. Each Agent and its
affiliates may make loans to, accept deposits from and generally engage in any
kind of business with Borrower and its Subsidiaries and affiliates as though
such Agent were not an Agent hereunder. With respect to Revolving Loans made and
Letters of Credit issued by ABN and CIBC as Banks, ABN and CIBC shall have the
same rights and powers under this Agreement and the other Credit Documents as
any other Bank Party and may exercise the same as though they were not Agents.
7.10. Agents' Communications Binding Upon Banks. Subject to the terms
of this Agreement, the Bank Parties agree that written communications from
Administrative Agent and the Co-Arrangers to Borrower on behalf of the Bank
Parties shall be binding upon the Bank Parties.
7.11. No Obligations of Borrower. Nothing contained in this Article VII
shall be deemed to impose upon Borrower any obligation in respect of the due and
punctual performance by any Agent of its obligations to the Bank Parties under
any provision of this Agreement, and Borrower shall have no liability to any
Agent or Bank Party in respect of any failure by any Agent or Bank Party to
perform any of their respective obligations to each other under this Agreement.
Without limiting the generality of the foregoing sentence, where any provision
of this Agreement relating to the payment of any amounts due and owing under the
Loan Documents provides that such payments shall be made by Borrower to the
Administrative Agent for the account of the Bank Parties, Borrower's obligations
to the Bank Parties in respect of such payments shall be deemed to be satisfied
upon the making of such payments to Administrative Agent in the manner provided
by this Agreement.
7.12. Co-Agents and Documentation Agent. None of the Banks identified
herein as a "co-agent" or as Documentation Agent shall have any right, power,
obligation, liability, responsibility or duty under this Agreement or any other
Credit Document other than those applicable to all Banks as such. Without
limiting the foregoing, none of the Banks so identified as a "co-agent" or as
Documentation Agent shall have or be deemed to have any fiduciary relationship
with any Bank. Each Bank acknowledges that it has not relied, and will not rely,
on any of the Banks identified as "co-agent" or as Documentation Agent in
deciding to enter into this Agreement or in taking or not taking action
hereunder. Without limiting the generality of the foregoing, it is understood
and agreed that the Documentation Agent is not responsible for the validity,
effectiveness,
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enforceability or sufficiency of this Agreement or any other Credit Document.
SECTION VIII. MISCELLANEOUS.
8.01. Notices. Except as otherwise provided herein, all notices,
requests, demands, consents, instructions or other communications to or upon
Borrower, any Bank Party or any Agent under this Agreement or the other Credit
Documents shall be in writing and faxed, mailed or delivered, if to Borrower or
Administrative Agent at its respective facsimile number or address set forth
below, if to any Bank, at the address or facsimile number specified beneath the
heading "Address for Notices" under the name of such Bank in Schedule I or, if
to Issuing Bank, at the address or facsimile number indicated in the notice
given by Issuing Bank to the other parties at the time any such Issuing Bank is
selected by Borrower and approved by Administrative Agent and the Co-Arrangers
(or to such other facsimile number or address for any party as indicated in any
notice given by that party to the other parties). All such notices and
communications shall be effective (a) when sent by Federal Express or other
overnight service of recognized standing, on the second Business Day following
the deposit with such service; (b) when mailed, first class postage prepaid and
addressed as aforesaid through the United States Postal Service, upon receipt;
(c) when delivered by hand, upon delivery; and (d) when faxed, upon confirmation
of receipt; provided, however, that any notice delivered to Administrative Agent
or Issuing Bank under Section II shall not be effective until received by such
Person.
Administrative
Agent: Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, New York 10017
Attn: Ian Palmer
Syndications
Telephone: (212) 856-3875
Facsimile: (212) 856-3763
Borrower: Quantum Corporation
500 McCarthy Boulevard
Milpitas, CA 95035
Attn: Ed McClammy,
Vice President Finance & Treasurer
Telephone: (408) 894-5703
Facsimile: (408) 894-4562
Each Notice of Borrowing, Notice of Conversion, Notice of Interest Period
Selection and LC Application shall be given by
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Borrower to Administrative Agent and, in the case of an LC Application, to
Issuing Bank, to the office of such Person located at the address referred to
above during such Person's normal business hours; provided, however, that any
such notice received by any such Person after 1:00 P.M. on any Business Day
shall be deemed received by such Person on the next Business Day. In any case
where this Agreement authorizes notices, requests, demands or other
communications by Borrower to any Agent or any Bank Party to be made by
telephone or facsimile, any Agent or any Bank Party may conclusively presume
that anyone purporting to be a person designated in any incumbency certificate
or other similar document received by such Agent or Bank Party is such a person.
8.02. Expenses. Borrower shall pay within ten (10) days after demand,
whether or not any Revolving Loan is made or any Letter of Credit is issued
hereunder, (a) all reasonable fees and expenses payable to third parties,
including each Agent's out-of-pocket expenses and reasonable attorneys' fees and
expenses, incurred by Agents in connection with the preparation, negotiation,
execution and delivery of, and the exercise of their duties under, the Summary
of Terms and Conditions dated May 5, 1997 among Borrower and the Co-Arrangers
and the Agents' Fee Letters and their structuring of, due diligence relating to
and syndication of the credit facilities set forth in this Agreement; (b) all
(i) Attorney Costs and (ii) other reasonable fees and expenses payable to third
parties incurred by Agents in connection with the preparation, negotiation,
execution, delivery and syndication of this Agreement and the other Credit
Documents, and the preparation, negotiation, execution and delivery of
amendments and waivers hereunder and thereunder; (c) all Attorney Costs and
other reasonable fees and expenses payable to third parties incurred by Agents
in connection with the exercise of their rights or duties under this Agreement
and the other Credit Documents; and (d) all Attorney Costs and other reasonable
fees and expenses payable to third parties incurred by any Agent or any Bank
Party in the enforcement or attempted enforcement of any of the Obligations or
in preserving any of Agents' or the Banks' rights and remedies (including all
such fees and expenses incurred in connection with any "workout" or
restructuring affecting the Credit Documents or the Obligations or any
bankruptcy or similar proceeding involving Borrower or any of its Subsidiaries).
The obligations of Borrower under this Paragraph 8.02 shall survive the payment
and performance of the Obligations and the termination of this Agreement.
8.03. Indemnification. To the fullest extent permitted by law, Borrower
agrees to protect, indemnify, defend and hold harmless Agents, the Bank Parties
and their Affiliates and their respective directors, officers, employees, agents
and advisors ("Indemnitees") from and against any and all liabilities, losses,
damages or expenses of any kind or nature and from any suits,
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claims or demands (including in respect of or for reasonable attorney's fees and
other expenses) arising on account of or in connection with (a) any use by
Borrower of any proceeds of the Revolving Loans or any Letter of Credit, (b) any
violation or alleged violation of any Requirement of Law by Borrower or any of
its Affiliates, (c) any Default or Event of Default, (d) or any acquisition or
proposed acquisition by Borrower of the stock or assets (in whole or in part) of
any other Person or (e) the execution, delivery and performance of this
Agreement and the other Credit Documents by any of the Indemnitees (unless
arising out of any violation by any of the Agents, the Bank Parties or any of
their Affiliates of any applicable law governing its banking powers), except to
the extent such liability arises from the willful misconduct or gross negligence
of such Indemnitee. Upon receiving knowledge of any suit, claim or demand
asserted by a third party that any Agent or any Bank Party believes is covered
by this indemnity, such Agent or such Bank Party shall give Borrower prompt
written notice of the matter (specifying with reasonable particularity the basis
therefor) and an opportunity (but not the obligation) to participate in and
defend it, at Borrower's sole cost and expense, with legal counsel reasonably
satisfactory to such Agent or such Bank Party, as the case may be. Any failure
or delay of any Agent or any Bank Party to notify Borrower of any such suit,
claim or demand as required by this Paragraph 8.03 or to cooperate in the
defense thereof shall not relieve Borrower of its obligations under this
Paragraph 8.03 but shall reduce such obligations to the extent of any increase
in those obligations caused solely by any such failure or delay which is
unreasonable. The obligations of Borrower under this Paragraph 8.03 shall
survive the payment and performance of the Obligations and the termination of
this Agreement.
8.04. Waivers; Amendments. Any term, covenant, agreement or condition
of this Agreement or any other Credit Document may be amended or waived if such
amendment or waiver is in writing and is signed by Borrower and the Majority
Banks; provided, however that:
(a) Any amendment, waiver or consent which (i) amends this
Paragraph 8.04, or (ii) amends the definition of Majority Banks must be
in writing and signed or approved in writing by all Banks;
(b) Any amendment, waiver or consent which (i) increases the
Total Commitment, (ii) extends the Maturity Date, (iii) reduces the
principal of or interest on the Revolving Loans or any fees or other
amounts payable for the account of the Banks hereunder, (iv) increases
the LC Commitment, or (v) postpones any date fixed for any payment of
the principal of or interest on the Revolving Loans or any fees or
other amounts payable for the account of the
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Banks hereunder must be in writing and signed or approved in writing by
all Banks;
(c) Any amendment, waiver or consent which increases or
decreases the Proportionate Share of any Bank must be in writing and
signed by such Bank;
(d) Any amendment, waiver or consent which increases the LC
Commitment or otherwise affects the rights or obligations of Issuing
Bank must be in writing and signed by Issuing Bank; and
(e) Any amendment, waiver or consent which affects the rights
or obligations of any Agent must be in writing and signed by such
Agent.
No failure or delay by any Agent or any Bank Party in exercising any right
hereunder shall operate as a waiver thereof or of any other right nor shall any
single or partial exercise of any such right preclude any other further exercise
thereof or of any other right. Unless otherwise specified in such waiver or
consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given.
8.05. Successors and Assigns.
(a) Binding Effect. This Agreement and the other Credit
Documents shall be binding upon and inure to the benefit of Borrower,
the Bank Parties, Agents, all future holders of the Notes and their
respective successors and permitted assigns, except that Borrower may
not assign or transfer any of its rights or obligations under any
Credit Document without the prior written consent of Agents and each
Bank. All references in this Agreement to any Person shall be deemed to
include all successors and assigns of such Person.
(b) Participations. Any Bank may, in the ordinary course of
its commercial banking business and in accordance with applicable law,
at any time sell to one or more banks or other financial institutions
("Participants") participating interests in any Revolving Loan owing to
such Bank, any Note held by such Bank, any Commitment of such Bank or
any other interest of such Bank under this Agreement and the other
Credit Documents. In the event of any such sale by a Bank of
participating interests to a Participant, such Bank's obligations under
this Agreement to the other parties to this Agreement shall remain
unchanged, such Bank shall remain solely responsible for the
performance thereof, such Bank shall remain the holder of any such Note
for all purposes under this Agreement, such Bank shall retain the right
to approve amendments and waivers and other voting
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rights hereunder and Agents and Borrower shall continue to deal solely
and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement; provided, however, that any agreement
pursuant to which any Bank sells a participating interest to a
Participant may require the selling Bank to obtain the consent of such
Participant in order for such Bank to agree in writing to any amendment
of a type specified in clause (i), (ii), (iii), (iv) or (v) of
Subparagraph 8.04(b) or Subparagraph 8.04(c), as appropriate. Borrower
agrees that if amounts outstanding under this Agreement and the other
Credit Documents are due and 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 fullest extent permitted by
law, be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any
other Credit Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Bank under this
Agreement or any other Credit Documents; provided, however, that (i) no
Participant shall exercise any rights under this sentence without the
consent of Administrative Agent, (ii) no Participant shall have any
rights under this sentence which are greater than those of the selling
Bank and (iii) such rights of setoff shall be subject to the obligation
of such Participant to share with the Banks, and the Banks agree to
share with such Participant, as provided in Subparagraph 2.09(b).
Borrower also agrees that any Bank which has transferred all or part of
its interests in the Commitments and the Revolving Loans to one or more
Participants shall, notwithstanding any such transfer, be entitled to
the full benefits accorded such Bank under Paragraph 2.10, Paragraph
2.11, and Paragraph 2.12, as if such Bank had not made such transfer.
(c) Assignments. Any Bank may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at
any time, sell and assign to any Bank, any affiliate of a Bank or any
other bank or financial institution (individually, an "Assignee Bank")
all or a portion of its rights and obligations under this Agreement and
the other Credit Documents (such a sale and assignment to be referred
to herein as an "Assignment") pursuant to an assignment agreement in
the form of Exhibit G (an "Assignment Agreement"), executed by each
Assignee Bank and such assignor Bank (an "Assignor Bank") and delivered
to Administrative Agent for its acceptance and recording in the
Register; provided, however, that:
(i) Without the written consent of Borrower (which
written consent of Borrower shall not be required after the
occurrence and during the
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continuation of an Event of Default), Administrative Agent and
Issuing Bank (which consent of Borrower, Administrative Agent
and Issuing Bank shall not be unreasonably withheld), no Bank
may make any Assignment to any Assignee Bank which is not,
immediately prior to such Assignment, a Bank hereunder or an
affiliate which controls, is controlled by or is under common
control with a Bank hereunder;
(ii) Without the written consent of Borrower (which
written consent of Borrower shall not be required after the
occurrence and during the continuation of an Event of Default)
and Administrative Agent (which consent of Borrower may be
withheld in its sole and absolute discretion but which consent
of Administrative Agent shall not be unreasonably withheld),
no Bank may make any Assignment to any Assignee Bank which is
not, immediately prior to such Assignment, a Bank hereunder or
an affiliate which controls, is controlled by or is under
common control with a Bank hereunder if (A) the principal
amount of such Assignment is less than the lesser of two and
one-half percent (2.50%) of the Total Commitment at the time
of such Assignment or all of the Assignor Bank's Revolving
Loans and Commitments hereunder or (B) if, after giving effect
to such Assignment, the sum of the Assignor Bank's Commitment
would be greater than zero but less than two and one-half
percent (2.50%) of the Total Commitment at the time of such
Assignment;
(iii) Without the written consent of Borrower (which
written consent of Borrower shall not be required after the
occurrence and during the continuation of an Event of Default)
and Administrative Agent (which consent of Borrower and
Administrative Agent shall not be unreasonably withheld), no
Bank may make any Assignment to any Assignee Bank which is,
immediately prior to such Assignment, a Bank hereunder or an
affiliate which controls, is controlled by or is under common
control with a Bank hereunder if the principal amount of such
Assignment is less than the lesser of Five Million Dollars
($5,000,000) or all of the Assignor Bank's Revolving Loans and
Commitments hereunder; and
(iv) No Bank may make any Assignment which does not
assign and delegate an equal pro rata interest in such Bank's
Revolving Loans, Commitments and all other rights, duties and
obligations of such Bank under this Agreement and the other
Credit Documents.
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Upon such execution, delivery, acceptance and recording of each
Assignment Agreement, from and after the Assignment Effective Date
determined pursuant to such Assignment Agreement, (A) each Assignee
Bank thereunder shall be a Bank hereunder with a Proportionate Share as
set forth on Attachment 1 to such Assignment Agreement and shall have
the rights, duties and obligations of such a Bank under this Agreement
and the other Credit Documents, and (B) the Assignor Bank thereunder
shall be a Bank with a Proportionate Share as set forth on Attachment 1
to such Assignment Agreement, or, if the Proportionate Share of the
Assignor Bank has been reduced to 0%, the Assignor Bank shall cease to
be a Bank; provided, however, that any such Assignor Bank which ceases
to be a Bank shall continue to be entitled to the benefits of any
provision of this Agreement which by its terms survives the termination
of this Agreement. Each Assignment Agreement shall be deemed to amend
Schedule I to the extent, and only to the extent, necessary to reflect
the addition of each Assignee Bank, the deletion of each Assignor Bank
which reduces its Proportionate Share to 0% and the resulting
adjustment of Proportionate Shares arising from the purchase by each
Assignee Bank of all or a portion of the rights and obligations of an
Assignor Bank under this Agreement and the other Credit Documents. On
or prior to the Assignment Effective Date determined pursuant to each
Assignment Agreement, Borrower, at its own expense, shall execute and
deliver to Administrative Agent, in exchange for the surrendered Note
of the Assignor Bank thereunder, a new Note to the order of each
Assignee Bank thereunder in an amount equal to the Commitment assumed
by such Assignee Bank and, if the Assignor Bank is continuing as a Bank
hereunder, a new Note to the order of the Assignor Bank in an amount
equal to the Commitment retained by it. Each such new Note shall be
dated the Closing Date and otherwise be in the form of the Note
replaced thereby (provided that Borrower shall not be obligated to pay
any additional interest to any Assignee Bank in respect to any
principal payments made prior to the Assignment Effective Date of the
Assignment to such Assignee Bank). The Notes surrendered by the
Assignor Bank shall be returned by Administrative Agent to Borrower
marked "replaced". Each Assignee Bank which was not previously a Bank
hereunder and which is not incorporated under the laws of the United
States of America or a state thereof shall, within three (3) Business
Days of becoming a Bank, deliver to Borrower and Administrative Agent
either two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224 (or successor applicable form), as the case
may be, certifying in each case that such Bank is entitled to receive
payments under this Agreement without deduction or withholding of any
United States federal income taxes.
87
<PAGE>
(d) Register. Administrative Agent shall maintain at its
address referred to in Paragraph 8.01 a copy of each Assignment
Agreement delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Banks and the
Proportionate Share of each Bank from time to time. The entries in the
Register shall be conclusive in the absence of manifest error, and
Borrower, Agents and the Bank Parties may treat each Person whose name
is recorded in the Register as the owner of the Revolving Loans
recorded therein for all purposes of this Agreement. The Register shall
be available for inspection by Borrower or any Bank Party at any
reasonable time and from time to time upon reasonable prior notice.
(e) Registration. Upon its receipt of an Assignment Agreement
executed by an Assignor Bank and an Assignee Bank (and, to the extent
required by Subparagraph 8.05(c), by Borrower, Administrative Agent and
Issuing Bank), together with payment to Administrative Agent by
Assignor Bank of a registration and processing fee of $3,500,
Administrative Agent shall (i) promptly accept such Assignment
Agreement and (ii) on the Assignment Effective Date determined pursuant
thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Bank Parties and
Borrower. Administrative Agent may, from time to time at its election,
prepare and deliver to the Bank Parties and Borrower a revised Schedule
I reflecting the names, addresses and respective Proportionate Shares
of all Banks then parties hereto.
8.06. Setoff; Security Interest.
(a) Setoff. In addition to any rights and remedies of the Bank
Parties provided by law, each Bank Party shall have the right, with the
prior consent of Administrative Agent, but without prior notice to or
consent from Borrower, any such notice or consent being expressly
waived by Borrower to the extent permitted by applicable law, upon the
occurrence and during the continuance of an Event of Default, to
set-off and apply, or to authorize or direct such Bank to set-off and
apply, against any indebtedness, whether matured or unmatured, of
Borrower to such Bank Party, any amount owing from such Bank Party to
Borrower, at or at any time after, the happening of any of the above
mentioned events, and as security for such indebtedness, Borrower
hereby grants to Administrative Agent and each Bank Party a continuing
security interest in any and all deposits, accounts or moneys of
Borrower then or thereafter maintained with such Bank Party, subject in
each case to Subparagraph 2.09(b). The aforesaid right of set-off may
be exercised by any Bank Party against Borrower or against any trustee
in
88
<PAGE>
bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver or execution, judgment or attachment creditor of
Borrower or against anyone else claiming through or against Borrower or
such trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment
creditor, notwithstanding the fact that such right of set-off shall not
have been exercised by such Bank Party prior to the occurrence of an
Event of Default. Any Bank Party which exercises its right of setoff
agrees promptly to notify Borrower after any such set-off and
application made by such Bank Party, provided that the failure to give
such notice shall not affect the validity of such set-off and
application.
(b) Security Interest. As security for the Obligations,
Borrower hereby grants to each Bank Party, for the benefit of all
Agents and Bank Parties, a continuing security interest in any and all
deposit accounts or moneys of Borrower now or hereafter maintained with
such Bank Party. Each Bank Party shall have all of the rights of a
secured party with respect to such security interest.
8.07. No Third Party Rights. Nothing expressed in or to be implied from
this Agreement is intended to give, or shall be construed to give, any Person,
other than the parties hereto and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by
virtue of this Agreement or under or by virtue of any provision herein.
8.08. Partial Invalidity. If at any time any provision of this
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability of
the remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
8.09. Jury Trial. EACH OF BORROWER, THE BANK PARTIES AND AGENTS, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY CREDIT DOCUMENT.
8.10. Counterparts. This Agreement may be executed in any number of
identical counterparts, any set of which signed by all the parties hereto shall
be deemed to constitute a complete, executed original for all purposes.
8.11. Confidentiality. None of the Banks and Agents shall disclose to
any Person any information with respect to Borrower or any of its Subsidiaries
which is furnished pursuant
89
<PAGE>
to this Agreement, except that any Bank or Agent may disclose any such
information (a) to its own directors, officers, employees, auditors, counsel and
other professional advisors and to its Affiliates if such Bank or Agent or such
Bank's or such Agent's holding or parent company in its sole discretion
determines that any such party should have access to such information; (b) to
another Bank or Agent; (c) if generally available to the public; (d) if required
or appropriate in any report, statement or testimony submitted to any
Governmental Authority having or claiming to have jurisdiction over such Bank or
Agent; (e) if required or appropriate in response to any summons or subpoena or
in connection with any litigation, to the extent permitted or deemed advisable
by counsel; (f) to comply with any Requirement of Law applicable to such Bank or
Agent; (g) to any Participant or Assignee Bank or any prospective Participant or
Assignee Bank, provided that such Participant or Assignee or prospective
Participant or Assignee agrees in writing to be bound by this Paragraph 8.11
prior to disclosure; or (h) otherwise with the prior consent of Borrower;
provided, however, that any disclosure made in violation of this Agreement shall
not affect the obligations of Borrower under this Agreement and the other Credit
Documents.
[The next page is the first signature page.]
90
<PAGE>
IN WITNESS WHEREOF, Borrower, the Bank Parties and Agents have caused
this Agreement to be executed as of the day and year first above written.
BORROWER: QUANTUM CORPORATION
By: /s/ G. Edward McClammy
---------------------------------------
G. Edward McClammy
Vice President Finance
& Treasurer
CO-ARRANGERS: ABN AMRO BANK N.V., San Francisco
International Branch,
As a Co-Arranger
By: /s/ Robin S. Yim
---------------------------------------
Name: Robin S. Yim
Title: Group Vice President
By: /s/ Richard R. DaCosta
---------------------------------------
Name: Richard R. DaCosta
Title: Assistant Vice President
CIBC INC.,
As a Co-Arranger
By: /s/ Cyd D. Petre
---------------------------------------
Name: Cyd D. Petre
Title: AUTHORIZED SIGNATORY
91
<PAGE>
ADMINISTRATIVE AGENT: CANADIAN IMPERIAL BANK OF COMMERCE,
As Administrative Agent
By: /s/ Cyd D. Petre
---------------------------------------
Name: Cyd D. Petre
Title: Authorized Signatory
BANKS: ABN AMRO BANK N.V., San Francisco
International Branch,
As a Bank
By: /s/ Robin S. Yim
---------------------------------------
Name: Robin S. Yim
Title: Group Vice President
By: /s/ Richard R. DaCosta
---------------------------------------
Name: Richard R. DaCosta
Title: Assistant Vice President
CIBC INC.,
As a Bank
By: /s/ Cyd D. Petre
---------------------------------------
Name: Cyd D. Petre
Title: AUTHORIZED SIGNATORY
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
As a Bank
By: /s/ Kevin McMahon
---------------------------------------
Name: Kevin McMahon
Title: Managing Director
92
<PAGE>
BANKBOSTON, N.A.,
As a Bank
By: /s/ Lee A. Merkle
---------------------------------------
Name: Lee A. Merkle
Title: Vice President
THE BANK OF NOVA SCOTIA,
As a Bank
By: /s/ Chris Johnson
---------------------------------------
Name: Chris Johnson
Title: Senior Relationship
Manager
FLEET NATIONAL BANK,
As a Bank
By: /s/ Matthew Glauninger
---------------------------------------
Name: Matthew Glauninger
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED,
As a Bank
By: /s/ Haruhiko Masuda
---------------------------------------
Name: Haruhiko Masuda
Title: Deputy General Manager
<TABLE>
BANQUE NATIONALE DE PARIS,
As a Bank
<CAPTION>
<S> <C>
By: /s/ William J. La Herran
------------------------------------------------------
Name: Rafael C. Lumanlan William J. La Herran
Title: Vice President Assistant Vice President
</TABLE>
93
<PAGE>
THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
As a Bank
By: /s/ Yasushi Satomi
---------------------------------------
Name: Yasushi Satomi
Title: Senior Vice President
UNION BANK OF CALIFORNIA, N.A.,
As a Bank
By: /s/ Patrick Clemens
---------------------------------------
Name: Patrick Clemens
Title: Assistant Vice President
THE FUJI BANK, LIMITED,
As a Bank
By: /s/ Kazuo Kamio
---------------------------------------
Name: Kazuo Kamio
Title: General Manager
ROYAL BANK OF CANADA,
As a Bank
By: /s/ Stephen S. Hughes
---------------------------------------
Name: Stephen S. Hughes
Title: Senior Manager
DEUTSCHE BANK AG NEW YORK AND/OR
CAYMAN ISLAND BRANCHES,
As a Bank
By: /s/ Ralf Hoffman
---------------------------------------
Name: Ralf Hoffman
Title: Vice President
By: /s/ Belinda J. Wheeler
---------------------------------------
Name: Belinda J. Wheeler
Title: Vice President
94
<PAGE>
KEYBANK NATIONAL ASSOCIATION
As a Bank
By: /s/ Kevin P. McBride
---------------------------------------
Name: Kevin P. McBride
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.,
As a Bank
By: /s/ Motokazu Uematsu
---------------------------------------
Name: Motokazu Uematsu
Title: Deputy General Manager
MELLON BANK,
As a Bank
By: /s/ Edwin H. Wiest
---------------------------------------
Name: Edwin H. Wiest
Title: First Vice President
SANWA BANK CALIFORNIA,
As a Bank
By: /s/ Robert R. Shutt
---------------------------------------
Name: Robert R. Shutt
Title: Vice President
THE SUMITOMO TRUST AND BANKING CO.,
LTD., LOS ANGELES AGENCY
As a Bank
By: /s/ Ninoos Y. Benjamin
---------------------------------------
Name: Ninoos Y. Benjamin
Title: Vice President & Manager
95
<PAGE>
BANQUE PARIBAS,
As a Bank
By: /s/ Nanci Meyer
---------------------------------------
Name: Nanci Meyer
Title: Assistant Vice President
By: /s/ Lee S. Buckner
---------------------------------------
Name: Lee S. Buckner
Title: Group Vice President
THE SUMITOMO BANK, LIMITED,
As a Bank
By: /s/ Kozo Masaki
---------------------------------------
Name: Kozo Masaki
Title: General Manager
96
<PAGE>
SCHEDULE I
BANKS
PROPORTIONATE
BANK SHARE*
- ---- ------
ABN AMRO BANK N.V. 8.00000000%
Applicable Lending Office:
ABN AMRO Bank N.V.
San Francisco International
Branch
101 California Street
Suite 4550
San Francisco, CA 94111-5812
Address for Notices:
ABN AMRO Bank N.V.
San Francisco International Branch
101 California Street, Suite 4550
San Francisco, CA 94111-5812
Attn: Robert N. Hartinger
Robin S. Yim
Telephone: (415) 984-3710
Fax: (415) 362-3524
ABN AMRO Bank, N.V.
1235 Avenue of the Americas, 9th Floor
New York, NY 10019
Attn: Drew Helene
Vice President, Syndications
Telephone: (212) 370-8505
Fax: (212) 503-2689 or 682-0364
Wiring Instructions:
ABN AMRO Bank N.V.
ABA No.: 026-009-580
Account No.: 651001054541
Account Name: ABN AMRO San
Francisco International Branch
Reference: Quantum Corp.
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-1
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
CIBC INC. 8.00000000%
Applicable Lending Office:
CIBC Inc.
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
Address for Notices:
CIBC Inc.
425 Lexington Avenue
New York, NY 10017
Attention: Jan Palmer
Telephone: (212) 856-3695
Fax: (212) 856-3763 or 3799
Wiring Instructions:
Morgan Guaranty Trust Company of
New York
New York, NY 10260
ABA No.: 021-000-238
Account No.: 630-00-480
Account Name: CIBC, New York Agency
For further credit to: Agented Loans
Account No. 07-09611
Attention: Syndications
Reference: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-2
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION 8.00000000%
Applicable Lending Office:
Bank of America National Trust
and Savings Association
1850 Gateway Boulevard, 3rd Floor
Concord, CA 94520
Attention: Julia Young
GPO Account Admin: #5693
Telephone: (510) 675-7328
Fax: (510) 675-7531
Address for Notices:
Bank of America National Trust
and Savings Association
Credit Products-High Technology-SF #3697
555 California Street, 41st Floor
San Francisco, CA 94104
Attention: Kevin McMahon
Managing Director
Telephone: (415) 622-8088
Fax: (415) 622-2514
Wiring Instructions:
Bank of America National Trust
and Savings Association
San Francisco, California
ABA No.: 121000358
Account No.: 1233183980
Reference: Quantum Corp.
Attention: Julia Young
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-3
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
BANKBOSTON, N.A. 6.00000000%
Applicable Lending Office:
BankBoston, N.A.
435 Tasso Street, Suite 250
Palo Alto, CA 94301
Address for Notices:
BankBoston, N.A.
435 Tasso Street, Suite 250
Palo Alto, CA 94301
Attn: Lee A. Merkle, Vice President
Telephone: (415) 853-0404
Fax: (415) 853-1425
Wiring Instructions:
BankBoston, N.A.
100 Federal Street
Boston, MA 02110
ABA No.: 011-000-390
Account No.: 540-99647
Attn: Comm Loan Svc, Adm 50 High Tech
Ref: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-4
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
THE BANK OF NOVA SCOTIA 6.00000000%
Applicable Lending Office:
The Bank of Nova Scotia
580 California Street, Suite 2100
San Francisco, CA 94104
Attention: Mr. Chris Johnson
Telephone: (415) 986-1100
Fax: (415) 397-0791
Address for Notices:
The Bank of Nova Scotia
600 Peachtree Street, N.E.
Atlanta, GA 30308
Attention: Norman O. Campbell
Telephone: (404) 877-1500
Fax: (404) 888-8998
Wiring Instructions:
The Bank of Nova Scotia
One Liberty Plaza
New York, NY
ABA No.: 026002532
Account No.: 60023-7
For Credit to: The Bank of Nova Scotia
San Francisco Agency
Reference: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-5
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
FLEET NATIONAL BANK 6.00000000%
Applicable Lending Office:
Fleet National Bank
75 State Street
Boston, MA 02109
Address for Notices:
Fleet National Bank
75 State Street
Boston, MA 02109
Attention: Matthew Glauninger
Vice President
Telephone: (617) 346-1645
Fax: (617) 346-1633
Wiring Instructions:
Fleet National Bank
75 State Street
Boston, MA 02109
ABA: 011-000-138
Account Name: Incoming Loan in Process Wire Account
A/C No.: 120986-03156
Reference: Quantum Corp.
Attention: Commercial Loan Operations/Agent Bank
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-6
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
THE INDUSTRIAL BANK OF
JAPAN, LIMITED 6.00000000%
Applicable Lending Office:
The Industrial Bank of Japan, Limited
San Francisco Agency
555 California Street, Suite 3110
San Francisco, CA 94104
Address for Notices:
The Industrial Bank of Japan, Limited
San Francisco Agency
555 California Street, Suite 3110
San Francisco, CA 94104
Attention: Jeanette O'Donnell
Telephone: (415) 693-1831
Fax: (415) 982-1917
Telex: 49608738
Answerback: IBJ SFO
Wiring Instructions:
Bank of American NT & SA
International Deposit Services 6561
1850 Gateway Boulevard
Concord, CA 94520
ABA No.: 121-000-358
Account: The Industrial Bank of Japan, Limited
Los Angeles Agency
Account No.: 62906-14014
"For Credit to IBJ SFA, A/C 2601-22011"
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-7
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
BANQUE NATIONALE DE PARIS 5.00000000%
Applicable Lending Office:
Banque Nationale de Paris
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Attention: Rafael Lumanlan
Telephone: (415) 956-0707
Fax: (415) 296-8954
Telex: RCA 278900
Answerback: BNPS UR
Address for Notices:
Banque Nationale de Paris
180 Montgomery Street, 3rd Floor
San Francisco, CA 94104
Credit:
Rafael Lumanlan
Vice President
Telephone: (415) 956-0707
Fax: (415) 296-8954
Operations:
Donald A. Hart
Treasurer
Telephone: (415) 956-2511
Fax: (415) 989-9041
Wiring Instructions:
Federal Reserve Bank of San Francisco
For the Account of: Banque Nationale de Paris
San Francisco Branch
ABA #: 121027234
Ref: QUANTUM REVOLVER
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-8
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
THE MITSUBISHI TRUST AND
BANKING CORPORATION, LOS ANGELES AGENCY 5.00000000%
Applicable Lending Office:
The Mitsubishi Trust and Banking Corporation, Los Angeles Agency
801 South Figueroa Street, Suite 500
Los Angeles, CA 90017
Attention: Michael Lundgren
Assistant Vice President
Telephone: (213) 896-4732
Fax: (213) 629-2571/ (213) 687-4631
Telex: 49657290
Answerback: MTB B LSA
Alternative Contact: Pam Khamvongsa
Loan Assistant
Telephone: (213) 896-4735
Fax: (213) 687-8325
Address for Notices:
The Mitsubishi Trust and Banking Corporation, Los Angeles Agency
801 South Figueroa Street, Suite 500
Los Angeles, CA 90017
Attention: Jill Kato
Vice President
Telephone: (213) 896-4655
Fax: (213) 687-4631
Alternative Contact: F. Frank Herrera
First Vice President
Telephone: (213) 896-4652
Wiring Instructions:
Bank of America, San Francisco, California
ABA #: 121 000 358
Account #: 62908-04915
Ref: Quantum Corporation
Attention: Loan Administration Department
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-9
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
UNION BANK OF CALIFORNIA, N.A. 5.00000000%
Applicable Lending Office:
Union Bank of California, N.A.
400 California Street, 16th Floor
San Francisco, CA 94104
Attention: Norma Sarto
Telephone: (415) 765-2722
Fax: (415) 765-2920
Telex: 188316 UNION SFO UT
Answerback: UNION SFO UT
Address for Notices:
Union Bank of California, N.A.
350 California Street, 6th Floor
San Francisco, CA 94104
Attention: Glenn Leyrer
Telephone: (415) 705-7578
Fax: (415) 705-5093
Wiring Instructions:
Union Bank of California, 1980 Saturn Street, Monterey, CA 91755
Los Angeles, CA
Fed ABA No.: 122-000-496
Account No.: 070196431
Reference: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-10
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
THE FUJI BANK, LIMITED 4.00000000%
Applicable Lending Office:
The Fuji Bank, Ltd.
601 California Street
San Francisco, CA 94108
Attention: Mike Rogers
Telephone: (415) 296-5440
Fax: (415) 362-4613
Telex: 176087
Answerback: FUJIBK SFO
Address for Notices:
The Fuji Bank, Ltd.
601 California Street
San Francisco, CA 94108
Credit:
Attention: Mami Yamajo, Vice President
Telephone: (415) 296-5433
Fax: (415) 362-4613
Operations:
Attention: Candi Eng
Telephone: (415) 296-5444
Fax: (415) 362-4613
Wiring Instructions:
Bank of America, NT&SA
San Francisco, CA
ABA #: 1210-0035-8
Account Name: The Fuji Bank, Limited, San Francisco
Account #: 62 901-08242
Ref: Quantum R/C
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-11
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
ROYAL BANK OF CANADA 4.00000000%
Applicable Lending Office:
Royal Bank of Canada
600 Wilshire Blvd., Suite 800
Los Angeles, CA 90017
Attention: Stephen Hughes
Telephone: (213) 955-5320
Fax: (213) 955-5350
Address for Notices:
Credit:
Royal Bank of Canada
600 Wilshire Blvd., Suite 800
Los Angeles, CA 90017
Attention: Stephen Hughes
Telephone: (213) 955-5320
Fax: (213) 955-5350
Operations:
Royal Bank of Canada
1 Financial Square, 23rd Floor
New York, NY 10005-3531
Attention: Linda Smith
Telephone: (212) 428-6323
Fax: (212) 428-2372
Telex: ROYBAN 65219
Wiring Instructions:
Chase Manhattan Bank, New York
New York, NY
ABA #: 021000021
Account #: 920-1-033363
Attention: Linda Smith
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-12
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
DEUTSCHE BANK AG NEW YORK AND/OR 4.00000000%
CAYMAN ISLANDS BRANCHES
Applicable Lending Office:
Deutsche Bank AG
31 West 52nd Street
New York, NY 10019
Attention: Nancy Zorn
Telephone: (212) 469-4112
Fax: (212) 469-4139
Backup Operations: Lynn Sweeney
Telephone: (212) 469-4098
Fax: (212) 469-4139
Address for Notices:
50 California Street, Suite 1500
San Francisco, CA 94111
Attention: Olaf Janke
Telephone: (415) 439-5225
Fax: (415) 439-5215
Wiring Instructions:
Deutsche Bank AG New York Branch
ABA #: 026003780
Ref: Quantum Corporation
Attention: Nancy Zorn
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-13
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
KEYBANK NATIONAL ASSOCIATION 4.00000000%
Applicable Lending Office:
KeyBank National Association
P.O. Box 1594
Tacoma, WA 98401
Attention: Vicky Heineck/Mary Pease
Telephone: (800) 297-5818
Fax: (800) 297-5495
Address for Notices:
700 Fifth Avenue, 48th Floor
Seattle, WA 98104
Attention: Kevin McBride/Mary Young
Telephone: (206) 684-6039
Fax: (206) 684-6035
Wiring Instructions:
KeyBank National Association
ABA #: 125000574
Account Name: NW Region Specialty Services
Account #: 01500163
Ref: Quantum
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-14
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
THE LONG-TERM CREDIT BANK
OF JAPAN, LTD. 4.00000000%
Applicable Lending Office:
The Long-Term Credit Bank of Japan, Ltd.
350 South Grand Avenue, Suite 3000
Los Angeles, CA 90071
Attention: Tamotsu Ukai
Telephone: (213) 689-6345
Fax: (213) 626-1067
Address for Notices:
The Long-Term Credit Bank of Japan, Ltd.
350 South Grand Avenue, Suite 3000
Los Angeles, CA 90071
Attention: Lisa Truong/Claude Graham
Telephone: (213) 689-6244/(213) 689-6235
Fax: (213) 626-1067
Telex: 673-3533
Answerback: LTCB LSA
Wiring Instructions:
First Interstate Bank of California
Los Angeles, CA
Fed ABA#: 122000358
For Credit to: Long-Term Credit Bank of Japan
Los Angeles Agency
Account No.: 6290131191
Attention: LA7
Reference: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-15
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
MELLON BANK 4.00000000%
Applicable Lending Office:
Mellon Bank
435 Tasso Street, Suite 100
Palo Alto, CA 94301
Attention: Sean C. Gannon
Telephone: (415) 326-3005 ext. 224
Fax: (415) 326-2382
Address for Notices:
Mellon Bank
Three Mellon Bank Center, 153-2304
Pittsburgh, PA 15259
Attention: Damon Carr
Telephone: (412) 234-1872
Fax: (412) 236-2027
Wiring Instructions:
Mellon Bank
Attention: Loan Administration
ABA #: 043000261
Account #: 990-873-800
Ref: Quantum Corporation
Attention: Loan Administration
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-16
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
SANWA BANK CALIFORNIA 4.00000000%
Applicable Lending Office:
Sanwa Bank California
San Jose Commercial Banking Center
220 Almaden Boulevard
San Jose, CA 95113
Address for Notices:
Sanwa Bank California
San Jose Commercial Banking Center
220 Almaden Boulevard
San Jose, CA 95113
Attention: Robert R. Schutt
James E. Rosewater
Telephone: (408) 297-6500
Fax: (408) 292-4092
Wiring Instructions:
Sanwa Bank California
ABA No.: 122003516
Account Name: San Jose CBC
Account No.: 1128-19005
Reference: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-17
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
THE SUMITOMO TRUST AND
BANKING CO., LTD. LOS ANGELES AGENCY 4.00000000%
Applicable Lending Office:
The Sumitomo Trust and Banking Co., Ltd., Los Angeles Agency
333 South Grand Avenue, Suite 5300
Los Angeles, CA 90071
Attention: Dan McGregor
Telephone: (213) 229-2197
Fax: (213) 613-1083
Address for Notices:
The Sumitomo Trust and Banking Co., Ltd.. Los Angeles Agency
333 South Grand Avenue, Suite 5300
Los Angeles, CA 90071
Attention: Manager, Credit Administration Department
Telephone: (213) 629-3191
Fax: (213) 628-2719
Wiring Instructions:
Bank of America NT & SA, San Francisco, California
ABA #: 121000358
Account Name: The Sumitomo Trust & Banking Co., Ltd., Los Angeles Agency
Account #: 62907-31117
Ref: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-18
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
BANQUE PARIBAS 3.00000000%
Applicable Lending Office:
Banque Paribas
101 California Street, Suite 3150
San Francisco, CA 94111
Attention: Nanci Meyer
Telephone: (415) 398-6811
Fax: (415) 398-4240
Address for Notices:
Banque Paribas
2029 Century Park East, Suite 3900
Los Angeles, CA 90067
Letters of Credit:
Attention: Tessie Xander
Telephone: (310) 551-7385
Fax: (310) 553-1504
Revolver:
Attention: Shirley Williams
Telephone: (310) 551-7360
Fax: (310) 553-1504
Wiring Instructions:
Bank of America, San Francisco CA
ABA #: 1210-0035-8
For credit to Banque Paribas, Los Angeles Agency
Account #: 62902-10150
Ref: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-19
<PAGE>
PROPORTIONATE
BANK SHARE*
- ---- ------
THE SUMITOMO BANK, LIMITED 2.00000000%
Applicable Lending Office:
The Sumitomo Bank, Limited
San Francisco Agency
555 California Street, Suite 3350
San Francisco, CA 94104
Attention: Gavin Hollis
Telephone: (415) 616-3003
Fax: (415) 397-1475
Address for Notices:
The Sumitomo Bank, Limited
San Francisco Agency
555 California Street, Suite 3350
San Francisco, CA 94104
Attention: Matt Kather
Telephone: (415) 616-3025
Fax: (415) 378-3580
Wiring Instructions:
The Sumitomo Bank of California
ABA No.: 121 002 042
Account Name: The Sumitomo Bank, Ltd., San Francisco Branch
Reference: Quantum Corporation
* To be expressed as a percentage rounded to the eighth digit to the right of
the decimal point.
I-20
<PAGE>
SCHEDULE II
PRICING GRID
LEVEL 1 LEVEL 2 LEVEL 3 LEVEL 4 LEVEL 5
PERIOD PERIOD PERIOD PERIOD PERIOD
------- ------- ------- ------- -------
APPLICABLE MARGINS
AND LC USAGE
FEE RATES: 0.40% 0.55% 0.70% 0.90% 1.10%
COMMITMENT FEE
PERCENTAGES: .150% .200% .250% .300% .375%
EXPLANATION
1. The Applicable Margin for each LIBOR Loan, the LC Usage Fee Rate on
each Letter of Credit and the Commitment Fee Percentage will be set for
each Pricing Period and will vary depending upon whether such period is
a Level 1 Period, a Level 2 Period, a Level 3 Period, a Level 4 Period
or a Level 5 Period.
2. The first Pricing Period, which commences on the date of this Agreement
and ends on September 30, 1997, will be a Level 3 Period.
3. The second Pricing Period, which commences on October 1, 1997 and ends
on November 30, 1997, will be a Level 1 Period, a Level 2 Period, a
Level 3 Period, a Level 4 Period or a Level 5 Period depending upon
Borrower's Total Funded Debt Ratio (and, with respect to determining
pricing at Level 1 Pricing only, EBITDA) for the consecutive
four-fiscal quarter period ending on June 30, 1997.
4. Each Pricing Period thereafter will be a Level 1 Period, a Level 2
Period, a Level 3 Period, a Level 4 Period or a Level 5 Period
depending upon Borrower's Total Funded Debt Ratio (and, with respect to
determining pricing at Level 1 Pricing only, EBITDA) for the most
recent consecutive four-fiscal quarter period ending prior to the first
day of such Pricing Period as follows:
(a) If, during any Pricing Period (i) Borrower's Total Funded Debt
Ratio is 1.00 or less and (ii) Borrower's EBITDA for the
previous four quarters is $400,000,000 or more, Borrower's
pricing will be a Level 1 Period.
(b) If, during any Pricing Period, (i) Borrower's Total Funded
Debt Ratio is more than 1.00 but less than or equal to
II-1
<PAGE>
1.50, or (ii) Borrower's Total Funded Debt Ratio is less than
or equal to 1.00 but Borrower's EBITDA for the previous four
quarters is less than $400,000,000, Borrower's pricing will be
a Level 2 Period.
(c) If, during any Pricing Period, Borrower's Total Funded Debt
Ratio is more than 1.50 but less than or equal to 2.00,
Borrower's pricing will be a Level 3 Period.
(d) If, during any Pricing Period, Borrower's Total Funded Debt
Ratio is more than 2.00 but less than or equal to 2.50,
Borrower's pricing will be a Level 4 Period.
(e) If, during any Pricing Period, Borrower's Total Funded Debt
Ratio is more than 2.50, Borrower's pricing will be a Level 5
Period.
5. Level 1 Period will also apply during any Pricing Period (other than
the first Pricing Period) in which Borrower's senior long term debt
rating from S&P or Moody's is equal to or better than either BBB- or
Baa3 or Borrower's subordinated debt rating from S&P or Moody's is
equal to or better than BB+ or Ba1.
II-2
<PAGE>
SCHEDULE 3.01
INITIAL CONDITIONS PRECEDENT
A. Principal Credit Documents.
(1) The Credit Agreement, duly executed by Borrower, each Bank
and each Agent; and
(2) A Note payable to each Bank, each duly executed by
Borrower.
B. Borrower Corporate Documents.
(1) The Certificate of Incorporation of Borrower, certified as
of a recent date prior to the Closing Date by the Secretary of State of
Delaware;
(2) A Certificate of Good Standing for Borrower (or comparable
certificate), certified as of a recent date prior to the Closing Date
by the Secretary of State of Delaware;
(3) A certificate of the Secretary or an Assistant Secretary
of Borrower, dated the Closing Date, certifying (a) that attached
thereto is a true and correct copy of the Bylaws of Borrower as in
effect on the Closing Date; (b) that attached thereto are true and
correct copies of resolutions duly adopted by the Board of Directors of
Borrower and continuing in effect, which authorize the execution,
delivery and performance by Borrower of this Agreement and the other
Credit Documents executed or to be executed by Borrower and the
consummation of the transactions contemplated hereby and thereby; (c)
that there are no proceedings for the dissolution or liquidation of
Borrower; and (d) the incumbency, signatures and authority of the
officers of Borrower authorized to execute, deliver and perform this
Agreement, the other Credit Documents and all other documents,
instruments or agreements related thereto executed or to be executed by
Borrower and indicating each such officer which is an Executive Officer
or Authorized Financial Officer; and
(4) Certificates of Good Standing (or comparable certificate)
for Borrower, certified as of a recent date prior to the Closing Date
by the Secretaries of State (or comparable public official) of each
state in which Borrower is qualified to do business.
C. Financial Statements, Financial Condition, Etc.
3.01-1
<PAGE>
(1) A copy of the unaudited balance sheet, statements of
income and cash flows of Borrower and its Subsidiaries for the fiscal
quarter ended March 31, 1997 and for the fiscal year to such date
(prepared on a consolidated basis);
(2) A copy of the audited consolidated Financial Statements of
Borrower for the fiscal year ended March 31, 1996, prepared by Ernst &
Young and a copy of the unqualified opinion delivered by such
accountants in connection with such Financial Statements;
(3) A copy of the 10-Q report filed by Borrower with the
Securities and Exchange Commission for the quarter ended December 29,
1996;
(4) A copy of the 10-K report filed by Borrower with the
Securities and Exchange Commission for the fiscal year ended March 31,
1996; and
(5) Such other financial, business and other information
regarding Borrower, or any of its Subsidiaries as any Co-Arranger may
reasonably request, including information as to possible contingent
liabilities, tax matters, environmental matters and obligations for
employee benefits and compensation.
D. Opinions. A favorable written opinion from Wilson Sonsini Goodrich & Rosati,
counsel for Borrower, dated the Closing Date, addressed to the Administrative
Agent for the benefit of the Agents and the Banks, covering such legal matters
as Agents may reasonably request and otherwise in form and substance
satisfactory to the Co-Arrangers.
E. Other Items.
(1) A duly completed and timely delivered Notice of Borrowing;
(2) The Disclosure Letter, duly executed by Borrower;
(3) A copy of the indenture (including, as applicable, the
form of debenture and the form of the note) and other documents,
agreements and instruments, related to the Convertible Subordinated
Debentures, together with all amendments and indentures supplemental
thereto through the Closing Date, certified by an Executive Officer of
Borrower;
(4) An organization chart for Borrower and its Subsidiaries,
setting forth the relationship among such Persons, certified by an
Executive Officer of Borrower;
3.01-2
<PAGE>
(5) A certificate of an Executive Officer of Borrower,
addressed to Administrative Agent and dated the Closing Date,
certifying that:
(a) The representations and warranties set forth in
Paragraph 4.01 are true and correct in all material respects
as of such date (except for such representations and
warranties made as of a specified date, which shall be true as
of such date); and
(b) No Event of Default or Default has occurred and
is continuing as of such date;
(6) Evidence satisfactory to Administrative Agent that the
proceeds of the initial Loans to be made on the Closing Date will be
used to satisfy all outstanding indebtedness of Borrower under the
Prior Credit Agreement, that the obligations of Borrower under the
Prior Credit Agreement (other than inchoate indemnity obligations) have
been satisfied and that the Prior Credit Agreement is terminated;
(7) All fees and expenses payable to the Agents and the Banks
on or prior to the Closing Date (including all Origination Fees and all
fees payable to the Agents pursuant to the Agents' Fee Letters);
(8) All fees and expenses of Agents' counsels through the
Closing Date; and
(9) Such other evidence as any Agent or Bank Party may
reasonably request to establish the accuracy and completeness of the
representations and warranties and the compliance with the terms and
conditions contained in this Agreement and the other Credit Documents.
3.01-3
<PAGE>
SCHEDULE 4.01(p)
See Disclosure Letter
4.01(p)-1
<PAGE>
SCHEDULE 5.02(a)
See Disclosure Letter
5.02(a)-1
<PAGE>
EXHIBIT A
NOTICE OF BORROWING
[Date]
Canadian Imperial Bank of Commerce,
as Administrative Agent
425 Lexington Avenue
New York, New York 10017
Attn: Ian Palmer
Syndications
1. Reference is made to that certain Credit Agreement, dated as of June
6, 1997 (as amended from time to time, the "Credit Agreement"), among Quantum
Corporation ("Borrower"), the financial institutions listed in Schedule I to the
Credit Agreement (the "Banks"), ABN AMRO Bank N.V., San Francisco International
Branch ("ABN") and CIBC Inc., as co-arrangers for the Banks, Canadian Imperial
Bank of Commerce, as administrative agent for the Banks (in such capacity,
"Administrative Agent"), ABN, as syndication agent for the Banks, Bank of
America National Trust and Savings Association, as documentation agent for the
Banks, and certain co-agents listed therein. Unless otherwise indicated, all
terms defined in the Credit Agreement have the same respective meanings when
used herein.
2. Pursuant to Subparagraph 2.01(b) of the Credit Agreement, Borrower
irrevocably hereby requests a Borrowing upon the following terms:
(a) The principal amount of the requested Borrowing is to be
$__________;
(b) The requested Borrowing is to consist of ["Base Rate" or
"LIBOR"] Loans;
(c) If the requested Borrowing is to consist of LIBOR Loans,
the initial Interest Period for such Revolving Loans will be
[__________ month[s]]; and
(d) The date of the requested Borrowing is to be __________,
_____.
3. Borrower hereby certifies to the Agents and the Banks that, on the
date of this Notice of Borrowing and after giving effect to the requested
Borrowing:
A-1
<PAGE>
(a) The representations and warranties of Borrower and its
Subsidiaries set forth in Paragraph 4.01 of the Credit Agreement and in
the other Credit Documents are true and correct in all material
respects as if made on such date (except for representations and
warranties expressly made as of a specified date, which are true as of
such date); and
(b) No Default or Event of Default has occurred and is
continuing or will result from the requested Borrowing.
4. Please disburse the proceeds of the requested Borrowing to
________________________________________________________________________________
______________________________________________________________.
IN WITNESS WHEREOF, Borrower has executed this Notice of Borrowing on
the date set forth above.
QUANTUM CORPORATION
By:___________________________
Name:_______________________
Title:______________________
A-2
<PAGE>
EXHIBIT B
NOTICE OF CONVERSION
[Date]
Canadian Imperial Bank of Commerce,
as Administrative Agent
425 Lexington Avenue
New York, New York 10017
Attn: Ian Palmer
Syndications
1. Reference is made to that certain Credit Agreement, dated as of June
6, 1997 (as amended from time to time, the "Credit Agreement"), among Quantum
Corporation ("Borrower"), the financial institutions listed in Schedule I to the
Credit Agreement (the "Banks"), ABN AMRO Bank N.V., San Francisco International
Branch ("ABN") and CIBC Inc., as co-arrangers for the Banks, Canadian Imperial
Bank of Commerce, as administrative agent for the Banks (in such capacity,
"Administrative Agent"), ABN, as syndication agent for the Banks, Bank of
America National Trust and Savings Association, as documentation agent for the
Banks, and certain co-agents listed therein. Unless otherwise indicated, all
terms defined in the Credit Agreement have the same respective meanings when
used herein.
2. Pursuant to Subparagraph 2.01(d) of the Credit Agreement, Borrower
hereby irrevocably requests to convert a Borrowing as follows:
(a) The Borrowing to be converted consists of ["Base Rate" or
"LIBOR"] Loans in the aggregate principal amount of $__________ which
were initially advanced to Borrower on ___________, ____;
(b) The Revolving Loans in the Borrowing are to be converted
into ["Base Rate" or "LIBOR"] Loans;
(c) If such Revolving Loans are to be converted into LIBOR
Loans, the initial Interest Period for such Revolving Loans commencing
upon conversion will be [__________ month[s]]; and
(d) The date of the requested conversion is to be ___________,
____;
3. Borrower hereby certifies to the Agents and the Banks that, on the
date of this Notice of Conversion, and after giving effect to the requested
conversion, no Default or Event of Default has occurred and is continuing or
will result from the requested conversion.
B-1
<PAGE>
B-2
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Notice of Conversion on
the date set forth above.
QUANTUM CORPORATION
By:___________________________
Name:_______________________
Title:______________________
B-3
<PAGE>
EXHIBIT C
NOTICE OF INTEREST PERIOD SELECTION
[Date]
Canadian Imperial Bank of Commerce,
as Administrative Agent
425 Lexington Avenue
New York, New York 10017
Attn: Ian Palmer
Syndications
1. Reference is made to that certain Credit Agreement, dated as of June
6, 1997 (as amended from time to time, the "Credit Agreement"), among Quantum
Corporation ("Borrower"), the financial institutions listed in Schedule I to the
Credit Agreement (the "Banks"), ABN AMRO Bank N.V., San Francisco International
Branch ("ABN") and CIBC Inc., as co-arrangers for the Banks, Canadian Imperial
Bank of Commerce, as administrative agent for the Banks (in such capacity,
"Administrative Agent"), ABN, as syndication agent for the Banks, Bank of
America National Trust and Savings Association, as documentation agent for the
Banks, and certain co-agents listed therein. Unless otherwise indicated, all
terms defined in the Credit Agreement have the same respective meanings when
used herein.
2. Pursuant to Subparagraph 2.01(e) of the Credit Agreement, Borrower
hereby irrevocably selects a new Interest Period for a Revolving Loan as
follows:
(a) The Borrowing for which a new Interest Period is to be
selected consists of LIBOR Loans in the aggregate principal amount of
$__________ which were initially advanced to Borrower on _____________,
_____ ;
(b) The last day of the current Interest Period for such
Revolving Loans is ___________, ____; and
(c) The next Interest Period for such Revolving Loans
commencing upon the last day of the current Interest Period is to be
[_________ month[s]].
3. Borrower hereby certifies to the Agents and the Banks that, on the
date of this Notice of Interest Period Selection, and after giving effect to the
requested selection, no Default or Event of Default has occurred and is
continuing or will result from the requested selection.
C-1
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Notice of Interest
Period Selection on the date set forth above.
QUANTUM CORPORATION
By:___________________________
Name:_______________________
Title:______________________
C-2
<PAGE>
EXHIBIT D
REVOLVING LOAN NOTE
$_________________ ___________, _____
____________, 1997
FOR VALUE RECEIVED, QUANTUM CORPORATION, a Delaware corporation
("Borrower"), hereby promises to pay to the order of
________________________________________ ("Bank"), the principal sum of
______________________________ DOLLARS ($__________), or such lesser amount as
shall equal the aggregate outstanding principal balance of the Revolving Loans
made by Bank to Borrower pursuant to the Credit Agreement referred to below (as
amended from time to time, the "Credit Agreement"), on or before the Maturity
Date specified in the Credit Agreement, and to pay interest on said sum, or such
lesser amount, at the rates and on the dates provided in the Credit Agreement.
Borrower shall make all payments hereunder, for the account of Bank's
Applicable Lending Office, to Administrative Agent as indicated in the Credit
Agreement, in lawful money of the United States and in same day or immediately
available funds.
Borrower hereby authorizes Bank to record on the schedule(s) annexed to
this note the date and amount of each Revolving Loan and of each payment or
prepayment of principal made by Borrower and agrees that all such notations
shall constitute prima facie evidence of the matters noted; provided, however,
that the failure of Bank to make any such notation shall not affect Borrower's
obligations hereunder.
This note is one of the Notes referred to in the Credit Agreement,
dated as of June 6, 1997, among Borrower, Bank and the other financial
institutions from time to time parties thereto (collectively, the "Banks"), ABN
AMRO Bank N.V., San Francisco International Branch and CIBC Inc., as
co-arrangers for the Banks, and Canadian Imperial Bank of Commerce, as
administrative agent for the Banks. This note is subject to the terms of the
Credit Agreement, including the rights of prepayment and the rights of
acceleration of maturity set forth therein. The transfer, sale or assignment of
any rights under or interest in this note is subject to certain restrictions
contained in the Credit Agreement, including Paragraph 8.05 thereof. Terms used
herein have the meanings assigned to those terms in the Credit Agreement, unless
otherwise defined herein.
Borrower shall pay all reasonable fees and expenses payable to third
parties, including reasonable attorneys' fees, incurred by Bank in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. Borrower hereby waives notice of presentment, demand,
protest or notice of any
D-1
<PAGE>
other kind. This note shall be governed by and construed in accordance with the
laws of the State of California.
QUANTUM CORPORATION
By:___________________________
Name:______________________
Title:_____________________
D-2
<PAGE>
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of Unpaid
Type of Amount of Interest Principal Paid Principal Notation
Date Loan Loan Period or Prepaid Balance Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
D-3
<PAGE>
EXHIBIT E
COMPLIANCE CERTIFICATE
[Date]
Canadian Imperial Bank of Commerce,
as Administrative Agent
425 Lexington Avenue
New York, New York 10017
Attn: Ian Palmer
Syndications
1. Reference is made to that certain Credit Agreement, dated as of June
6, 1997 (as amended from time to time, the "Credit Agreement"), among Quantum
Corporation ("Borrower"), the financial institutions listed in Schedule I to the
Credit Agreement (the "Banks"), ABN AMRO Bank N.V., San Francisco International
Branch ("ABN") and CIBC Inc., as co-arrangers for the Banks, Canadian Imperial
Bank of Commerce, as administrative agent for the Banks (in such capacity,
"Administrative Agent"), ABN, as syndication agent for the Banks, Bank of
America National Trust and Savings Association, as documentation agent for the
Banks, and certain co-agents listed therein. Unless otherwise indicated, all
terms defined in the Credit Agreement have the same respective meanings when
used herein (including Attachment 1 hereto).
2. Borrower hereby certifies to the Agents and the Banks as follows:
(a) In connection with the preparation of the Financial
Statements of Borrower for the [quarter][year] ended __________, ____
(the "Financial Statements"), the undersigned Executive Officer of
Borrower (the "Undersigned") has reviewed the terms of the Credit
Agreement and has made, or caused to be made, a detailed review of the
transactions and financial condition of Borrower and its Subsidiaries
during the accounting period covered by the Financial Statements.
(b) The Undersigned did not discover during the course of such
reviews, and has no other knowledge of, any event or condition which
constitutes a Default or an Event of Default at the end of the
accounting period covered by the Financial Statements or as of the date
of this Compliance Certificate, except as follows:
[State "None" or describe in detail any event or
condition which constitutes a Default or an Event of
Default, including the period during which any such
event or condition has existed, and the action which
Borrower proposes to take in connection therewith.]
E-1
<PAGE>
(c) Set forth in Attachment 1 hereto are true, complete and
accurate computations used in determining compliance with various
covenants set forth in the Credit Agreement for the period covered by
the Financial Statements and as of the last day of such period.
IN WITNESS WHEREOF, Borrower has executed this Compliance Certificate
on the date set forth above.
QUANTUM CORPORATION
By:___________________________
Name:______________________
Title:_____________________
E-2
<PAGE>
EXHIBIT F
SUBORDINATED DEBT TERMS
Section [_].1 Agreement of Subordination. [Quantum Corporation]
covenants and agrees, and each holder of Notes issued hereunder by his
acceptance thereof likewise covenants and agrees, that all Notes shall be issued
subject to the provisions of this Article [__]; and each Person holding any
Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees to be bound by such provisions.
The payment of the principal of, premium, if any, and interest on all
Notes (including, but not limited to, the redemption price with respect to the
Notes called for redemption in accordance with Section [_] [Notice of
Redemption: Selection of Notes] or submitted for redemption in accordance with
Section [_] [Redemption at Option of Holders], as the case may be, as provided
in the Indenture) issued hereunder shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness, whether outstanding at the
date of this Indenture or thereafter incurred.
No provision of this Article [_] shall prevent the occurrence of any
default or Event of Default hereunder.
Section [_].2 Payments to Noteholders. No payment shall be made with
respect to the principal of, or premium, if any, or interest on the Notes
(including, but not limited to, the redemption price with respect to the Notes
to be called for redemption in accordance with Section [_] [Notice of
Redemption: Selection of Notes] or submitted for redemption in accordance with
Section [_] [Redemption at Option of Holders], as the case may be, as provided
in the Indenture), except payments and distributions made by the Trustee as
permitted by the first or second paragraph of Section [_].5, if:
(i) a default in the payment of principal, premium, interest, rent
or other obligations due on any Senior Indebtedness occurs and
is continuing (or, in the case of Senior Indebtedness for
which there is a period of grace, in the event of such a
default that continues beyond the period of grace, if any,
specified in the instrument or lease evidencing such Senior
Indebtedness), unless and until such default shall have been
cured or waived or shall have ceased to exist; or
(ii) a default, other than a payment default, on a Designated
Senior Indebtedness occurs and is continuing that then permits
holders of such Designated Senior Indebtedness to accelerate
its maturity and the Trustee receives a notice of the default
(a "Payment Blockage Notice") from a Representative or
[Quantum Corporation].
F-1
<PAGE>
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section [_].2 unless and until (A) at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice, and (B) all scheduled payments of principal, premium, if any,
and interest on the Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
[Quantum Corporation] may and shall resume payments on and
distributions in respect of the Notes upon the earlier of:
(1) the date upon which the default is cured or waived or ceases to
exist, or
(2) in the case of a default referred to in clause (ii) above, 179 days
pass after notice is received if the maturity of such Designated Senior
Indebtedness has not been accelerated,
unless this Article [_] otherwise prohibits the payment or distribution at the
time of such payment or distribution.
Upon any payment by [Quantum Corporation], or distribution of assets of
[Quantum Corporation] of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or liquidation or
reorganization of [Quantum Corporation], whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or to
become due upon all Senior Indebtedness shall first be paid in full in cash or
other payment satisfactory to the holders of such Senior Indebtedness, or
payment thereof in accordance with its terms provided for in cash or other
payment satisfactory to the holders of such Senior Indebtedness before any
payment is made on account of the principal of, premium, if any, or interest on
the Notes (except payments made pursuant to Article [_] [Trustee Provisions]
from monies deposited with the Trustee pursuant thereto prior to commencement of
proceedings for such dissolution, winding-up, liquidation or reorganization);
and upon any such dissolution or winding-up or liquidation or reorganization of
[Quantum Corporation] or bankruptcy, insolvency, receivership or other
proceeding, any payment by [Quantum Corporation], or distribution of assets of
[Quantum Corporation] of any kind or character, whether in cash, property or
securities, to which the holders of the Notes or the Trustee would be entitled,
except for the provision of this Article [_], shall (except as aforesaid) be
paid by [Quantum Corporation] or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the holders of the Notes or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Indebtedness (pro rata
to such holders on the basis of the respective amounts of Senior Indebtedness
held by such
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<PAGE>
holders, or as otherwise required by law or a court order) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing any Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all Senior Indebtedness in full, in cash or other payment
satisfactory to the holders of such Senior Indebtedness, after giving effect to
any concurrent payment or distribution to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the holders of the
Notes or to the Trustee.
For purposes of this Article [_], the words, "cash, property or
securities" shall not be deemed to include shares of stock of [Quantum
Corporation] as reorganized or readjusted, or securities of [Quantum
Corporation] or any other corporation provided for by a plan of reorganization
or readjustment, the payment of which is subordinated at least to the extent
provided in this Article [_] with respect to the Notes to the payment of all
Senior Indebtedness which may at the time be outstanding; provided that (i) the
Senior Indebtedness is assumed by the new corporation, if any, resulting from
any reorganization or readjustment, and (ii) the rights of the holders of Senior
Indebtedness (other than leases which are not assumed by [Quantum Corporation]
or the new corporation, as the case may be) are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation of
[Quantum Corporation] with, or the merger of [Quantum Corporation] into, another
corporation or the liquidation or dissolution of [Quantum Corporation] following
the conveyance or transfer of its property as an entirety, or substantially as
an entirety, to another corporation upon the terms and conditions provided for
in Article [_] [Consolidation, Merger, Sale, Conveyance and Lease] shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section [_].2 if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions stated
in Article [_] [Consolidation, Merger, Sale, Conveyance and Lease].
In the event of the acceleration of the Notes because of an Event of
Default, no payment or distribution shall be made to the Trustee or any holder
of Notes in respect of the principal of, premium, if any, or interest on the
Notes (including, but not limited to, the redemption price with respect to the
Notes called for redemption in accordance with Section [_] [Notice of
Redemption; Selection of Notes] or submitted for redemption in accordance with
Section [__] [Redemption at Option of Holders], as the case may be, as provided
in the Indenture), except payments and distributions made by the Trustee as
permitted by the first or second paragraph of Section [_].5, until all Senior
Indebtedness has been paid in full in cash or other payment satisfactory to the
holders of Senior Indebtedness or such acceleration is rescinded in accordance
with the terms of this Indenture. If payment of the Notes is accelerated because
of an Event of Default, [Quantum Corporation] shall promptly notify holders of
Senior Indebtedness of the acceleration.
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<PAGE>
In the event that, notwithstanding the foregoing provisions, any
payment or distribution of assets of [Quantum Corporation] of any kind or
character, whether in cash, property or securities (including, without
limitation, by way of setoff or otherwise), prohibited by the foregoing, shall
be received by the Trustee or the holders of the Notes before all Senior
Indebtedness is paid in full in cash or other payment satisfactory to the
holders of such Senior Indebtedness, or provision is made for such payment
thereof in accordance with its terms in cash or other payment satisfactory to
the holders of such Senior Indebtedness, such payment or distribution shall be
held in trust for the benefit of and shall be paid over or delivered to the
holders of Senior Indebtedness or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by [Quantum Corporation], for application to
the payment of all Senior Indebtedness remaining unpaid to the extent necessary
to pay all Senior Indebtedness in full in cash or other payment satisfactory to
the holders of such Senior Indebtedness, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Indebtedness.
Nothing in this Section [_].2 shall apply to claims of, or payments to,
the Trustee under or pursuant to Section [__][Compensation and Expenses of
Trustee]. This Section [_].2 shall be subject to the further provisions of
Section [_].5.
Section [_].3 Subrogation of Notes. Subject to the payment in full of
all Senior Indebtedness, the rights of the holders of the Notes shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Article [_](equally
and ratably with the holders of all indebtedness of [Quantum Corporation] which
by its express terms is subordinated to other indebtedness of [Quantum
Corporation] to substantially the same extent as the Notes are subordinated and
is entitled to like rights of subrogation) to the rights of the holders of
Senior Indebtedness to receive payments or distributions of cash, property or
securities of [Quantum Corporation] applicable to the Senior Indebtedness until
the principal, premium, if any, and interest on the Notes shall be paid in full;
and, for the purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the holders of the Notes or the Trustee would be entitled except for the
provisions of this Article [_] and no payment over pursuant to the provisions of
this Article [_] to or for the benefit of the holders of Senior Indebtedness by
holders of the Notes or the Trustee, shall, as between [Quantum Corporation],
its creditors other than holders of Senior Indebtedness, and the holders of the
Notes, be deemed to be a payment by [Quantum Corporation] to or on account of
the Senior Indebtedness; and no payments or distributions of cash, property or
securities to or for the benefit of the holders of the Notes
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<PAGE>
pursuant to the subrogation provisions of this Article [_], which would
otherwise have been paid to the holders of Senior Indebtedness shall be deemed
to be a payment by [Quantum Corporation] to or for the account of the Notes. It
is understood that the provisions of this Article [_] are and are intended
solely for the purposes of defining the relative rights of the holders of the
Notes, on the one hand, and the holders of the Senior Indebtedness, on the other
hand.
Nothing contained in this Article [_] or elsewhere in this Indenture or
in the Notes is intended to or shall impair, as among [Quantum Corporation], its
creditors other than the holders of Senior Indebtedness, and the holders of the
Notes, the obligation of [Quantum Corporation], which is absolute and
unconditional, to pay to the holders of the Notes the principal of (and premium,
if any) and interest on the Notes as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holders of the Notes and creditors of [Quantum
Corporation] other than the holders of the Senior Indebtedness, nor shall
anything herein or therein prevent the Trustee or the holder of any Note from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article [_] of the
holders of Senior Indebtedness in respect of cash, property or securities of
[Quantum Corporation] received upon the exercise of any such remedy.
Upon any payment or distribution of assets of [Quantum Corporation]
referred to in this Article [_], the Trustee, subject to the provisions of
Section [_] [Duties and Responsibilities of Trustee], and the holders of the
Notes shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such bankruptcy, dissolution, winding-up,
liquidation or reorganization proceedings are pending, or a certificate of the
receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making such payment or distribution, delivered to the Trustee or to the holders
of the Notes, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of [Quantum Corporation], the amount thereof or payable
thereon and all other facts pertinent thereto or to this Article [_].
Section [_].4 Authorization to Effect Subordination. Each holder of a
Note by the holder's acceptance thereof authorizes and directs the Trustee on
the holder's behalf to take such action as may be necessary or appropriate to
effectuate the subordination as provided in this Article [_] and appoints the
Trustee to act as the holder's attorney-in-fact for any and all such purposes.
If the Trustee does not file a proper proof of claim or proof of debt in the
form required in any proceeding referred to in the third paragraph of Section
[_] [Payments of Notes on Default; Suit Therefor] hereof at least 30 days before
the expiration of the time to file such claim, the holders of any Senior
Indebtedness or their
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representatives are hereby authorized to file an appropriate claim for and on
behalf of the holders of the Notes.
Section [_].5 Notice to Trustee. [Quantum Corporation] shall give
prompt written notice in the form of an Officers' Certificate to a Responsible
Officer of the Trustee and to any paying agent of any fact known to [Quantum
Corporation] which would prohibit the making of any payment of monies to or by
the Trustee or any paying agent in respect of the Notes pursuant to the
provisions of this Article [_]. Notwithstanding the provisions of this Article
[_] or any other provision of this Indenture, the Trustee shall not be charged
with knowledge of the existence of any facts which would prohibit the making of
any payment of monies to or by the Trustee in respect of the Notes pursuant to
the provisions of this Article [_], unless and until a Responsible Officer of
the Trustee shall have received written notice thereof at the Corporate Trust
Office from [Quantum Corporation] (in the form of an Officers' Certificate) or a
Representative or a holder or holders of Senior Indebtedness or from any trustee
thereof; and before the receipt of any such written notice, the Trustee, subject
to the provisions of Section [_] [Duties and Responsibilities of Trustee], shall
be entitled in all respects to assume that no such facts exist; provided that if
on a date not fewer than one Business Day prior to the date upon which by the
terms hereof any such monies may become payable for any purpose (including,
without limitation, the payment of the principal of, or premium, if any, or
interest on any Note) the Trustee shall not have received, with respect to such
monies, the notice provided for in this Section [_].5, then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such monies and to apply the same to the purpose for which
they were received, and shall not be affected by any notice to the contrary
which may be received by it on or after such prior date.
Notwithstanding anything in this Article [_] to the contrary, nothing
shall prevent any payment by the Trustee to the Noteholders of monies deposited
with it pursuant to Section [_] [Discharge of Indenture], and any such payment
shall not be subject to the provisions of Section [_].1 or [_].2.
The Trustee, subject to the provisions of Section [_] [Duties and
Obligations of Trustee], shall be entitled to rely on the delivery to it of a
written notice by a Representative or a person representing himself to be a
holder of Senior Indebtedness (or a trustee on behalf of such holder) to
establish that such notice has been given by a Representative or a holder of
Senior Indebtedness or a trustee on behalf of any such holder or holders. In the
event that the Trustee determines in good faith that further evidence is
required with respect to the right of any person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article [_], the Trustee may request such person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such person, the extent to which such person is entitled to participate
in such
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<PAGE>
payment or distribution and any other facts pertinent to the rights of such
person under this Article [_], and if such evidence is not furnished the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment.
Section [_].6 Trustee's Relation to Senior Indebtedness. The Trustee in
its individual capacity shall be entitled to all the rights set forth in this
Article [_] in respect of any Senior Indebtedness at any time held by it, to the
same extent as any other holder of Senior Indebtedness, and nothing in Section
[_] [Limitations on Rights of Trustee as Creditor] or elsewhere in this
Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article [_], and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and, subject to the
provisions of Section [_] [Duties and Obligations of Trustee], the Trustee shall
not be liable to any holder of Senior Indebtedness if it shall pay over or
deliver to holders of Notes, [Quantum Corporation] or any other person money or
assets to which any holder of Senior Indebtedness shall be entitled by virtue of
this Article [_] or otherwise.
Section [_].7 No Impairment of Subordination. No right of any present
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired by any act or
failure to act on the part of [Quantum Corporation] or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by [Quantum
Corporation] with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof which any such holder may have or otherwise
be charged with.
Section [_].8 Certain Conversions Deemed Payment. For the purposes of
this Article [_] only, (1) the issuance and delivery of junior securities upon
conversion of Notes in accordance with Article [_] [Conversion of Notes] shall
not be deemed to constitute a payment or distribution on account of the
principal of (or premium, if any) or interest on Notes or on account of the
purchase or other acquisition of Notes, and (2) the payment, issuance or
delivery of cash (except in satisfaction of fractional shares pursuant to
Section 15.[_] [Cash Payment in Lieu of Fractional Shares]), property or
securities (other than junior securities) upon conversion of a Note shall be
deemed to constitute payment on account of the principal of such Note. For the
purposes of this Section [_].8, the term "junior securities" means (a) shares of
any stock of any class of [Quantum Corporation], or (b) securities of [Quantum
Corporation] which are subordinated in right of payment to
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<PAGE>
all Senior Indebtedness which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Notes are so subordinated as provided in this Article [_].
Nothing contained in this Article [_] or elsewhere in this Indenture or in the
Notes is intended to or shall impair, as among [Quantum Corporation], its
creditors other than holders of Senior Indebtedness and the Noteholders, the
right, which is absolute and unconditional, of the Holder of any Note to convert
such Note in accordance with Article [_] [Conversion of Notes].
Section [_].9 Article Applicable to Paying Agents. If at any time any
paying agent other than the Trustee shall have been appointed by [Quantum
Corporation] and be then acting hereunder, the term "Trustee" as used in this
Article [_] shall (unless the context otherwise requires) be construed as
extending to and including such paying agent within its meaning as fully for all
intents and purposes as if such paying agent were named in this Article [_] in
addition to or in place of the Trustee; provided, however, that the first
paragraph of Section [_].5 shall not apply to [Quantum Corporation] or any
Affiliate of [Quantum Corporation] if it or such Affiliate acts as paying agent.
Section [_].10 Senior Indebtedness Entitled to Rely. The holders of
Senior Indebtedness (including, without limitation, Designated Senior
Indebtedness) shall have the right to rely upon this Article [_], and no
amendment or modification of the provisions contained herein shall diminish the
rights of such holders unless such holders shall have agreed in writing thereto.
Definitions:
Designated Senior Indebtedness: The term "Designated Senior
Indebtedness" means the Sumitomo Credit Agreement and any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which
[Quantum Corporation] is a party) expressly provides that such Indebtedness
shall be "Designated Senior Indebtedness" for purposes of the Indenture
(provided that such instrument, agreement or other document may place
limitations and conditions on the right of such Senior Indebtedness to exercise
the rights of Designated Senior Indebtedness). If any payment made to any holder
of any Designated Senior Indebtedness or its Representative with respect to such
Designated Senior Indebtedness is rescinded or must otherwise be returned by
such holder or Representative upon the insolvency, bankruptcy or reorganization
of [Quantum Corporation] or otherwise, the reinstated Indebtedness of [Quantum
Corporation] arising as a result of such rescission or return shall constitute
Designated Senior Indebtedness effective as of the date of such rescission or
return.
Senior Indebtedness: The term "Senior Indebtedness" means the principal
of, premium, if any, interest (including all interest
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<PAGE>
accruing subsequent to the commencement of any bankruptcy or similar proceeding,
whether or not a claim for post-petition interest is allowable as a claim in any
such proceeding) and rent payable on or in connection with, and all fees, costs,
expenses and other amounts accrued or due on or in connection with, Indebtedness
of [Quantum Corporation], whether outstanding on the date of this Indenture or
thereafter created, incurred, assumed, guaranteed or in effect guaranteed by
[Quantum Corporation] (including all deferrals, renewals, extensions or
refundings of, or amendments, modifications or supplements to, the foregoing),
unless in the case of any particular Indebtedness the instrument creating or
evidencing the same or the assumption or guarantee thereof expressly provides
that such Indebtedness shall not be senior in right of payment to the Notes or
expressly provides that such Indebtedness is "pari passu" or "junior" to the
Notes. Notwithstanding the foregoing, the term Senior Indebtedness shall not
include any Indebtedness of [Quantum Corporation] to any subsidiary of [Quantum
Corporation], a majority of the voting stock of which is owned, directly or
indirectly, by [Quantum Corporation] or [Quantum Corporation]'s 5% Convertible
Subordinated Debentures due April 1, 2002. If any payment made to any holder of
any Senior Indebtedness or its Representative with respect to such Senior
Indebtedness is rescinded or must otherwise be returned by such holder or
Representative upon the insolvency, bankruptcy or reorganization of [Quantum
Corporation] or otherwise, the reinstated Indebtedness of [Quantum Corporation]
arising as a result of such rescission or return shall constitute Senior
Indebtedness effective as of the date of such rescission or return.
Sumitomo Credit Agreement: The term "Sumitomo Credit Agreement" means
that certain Credit Agreement, dated as of September 22, 1995 by and among
[Quantum Corporation], the several financial institutions listed on the
signature pages thereto (collectively, the "Banks"), and The Sumitomo Bank,
Limited, acting through its San Francisco Branch, as agent for the Banks (the
"Agent") and as Issuer, as amended, amended and restated, supplemented or
otherwise modified from time to time.
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<PAGE>
EXHIBIT G
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT, dated as of the date set forth at the top of
Attachment 1 hereto, is by and among:
(1) The bank designated under item A of Attachment 1 hereto as
the Assignor Bank ("Assignor Bank"); and
(2) Each bank designated under item B of Attachment 1 hereto
as an Assignee Bank (individually, an "Assignee Bank").
RECITALS
A. Assignor Bank is one of the banks which is a party to the Credit
Agreement dated as of June 6, 1997, by and among Quantum Corporation, a Delaware
corporation ("Borrower"), Assignor Bank and the other financial institutions
parties thereto (collectively, the "Banks"), ABN AMRO Bank N.V., San Francisco
International Branch ("ABN") and CIBC Inc., as co-arrangers for the Banks,
Canadian Imperial Bank of Commerce, as administrative agent for the Banks (in
such capacity, "Administrative Agent"), ABN, as syndication agent for the Banks,
Bank of America National Trust and Savings Association, as documentation agent
for the Banks, and certain co-agents listed therein. (Such Credit Agreement, as
amended, supplemented or otherwise modified in accordance with its terms from
time to time to be referred to herein as the "Credit Agreement").
B. Assignor Bank wishes to sell, and Assignee Bank wishes to purchase,
a portion of Assignor Bank's rights under the Credit Agreement pursuant to
Subparagraph 8.05(c) of the Credit Agreement.
AGREEMENT
Now, therefore, the parties hereto hereby agree as follows:
1. Definitions. Except as otherwise defined in this Assignment
Agreement, all capitalized terms used herein and defined in the Credit Agreement
have the respective meanings given to those terms in the Credit Agreement.
2. Sale and Assignment. Subject to the terms and conditions of this
Assignment Agreement, Assignor Bank hereby agrees to sell, assign and delegate
to each Assignee Bank and each Assignee Bank hereby agrees to purchase, accept
and assume an undivided interest in and share of Assignor Bank's rights,
obligations and duties under the Credit Agreement and the other Credit Documents
equal to the Proportionate Share set forth under the caption "Proportionate
Share" opposite such Assignee Bank's name on Attachment 1 hereto.
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3. Assignment Effective Upon Notice. Upon (a) receipt by Administrative
Agent of five (5) counterparts of this Assignment Agreement (to each of which is
attached a fully completed Attachment 1), each of which has been executed by
Assignor Bank and each Assignee Bank (and, if any Assignee Bank is not then a
Bank, by Borrower, Administrative Agent and Issuing Bank (if any)) and (b)
payment to Administrative Agent of the registration and processing fee specified
in Subparagraph 8.05(e) by Assignor Bank, Administrative Agent will transmit to
Borrower, Assignor Bank and each Assignee Bank an Assignment Effective Notice
substantially in the form of Attachment 2 hereto (an "Assignment Effective
Notice"). Such Assignment Effective Notice shall set forth the date on which the
assignment affected by this Assignment Agreement shall become effective (the
"Assignment Effective Date"), which date shall be the fifth Business Day
following the date of such Assignment Effective Notice.
4. Assignment Effective Date. At or before 12:00 noon (local time of
Assignor Bank) on the Assignment Effective Date, each Assignee Bank shall pay to
Assignor Bank, in immediately available or same day funds, an amount equal to
the purchase price, as agreed between Assignor Bank and such Assignee Bank (the
"Purchase Price"), for the Proportionate Share purchased by such Assignee Bank
hereunder. Effective upon receipt by Assignor Bank of the Purchase Price payable
by each Assignee Bank, the sale, assignment and delegation to such Assignee Bank
of such Proportionate Share as described in Paragraph 2 hereof shall become
effective.
5. Payments After the Assignment Effective Date. Assignor Bank and each
Assignee Bank hereby agree that Administrative Agent shall, and hereby authorize
and direct Administrative Agent to, allocate amounts payable under the Credit
Agreement and the other Credit Documents as provided in the Credit Agreement in
accordance with its appropriate Proportionate Share. Assignor Bank and each
Assignee Bank have made separate arrangements for (i) the payment by Assignor
Bank to such Assignee Bank of any principal, interest, fees or other amounts
previously received or otherwise payable to Assignor Bank hereunder if Assignor
Bank and such Assignee Bank have otherwise agreed that such Assignee Bank is
entitled to receive any such amounts and (ii) the payment by such Assignee Bank
to Assignor Bank of any principal, interest, fees or other amounts payable to
such Assignee Bank hereunder if Assignor Bank and such Assignee Bank have
otherwise agreed that Assignor Bank is entitled to receive any such amounts.
6. Delivery of Notes. On or prior to the Assignment Effective Date,
Assignor Bank will deliver to Administrative Agent the Note payable to Assignor
Bank. On or prior to the Assignment Effective Date, Borrower will deliver to
Administrative Agent a Note for each Assignee Bank and Assignor Bank, in each
case a in principal amount reflecting, in accordance with the Credit Agreement,
their respective Commitment (as adjusted pursuant to this Assignment Agreement).
As provided in Subparagraph 8.05(c) of
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<PAGE>
the Credit Agreement, each such new Note shall be dated the Closing Date and
otherwise be in the form of Note replaced thereby (provided that Borrower shall
not be obligated to pay any principal paid or interest accrued prior to the
effective date of this assignment to the Assignee Bank). Promptly after the
Assignment Effective Date, Administrative Agent will send to each of Assignor
Bank and the Assignee Banks its new Note and will send to Borrower the
superseded Note of Assignor Bank, marked "replaced."
7. Delivery of Copies of Credit Documents. Concurrently with the
execution and delivery hereof, Assignor Bank will provide to each Assignee Bank
(if it is not already a Bank party to the Credit Agreement) conformed copies of
all documents delivered to Assignor Bank on or prior to the Closing Date in
satisfaction of the conditions precedent set forth in the Credit Agreement.
8. Further Assurances. Each of the parties to this Assignment Agreement
agrees that at any time and from time to time upon the written request of any
other party, it will execute and deliver such further documents and do such
further acts and things as such other party may reasonably request in order to
effect the purposes of this Assignment Agreement.
9. Further Representations, Warranties and Covenants. Assignor Bank and
each Assignee Bank further represent and warrant to and covenant with each
other, Administrative Agent, the Co-Arrangers and the Banks as follows:
(a) Other than the representation and warranty that it is the
legal and beneficial owner of the interest being assigned hereby free
and clear of any adverse claim, Assignor Bank makes no representation
or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with
the Credit Agreement or the other Credit Documents or the execution,
legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or the other Credit Documents furnished.
(b) Assignor Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of
Borrower or any of its obligations under the Credit Agreement or any
other Credit Documents.
(c) Each Assignee Bank confirms that it has received a copy of
the Credit Agreement and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to
enter into this Assignment Agreement.
(d) Each Assignee Bank will, independently and without
reliance upon any Agent, Assignor Bank or any other Bank Party and
based upon such documents and information as it shall deem appropriate
at the time, continue to make its own credit
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decisions in taking or not taking action under the Credit Agreement and
the other Credit Documents.
(e) Each Assignee Bank appoints and authorizes Agents to take
such action as Agents on its behalf and to exercise such powers under
the Credit Agreement and the other Credit Documents as are delegated to
Agents by the terms thereof, together with such powers as are
reasonably incidental thereto, all in accordance with Section VII of
the Credit Agreement.
(f) Each Assignee Bank agrees that it will perform in
accordance with their terms all of the obligations which by the terms
of the Credit Agreement and the other Credit Documents are required to
be performed by it as a Bank.
(g) Attachment 1 hereto sets forth the revised Proportionate
Share of Assignor Bank and each Assignee Bank as well as administrative
information with respect to each Assignee Bank.
10. Effect of this Assignment Agreement. On and after the Assignment
Effective Date, (a) each Assignee Bank shall be a Bank with a Proportionate
Share as set forth on Attachment 1 hereto and shall have the rights, duties and
obligations of such a Bank under the Credit Agreement and the other Credit
Documents and (b) Assignor Bank shall be a Bank with a Proportionate Share as
set forth on Attachment 1 hereto, or, if the Proportionate Share of Assignor
Bank has been reduced to 0%, Assignor Bank shall cease to be a Bank.
11. Miscellaneous. This Assignment Agreement shall be governed by, and
construed in accordance with, the laws of the State of California. Paragraph
headings in this Assignment Agreement are for convenience of reference only and
are not part of the substance hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date set forth in Attachment 1 hereto.
_____________________________,
as an Assignee Bank
By:___________________________
Name:______________________
Title:_____________________
_____________________________,
as an Assignee Bank
By:___________________________
Name:______________________
Title:_____________________
_____________________________,
as an Assignee Bank
By:___________________________
Name:______________________
Title:_____________________
_____________________________,
as an Assignee Bank
By:___________________________
Name:______________________
Title:_____________________
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CONSENTED TO AND ACKNOWLEDGED BY:
QUANTUM CORPORATION
By:___________________________
Name:______________________
Title:_____________________
CANADIAN IMPERIAL BANK OF COMMERCE,
As Administrative Agent
By:___________________________
Name:______________________
Title:_____________________
ACCEPTED FOR RECORDATION
IN REGISTER:
CANADIAN IMPERIAL BANK OF COMMERCE,
As Administrative Agent
By:___________________________
Name:______________________
Title:_____________________
G-6
<PAGE>
ATTACHMENT 1
TO ASSIGNMENT AGREEMENT
NAMES, ADDRESSES AND PROPORTIONATE SHARES
OF ASSIGNOR BANK AND ASSIGNEE BANKS AFTER ASSIGNMENT
--------------, ----
Proportionate
A. ASSIGNOR BANK Share*
------------------------------ -----%
Applicable Lending Office:
------------------------------
------------------------------
------------------------------
------------------------------
Address for notices:
------------------------------
------------------------------
------------------------------
------------------------------
Telephone No: __________
Facsimile No: __________
Wiring Instructions:
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B. ASSIGNEE BANKS
------------------------------ -----%
Applicable Lending Office:
------------------------------
------------------------------
------------------------------
------------------------------
- --------
* To be expressed by a percentage rounded to the eighth-digit to the right of
the decimal point.
G[1]-1
<PAGE>
Proportionate
Share*
B. ASSIGNEE BANKS (cont'd)
Address for notices:
------------------------------
------------------------------
------------------------------
------------------------------
Telephone No: __________
Facsimile No: __________
Wiring Instructions:
------------------------------
------------------------------
------------------------------ -----%
Applicable Lending Office:
------------------------------
------------------------------
Address for notices:
------------------------------
------------------------------
------------------------------
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Telephone No: __________
Facsimile No: __________
Wiring Instructions:
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G[1]-2
<PAGE>
ATTACHMENT 2
TO ASSIGNMENT AGREEMENT
FORM OF
ASSIGNMENT EFFECTIVE NOTICE
The undersigned, as administrative agent for the banks under the Credit
Agreement, dated as of June 6, 1997 (as amended from time to time) among Quantum
Corporation ("Borrower"), the financial institutions parties thereto (the
"Banks") ABN AMRO Bank N.V., San Francisco International Branch ("ABN") and CIBC
Inc., as co-arrangers for the Banks, Canadian Imperial Bank of Commerce, as
administrative agent for the Banks (in such capacity, "Administrative Agent"),
ABN, as syndication agent for the Banks, Bank of America National Trust and
Savings Association, as documentation agent for the Banks, and certain co-agents
listed therein, acknowledges receipt of five executed counterparts of a
completed Assignment Agreement, a copy of which is attached hereto. [Note:
Attach copy of Assignment Agreement.] Terms defined in such Assignment Agreement
are used herein as therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Assignment Effective Date will be __________ [Insert fifth business day
following date of Assignment Effective Notice].
2. Pursuant to such Assignment Agreement, Assignor Bank is required to
deliver to Administrative Agent on or before the Assignment Effective Date the
Note payable to Assignor Bank.
3. Pursuant to such Assignment Agreement, Borrower is required to
deliver to Administrative Agent on or before the Assignment Effective Date the
following Notes, each dated _________________ [Insert appropriate date]:
[Describe each new Note for Assignor Bank and each Assignee Bank as to
principal amount.]
4. Pursuant to such Assignment Agreement, each Assignee Bank is
required to pay its Purchase Price to Assignor Bank at or before 12:00 Noon
(local time of Assignor Bank) on the Assignment Effective Date in immediately
available funds.
Very truly yours,
CANADIAN IMPERIAL BANK OF COMMERCE,
as Administrative Agent
By:___________________________
Name:_________________________
Title:________________________
G[2]-1
AMENDED AND RESTATED MASTER AGREEMENT
BETWEEN
MATSUSHITA-KOTOBUKI ELECTRONICS INDUSTRIES, LTD.,
AND
QUANTUM CORPORATION
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
1. ROLES...............................................................................................................2
1.1. Quantum........................................................................................................2
1.2. MKE............................................................................................................2
1.3. Cooperative Roles..............................................................................................2
1.4. Regular Meetings...............................................................................................2
2. DEFINITIONS.........................................................................................................2
2.1. "Components"...................................................................................................2
2.2. "Confidential Information".....................................................................................2
2.3. "Development Costs"............................................................................................2
2.4. "Exclusive"....................................................................................................2
2.5. "Manufacturing Costs"..........................................................................................2
2.6. "MEI"..........................................................................................................3
2.7. "Products".....................................................................................................3
2.8. "Quantum"......................................................................................................3
2.9. "Technical Information"........................................................................................3
3. MARKETING RIGHTS....................................................................................................3
3.1. Quantum Rights.................................................................................................3
3.2. Marketing Decisions............................................................................................4
3.3. Product Components.............................................................................................4
3.4. MKE Cooperation................................................................................................4
4. MANUFACTURING RIGHTS................................................................................................4
4.1. MKE Rights.....................................................................................................4
4.2. Manufacturing Decisions........................................................................................4
4.3. Quantum Manufacturing..........................................................................................4
4.4. Third Party Manufacturing......................................................................................5
4.5. Non-Competitive Products.......................................................................................5
5. DEVELOPMENT AND MANUFACTURING COSTS.................................................................................6
5.1. Development Costs..............................................................................................6
5.2. Manufacturing Costs............................................................................................6
5.3. Technology Exchange Costs......................................................................................6
5.4. Component Development Costs....................................................................................6
6. EXCLUDED PRODUCTS; PRODUCT DEVELOPMENT..............................................................................6
6.1. Excluded Products..............................................................................................6
6.2. Development....................................................................................................6
6.3. Development of New HDD Technology and Products.................................................................7
6.4. Product Changes................................................................................................7
7. COMPONENTS..........................................................................................................8
7.1. Component Integration..........................................................................................8
7.2. Component Purchases............................................................................................8
8. TECHNICAL COOPERATION...............................................................................................8
9. PROPRIETARY RIGHTS..................................................................................................8
9.1. Right To Use...................................................................................................8
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<PAGE>
TABLE OF CONTENTS
Page
9.2. Product Designs and Manufacturing Processes....................................................................8
9.3. Patents........................................................................................................9
9.4. Patent Protection..............................................................................................9
9.5. Patent Rights..................................................................................................9
9.6. Trademarks.....................................................................................................9
9.7. Patent Contributions...........................................................................................9
10. CONFIDENTIALITY....................................................................................................9
10.1. Confidentiality...............................................................................................9
10.2. Restrictions..................................................................................................9
11. PATENT INDEMNIFICATION............................................................................................10
12. PURCHASE AGREEMENT................................................................................................12
12.1. Purpose......................................................................................................12
13. TERM AND TERMINATION..............................................................................................12
13.1. Term.........................................................................................................12
13.2. Interim Review Prior to Scheduled Termination................................................................12
13.3. Termination..................................................................................................12
13.4. Rights Upon Termination......................................................................................13
14. ARBITRATION.......................................................................................................13
15. GOVERNMENTAL CONSENTS.............................................................................................14
15.1. U.S. Requirements............................................................................................14
15.2. Japan Requirements...........................................................................................14
15.3. Visas........................................................................................................14
15.4. Compliance with Laws.........................................................................................14
16. MISCELLANEOUS.....................................................................................................14
16.1. Nonassignability.............................................................................................14
16.2. Failure to Enforce...........................................................................................15
16.3. Governing Law................................................................................................15
16.4. Severability.................................................................................................15
16.5. Notices......................................................................................................15
16.6. Entire Agreement.............................................................................................16
16.7. Force Majeure................................................................................................16
16.8. Limitation of Liability......................................................................................16
16.9. MEI..........................................................................................................16
16.10. Binding.....................................................................................................16
16.11. Agency......................................................................................................17
16.12. Headings....................................................................................................17
16.13. Changes in Control..........................................................................................17
16.14. Bankruptcy Code.............................................................................................17
ii
</TABLE>
<PAGE>
AMENDED AND RESTATED MASTER AGREEMENT BETWEEN
MATSUSHITA-KOTOBUKI ELECTRONICS INDUSTRIES, LTD.,
AND QUANTUM CORPORATION
THIS AMENDED AND RESTATED MASTER AGREEMENT is made by and among
MATSUSHITA-KOTOBUKI ELECTRONICS INDUSTRIES, LTD., a Japanese corporation, its
subsidiaries, IRELAND KOTOBUKI ELECTRONICS INDUSTRIES, LTD. , an Irish
corporation, and KOTOBUKI ELECTRONICS INDUSTRIES (S) PTE. LTD., a Singapore
corporation (collectively, "MKE") and QUANTUM CORPORATION, a Delaware
corporation, and its subsidiary QUANTUM PERIPHERALS (EUROPE) SA, a Swiss
corporation (hereinafter collectively "Quantum"). This Agreement is entered into
as of the 30th day of April, 1997 (the "Effective Date").
RECITALS:
WHEREAS, Quantum is a leader in designing, developing and marketing hard disk
drive products, and computer memory storage products for worldwide business and
consumer markets and MKE is a leader in manufacturing hard disk drive products;
WHEREAS, Quantum and MKE have been partners in a manufacturing and marketing
relationship since 1985 pursuant to which MKE has manufactured, and Quantum has
marketed, hard disk drive products which Quantum has designed and developed;
WHEREAS, Quantum and MKE entered into an agreement on December 31, 1992 setting
forth the terms of such manufacturing and marketing relationship;
WHEREAS, Quantum and MKE are desirous of continuing their long-term business
relationship and wish to continue such relationship as herein provided;
WHEREAS, Quantum has the exclusive right to market all hard disk drive products
manufactured or to be manufactured by MKE, excluding only hard disk drives
developed by MKE and/or MEI which do not utilize Technical Information and/or
Confidential Information of Quantum;
WHEREAS, MKE has the exclusive right to manufacture all such hard disk drive
products for Quantum;
WHEREAS, each of Quantum and MKE is willing to grant such exclusive rights and
MKE is willing to manufacture such products; and
WHEREAS, as a result of the expanded scope of their manufacturing and marketing
relationship, Quantum and MKE now desire that the terms of the agreement between
the parties dated as of December 31, 1992, as amended September 1, 1994, and
January 26, 1996 (the "Master Agreement"), be amended and restated in their
entirety as set forth herein;
1
<PAGE>
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and promises in this
Agreement, the parties agree as follows:
1. ROLES.
1.1. Quantum. Subject to the terms and conditions of this Agreement,
Quantum shall have the responsibility for product development and design of the
Products (as hereinafter defined) and completion of the prototype thereof.
Except as expressly set forth herein, Quantum shall have the Exclusive,
worldwide right to market, offer to sell and sell the Products.
1.2. MKE. Subject to the terms and conditions of this Agreement, MKE shall
have the Exclusive, worldwide right and responsibility to manufacture the
Products designed by Quantum and to be purchased by Quantum under the terms and
conditions hereof. MKE shall be responsible for the purchase and ownership of
such facilities and capital equipment as MKE may determine to be necessary for
Product manufacture.
1.3. Cooperative Roles. The parties have worked together over time
regarding the manufacture of the Products and have established a successful
working relationship for discussing and implementing operational details of the
development, manufacture and supply of Products. The parties intend to continue
this successful operational relationship. MKE and Quantum intend that sound
cooperation will result from the contributions of each party and this division
of responsibilities. Both parties understand, however, that full cooperation is
necessary to fully develop this business and achieve the potential opportunities
in this new market.
1.4. Regular Meetings. MKE and Quantum shall hold regular meetings, but not
less than once each calendar quarter, at a location alternating between Japan
and California, to discuss and confer on issues relating to the joint interest
of the parties in developing, manufacturing and marketing the Products. The
matters to be discussed at such meetings shall include, without limitation, new
product development, manufacturing process development, marketing strategy,
financial matters and technology strategy.
2. DEFINITIONS.
The following terms, as used in this Agreement, shall have the meanings
referenced below:
2.1. "Components" shall mean parts and components specially designed by
Quantum or MKE which are included in a Product, including heads, disks and
motors.
2.2. "Confidential Information" shall have the meaning set forth in Section
10.1.
2.3. "Development Costs" shall mean all expenditures associated with
Product development until the completion of the drawings defining the
requirements and design of the Products, including testing and completion of
prototypes, up to the stage that such Products can be put into pre-production by
MKE in Japan.
2.4. "Exclusive" shall mean sole rights excluding all other parties.
2.5. "Manufacturing Costs" shall mean all costs of the design development
and construction of the manufacturing hardware for the Products, including
tooling design and equipment acquisition.
2
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2.6. "MEI" shall mean Matsushita Electric Industrial Co., Ltd., a
corporation organized under the laws of Japan, having its principal place of
business at 1006, Kadoma, Osaka 571 Japan.
2.7. "Products" [CONFIDENTIAL TREATMENT REQUESTED]
2.8. "Quantum" shall also include any subsidiary of Quantum not
specifically referenced above.
2.9. "Technical Information" shall mean all non-public information and
know-how which is proprietary to Quantum or MKE, as the case may be, directly
related to the development and manufacturing of any Products, including all
inventions, processes and discoveries known, actively used, or hereafter
developed by either party with respect thereto during the term of this
Agreement. Technical Information shall be mutually exchanged between the parties
solely for the purpose of contributing to, or assisting with, the design,
manufacturing, marketing, testing and service of the Products, provided that
either party has the right to transfer such information without the consent of
or payment of royalties to a third party, and further provided that such
Technical Information as will be transferred by MKE to Quantum may not be used
for Quantum's manufacturing of any product, including the Products, without
MKE's prior written consent. Notwithstanding anything to the contrary contained
herein, no exchange of Technical Information shall be deemed to transfer,
license or otherwise assign from one party to the other party any proprietary
rights any party hereto may have in the Technical Information.
3. MARKETING RIGHTS.
3.1. Quantum Rights. Subject to the terms and conditions of this Agreement,
Quantum shall have the Exclusive worldwide rights to market, distribute and sell
Products during the term of this Agreement. Quantum agrees to use its best
efforts to market and sell Products subject to the terms and conditions of this
Agreement.
[CONFIDENTIAL TREATMENT REQUESTED]
3
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]
3.2. Marketing Decisions. Except as expressly set forth in Section 3.1
("Quantum Rights") above, Quantum will have complete responsibility and
authority for all decisions regarding the marketing and sale of the Products.
Quantum will evaluate and determine the distribution methods, the organization
to be established, the customers to whom the Products will be sold and the
strategy to be utilized. Quantum shall further be responsible for planning and
reviewing marketing opportunities. Quantum is responsible for all costs incurred
in the sale and marketing of the Products. Quantum agrees that all Products will
be manufactured by and purchased from MKE, except as otherwise provided in this
Agreement.
3.3. Product Components. During the term of this Agreement, the parties
contemplate that a number of the Components, which are integral parts of the
Products, will be developed. MKE anticipates that certain Components will be
useful in other products and that sales opportunities will develop for such
Components. If MKE desires to market any such Component to the mutual benefit of
both parties, the parties agree to enter into good faith discussions to reach
agreement on MKE's marketing rights, although neither party shall be obligated
to enter into any such agreement. Nothing herein shall limit MKE's ability to
manufacture and market parts and components for MKE Customers or third parties
which do not utilize Quantum Technical Information.
3.4. MKE Cooperation. With the prior approval of MKE, MKE shall permit the
customers of Quantum to tour and evaluate MKE's manufacturing facilities for the
Products.
4. MANUFACTURING RIGHTS.
4.1. MKE Rights. Subject to the terms and conditions of this Agreement,
Quantum hereby grants MKE the Exclusive worldwide rights to manufacture any and
all Products during the term of this Agreement. MKE shall not have the right to
grant rights to manufacture or have manufactured the Products without Quantum's
written consent.
4.2. Manufacturing Decisions. MKE will have complete responsibility and
authority for the development of manufacturing processes, acquisition of
production equipment and the construction of facilities. [CONFIDENTIAL TREATMENT
REQUESTED] Except as expressly set forth in Section 3.1 ("Quantum Rights")
above, all Products manufactured by MKE will be sold to and marketed by Quantum.
4.3. Quantum Manufacturing. The parties understand that the assurance of
continued production of quality and low-cost Products is critical to Quantum's
business and that Quantum is relying on MKE as the sole source of the Products.
[CONFIDENTIAL TREATMENT REQUESTED]
4
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]
4.4. [CONFIDENTIAL TREATMENT REQUESTED]
4.5. Non-Competitive Products. On a case-by-case basis, the parties will
negotiate in good faith the rights and consideration to use each other's
Technical Information and/or other intellectual property for non-competitive
products or to work together to produce such non-competitive products. For
purposes hereof, "non-competitive products" are products that would not compete
with then-existing or contemplated Products as mutually agreed upon by the
Parties.
5
<PAGE>
5. DEVELOPMENT AND MANUFACTURING COSTS.
5.1. Development Costs.
a. [CONFIDENTIAL TREATMENT REQUESTED]
b. [CONFIDENTIAL TREATMENT REQUESTED]
5.2. Manufacturing Costs.
a. [CONFIDENTIAL TREATMENT REQUESTED]
b. [CONFIDENTIAL TREATMENT REQUESTED]
5.3. Technology Exchange Costs. MKE and Quantum will be exchanging
engineering personnel as part of the initial and ongoing technology exchange
under Section 8 ("Technical Cooperation"). [CONFIDENTIAL TREATMENT REQUESTED]
5.4. Component Development Costs. The parties expect that further cost
reductions will be achieved in the Products after they are developed by further
development of Components through vertical integration techniques. [CONFIDENTIAL
TREATMENT REQUESTED]
6. EXCLUDED PRODUCTS; PRODUCT DEVELOPMENT.
6.1. Excluded Products. MKE shall be free to pursue the development,
manufacture and sale of any products, including but not limited to components
and parts, not utilizing the Technical Information of Quantum as is confidential
pursuant to the provisions of Section 10 ("Confidentiality") hereof.
6.2. Development. For each Product proposed by Quantum and determined to be
economically attractive for production under this Agreement, [CONFIDENTIAL
TREATMENT REQUESTED] MKE and Quantum will work together in selecting and
locating low-cost component sources on a worldwide basis. The Product design and
key component design will be transferred by Quantum for MKE to develop the
processes and tooling to manufacture
6
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the Product. The parties recognize that the development process necessary to
insure that the developed Product will be complementary with MKE's manufacturing
processes, while requiring the assistance of MKE, shall be the sole
responsibility of Quantum.
6.3. Development of New HDD Technology and Products.
a. [CONFIDENTIAL TREATMENT REQUESTED]
b. [CONFIDENTIAL TREATMENT REQUESTED]
c. In accordance with Section 9 ("Proprietary Rights") of this
Agreement, MKE shall own all rights to any new manufacturing process technology
developed under this Section 6.3. In accordance with Section 9 of this
Agreement, Quantum shall own all rights to any new Product design technology
developed by employees, agents and consultants of MKE under this Section 6.3;
provided, however, that such ownership shall not impair MKE's rights to use such
technology as provided in paragraph (b) of this Section 6.3.
6.4. Product Changes. Quantum shall have the right to control changes to
the Products provided that any changes that would materially alter the
manufacturing process or cost shall require MKE's prior written consent, such
consent not to be unreasonably withheld or delayed. If MKE believes that design
changes to the Products are beneficial, the proposed change shall be submitted
to Quantum for approval, such approval not to be unreasonably withheld. MKE
understands that after the Products are introduced into the marketplace by
Quantum that subsequent changes may affect the design of the system into which
an OEM incorporated such Product. MKE agrees to notify Quantum of any changes in
the manufacturing process employed by MKE that may affect form, fit, function,
or reliability of the Product. Enhancements and modifications to the Product
design may be submitted from time to time by Quantum and MKE agrees to cooperate
in promptly incorporating such revised design in the manufacturing process
subject to the sufficient time allowance and the changes in the price of the
Products to be paid by Quantum to MKE.
7
<PAGE>
7. COMPONENTS.
7.1. Component Integration. After product designs are submitted to MKE, the
key Components of the design will be integrated by MKE for cost-effective
manufacturing to the extent the parties mutually agree. As part of the
integration and cost reduction of the manufacturing process, Components may be
jointly redesigned or additional Components may be developed.
7.2. Component Purchases. MKE will negotiate with various suppliers to
establish sources of supply for the Components needed to manufacture the
Products. Should MKE desire to change or add vendors of Components for
particular components following initial selection for a particular Product, MKE
shall notify Quantum thereof and shall obtain Quantum's prior written approval
for any change or addition of vendors for key components.
8. TECHNICAL COOPERATION.
The Technical Information exchange will be an ongoing process during the
term of the Agreement. Each party shall have full access to the other's
facilities and production processes for the Products and full cooperation will
be provided by all parties. The parties recognize, however, that it is intended
that information transfer shall be efficiently accomplished and not impede the
business of any party. Quantum agrees to make available to MKE design
information (including Technical Information) relating to a Product, as it is
developed by Quantum, and to compile the product documentation to facilitate
transfer. Quantum agrees to use reasonable commercial efforts to assist and
provide technical support as reasonably necessary to enable MKE to manufacture
the Products. MKE agrees to retain and create documentation for its
manufacturing processes for the Products to the extent that is possible and
practical. Quantum recognizes that it may be expensive and impractical for MKE
to assemble complete information relating to MKE's manufacturing processes for
the Products. Quantum shall have full access to all information relating to
MKE's manufacturing processes for the Products upon reasonable request, provided
that Quantum may not use the Technical Information of MKE included in such
information for any purpose except as expressly provided in this Agreement. Both
parties recognize that continued access to the Technical Information of the
other party pursuant to this Agreement is necessary for broad business planning,
which includes implementing product designs and changes and assisting the other
party in overcoming problems.
9. PROPRIETARY RIGHTS.
9.1. Right To Use. Subject to the terms and conditions of this Agreement,
Quantum hereby grants to MKE a worldwide, [CONFIDENTIAL TREATMENT REQUESTED],
nonexclusive and [CONFIDENTIAL TREATMENT REQUESTED] license to use any
manufacturing processes, techniques, Technical Information and know-how of
Quantum used in the production of the Products, including any modifications,
alterations or revisions thereof for manufacture of any Product.
9.2. Product Designs and Manufacturing Processes. MKE agrees that all
rights to the Products and Product designs, including modifications and
enhancements, shall remain proprietary to Quantum or the third party from which
it has been licensed, regardless of the contributions of the parties. Quantum
agrees that all rights to manufacturing processes, techniques, Technical
Information and know-how used in the production for the Products, including any
modifications, alterations or revisions thereof regardless of contribution of
the parties but excluding any test software programs supplied by Quantum to MKE
without charge, shall remain proprietary to MKE or the third party from which it
has been licensed, and that such MKE technology may be used by MKE
8
<PAGE>
for other purposes. Neither party shall have the right to transfer any Technical
Information of the other party obtained hereunder to a third party without the
prior written consent of the disclosing party.
9.3. Patents. The parties recognize that during the term of this Agreement,
inventions and patentable technology may be developed by Quantum and MKE within
the scope of this Agreement. If an invention or patentable technology relates to
Products or Product designs, Quantum shall have sole ownership and MKE agrees to
assign to Quantum any rights it may have to such invention. If an invention or
patentable technology relates to manufacturing techniques or processes, MKE
shall have sole ownership and Quantum agrees to assign to MKE any rights it may
have to such invention.
9.4. Patent Protection. The parties agree to develop and diligently pursue
a strategy for protecting the proprietary rights developed under this Agreement
against infringement by third parties, which shall include filing patent
applications in countries which the parties mutually agree. The cost of
obtaining all Product patents will be borne by Quantum and the cost of obtaining
all manufacturing and process patents will be borne by MKE. Each party shall
provide assistance to the other, as requested, without charge.
9.5. Patent Rights. If MKE desires to utilize the technology covered by a
Product patent owned by Quantum for the development of a product outside the
scope of this Agreement, Quantum and MKE agree to in good faith discuss the
grant of rights to MKE.
9.6. Trademarks. Except as set forth in the Purchase Agreement, each party
shall have the right during the term of this Agreement to use trademarks and
tradenames of its own selection and neither party shall have any rights to use
the trademarks of the other without the other's written consent.
9.7. Patent Contributions. The parties acknowledge that when one party
makes a significant contribution of demonstrated substantial commercial value to
the operations of the other party pursuant to this Section 9, they will enter
into good faith discussions to determine whether the contributing party should
receive compensation for such contribution. It is expressly understood that
there is no obligation to provide any compensation to any party and the
determination of any compensation, if any, shall be in the sole discretion of
the party who may wish to pay such compensation.
10. CONFIDENTIALITY.
10.1. Confidentiality. All parties acknowledge that, in the course of
performing their respective obligations, they will be receiving information
which is confidential and proprietary to the disclosing party and which the
disclosing party wishes to protect from public disclosure. "Confidential
Information" means any information which has been or will be disclosed between
the parties relating to the Technical Information and to their respective
businesses, customers, products, marketing plans, financial status and the like.
The parties agree that regardless of the date of termination of this Agreement,
each will keep confidential any "Confidential Information" of the other party
for a period commencing upon receipt thereof until three (3) years following the
date of such termination and any extension hereof.
10.2. Restrictions. Each party (i) agrees to use Confidential Information
only for the purposes described in this Agreement, and not to disclose
Confidential Information given to it by the other party to any person, real or
legal, except as authorized in this Agreement; (ii) shall require a
9
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third party to whom disclosure of Confidential Information is authorized to sign
a confidentiality agreement in form mutually acceptable to the parties; (iii)
shall exercise the same degree of care to safeguard the confidentiality of such
Confidential Information as it would exercise in protecting the confidentiality
of similar property of its own; and (iv) agrees to use its diligent efforts to
prevent inadvertent or unauthorized disclosure, publication or dissemination of
any Confidential Information. The obligations to avoid publication or
dissemination of Confidential Information will not apply to any information
which a party can show:
a. is already in the possession of such party;
b. is or becomes publicly available without breach of this Agreement
by such party or through ordinary marketing or sale of the Products;
c. is rightfully received by such party from a third party not known
(whether at the time of receipt or dissemination of such information) to be
under an obligation of confidence to the other party with respect thereto;
d. is released for disclosure by the other party with its written
consent;
e. is disclosed pursuant to the requirement of a governmental agency
or operation of law, provided that such party is obligated to use its best
efforts to prevent disclosure or seek confidential treatment as requested by a
party under such circumstances; or
f. is independently developed by such party.
11. PATENT INDEMNIFICATION.
Quantum will defend any action brought against MKE based on a claim that a
Product manufactured by MKE and any software/firmware and Product interface
supplied by Quantum infringes any trade secret, copyright, patent or any other
intellectual property rights. Quantum will indemnify and hold MKE harmless and
Quantum agrees to defend any action brought against MKE and hold MKE harmless
from any and all damages, liabilities, costs and expenses, including reasonable
attorneys' fees and cost of investigation, arising as a result of infringement
or a claim of infringement covered by this Section. If promptly notified in
writing of any action or suit or threats thereof brought against MKE based on a
claim that the Product supplied hereunder, including any software/firmware and
Product interface supplied by Quantum, infringes any patent, trade secret,
copyright, or any other intellectual property rights, Quantum shall defend such
action or suit at its own expense, by reputable counsel selected by Quantum and
reasonably acceptable to MKE and shall pay any and all fees, costs and damages
that may be awarded in such action or in settlement thereof. MKE shall provide
Quantum information and assistance reasonably required to defend and/or settle
such action or suit or threats thereof. Settlement shall be at the option of
Quantum; provided that no settlement shall require MKE to take or refrain from
taking any action or give or accept any property or forgive or forbear any right
of action; and provided further that Quantum shall not effect any settlement
that does not provide for the full and unconditional release of all applicable
claims against MKE without MKE's prior written consent. In the event that a
charge of infringement of a patent, trade secret or copyright is made or a final
injunction is obtained against MKE prohibiting the supply of the Products to
Quantum hereunder or any part thereof, by reason of such infringement, Quantum
shall have the right, after consulting with MKE and upon written notice to MKE,
to either (A) at its expense, procure for MKE the right to continue supplying
the Product or replace or modify the Product, or (B) modify the Product so that
it is non-infringing so long as such modification does not
10
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affect the Product's functioning, or (C) direct MKE to dispose of MKE's
inventory of such Product at Quantum's expense. In case of (B) above, Quantum
shall be liable to MKE for, and MKE shall be entitled to recover from Quantum,
all of the following costs and expenses in the event of any such change of the
Product design:
a. MKE's inventory of certain components and/or parts useful only in
the Product before such change of the Product design;
b. Working and processing costs and expenses actually incurred by MKE
prior to notice of such change of the Product design for the finished and/or
unfinished Product;
c. Working and processing costs and expenses actually incurred for
disassembling the finished and/or unfinished Product in MKE's inventory at the
time of notice of such change of the Product design, if and to the extent such
disassembling is required to mitigate the costs and expenses due to such change
of the Product design.
In case of (C) above, this Agreement shall be terminated with respect to
the affected Product. If any Product is so disposed of by MKE in line with
Quantum's discretion, MKE shall not be liable for the result thereof and Quantum
shall pay to MKE the original purchase price for such Product in addition to the
expense incurred by MKE in such disposal of the Products.
Notwithstanding anything in this Section 11 to the contrary, Quantum shall
have no liability for any claim of patent, trade secret, or copyright
infringement, if the alleged infringement arises from (A) changes and
modifications to the Products by MKE other than those provided in the Purchase
Agreement; or (B) the manufacturing process by which the Product is manufactured
unless the product design provided by Quantum requires the manufacturing process
or the manufacturing process which is the subject of such claim is originated
with Quantum and has been performed by MKE in compliance with Quantum
engineering drawings.
MKE shall defend such action or suit at its expense, by reputable counsel
selected by MKE and reasonably acceptable to Quantum and shall pay any and all
fees, costs or damages that may be awarded in such action or in settlement
thereof, provided Quantum gives MKE full information and assistance to defend
and/or settle such action or suit or threats thereof. Settlement shall be at the
option of MKE. In the event that a charge of infringement of a patent, trade
secret or copyright is made or a final injunction is obtained against Quantum
prohibiting usage of the Product purchased hereunder or any part thereof, by
reason of such infringement, MKE shall have the right, upon written notice to
Quantum, to either (A) at its expense, procure for Quantum the right to continue
using the Product or replace or modify the Product, or (B) modify the
manufacturing process for the Product so that it is non-infringing so long as
such modification does not affect the Product's functioning, or (C) direct
Quantum to return such Product to MKE at MKE's expense. In case of (C) above
this Agreement shall be terminated with respect to the affected Product. If any
Product is so returned to MKE, MKE shall not be liable for the result thereof
except that if MKE has been paid for the products by Quantum, MKE shall pay to
Quantum the original purchase price for such Product which does not contain any
part originated with Quantum's request and involving possible infringement upon
the patent, trade secret or copyright in question.
12. PURCHASE AGREEMENT.
12.1. Purpose. This Agreement is intended to set forth the general
framework of the relationship of the parties, including the roles and rights of
each party. The specific terms of the
11
<PAGE>
business relationship between MKE and Quantum relating to the manufacture,
purchase and sale of the Products are set forth in a separate Amended and
Restated Purchase Agreement entered into by and between the parties hereto of
even date herewith, including any amendments thereof.
13. TERM AND TERMINATION.
13.1. Term. This Agreement shall be effective on the first date set forth
above and shall continue until December 31, 2007, unless earlier terminated
pursuant to this Section 13. Upon its scheduled expiration this Agreement shall
be renewed automatically for one additional term of five (5) years; provided,
however, that either party may elect not to renew this Agreement by giving no
less than sixty (60) days written notice to the other party prior to the
expiration date of its intention not to renew this Agreement. The date upon
which the Agreement expires in accordance with the provisions set forth in this
Section 13.1 or in accordance with the provisions of Section 13.2 ("Interim
Review Prior to Scheduled Termination") shall be referred to as the "Expiration
Date."
13.2. Interim Review Prior to Scheduled Termination. At any time after
December 31, 2002, either party may request a review of and propose changes to
this Agreement (the "Request"). The parties shall promptly commence such review
and negotiate in good faith with respect to the proposed changes. If agreement
with respect to such changes is not reached within twelve (12) months from the
date of the Request, either party may upon written notice to the other party,
delivered within thirty (30) days after the end of such twelve (12) month review
period, terminate this Agreement [CONFIDENTIAL TREATMENT REQUESTED].
13.3. Termination. This Agreement may be terminated prior to its expiration
for the reasons described below in paragraph (a) (an "Event of Default"),
paragraph (b) (an "Event of Bankruptcy") or paragraph (c) (a "Change of
Control"). Termination shall become effective following an Event of Default or a
Change of Control only after the party seeking to terminate has complied with
the notice requirements and/or time periods set forth in paragraph (a) below or
Section 16.13, respectively. Termination may occur following an Event of
Bankruptcy upon notice from the party entitled to terminate to the other party.
In all cases, the date of notice of termination of this Agreement (i.e., after
the expiration of any required time periods) shall be referred to as the
"Termination Notice Date." [CONFIDENTIAL TREATMENT REQUESTED].
a. The material default by one party on a material obligation of such
party under this Agreement or the Purchase Agreement shall entitle the party not
in default to give the party in default written notice describing such default
and requiring the party in default to remedy such default. If such default is
not fully remedied within sixty (60) days after the date of such notice, the
party not in default shall be entitled to terminate this Agreement immediately.
b. Either party may terminate this Agreement at any time upon or after
the filing of an order for relief in respect of any petition against the other
party filed under Title 11 of the United States Code, or the entry of a decree
or order by a court having competent jurisdiction in respect of any petition
filed or action taken against the other party looking to reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any other present or future federal or state statute, law or
regulation, resulting in the appointment of a receiver,
12
<PAGE>
liquidator, custodian, assignor, trustee, sequestrator or other similar official
of the other party or of any substantial part of its property, or resulting in
the winding-up or liquidation of its affairs, in the case of any involuntary
filing or petition, and the continuation of any decree or order is unstayed and
in effect for a period of sixty (60) consecutive days; or at any time upon or
after the filing of a petition for relief under Title 11 of the United States
Code by the other party or the consent, acquiescence or taking of any action by
the other party in support of a petition filed by or against it looking to
reorganization arrangement, composition, readjustment, liquidation, dissolution,
or similar relief under any other present or future federal or state statute,
law or regulation, or the appointment, with the consent of the other party, of
any receiver, liquidator, custodian, assignor, trustee, sequestrator or other
similar official of the other party or of any substantial part of its property,
or the making by it of an assignment for the general benefit of all creditors,
or the admission by it in writing of its inability to pay its debts generally as
they become due, or the taking of corporate action by the other party in
furtherance of any such action.
c. Either party may terminate this Agreement upon the occurrence of a
change in control of the other party in accordance with Section 16.13 ("Changes
in Control").
13.4. Rights Upon Termination.
a. In the event of any termination of this Agreement under Article 13,
Articles 2, 10, 11, 14, 15 and 16, and Sections 9.1, 9.2, 9.3 and 13.4 shall
survive. Any termination of this Agreement shall only be effective upon
completion of the wind down phase described in the Purchase Agreement.
b. In addition, in the event of any valid termination of this
Agreement by MKE under Section 13.3 ("Termination") due to a material breach by
Quantum, MKE shall be entitled to such remedies as may be awarded in arbitration
pursuant to Section 14 ("Arbitration").
c. In addition, in the event of any valid termination of this
Agreement by Quantum under Section 13.3 due to a material breach by MKE, Quantum
shall be entitled to such rights as set forth in Section 4.3 ("Quantum
Manufacturing") and such other remedies as may be awarded by arbitration
pursuant to Section 14 ("Arbitration").
d. This Section sets forth the sole remedy of a party in the event of
a material breach of this Agreement by the other party.
e. Following termination or expiration of the Agreement, amounts due
and owing prior to termination or expiration of this Agreement shall still be
due and payable to the party owed such payment in accordance with the terms and
conditions of this Agreement.
14. ARBITRATION.
This Agreement shall be governed in all respects by the laws of the United
States of America and by the laws of the State of California, excluding its
conflict of law provisions. This Agreement is prepared and executed in the
English language only and any translation of this Agreement into any other
language shall have no effect. All disputes, controversy or claim arising out of
or relating to this Agreement, or the breach, termination, or invalidity
thereof, shall be settled by arbitration in Geneva, Switzerland, in accordance
with the United Nations Commission on International Trade Law (UNCITRAL)
Arbitration Rules. The language of the arbitration shall be English. The award
rendered by the arbitrator shall include costs of the arbitration, reasonable
attorneys' fees and reasonable costs for experts and other witnesses. Judgment
on the award may be entered in any court having jurisdiction.
13
<PAGE>
The parties agree that the arbitrator shall have the authority to issue interim
orders for provisional relief, including, but not limited to, orders for
injunctive relief, attachment or other provisional remedy, as necessary to
protect either party's name, proprietary information, trade secrets, know-how or
any other proprietary right. The parties agree that any interim order of the
arbitrator for any injunctive or other preliminary relief shall be enforceable
in any court of competent jurisdiction. In addition, either party shall be free
to seek provisional relief from any court of competent jurisdiction, in order to
protect that party's name or proprietary rights, prior to or after the
arbitration procedure set forth in this Section.
Anything in this Agreement to the contrary notwithstanding, in no event
shall the failure to agree upon the prices of the Products and the minimum
quantities be subject to arbitration.
15. GOVERNMENTAL CONSENTS.
15.1. U.S. Requirements. MKE recognizes that the transfer of technology
from Quantum is subject to compliance with United States export laws. Quantum
agrees to use its best efforts to promptly obtain necessary consents for the
export of technology under this Agreement.
15.2. Japan Requirements. Quantum recognizes that approval of the
government of Japan may be required prior to this Agreement becoming effective.
MKE agrees to use its best efforts to promptly obtain such necessary approval.
15.3. Visas. During the term of this Agreement, both parties agree to
assist the other to obtain visas necessary to permit the exchange of personnel.
15.4. Compliance with Laws. All parties agree during the term of this
Agreement to comply with all applicable laws of any country or government
authority including, but not limited to Foreign Exchange and Foreign Trade
Control Act and Export Trade Control Order of Japan and administrative guidance
prohibiting use of products or technology for design or manufacture of nuclear
weapons, chemical weapons, biological weapons or missiles, or Export
Administration Act and Regulations of the United States. The parties recognize
and agree that products and technology delivered or transferred from one party
to the other party may be subject to restrictions on export or reexport imposed
by the United States Department of Commerce or the Ministry of International
Trade and Industry of Japan.
16. MISCELLANEOUS.
16.1. Nonassignability. Except as specifically permitted by this Agreement,
neither party may assign, transfer or sublicense any of the rights or
obligations arising under this Agreement (including any affiliate or subsidiary
of a party) other than to a successor to its entire business by reason of merger
or sale of assets provided that the other party first receives written notice of
any such proposed merger or sale of assets and the intended successor in
interest of such proposed merger or sale of assets pursuant to such transaction
acknowledges in writing to be bound by the terms and conditions of this
Agreement, without the prior written consent of the other party, and any
attempted assignment without such consent shall be void and without effect.
16.2. Failure to Enforce. The failure of either party to enforce at any
time or for any period of time the provisions of this Agreement shall not be
construed to be a waiver of such provisions or of the right of such party to
enforce each and every such provision.
14
<PAGE>
16.3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, United States of America,
excluding its conflict of law provisions.
16.4. Severability. In the event that any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, the remaining portions of this Agreement shall remain in
full force and effect.
16.5. Notices. Any notice which any party desires or is obligated to give
to the other shall be given in writing and sent to the appropriate address shown
below or to such other address as the party to receive the notice may have last
designated in writing in the manner herein provided. Unless otherwise provided,
any notice required or permitted under this Agreement shall be given in writing
and shall be deemed effective (i) if personally delivered, at the time delivered
by hand, (ii) if delivered by facsimile transmission, upon confirmation of
transmission, (iii) if by courier, on the business day such courier guarantees
delivery, and (iv) if delivered by U.S. Mail, seven (7) business days after
deposit in the U.S. mail, postage prepaid, all properly addressed as follows:
Quantum Corporation
500 McCarthy Boulevard
Milpitas, CA 95035
Attention: Chief Executive Officer
facsimile: (408) 232-6798
Matsushita-Kotobuki Electronics
Industries, Ltd.
8-1 Furujin-Machi
Takamatsu-City, Kagawa 760, Japan
Attention: Takashi Honjo, President
facsimile: 011-81-(878) 511047
Quantum Peripherals (Europe) SA
Champs-Montants 16a
CH-2074 Marin-Epagnier
Neuchatel, Switzerland
Attention: Chief Executive Officer
facsimile: 011-41-32-753-5541
Ireland Kotobuki Electronics, Ltd.
Finnabair Industrial Park, Coe's Road
Dundalk, Co Louth
The Republic of Ireland
Attention: Managing Director
Kotobuki Electronics Industries (s) Pte. Ltd.
2 Corporation Road #02-01/12, #04-01/12
Corporation Place
Singapore 618494
15
<PAGE>
16.6. Entire Agreement. Except for the Purchase Agreement, an Inventory
Storage Agreement between the parties effective December 8, 1993, a Revised
Hydrodynamic Spindle Motor Proprietary Right and Manufacturing Agreement between
the parties effective February 3, 1995, and a Limited Voice Messaging/Processing
Industry Sales Agreement between the parties effective July 28, 1993, as well as
any agreements between the parties regarding the establishment and operation of
TA Diamond LLC (which may in future be known as Quantum-MKE Components LLC), and
the supply of products manufactured by such entity, this Agreement and any
attachments or exhibits hereto constitute the entire agreement among the parties
pertaining to the subject matter hereof, and any and all other written or oral
agreements existing between the parties are expressly canceled. Any
modifications of this Agreement must be in writing and signed by duly authorized
officers of all parties.
16.7. Force Majeure. In the event of any delay in performance or failure of
performance of obligations under this Agreement by either party due to any
causes arising from acts of God, war, mobilization, riot, strike, fire,
earthquake, flood, embargo, delay of carrier, power failure or attributable to
acts, events or omissions beyond the reasonable control of the party concerned,
such delay or failure of performance shall not be deemed a default and the party
so delayed or prevented shall be under no liability for loss or injury suffered
by the other party. Nothing in this paragraph shall affect the right of either
party to terminate this Agreement as otherwise provided herein.
16.8. Limitation of Liability. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL
ANY PARTY UNDER THIS AGREEMENT BE LIABLE FOR ANY SPECIAL OR CONSEQUENTIAL
DAMAGES OR LOSS OF PROFITS OF THE OTHER PARTY OR PARTIES OR ANY EXPENDITURES,
COSTS OR INVESTMENTS MADE OR INSURED BY THE OTHER PARTY OR PARTIES AS PROVIDED
HEREIN.
16.9. MEI. Quantum acknowledges that MKE is a subsidiary of MEI which is a
manufacturer of products which may be competitive with the Products and that MEI
and its subsidiaries other than MKE may now have or will have under development
products which are competitive with the Products.
16.10. Binding. This Agreement is not binding upon MEI, its subsidiaries,
and their respective affiliates other than MKE and nothing herein shall be
construed as a limitation upon the rights of MEI and its subsidiaries other than
MKE to sell any products to any customers or potential customers therefor
anywhere in the world, but nothing herein contained shall authorize the
disclosure of Quantum's Technical Information to MEI and its subsidiaries other
than MKE. Also, this Agreement does not apply to the design, manufacture or
supply to or from TA Diamond LLC, of Products or Components to either party
hereunder, which are addressed by separate agreement among the parties hereto
and TA Diamond LLC.
16.11. Agency. This Agreement does not create a principal to agent,
employer to employee partnership, joint venture, or any other relationship
except that of independent contractors between Quantum and MKE.
16.12. Headings. Headings to Paragraphs and Sections of this Agreement are
to facilitate reference only, do not form a part of this Agreement, and shall
not in any way affect the interpretation hereof.
16.13. Changes in Control. Prior to the occurrence of a change of control
of either Quantum or MKE, i.e., a person or entity acquires more than fifty
percent (50%) of the voting control of either
16
<PAGE>
Quantum or MKE, the party likely to undergo such change of control will notify
the other party and the parties will discuss the likely effect. [CONFIDENTIAL
TREATMENT REQUESTED].
16.14. Bankruptcy Code. All rights and licenses granted under or pursuant
to this Agreement by one party to the other with respect to the Products or the
Technical Products of the Technical Information are, and shall otherwise be
deemed to be, for the purposes of Section 365(n) of the United States Bankruptcy
Code, 11 U.S.C. Section 101, et seq. (the "Bankruptcy Code"), licenses of rights
to "intellectual property" as defined under Section 101(56) of the Bankruptcy
Code; provided it abides by the terms of this Agreement. The parties further
agree that, in the event that any proceeding shall be instituted by or against a
party seeking to adjudicate it bankrupt or insolvent or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy of
insolvency or reorganization or relief of debtors, or seeking an entry or an
order for relief of debtors, or seeking an entry or an order for relief or the
appointment of a receiver, trustee or other similar official for it or any
substantial part of its property, or such party shall take any action to
authorize any of the foregoing actions (each a "Proceeding"), the other party
shall have the right to retain and enforce its rights under this Agreement
including, but not limited to the following rights, provided it abides by the
terms of this Agreement: (i) the right to continue to use the Technical
Information, all documentation and other supporting materials relater thereto
and manufacture and sell Products and all versions and derivatives thereof; and
(ii) the right to complete access to, as appropriate, all Technical Information
and Products and all embodiments of such to be provided under this Agreement,
including documentation therefor, and the same, if not already in the
non-bankrupt party's possession, shall be promptly delivered to such party: (a)
upon any such commencement of a Proceeding upon written request therefor by such
party, unless the bankrupt party elects to continue to perform all of its
obligations under his Agreement; or (b) if not delivered under (a) above, upon
the rejection of this Agreement by or on behalf of the bankrupt party upon
written request therefor by the non-bankrupt party.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written. Notwithstanding such execution, this Agreement shall become
effective only after obtaining required approval of the government of Japan.
QUANTUM CORPORATION
By: /s/ Michael Brown
----------------------------------
Name: Michael Brown
Title: President and CEO
QUANTUM PERIPHERALS
(EUROPE) SA
By: /s/ Andrew Kryder
----------------------------------
Name: Andrew Kryder
Title:
MATSUSHITA-KOTOBUKI
ELECTRONICS INDUSTRIES, LTD.
By: /s/ Takashi Hanjo
----------------------------------
Name: Takashi Hanjo
Title: President
IRELAND KOTOBUKI
ELECTRONICS INDUSTRIES, LTD.
By: /s/ Yoshiyuiri Aono
----------------------------------
Name: Yoshiyuiri Aono
Title: Managing Director
KOTOBUKI ELECTRONICS
INDUSTRIES (S) PTE. LTD.
By: /s/ Hironijo Sakioka
----------------------------------
Name: Hironijo Sakioka
Title: Managing Director
AMENDED AND RESTATED MASTER AGREEMENT
18
AMENDED AND RESTATED
PURCHASE AGREEMENT
BETWEEN
MATSUSHITA-KOTOBUKI ELECTRONICS INDUSTRIES, LTD.,
AND
QUANTUM CORPORATION
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
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<S> <C>
1. DEFINITIONS.........................................................................................................1
1.1. Confidential Information.......................................................................................1
1.2. DPSG Products..................................................................................................1
1.3. Engineering Change.............................................................................................1
1.4. Master Agreement...............................................................................................1
1.5. Products.......................................................................................................1
1.6. Product Specifications.........................................................................................1
1.7. Purchase Order.................................................................................................1
1.8. Quantum........................................................................................................2
1.9. Spare Parts....................................................................................................2
1.10. Technical Information.........................................................................................2
1.11. Unique Customer Configured Products...........................................................................2
1.12. WSSG Products.................................................................................................2
2. CONTROLLING DOCUMENT................................................................................................2
2.1. Controlling Agreement..........................................................................................2
2.2. Conflicts......................................................................................................2
3. PURCHASE ORDERS.....................................................................................................2
3.1. Orders.........................................................................................................2
3.2. European Purchase Orders.......................................................................................3
3.3. Confirmation...................................................................................................3
3.4. Contents.......................................................................................................3
3.5. Emergency Orders...............................................................................................3
3.6. Shipment Report................................................................................................3
4. FORECASTS/COMMITMENTS...............................................................................................3
4.1. Purchase Orders................................................................................................3
[CONFIDENTIAL TREATMENT REQUESTED]
4.3. European Purchase Commitment...................................................................................4
4.4. Discontinuance of Model........................................................................................4
5. PRICES..............................................................................................................4
5.1. Price..........................................................................................................4
5.2. Special Pricing................................................................................................4
6. CURRENCY............................................................................................................4
7. TAXES...............................................................................................................4
8. PURCHASE ORDER RESCHEDULES AND FORECAST ADJUSTMENTS.................................................................4
9. PAYMENT TERMS.......................................................................................................5
10. TITLE..............................................................................................................5
11. DELIVERY...........................................................................................................6
11.1. Transportation................................................................................................6
11.2. Packaging.....................................................................................................6
11.3. Delivery Times................................................................................................6
12. INSPECTION AND ACCEPTANCE..........................................................................................6
12.1. MKE Inspection................................................................................................6
12.2. Quantum Inspection............................................................................................6
i
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TABLE OF CONTENTS
(continued)
Page
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12.3. Quantum Corrections...........................................................................................7
12.4. Non-conforming Acceptance.....................................................................................7
12.5. Lot Failures..................................................................................................7
12.6. Ongoing Reliability Testing...................................................................................7
12.7. OEM Customer Inspection.......................................................................................8
13. WARRANTY, PATENT INDEMNIFICATION...................................................................................8
13.1. MKE Warranty..................................................................................................8
13.2. Quantum Warranty..............................................................................................8
13.3. Remedy........................................................................................................8
13.4. Warranty Costs................................................................................................8
13.5. Exclusive Remedy..............................................................................................9
13.6. Warranty and Service by MKE for Sales by MKE to MKE Customers.................................................9
13.7. Patent Indemnification........................................................................................9
14. ENGINEERING CHANGES................................................................................................9
14.1. MKE Changes...................................................................................................9
14.2. Quantum Changes...............................................................................................9
15. SPARE PARTS.......................................................................................................10
15.1. Spare Parts During Product Manufacture.......................................................................10
15.2. Prices of Spare Parts During Product Manufacture.............................................................10
15.3. Spare Parts After Termination of Product Manufacturing.......................................................10
15.4. Prices for Spare Parts After Termination of Product Manufacturing............................................10
16. DOCUMENTATION.....................................................................................................10
16.1. Quantum's Brands.............................................................................................10
17. Components........................................................................................................11
18. TERM AND TERMINATION..............................................................................................11
18.1. Term.........................................................................................................11
[CONFIDENTIAL TREATMENT REQUESTED]
18.3. Rights Upon Termination......................................................................................12
19. ARBITRATION.......................................................................................................13
20. GOVERNMENTAL CONSENTS.............................................................................................13
20.1. Compliance with Laws.........................................................................................13
21. MISCELLANEOUS.....................................................................................................14
21.1. Nonassignability.............................................................................................14
21.2. Failure to Enforce...........................................................................................14
21.3. Governing Law................................................................................................14
21.4. Severability.................................................................................................14
21.5. Notices......................................................................................................14
21.6. Entire Agreement.............................................................................................15
21.7. Force Majeure................................................................................................15
21.8. Limitation of Liability......................................................................................15
21.9. Binding......................................................................................................15
21.10. Agency......................................................................................................16
21.11. Headings....................................................................................................16
ii
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TABLE OF CONTENTS
(continued)
Page
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21.12. Trading Company.............................................................................................16
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED PURCHASE AGREEMENT BETWEEN
MATSUSHITA-KOTOBUKI ELECTRONICS INDUSTRIES, LTD.,
AND QUANTUM CORPORATION
THIS AMENDED AND RESTATED PURCHASE AGREEMENT is made by and among
MATSUSHITA-KOTOBUKI ELECTRONICS INDUSTRIES, LTD., a Japanese corporation, its
subsidiaries, IRELAND KOTOBUKI ELECTRONICS INDUSTRIES, LTD., an Irish
corporation, and KOTOBUKI ELECTRONICS INDUSTRIES (S) PTE. LTD., a Singapore
corporation (collectively, "MKE") and QUANTUM CORPORATION, a Delaware
corporation, and its subsidiary QUANTUM PERIPHERALS (EUROPE) SA, a Swiss
corporation (hereinafter collectively "Quantum"). This Agreement is entered into
as of the 30th day of April, 1997 (the "Effective Date") and is intended to be
an amendment and restatement of the Purchase Agreement between the parties dated
as of December 1987, as amended.
In consideration of the mutual covenants and promises in this Agreement, the
parties agree as follows:
1. DEFINITIONS.
The following terms, as used in this Agreement, shall have the meanings
referenced below:
1.1. "Confidential Information" shall have the meaning set forth in the
Master Agreement.
1.2. "DPSG Products" shall mean Products designed by Quantum primarily for
the storage needs of desktop and portable systems, including by way of example
but not limitation, personal computers for home and business use.
1.3. "Engineering Change" regarding design shall mean any electrical or
mechanical changes to the Products or Spare Parts, proposed by Quantum or MKE,
which would affect the performance, reliability, safety, serviceability,
appearance, dimensions, tolerances, final assembly or Product Specifications of
the Products. Regarding manufacturing process, "Engineering Change" shall mean
any change to the manufacturing process, proposed by Quantum or MKE, which may
affect form, fit, function, quality, and/or reliability of the Products.
1.4. "Master Agreement" means the Amended and Restated Master Agreement
between MKE and Quantum dated as of even date herewith.
1.5. "Products" [CONFIDENTIAL TREATMENT REQUESTED].
1.6. "Product Specifications" shall mean the specifications for the
Products mutually agreed by the parties from time to time in accordance with the
procedures of the parties in effect on the Effective Date.
1.7. "Purchase Order" shall mean purchase orders submitted to MKE from
Quantum in accordance with Sections 3 ("Purchase Orders") and 4
("Forecasts/Commitments") of this Agreement.
1.
<PAGE>
1.8. "Quantum" shall also include any subsidiary of Quantum not
specifically referenced above.
1.9. "Spare Parts" shall mean all spare parts for the Products.
1.10. "Technical Information" shall mean all non-public information and
know-how which is proprietary to Quantum or MKE, as the case may be, directly
related to the development and manufacturing of any Products, including all
inventions, processes and discoveries known, actively used, or hereafter
developed by either party with respect thereto during the term of this
Agreement. Technical Information shall be mutually exchanged between the parties
solely for the purpose of contributing to, or assisting with, the design,
manufacturing, marketing, testing and service of the Products, provided that
either party has the right to transfer such information without the consent of
or payment of royalties to a third party, and further provided that such
Technical Information as will be transferred by MKE to Quantum may not be used
for Quantum's manufacturing of any product, including the Products, without
MKE's prior written consent. Notwithstanding anything to the contrary contained
herein, no exchange of Technical Information shall be deemed to transfer,
license or otherwise assign from one party to the other party any proprietary
rights any party hereto may have in the Technical Information.
1.11. "Unique Customer Configured Products" shall mean Products based upon
standard Products but incorporating changes that may include electrical,
hardware interface, firmware and/or form factor made pursuant to the terms of
this Agreement. The specifications of such products will be mutually confirmed
in writing on an as-needed basis.
1.12. "WSSG Products" shall mean Products designed by Quantum primarily for
the storage needs of storage-intensive applications, including by way of example
but not limitation, servers, workstations, disk arrays, networked databases,
storage subsystems and mini-computers.
2. CONTROLLING DOCUMENT.
2.1. Controlling Agreement. All purchases of the Products by Quantum from
MKE shall be subject to the terms and conditions of this Agreement, the Master
Agreement and the Exhibits, if any, attached to each. Any additional,
inconsistent and conflicting clauses in any Purchase Order, release, acceptance
or other written correspondences from one party to the other, are to be
considered rejected and of no effect. Any addition to, deletion from or
modification of any of the provisions of this Agreement shall be made in writing
signed by duly authorized representatives of both parties and shall state that
it is an amendment of this Agreement.
2.2. Conflicts. If a conflict arises between any of the terms in the
following documents, the order of precedence shall be: (i) this Agreement, (ii)
the Master Agreement, and (iii) written terms on any issued and accepted
Purchase Order.
3. PURCHASE ORDERS.
3.1. Orders. The purchase and sale of Products and Spare Parts shall be
made against specific Purchase Orders placed by Quantum to MKE and accepted by
MKE during the term of this Agreement in accordance with the provisions hereof,
provided that such acceptance shall not be unreasonably withheld or delayed in
accordance with the provisions hereof. Purchase Orders and change orders may be
placed by facsimile. A Purchase Order may provide for delivery of the Products
for a period up to one hundred eighty (180) days following normal expiration of
this Agreement and all terms and conditions of this Agreement shall govern.
Subject to the provisions of
2.
<PAGE>
Section 18.2 ("Termination"), no Purchase Order is required to be accepted by
MKE on and after the expiration or the termination of this Agreement. Any
Purchaser Order issued, or to be issued, for any firm commitment of purchase of
Products hereunder shall be noncancellable except as otherwise provided for in
Sections 11.3 ("Delivery Times") and 21.7 ("Force Majeure") hereof and Quantum
shall be responsible for taking deliveries of and paying for all Products set
forth in such Purchase Order.
3.2. European Purchase Orders. All purchase orders from Quantum Peripherals
(Europe) SA ("Quantum-Switzerland") to Ireland Kotobuki Electronics Industries,
Ltd. ("MKE-Ireland") shall be issued to MKE and the copy of such purchase orders
shall be delivered to MKE-Ireland simultaneously with such issuance. Control of
order acceptance and production allocation shall be made by MKE.
3.3. Confirmation. MKE will notify Quantum of receipt of a Purchase Order
within five (5) working days after receipt of Quantum's Purchase Order.
Confirmation of receipt and acceptance by MKE may be by facsimile. No individual
Purchase Order shall be binding upon MKE unless and until accepted in writing by
MKE, but such acceptance shall not be unreasonably withheld or delayed.
3.4. Contents. All Purchase Orders for Products and Spare Parts submitted
by Quantum shall state the following: (i) price, (ii) the quantities ordered,
(iii) delivery dates, (iv) destination (which shall be the mutually agreed
Quantum facility unless otherwise specifically agreed by the parties), (v)
requested method of shipment (and specific carrier if desired) and (vi) Product
model or Spare Parts number in accordance with the terms and conditions hereof.
Quantum shall use the form of Purchase Order agreed upon by the parties from
time to time to place the Purchase Order and emergency orders referred to in
Section 3.5 ("Emergency Orders") below. Any additional or inconsistent terms
contained on such form of Purchase Order shall not be applicable and are hereby
rejected.
3.5. Emergency Orders. The monthly rolling forecasts and Purchase Orders
placed by Quantum under Sections 3.1 ("Orders") and 4.2 ("Commitments") shall
not prevent Quantum from placing emergency orders for Products for delivery up
to the quantities as may be agreed to by MKE in accordance with the provisions
hereof in less than ninety (90) days and MKE agrees to make reasonable efforts
to deliver the Products on the requested schedule but shall have no liability
hereunder for failure to deliver such emergency orders on the requested
schedule.
3.6. Shipment Report. MKE will supply Quantum a weekly shipment report for
all Products shipped during the past week, which report shall specify the
quantity, part number (including revision or configuration level), shipment date
and commercial invoice number with the form and method to be mutually agreed
upon between the parties.
4. FORECASTS/COMMITMENTS.
4.1. Purchase Orders. Quantum will issue a non-cancelable Purchase Order on
a monthly basis, on or before the 10th day of such month, [CONFIDENTIAL
TREATMENT REQUESTED].
4.2. [CONFIDENTIAL TREATMENT REQUESTED]
3.
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]
4.3. European Purchase Commitment. Quantum warrants and guarantees that
Quantum or Quantum's subsidiaries will utilize MKE-Ireland's product first in
meeting European demand; provided that Quantum and MKE shall mutually agree as
to the timing of any increases in MKE- Ireland's production capacity. Quantum
agrees to use diligent efforts to market, sell and promote the Products and
Unique Customer Configured Products in Europe through Quantum-Switzerland.
4.4. Discontinuance of Model. Quantum shall promptly notify MKE of
Quantum's decision to discontinue to order any specific model of Product.
Notwithstanding any such notice, Quantum shall remain obligated to purchase the
specific model of Product pursuant to the application of Section 3.1 ("Orders")
and Section 8 ("Purchase Order Reschedules and Forecast Adjustments").
5. PRICES.
5.1. Price. The purchase price to Quantum for each item of the Products
sold to Quantum shall be agreed to from time to time by the parties.
5.2. Special Pricing.
a. In order to obtain business from specific potential customers
identified by Quantum and deemed to be in the mutual best interests of Quantum
and MKE, Quantum and MKE shall in good faith work together to establish a
mutually agreeable price for the Products between MKE and Quantum where such
special pricing may be necessary in order for Quantum to obtain the business
from such customers.
b. All prices to Quantum for Products, Unique Custom Configured
Products and/or Spare Parts, where MKE's trading company provides export
services from Japan, shall be F.O.B. Japanese Port (Osaka, Kobi or their
vicinity) as designated by Quantum [CONFIDENTIAL TREATMENT REQUESTED] the Ex-MKE
factory price for such Products, Unique Custom Configured Products and/or Spare
Parts as set forth in Section 5.1 ("Price") above.
6. CURRENCY.
MKE sales of Products and Spare Parts to Quantum shall be in U.S.
Dollars.
7. TAXES.
The price for the Products includes all taxes necessary to pass title
to the Products, Unique Customer Configured Products and Spare Parts to Quantum
at the delivery point. In the case of substantially high rate taxes, charges or
duties such as 100% sanctions, Quantum and MKE agree to meet immediately and to
agree upon a method to resolve such problem. Title to the Products, Unique
Customer Configured Products and Spare Parts shall pass to Quantum from MKE
ex-MKE Factory unless MKE's Trading Company provides export services, in which
event title shall pass to Quantum F.O.B. Japanese Port (Osaka, Kobe or their
vicinity) as designated by Quantum.
8. PURCHASE ORDER RESCHEDULES AND FORECAST ADJUSTMENTS.
[CONFIDENTIAL TREATMENT REQUESTED]
4.
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<S> <C>
[CONFIDENTIAL TREATMENT REQUESTED]
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It is expected that a significant portion of Quantum's business will
require special configuration of the Products. Some may be as minor as code
changes while others may require special brackets or other hardware changes.
Quantum's customers also will change the mix of Products in addition to their
configuration with virtually no lead time. Therefore, Quantum shall be able to
change the configuration and mix of products on a weekly basis. Quantum and MKE
will work together to establish a mutually agreeable procedure for changing the
configuration and mix of Products and Unique Customer Configured Products.
9. PAYMENT TERMS.
Unless otherwise specifically provided herein, all payments, including
without limitation payments for the Products, Unique Customer Configured
Products and Spare Parts made by Quantum hereunder shall be payable in U.S.
Dollars, [CONFIDENTIAL TREATMENT REQUESTED], in case of Products manufactured in
Japan and [CONFIDENTIAL TREATMENT REQUESTED], in case of Products manufactured
in Ireland or Singapore, after delivery of the Products, Unique Customer
Configured Products or Spare Parts to Quantum. Delivery of the Products, Unique
Customer Configured Products or Spare Parts shall be deemed to occur when such
Products, Unique Customer Configured Products or Spare Parts are delivered
ex-MKE Factory unless MKE's designated Trading Company provides export service
to Quantum, in which event delivery shall be deemed to occur when the Products,
Unique Customer Configured Products and/or Spare Parts are delivered F.O.B.
Japanese Port (Osaka, Kobe or their vicinity) as designated by Quantum.
[CONFIDENTIAL TREATMENT REQUESTED]
10. TITLE.
Title to the Products, Unique Customer Configured Products and/or Spare
Parts and risk of loss shall pass to Quantum upon MKE's delivery thereof, as
delivery is defined in Section 9 ("Payment Terms") above regardless of any
provisions for payment of freight or insurance or form of shipping documents.
5.
<PAGE>
11. DELIVERY.
11.1. Transportation. The method of transportation and the carrier selected
shall be as specified by Quantum in its Purchase Order. All transportation
charges, including insurance, shall be paid by Quantum.
11.2. Packaging. The method of packaging shall be in accordance with
specifications established by Quantum from time to time. The cost of packaging
for shipment to the United States is included in the price. Each shipment shall
include a packing list containing: (i) Purchase Order number, (ii) Product,
Unique Customer Configured Products or Spare Part number, and (iii) quantity of
shipped Products, Unique Customer Configured Products or Spare Parts. Serial
numbers of Products shipped to Quantum shall be delivered concurrently with the
packing list but by separate communications in accordance with the parties'
standard practices. Quantum shall indemnify and hold harmless MKE from and
against any and all liabilities, cost, expenses, loss and damages, arising out
of or relating to the packaging for the Products provided that the Products and
Spare Parts are packed in conformity with Quantum's specifications.
11.3. Delivery Times. The delivery dates and quantities specified by
Quantum in its Purchase Orders accepted by MKE are firm. If a delivery date,
along with the appropriate quantities, is missed by more than five (5) days,
then Quantum may reschedule the delivery in question.
12. INSPECTION AND ACCEPTANCE.
12.1. MKE Inspection. MKE shall provide and maintain an inspection
procedure and quality assurance program for Products and Spare Parts and their
production processes. Complete records of all inspection work done by MKE
including equipment calibration, shall be made available to Quantum upon its
request and reasonable times during the term of this Agreement. Quantum is
authorized to perform source inspection and quality assurance audits at MKE's
manufacturing facilities, but this shall not relieve MKE of its obligation to
deliver conforming Products or waive Quantum's right of inspection and
acceptance at destination.
12.2. Quantum Inspection. All Products, Unique Customer Configured Products
and Spare Parts ordered by Quantum under this Agreement shall be subject to
inspection and acceptance by Quantum at its destination in accordance with
incoming inspection test procedures agreed to by MKE. All Products, Unique
Customer Configured Products and Spare Parts shipped, under this Agreement will
comply one hundred percent (100%) to the Product Specifications. Products,
Unique Customer Configured Products and Spare Parts which fail to pass Quantum's
incoming test or inspection requirements for the Products, Unique Customer
Configured Products and Spare Parts which have been established by the mutual
agreement of Quantum and MKE may be rejected by Quantum and returned to MKE for
repair or replacement, with all costs to repair or replace and of transportation
(with MKE choosing the carrier) and risk of loss from Quantum's principal
facility, to be paid as provided below.
a. During the Agreement term, and by mutual agreement between Quantum
and MKE, MKE shall provide at MKE's expense, at Quantum's facility, technical
personnel for purpose of analyzing manufacturing defects found during incoming
acceptance tests.
b. In the event that MKE's technical personnel at Quantum's facility
cannot correct defects relating solely to manufacturing defects within a
reasonable number of working days following MKE's receipt of Quantum's notice of
defects, the non-conforming Products, Unique
6.
<PAGE>
Customer Configured Products and Spare Parts may be returned to MKE for repair
or replacement. Quantum shall notify MKE prior to return of nonconforming
Products, Unique Customer Configured Products or Spare Parts. All returned
Products, Unique Customer Configured Products or Spare Parts will be shipped to
MKE's designated facility.
c. All shipments of non-conforming Products, Unique Customer
Configured Products or Spare Parts pursuant to (b) above shall be made freight
collect and MKE assumes risk of loss and damage during transit. Replacement
Products, Unique Customer Configured Products or Spare Parts will be delivered
to Quantum, at Quantum's applicable facility, at MKE's expense within thirty
(30) days after the date of receipt of non-conforming Products, Unique Customer
Configured Products or Spare Parts by MKE. Should MKE fail to repair or replace
rejected Products, Unique Customer Configured Products or Spare Parts and return
conforming Products, Unique Customer Configured Products or Spare Parts to
Quantum within thirty (30) days, Quantum shall have the option to cancel without
cost or liability the purchase of such Products, Unique Customer Configured
Products or Spare Parts and receive, at Quantum's option, a credit or rebate if
payment has been made. Quantum shall pay freight charges, insurance and other
customary charges for transportation for improperly rejected Products, Unique
Customer Configured Products or Spare Parts. Notwithstanding the foregoing,
Quantum and MKE shall separately negotiate in good faith if either party
believes that different procedures for repair and replacement of WSSG Products
or other new Products should be established because of the differences in such
Products.
d. It is understood that all costs to repair or replace and of
transportation with respect to defective Products, Unique Customer Configured
Products or Spare Parts shall be [CONFIDENTIAL TREATMENT REQUESTED].
12.3. Quantum Corrections. Quantum may attempt to correct deficiencies with
Spare Parts purchased under this Agreement. Such correction by Quantum shall
neither invalidate nor act as a waiver of Quantum's rights to satisfaction under
Section 12.2 ("Quantum Inspection") above nor affect any other terms of this
Agreement, including, but not limited to, the warranty under Section 13
("Warranty"). The act of payment for Products or Spare Parts shall not of itself
signify acceptance by Quantum of the Products or Spare Parts.
12.4. Non-conforming Acceptance. Quantum may choose to accept Products,
Unique Customer Configured Products or Spare Parts which fail to conform in a
minor aspect to the specifications established by this Agreement without
prejudice to its right to reject non-conforming items in the future. If Quantum
so chooses, Quantum will notify MKE of its intent to accept non-conforming
items. MKE agrees to negotiate in good faith a price reduction for such items
based upon Quantum's added expenses to correct such deficiencies provided that
the basis for non-conformance is not the result of a design defect. After the
parties agree on a price Quantum will notify MKE that Quantum has accepted the
non-conforming items.
12.5. Lot Failures. If a lot fails the acceptance quality yield level
established by the parties from time to time then Quantum may reject the entire
lot and require MKE technical personnel to verify individual Products in the lot
as acceptable provided that the basis for failure of quality yield level is not
the result of a design defect.
7.
<PAGE>
12.6. Ongoing Reliability Testing. MKE shall perform ongoing reliability
testing in a manner and frequency mutually agreed upon by the parties from time
to time.
12.7. OEM Customer Inspection. MKE shall allow with prior arrangement,
Quantum's OEM customers to perform or cause to be performed inspection, audit
and/or test of Product and/or manufacturing process. The OEM customer is to be
accompanied by a Quantum employee(s) who will be the interface between the OEM
customer and MKE.
13. WARRANTY, PATENT INDEMNIFICATION.
13.1. MKE Warranty. The MKE warranty period extended to Quantum shall be
[CONFIDENTIAL TREATMENT REQUESTED]. Such warranty period shall commence from the
date of delivery of Products by MKE to Quantum as described in Section 9
("Payment Terms") hereof. All Products, Unique Customer Configured Products or
Spare Parts furnished under this Agreement, except for software/firmware and
product interface components supplied by Quantum, will be warranted by MKE to be
free of defects in materials and workmanship, and will conform to applicable
Product Specifications, drawings and/or samples provided or incorporated in this
Agreement. Notwithstanding the above, the warranty period may be extended by
mutual agreement. The terms of the warranty periods will be reviewed on an
annual basis. Quantum and MKE agree to negotiate in good faith extensions of the
warranty period due to competitive market conditions.
13.2. Quantum Warranty. Quantum warrants for the period of time that
Quantum warrants to its customers from the date of delivery of Products by
Quantum to its customers that all Products, Unique Customer Configured Products
and Spare Parts furnished under this Agreement will be free from defects in
design. These warranties shall survive any inspection, delivery, payment and
termination or expiration of this Agreement, and shall run to MKE and MKE
Customers, or its successors and assigns.
13.3. Remedy. Correction of warranty defects hereunder shall be performed
at either Quantum's or MKE's facility, as MKE and Quantum shall agree. MKE
shall, with the mutual agreement of Quantum, repair or replace all defective
Products, Unique Customer Configured Products and Spare Parts within thirty (30)
days of receipt of defective Products returned to it by Quantum. During the term
of this Agreement, and if mutually agreed between Quantum and MKE, MKE shall
provide, at Quantum's facility, technical personnel for the purpose of analyzing
and repairing defects in the Products, Unique Customer Configured Products and
Spare Parts. Notwithstanding the foregoing, Quantum and MKE shall separately
negotiate in good faith if either party believes that different procedures for
repair and replacement of WSSG Products or other new Products should be
established because of the differences in such Products.
13.4. Warranty Costs. [CONFIDENTIAL TREATMENT REQUESTED]
8.
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]. The parties shall review on a semi-annual
basis the procedures for warranty repairs and allocation of warranty expenses as
well as the reimbursement policy for such warranty repairs as hereinafter set
forth. Initially, a report shall be prepared by MKE and Quantum on a calendar
quarterly basis indicating the warranty costs incurred by the parties pursuant
to this Section 13. Within thirty (30) days after a warranty cost report is
submitted, the owing party shall reimburse the owed party. Any disputes pursuant
to this Section 13 shall be resolved by arbitration in the manner established by
Section 19 ("Arbitration") below.
13.5. Exclusive Remedy. THE WARRANTIES SET FORTH ABOVE CONSTITUTE THE SOLE
AND EXCLUSIVE REMEDY OF MKE AND QUANTUM REGARDING THE PERFORMANCE OF THE
PRODUCTS. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, QUANTUM AND MKE MAKE
NO WARRANTIES, EXPRESS OR IMPLIED, AND HEREBY EXPRESSLY DISCLAIM ALL OTHER
WARRANTIES, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. NEITHER MKE OR QUANTUM SHALL BE LIABLE FOR
CONSEQUENTIAL DAMAGES.
13.6. Warranty and Service by MKE for Sales by MKE to MKE Customers. MKE
shall at its cost, expense and responsibility, warrant the Products and/or
provide after-sales service on the Products sold to MKE Customers hereunder.
Notwithstanding, Quantum shall at MKE's request provide in good faith reasonable
technical advice and assistance regarding Product design in support of such
warranty and after-sales service. Quantum shall reasonably support MKE's
requests regarding customer specifications, firmware changes, and assignment of
part numbers for Product sold hereunder. The parties agree to negotiate in good
faith reasonable terms and conditions regarding any specification and/or
schedule changes.
13.7. Patent Indemnification. The provisions of Section 11 ("Patent
Indemnification") of the Master Agreement shall be deemed incorporated into this
Agreement.
14. ENGINEERING CHANGES.
14.1. MKE Changes. MKE shall notify Quantum of any Engineering Change
proposed to be made by MKE to the Product, Spare Parts, or manufacturing process
and shall supply a written description of the expected effect of the Engineering
Change on the Product or manufacturing process, including the effect on
performance, all test results of the proposed change, reliability, quality and
serviceability and any cost changes expected by the Engineering Change. In
deciding whether or not to give its consent to the inclusion of an MKE-proposed
Engineering Change, Quantum may elect to evaluate parts and/or designs specified
as part of the proposed change. Quantum agrees to approve or disapprove
MKE-proposed changes or respond with alternate proposals within sixty (60)
working days of receipt of a written request including all necessary
documentation and materials to correctly evaluate the requested change for
changes requiring customer approval and ten (10) working days for changes
requiring only Quantum approval.
9.
<PAGE>
Quantum will use its best effort to reduce the response time for MKE - proposed
changes that require customer approval.
14.2. Quantum Changes. Quantum may request, in writing, that MKE
incorporate an Engineering Change into the Product or a manufacturing process.
Such request will include a description of the proposed change sufficient to
permit MKE to evaluate its feasibility and the proposed effect on quality,
reliability, performance, cost and serviceability. Within ten (10) working days
of such request by Quantum, MKE will advise Quantum of the terms and conditions
under which it would make the Engineering Change requested by Quantum. MKE's
evaluation shall be in writing and shall state the cost savings or increase, if
any, expected to be created by the Engineering Change, and its effect on the
performance, quality, reliability, safety, appearance, dimensions, tolerance,
inventory cost and lead time, provided such advice and evaluation by MKE shall
be deemed conditional only and such change request shall be of no force and
effect until such time as Quantum and MKE shall agree in writing upon a
commensurate increase or decrease in the purchase price or revision of delivery
schedule or both. If Quantum requests MKE in writing to incorporate an
Engineering Change into the Product or manufacturing process and it is agreed to
by MKE, the Product Specifications will be amended as required. MKE shall not
unreasonably refuse to incorporate Quantum's Engineering Changes into the
Product or manufacturing process.
15. SPARE PARTS.
15.1. Spare Parts During Product Manufacture. During the manufacture of the
Products Quantum shall have the right to order all piece parts for the purpose
of providing service on the Products by Quantum, or any authorized third party
repair organization. Quantum will order Spare Parts with at least ninety (90)
days lead time and MKE agrees to supply the Spare Parts.
15.2. Prices of Spare Parts During Product Manufacture. The prices of all
piece parts or subassemblies that compose the Product [CONFIDENTIAL TREATMENT
REQUESTED] of the total Product price to Quantum.
15.3. Spare Parts After Termination of Product Manufacturing. Quantum shall
have the right to purchase the recommended Spare Parts and MKE agrees to supply
these Spare Parts for a period of seven (7) years after discontinuance of a
relevant model of a Product. Quantum shall also have the right to purchase all
mutually agreed upon individual piece parts from MKE or their vendors during
this time period so that MKE is not required to stock every individual piece
part. MKE will assist Quantum in purchasing and obtaining the best prices from
their vendors.
15.4. Prices for Spare Parts After Termination of Product Manufacturing.
After termination of this Agreement, Prices for the Spare Parts shall be
mutually agreed upon, however, the parties agree to negotiate commercially
reasonable prices for said Spare Parts. At Quantum's option certain Spare Parts
of U.S. manufacture may be purchased directly from the manufacturers. Warranty
for MKE - supplied Spare Parts will be the same as for the Product under Section
13 ("Warranty"). Order lead times and payment terms for parts and subassemblies
shall be the same as for Spare Parts.
16. DOCUMENTATION.
16.1. Quantum's Brands.
a. Quantum grants to MKE the right to apply such of Quantum's Brands
to the Products to be manufactured and delivered to Quantum pursuant to this
Agreement as Quantum shall direct upon reasonable written notice. Quantum's
Brands shall not be used in combination with any
10.
<PAGE>
other tradenames, trademarks, characters, figures or marks by MKE without the
prior written approval of Quantum. Quantum represents and warrants that it is
the sole and exclusive owner of Quantum's Brands and that the use thereof on the
Product will not infringe the rights of any third party.
b. Quantum's Brands shall be affixed to each unit of the Product, in
such manner as may be specified by Quantum trademark guidelines issued by
Quantum to MKE from time to time.
c. Quantum shall indemnify and hold harmless MKE from and against any
and all liabilities, costs, expenses, loss and damages, including reasonable
counsel fees and expenses for the cost of settlement, arising out of or relating
to any claim by any third party of any proprietary right or interest in
Quantum's Brands or any claim relating to any art work, labeling and other
printed matters supplied by or included at the direction of Quantum. Quantum
shall, at the request of MKE, assume the defense of any action or suit against
MKE relating hereto, by reputable counsel reasonably acceptable to MKE retained
at Quantum's expense, and shall pay any damages assessed against or otherwise
payable by MKE as a result of the disposition of any such action or suit. MKE
shall promptly notify Quantum of the commencement of any such action or suit, or
threats thereof, and Quantum shall be afforded the opportunity to determine the
manner in which such action or suit should be handled or otherwise disposed of.
Quantum shall not effect any settlement that does not provide for the full and
unconditional release of all applicable claims against MKE without MKE's prior
written consent. Notwithstanding the foregoing, if MKE is a named party in any
action or suit, MKE may participate in any such action or suit at its own
expense and by its own counsel. MKE shall not undertake to settle, or agree to
any settlement herein, without first obtaining the written consent of Quantum.
17. COMPONENTS.
MKE and Quantum agree to work together and mutually agree on sourcing of
parts components to insure that consideration be given to sources outside MKE,
given price, quality, delivery and other procurement considerations are equal.
While Quantum and MKE will jointly develop the specifications for the key
components and parts, Quantum shall be responsible for establishing the actual
specifications for such components and parts. MKE shall be responsible for the
components and parts after such components and parts successfully pass MKE's
incoming test inspection subject to Section 13.1 ("MKE Warranty") and Section
13.2 ("Quantum Warranty") hereof. Notwithstanding the aforesaid, should the
application of the previous sentence work a hardship on either party, Quantum
and MKE shall, in good faith, negotiate a reasonable commercial solution.
It is contemplated that all components and parts for the Products or Unique
Customer Configured Products will be either provided by MKE or other worldwide
sources resulting in the lowest total cost.
Quantum shall provide reasonable assistance to MKE to resolve any material
problems of such components and parts if such problems may occur after the
commencement of mass-production of such components and parts.
18. TERM AND TERMINATION.
18.1. Term. This Agreement shall be effective as of the date first set
forth above and shall continue in effect for the same period of time as the
Master Agreement remains in effect. In the event the Master Agreement terminates
for any reason, this Agreement shall terminate concurrently. In the event
11.
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the term of the Master Agreement is extended for any reason, this Agreement
shall automatically be extended for the same period of time.
18.2. [CONFIDENTIAL TREATMENT REQUESTED]
12.
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]
b. [CONFIDENTIAL TREATMENT REQUESTED].
18.3. Rights Upon Termination.
a. In the event of any termination of this Agreement following
completion of the wind down period under Section 18.2, Articles 1, 6, 9, 13, 15,
16, 19, 20 and 21, and Sections 18.2 and 18.3 shall survive.
b. In addition, in the event of any valid termination of this
Agreement by MKE under Section 18.2 ("Termination") due to a material breach by
Quantum, MKE shall be entitled to damages as awarded in arbitration pursuant to
Section 19 ("Arbitration").
c. In addition, in the event of any valid termination of this
Agreement by Quantum under Section 18.2 ("Termination") due to a material breach
by MKE, Quantum shall be entitled to damages as awarded in arbitration pursuant
to Section 19 ("Arbitration").
d. This Section sets forth the sole remedy of a party in the event of
a material breach of this Agreement by the other party.
19. ARBITRATION.
This Agreement shall be governed in all respects by the laws of the United
States of America and by the laws of the State of California, excluding its
conflict of law provisions. This Agreement is prepared and executed in the
English language only and any translation of this Agreement into any other
language shall have no effect. All disputes, controversy or claim arising out of
or relating to this Agreement, or the breach, termination, or invalidity
thereof, shall be settled by arbitration in Geneva, Switzerland, in accordance
with the United Nations Commission on International Trade Law (UNCITRAL)
Arbitration Rules. The language of the arbitration shall be English. The award
rendered by the arbitrator shall include costs of the arbitration, reasonable
attorneys' fees and reasonable costs for experts and other witnesses. Judgment
on the award may be entered in any court having jurisdiction. The parties agree
that the arbitrator shall have the authority to issue interim orders for
provisional relief, including, but not limited to, orders for injunctive relief,
attachment or other provisional remedy, as necessary to protect either party's
name, proprietary information, trade secrets, know-how or any other proprietary
right. The parties agree that any interim order of the arbitrator for any
injunctive or other preliminary relief shall be enforceable in any court of
competent jurisdiction. In addition, either party shall be free to seek
provisional relief from any court of competent jurisdiction, in order to protect
that party's name or proprietary rights, prior to or after the arbitration
procedure set forth in this Section.
Anything in this Agreement to the contrary notwithstanding, in no event
shall the failure to agree upon the prices of the Products and the minimum
quantities be subject to arbitration.
13.
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20. GOVERNMENTAL CONSENTS.
20.1. Compliance with Laws. All parties agree during the term of this
Agreement to comply with all applicable laws of any country or government
authority including, but not limited to Foreign Exchange and Foreign Trade
Control Act and Export Trade Control Order of Japan and administrative guidance
prohibiting use of products or technology for design or manufacture of nuclear
weapons, chemical weapons, biological weapons or missiles, or Export
Administration Act and Regulations of the United States. The parties recognize
and agree that products and technology delivered or transferred from one party
to the other party may be subject to restrictions on export or re-export imposed
by the United States Department of Commerce or the Ministry of International
Trade and Industry of Japan.
21. MISCELLANEOUS.
21.1. Nonassignability. Except as specifically permitted by this Agreement,
neither party may assign, transfer or sublicense any of the rights or
obligations arising under this Agreement (including any affiliate or subsidiary
of a party) other than to a successor to its entire business by reason of merger
or sale of assets provided that the other party first receives written notice of
any such proposed merger or sale of assets and the intended successor in
interest of such proposed merger or sale of assets pursuant to such transaction
acknowledges in writing to be bound by the terms and conditions of this
Agreement, without the prior written consent of the other party, and any
attempted assignment without such consent shall be void and without effect.
21.2. Failure to Enforce. The failure of either party to enforce at any
time or for any period of time the provisions of this Agreement shall not be
construed to be a waiver of such provisions or of the right of such party to
enforce each and every such provision.
21.3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, United States of America,
excluding its conflict of law provisions.
21.4. Severability. In the event that any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, the remaining portions of this Agreement shall remain in
full force and effect.
21.5. Notices. Any notice which any party desires or is obligated to give
to the other shall be given in writing and sent to the appropriate address shown
below or to such other address as the party to receive the notice may have last
designated in writing in the manner herein provided. Unless otherwise provided,
any notice required or permitted under this Agreement shall be given in writing
and shall be deemed effective (i) if personally delivered, at the time delivered
by hand, (ii) if delivered by facsimile transmission, upon confirmation of
transmission, (iii) if by courier, on the business day such courier guarantees
delivery, and (iv) if delivered by U.S. Mail, seven (7) business days after
deposit in the U.S. mail, postage prepaid, all properly addressed as follows:
Quantum Corporation
500 McCarthy Boulevard
Milpitas, CA 95035
Attention: Chief Executive Officer
facsimile: (408) 232-6798
14.
<PAGE>
Matsushita-Kotobuki Electronics
Industries, Ltd.
8-1 Furujin-Machi
Takamatsu-City, Kagawa 760, Japan
Attention: Takashi Honjo, President
facsimile: 011-81-(878) 511047
Quantum Peripherals (Europe) SA
Champs-Montants 16a
CH-2074 Marin-Epagnier
Neuchatel, Switzerland
Attention: Chief Executive Officer
facsimile: 011-41-32-753-5541
Ireland Kotobuki Electronics, Ltd.
Finnabair Industrial Park, Coe's Road
Dundalk, Co Louth
The Republic of Ireland
Attention: Managing Director
Kotobuki Electronics Industries (s) Pte. Ltd.
2 Corporation Road #02-01/12, #04-01/12
Corporation Place
Singapore 618494
21.6. Entire Agreement. Except for the Master Agreement, an Inventory
Storage Agreement between the parties effective December 8, 1993, a Revised
Hydrodynamic Spindle Motor Proprietary Right and Manufacturing Agreement between
the parties effective February 3, 1995, and a Limited Voice Messaging/Processing
Industry Sales Agreement between the parties effective July 28, 1993, as well as
any agreements between the parties regarding the establishment and operation of
TA Diamond LLC (which may be known in future as Quantum-MKE Components LLC), and
the supply of products manufactured by such entity, this Agreement and any
attachments or exhibits hereto constitute the entire agreement among the parties
pertaining to the subject matter hereof, and any and all other written or oral
agreements existing between the parties are expressly canceled. Any
modifications of this Agreement must be in writing and signed by duly authorized
officers of all parties.
21.7. Force Majeure. In the event of any delay in performance or failure of
performance of obligations under this Agreement by either party due to any
causes arising from acts of God, war, mobilization, riot, strike, fire,
earthquake, flood, embargo, delay of carrier, power failure or attributable to
acts, events or omissions beyond the reasonable control of the party concerned,
such delay or failure of performance shall not be deemed a default and the party
so delayed or prevented shall be under no liability for loss or injury suffered
by the other party. Nothing in this paragraph shall affect the right of either
party to terminate this Agreement as otherwise provided herein.
21.8. LIMITATION OF LIABILITY. IN NO EVENT AND UNDER NO CIRCUMSTANCES SHALL
ANY PARTY UNDER THIS AGREEMENT BE LIABLE FOR ANY
15.
<PAGE>
SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSS OF PROFITS OF THE OTHER PARTY OR
PARTIES OR ANY EXPENDITURES, COSTS OR INVESTMENTS MADE OR INSURED BY THE OTHER
PARTY OR PARTIES AS PROVIDED HEREIN.
21.9. Binding. This Agreement does not apply to the design, manufacture or
supply to or from TA Diamond LLC, of products or components to either party
hereunder, which are addressed by separate agreement among the parties hereto
and TA Diamond LLC.
21.10. Agency. This Agreement does not create a principal to agent,
employer to employee partnership, joint venture, or any other relationship
except that of independent contractors between Quantum and MKE.
21.11. Headings. Headings to Paragraphs and Sections of this Agreement are
to facilitate reference only, do not form a part of this Agreement, and shall
not in any way affect the interpretation hereof.
21.12. Trading Company. Unless otherwise agreed to in writing by MKE and
Quantum, MKE and Quantum agree that either Quantum will establish a "trading
company" (as hereafter defined) or establish a relationship with an existing
trading company acceptable to MKE, for the purpose of expediting the necessary
documentation for that shipment of Products and Spare Parts under this Agreement
and the importation of components and parts by Quantum for MKE and may be
responsible pursuant to the specific terms and times of payment as provided for
elsewhere in this Agreement for the collection and payment of all monies due to
the appropriate party under this Agreement during the term of this Agreement and
any other functions necessary to carry out the business between Quantum and MKE.
A "trading company" shall mean such organization existing, or to exist, which
is, or shall be, able to effect the functions described in the proceeding
sentence. At any time during the term of this Agreement, Quantum shall have the
right to establish its own trading company to act as such in replacement of any
prior existing relationship, or Quantum may change its relationship from a
non-Quantum affiliated trading company to any other non-Quantum affiliated
trading company, with the written consent of MKE, which shall not be
unreasonably withheld.
16.
<PAGE>
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written. Notwithstanding such execution, this Agreement shall become
effective only after obtaining required approval of the government of Japan.
QUANTUM CORPORATION
By: /s/ Michael Brown
----------------------------------
Name: Michael Brown
Title: President and CEO
QUANTUM PERIPHERALS
(EUROPE) SA
By: /s/ Andrew Kryder
----------------------------------
Name: Andrew Kryder
Title:
MATSUSHITA-KOTOBUKI
ELECTRONICS INDUSTRIES, LTD.
By: /s/ Takashi Hanjo
----------------------------------
Name: Takashi Hanjo
Title: President
IRELAND KOTOBUKI
ELECTRONICS INDUSTRIES, LTD.
By: /s/ Yoshiyuki Aono
----------------------------------
Name: Yoshiyuki Aono
Title: Managing Director
KOTOBUKI ELECTRONICS
INDUSTRIES (S) PTE. LTD.
By: /s/ Hironijo Sakioka
----------------------------------
Name: Hironijo Sakioka
Title: Managing Director
AMENDED AND RESTATED PURCHASE AGREEMENT
17.
041797
LICENSE AGREEMENT ("Agreement") with an Effective Date of January 1, 1996
between INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation
("IBM"), and QUANTUM CORPORATION, a Delaware corporation ("QUANTUM").
Each of the parties (as "Grantee") desires to acquire a nonexclusive
license under patents of the other party (as "Grantor"). In consideration of the
premises and mutual covenants herein contained, IBM and QUANTUM agree as
follows:
Section 1. Definitions
1.1 "Information Handling System" shall mean any instrumentality or aggregate of
instrumentalities primarily designed to compute, classify, process, transmit,
receive, retrieve, originate, switch, store, display, manifest, measure, detect,
record, reproduce, handle or utilize any form of information, intelligence or
data for business, scientific, control or other purposes.
1.2 "IHS Product" shall mean an Information Handling System or any
instrumentality or aggregate of instrumentalities (including, without
limitation, any component, subassembly, computer program or supply) designed for
incorporation in an Information Handling System. Any instrumentality or
aggregate of instrumentalities primarily designed for use in the fabrication
(including testing) of an IHS Product licensed herein shall not be considered to
be an IHS Product.
1.3 "Subsidiary" of a party hereto or of a third party shall mean a corporation,
company or other entity:
(a) more than fifty percent (50%) of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are, now or hereafter, owned or controlled, directly or
indirectly, by a party hereto or such third party, but such corporation,
company or other entity shall be deemed to be a Subsidiary only so long as
such ownership or control exists; or
(b) which does not have outstanding shares or securities, as may be the case in
a partnership, joint venture or unincorporated association, but more than
fifty percent (50%) of whose ownership interest representing the right to
make the decisions for such corporation, company or other entity is now or
hereafter, owned or controlled, directly or
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indirectly, by a party hereto or such third party, but such corporation,
company or other entity shall be deemed to be a Subsidiary only so long as
such ownership or control exists.
1.4 "IBM Licensed Patents" and "QUANTUM Licensed Patents" shall mean
all patents, including utility models and typeface design patents and
registrations (but not including any other design patents or registrations) of
Grantor:
(a) [CONFIDENTIAL TREATMENT REQUESTED];
(b) which, but for this Agreement, would be infringed by Grantee's making,
using, importing, offering for sale, or leasing, selling or otherwise
transferring a Grantee's Licensed Product in the country in which such
patent exists; and
(c) under which patents or the applications therefor Grantor or any of its
Subsidiaries now has, or hereafter obtains, the right to grant licenses to
Grantee of or within the scope granted herein without such grant or the
exercise of rights thereunder resulting in the payment of royalties or
other consideration by Grantor or its Subsidiaries to third parties (except
for payments between Grantor and its Subsidiaries, and payments to third
parties for inventions made by said third parties while employed by Grantor
or any of its Subsidiaries).
Licensed Patents shall include said patent applications, continuations in part
of said patent applications, and any patents reissuing on any of the aforesaid
patents.
1.5 "Licensed Patents" shall mean either IBM Licensed Patents or QUANTUM
Licensed Patents as the context indicates.
1.6 "IBM Licensed Products" shall mean IHS Products.
1.7 "Magnetic Disk" shall mean a platter-like rigid element having a magnetic
material coated or plated on or otherwise deposited on, or incorporated in, one
or both planar surfaces of said element and primarily designed for magnetically
or magneto-optically storing digital information recorded thereon or reproduced
therefrom while said element is rotating.
1.8 "Program" shall mean a plurality of instructions capable of being executed
by another IHS Product, whether or not such instructions are in a
machine-readable form and whether or not
2
<PAGE>
such plurality of instructions require processing such as assembly or
compilation prior to being so executed.
1.9 "Rotating Magnetic Memory Product" (hereinafter "RMM Products") shall mean
an IHS Product primarily designed to record and/or read, magnetically or
magneto-optically, digital information on or from a rotating Magnetic Disk,
which may be either fixed or removable, and any instrumentality or aggregate of
instrumentalities (including any Magnetic Disk) primarily designed for
incorporation therein.
1.10 "Tape Transport" shall mean an IHS Product primarily designed to effect
relative movement between a magnetic tape and one or more magnetic transducers,
each transducer operative to read and/or write information from or on such tape,
whether or not such instrumentality or aggregate of instrumentalities is
mechanically or electrically connected to other apparatus but shall not mean or
include such other apparatus. The term "Tape Transport" shall also include any
instrumentality, including a multi-cartridge tape loader and tape media
cartridge, or aggregate of instrumentalities primarily designed for
incorporation in such an IHS Product.
1.11 "Data Storage Transducer" shall mean a magnetic transducing unit operative
to read and/or write information from or on a Magnetic Disk or magnetic tape
while operating in close physical proximity thereto.
1.12 "Semiconductor Material" shall mean any material whose conductivity is
intermediate to that of metals and insulators at room temperature and whose
conductivity, over some temperature range, increases with increases in
temperature. Such materials shall include, but not be limited to, refined
products, reaction products, reduced products, mixtures and compounds.
1.13 "Solid State Disk" shall mean any instrumentality or aggregate of
instrumentalities, which is coupled to a CPU or auxiliary apparatus via a
Controller Apparatus and peripheral bus and is designed for storage and
reproduction of digital information by selectively setting or presetting
detectable states in Semiconductor Material forming at least a portion of such
instrumentality or aggregate of instrumentalities. A Solid State Disk may
include powering means and auxiliary and/or support circuits (such as
regeneration means, true-complement
3
<PAGE>
generation means, address means, address decoding means, sensing means,
selection means input/output means) to control the flow of such information into
or out of such Solid State Disk.
1.14 "RAID Product" shall mean an IHS Product, having a plurality of RMM
Products acting in concert as an array, primarily designed to record and/or read
digital information to or from the RMM Products in the array, and for
reconstituting any digital information which as stored on a failed RMM Product
in the array from digital information stored on the remaining RMM Products in
the array.
1.15 "Controller Apparatus" shall mean an IHS Product which is substantially
physically resident within an RMM Product, Solid State Disk or a Tape Transport
and is primarily designed to serve as an interface between a central processor
or auxiliary apparatus (which term shall include, without limitation, an
input/output channel for a central processor) and such RMM Product, Solid State
Disk or Tape Transport, whether or not such apparatus is physically separate
from such central processor or auxiliary apparatus or such RMM Product, Solid
State Disk or Tape Transport, for interpreting and executing commands,
translating data formats, checking and maintaining integrity of information,
furnishing status information, or indexing, searching, selecting, switching,
locating, comparing or controlling information in, on or with respect to, such
RMM Product, Solid State Disk or Tape Transport. Such apparatus shall be deemed
to be a Controller Apparatus notwithstanding that it is also capable of
performing the aforesaid functions while not connected to said central
processor or auxiliary apparatus.
1.16 "Controller Program" shall mean a plurality of instructions capable of
being compiled, executed or interpreted by a Controller Apparatus whether or not
such instructions are in a machine-readable form.
1.17 "Program Medium" shall mean any medium primarily designed for and
containing a Controller Program.
1.18 "Net List" shall mean a detailed specification of circuit functions
implementing logic or circuit equations to carry out defined operational tasks
within a custom or "Application-Specific-Integrated-Circuit" (ASIC) utilizing a
vendor-supplied library of functional circuit elements such as AND gates, OR
4
<PAGE>
gates, multipliers, flip-flops, etc. to lay out mask sets and manufacture ASIC
Semiconductor Chips.
1.19 "Semiconductor Chip" shall mean an integral unit containing an
interconnected array of active and/or passive elements, integrated on or in a
single substrate comprising Semiconductor Material where such unit is primarily
designed to be used in relation to a QUANTUM Licensed Product.
1.20 "QUANTUM Licensed Products" shall mean RMM Products, Tape Transports, Solid
State Disks, Controller Apparatus, Controller Programs, Semiconductor Chips
designed by QUANTUM or generated from Net Lists authored by QUANTUM, Data
Storage Transducers, Program Mediums, and any combinations of any, some or all
of the foregoing. The term Quantum Licensed Products shall not include RAID
Products.
1.21 "Licensed Products" shall mean either IBM Licensed Products or QUANTUM
Licensed Products as the context indicates.
Section 2. Grants of Rights
2.1 Subject to the provisions of Sections 2.3, 2.4 and 4, IBM on behalf of
itself and its Subsidiaries grants to QUANTUM a worldwide, nonexclusive license
under the IBM Licensed Patents:
(a) to use, import, and lease, sell and otherwise transfer QUANTUM Licensed
Products;
(b) to make QUANTUM Licensed Products other than RMM Products and Semiconductor
Chips, to use any apparatus in the manufacture of such products, and to
practice any method or process in such manufacture;
(c) to have QUANTUM Licensed Products made by another manufacturer for the use
and/or lease, sale or other transfer by QUANTUM only when the designs and
specifications for such QUANTUM Licensed Products were created by QUANTUM
(either solely or jointly with one or more third parties); provided,
however the license under this Section 2(c):
(i) with respect to Semiconductor Chips shall only be under
non-manufacturing method and/or non-manufacturing process claims of
IBM Licensed Patents, the infringement of which would be
necessitated by compliance with such designs and specifications; and
(ii) with respect to QUANTUM Licensed Products other than Semiconductor
Chips shall only be under claims of IBM Licensed Patents, the
infringement of which would be
5
<PAGE>
necessitated by compliance with such designs and specifications; and
(iii) shall not apply to any QUANTUM Licensed Products in the form
manufactured or marketed by said other manufacturer prior to
QUANTUM's furnishing of said designs and specifications; and
(d) to make RMM Products, to use any apparatus in the manufacture of such
products, and to practice any method or process in such manufacture, but
this license shall only be effective in the event that QUANTUM's RMM
Product foundry is unable to supply such products to QUANTUM, and in such
event, [CONFIDENTIAL TREATMENT REQUESTED].
Unless QUANTUM informs IBM to the contrary, QUANTUM shall be deemed to
have authorized said other manufacturer to make said QUANTUM Licensed
Products under the license granted to QUANTUM in this Section 2.1(c) when
the condition specified herein is fulfilled. Within thirty (30) days of a
written request identifying a product and a manufacturer, QUANTUM shall
inform IBM of the quantity of such product, if any, manufactured by such
manufacturer.
In the event that neither IBM nor any of its Subsidiaries has the right to grant
a license under any particular IBM Licensed Patent of the scope set forth above
in this Section 2.1, then the license granted herein under said IBM Licensed
Patent shall be of the broadest scope which IBM or any of its Subsidiaries has
the right to grant within the scope set forth above.
Upon receipt by IBM of all payments specified in Section 4, the license granted
to QUANTUM shall be fully paid-up.
2.2 Subject to the provisions of Section 2.4, QUANTUM on behalf of itself and
its Subsidiaries grants to IBM a worldwide, fully paid-up, nonexclusive license
under the QUANTUM Licensed Patents:
(a) to make, use, import, and lease, sell or otherwise transfer IBM
Licensed Products;
(b) in the manufacturing of IBM Licensed Products, to use any apparatus
and practice any method or process; and
(c) to have IBM Licensed Products made by another manufacturer for the use
and/or lease, sale or other transfer by IBM only when the designs and
specifications for such IBM Licensed Products were created by IBM
(either solely or jointly with
6
<PAGE>
one or more third parties); provided, however the license under this
Section 2.2(c):
(i) shall only be under claims of QUANTUM Licensed Patents, the
infringement of which would be necessitated by compliance with
such designs and specifications; and
(ii) shall not apply to any IBM Licensed Products in the form
manufactured or marketed by said other manufacturer prior to
IBM's furnishing of said designs and specifications.
Unless IBM informs QUANTUM to the contrary, IBM shall be deemed
to have authorized said other manufacturer to make said IBM Licensed
Products under the license granted to IBM in this Section 2.2(c) when
the condition specified herein is fulfilled. Within thirty (30) days
of a written request identifying a product and a manufacturer, IBM
shall inform QUANTUM of the quantity of such product, if any,
manufactured by such manufacturer.
In the event that neither QUANTUM nor any of its Subsidiaries has the right to
grant a license under any particular QUANTUM Licensed Patent of the scope set
forth above in this Section 2.2, then the license granted herein under said
QUANTUM Licensed Patent shall be of the broadest scope which QUANTUM or any of
its Subsidiaries has the right to grant within the scope set forth above.
2.3 Notwithstanding the rights granted to QUANTUM by IBM in this Section 2, no
license or immunity is granted hereunder by IBM with respect to Semiconductor
Chips made, used, sold, leased, or otherwise transferred by QUANTUM separately
from any other QUANTUM Licensed Products [CONFIDENTIAL TREATMENT REQUESTED]
7
<PAGE>
[CONFIDENTIAL TREATMENT REQUESTED]
2.4 No license or immunity is granted by either party hereto either directly or
by implication, estoppel or otherwise to any third parties acquiring items from
either party for the combination of such acquired items with other items
(including items acquired from either party hereto) or for the use of such
combination even if such acquired items have no substantial use other than as
part of such a combination.
2.5 Subject to Section 2.6, the licenses granted herein shall include the right
of each party to grant sublicenses to its Subsidiaries, which sublicenses may
include the right of sublicensed Subsidiaries to sublicense other Subsidiaries
of said party. No sublicense shall be broader in any respect at any time during
the life of this Agreement than the license held at that time by the party that
granted the sublicense.
2.6 A sublicense granted to a Subsidiary shall terminate on the earlier of:
(a) the date such Subsidiary ceases to be a Subsidiary; and
(b) the date of termination or expiration of the license of the party that
granted the sublicense.
If a Subsidiary ceases to be a Subsidiary and holds any patents under which a
party hereto is licensed, such license shall continue for the term defined
herein.
2.7 If, after the Effective Date, a party or any of its Subsidiaries ("Acquiring
Party") acquires assets, either by acquiring an entity which owns the assets or
by acquiring the assets from such an entity, and said entity is, as of the date
of acquisition, licensed by the other party ("Licensor") under one or more
Licensed Patents through an existing agreement pursuant to which royalties or
other payments are made by said entity to said Licensor, then the license and
other rights granted herein to the Acquiring Party with respect to said Licensed
Patents shall apply to products manufactured through the use of said assets;
provided, however, such royalties or other payments shall continue to be made by
the Acquiring Party to the Licensor with respect to products manufactured
through the use of said assets notwithstanding that the Acquiring Party may have
been licensed for the same Licensed Products before the acquisition.
8
<PAGE>
2.8 If one party transfers a product line, either as part of or separate from a
disposition of a Subsidiary to any third party, and if such transfer includes
[CONFIDENTIAL TREATMENT REQUESTED], then after written request to the other
party hereto jointly by the transferring party and such third party within sixty
(60) days following the transfer, the other party hereto agrees to grant to such
third party a royalty-free license (under the same terms as the license granted
to said one party herein) under the other party's Licensed Patents for the field
(as defined between the transferring party and such third party) of such product
line provided that:
(a) such field shall be within the field then licensed to the transferring
party;
(b) such field shall not be defined more broadly than appropriate to cover the
particular product line being transferred and shall be in form and
substance acceptable to such other party;
(c) the license granted shall be subject to a revenue cap which (i) for the
twelve (12) month period following the transfer shall be set at the
revenue attributable to the sale of products in the product line in the
last full calendar year prior to the date of transfer plus the greater of
ten percent (10%) and the average growth rate during the two calendar
years preceding the transfer; and (ii) for subsequent twelve (12) months
period shall also be subject to an annual compounded growth rate
calculated according to the same formula;
(d) the transferring party shall relinquish its rights under this Agreement
for such field for five (5) years following such transfer;
(e) such third party shall grant to such other party a royalty-free license
(under the same terms as the license granted to such other party herein)
under all Third Party Patents for all products licensed herein to such
other party on the Effective Date of this Agreement. "Third Party Patents"
shall mean all patents throughout the world under which, at any time
commencing with the date of the product line transfer, the third party or
any of its Subsidiaries has the right to grant such licenses; and
(f) this Section 2.8, Section 3, and Section 4 shall be omitted from the
license granted to such third party.
The relinquishing of its rights by such transferring party pursuant to this
Section 2.8 shall be automatically effected as an amendment hereto as of the
effective date of such transfer,
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<PAGE>
which amendment shall automatically terminate five (5) years after the date of
transfer, but licenses to such transferring party to use, lease, sell or
otherwise transfer apparatus that was manufactured by or for it prior to the
time of such relinquishing shall continue with respect to such apparatus.
Section 3. Releases
3.1 Each party (as "Releasor") on behalf of itself and its Subsidiaries which
are Subsidiaries as of the Effective Date, irrevocably releases the other party,
its Subsidiaries which are Subsidiaries as of the Effective Date and its and
their respective customers from any and all claims of infringement of Releasor's
Licensed Patents which claims are based on acts prior to the Effective Date,
which, had they been performed after the Effective Date would have been licensed
under this Agreement.
The release contained herein shall not apply to any person other than the
persons named in this Section 3 and shall not apply to the manufacture of any
items by any person other than the other party or its Subsidiaries. The release
granted by QUANTUM to IBM is effective as of the Effective Date. The release
granted by IBM to QUANTUM shall become effective upon receipt of payment
specified in Section 4.1.
Section 4. Payment
4.1 [CONFIDENTIAL TREATMENT REQUESTED]:
(a) [CONFIDENTIAL TREATMENT REQUESTED]; and
(b) [CONFIDENTIAL TREATMENT REQUESTED].
4.2 QUANTUM shall be liable for interest on any overdue payment required to be
made pursuant to Section 4, commencing on the date such payment becomes due, at
an annual rate which is the greater of ten percent (10%) or one percentage point
higher than the prime interest rate as quoted by the head office of Citibank
N.A., New York, at the close of banking on such date, or on the first business
day thereafter if such date falls on a non-business day. If such interest rate
exceeds the maximum legal rate in the jurisdiction where a claim therefore is
being
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asserted, the interest rate shall be reduced to such maximum legal rate.
4.3 If an installment payment set forth in Section 4.1 is not made by its due
date, and if such payment, plus interest pursuant to Section 4.2, is not made
prior to sixty (60) days after notice from IBM of QUANTUM's delinquency, then,
at IBM's sole option, either:
(a) all of the above installment payments which were due after such notice
shall automatically become due and payable in full on the sixtieth day
after such notice without presentment, demand or additional notice of any
kind (all of which are hereby expressly waived); or
(b) all licenses and other rights granted herein to QUANTUM shall
automatically terminate on the sixtieth day after such notice.
QUANTUM shall remain obligated to pay all installments which had become due
prior to such notice (plus interest thereon as provided in Section 4.2) and
QUANTUM shall not be obligated to make any other payments. IBM's election of the
option set forth in Section 4.3 (a) or 4.3 (b) shall be stated in such notice.
Such notice shall be given as stated in Section 6 herein.
Section 5. Term of Agreement; Acquisition of a Party
5.1 The term of the licenses granted under this Agreement shall be from the
Effective Date until * [CONFIDENTIAL TREATMENT REQUESTED], unless earlier
terminated under the provisions of this Agreement.
5.2 IBM shall have the right to terminate the license and any other rights
granted to QUANTUM granted under this Agreement if QUANTUM fails at any time to
make any payment required herein, and if QUANTUM does not cure such failure
(including the payment of any interest) within sixty (60) days after written
notice from IBM to QUANTUM specifying the nature of such failure.
5.3 If one party (the "Acquired Party") is acquired by a third party, becoming a
Subsidiary of such third party:
(a) the Acquired Party shall promptly give notice of such acquisition to the
other party;
(b) the date in Section 1.4 (a) shall automatically change to the date of such
acquisition;
(c) the license granted to the Acquired Party shall automatically be subject
to an annual revenue cap which shall be set at the revenue attributable to
the sale of the
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<PAGE>
Acquired Party's Licensed Products in the last full calendar year prior to
the date of such acquisition plus an annual, compounded growth factor
calculated at the average growth rate during the last two calendar years
prior to the date of acquisition;
(d) all payments specified in Section 4 (if any) which would have been paid
after the date of such acquisition shall become immediately due and
payable; and
(e) the rights of the non-Acquired party shall not be affected.
5.4 If one party (the "Acquired Party") is acquired by a third party such that
it is no longer a separate legal entity, then the Acquired Party shall require
as a condition precedent to the acquisition that the entity that survives after,
or results from, such acquisition shall be obligated to make the payments, if
any, due pursuant to Section 4.
5.5 Providing that the parties are actively engaged in good faith negotiations
toward a renewal of this Agreement, each party agrees not to bring suit against
the other for patent infringement for a period of six months after *
[CONFIDENTIAL TREATMENT REQUESTED], to allow time to conclude a mutually
acceptable renewal.
Section 6. Means of Payment and Communication
6.1 Payment shall be made by electronic funds transfer. Payments shall be deemed
to be made on the date credited to the following account:
IBM, Director of Licensing
The Bank of New York
48 Wall Street
New York, New York 10286
United States of America
[CONFIDENTIAL TREATMENT REQUESTED]
6.2 Notices and other communications shall be sent by facsimile or by registered
or certified mail to the following addresses and shall be effective upon
mailing:
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For IBM: For QUANTUM:
Director of Licensing Office of Corporate
IBM Corporation General Counsel
500 Columbus Avenue Quantum Corporation
Thornwood, New York 10594 500 McCarthy Boulevard
Milpitas, CA 95035
Facsimile: (914) 742-6737 Facsimile: (408) 324-7005
Section 7. Miscellaneous
7.1 Neither party shall assign or grant any right under any of its Licensed
Patents unless such assignment or grant is made subject to the terms of this
Agreement.
7.2 Neither party shall assign any of its rights or delegate any of its
obligations under this Agreement. Any attempt to do so shall be void. However, a
party which undergoes reorganization may assign such rights and delegate such
obligation to its legal successor, provided that after the reorganization, the
successor and its Subsidiaries will have essentially the same assets as such
party and its Subsidiaries had prior to the reorganization.
7.3 Neither party shall use or refer to this Agreement or any of its provisions
in any promotional activity. Brief reference to this Agreement in financial
statements and reports of either party, including by example, filings with the
U.S. Securities and Exchange Commission, shall not be deemed to be promotional
activity within the scope of this Section 7.3.
7.4 Each party represents and warrants that it has the full right and power to
grant the license and release set forth in Sections 2 and 3. Each party (as a
Grantor) further represents and warrants that prior to the execution of this
Agreement, it has informed the other party of any patent originating from
inventions made by employees of Grantor or its Subsidiaries, which patent is now
owned by Grantor or its Subsidiaries and which patent, owing to prior
arrangements with third parties, does not qualify as a Licensed Patent of
Grantor under which licenses are granted in Section 2. Neither party makes any
other representation or warranties, express or implied, nor shall either party
have any liability in respect of any infringement of patents or other rights of
third parties due to the other party's operation under the license herein
granted.
7.5 Nothing contained in this Agreement shall be construed as conferring any
rights by implication, estoppel or otherwise,
13
<PAGE>
under any non-patent intellectual property right, or any patents, other than the
Licensed Patents. Neither party is required hereunder to furnish or disclose to
the other any technical or other information (including copies of Licensed
Patents).
7.6 Neither party shall have any obligation hereunder to institute any action or
suit against third parties for infringement of any of its Licensed Patents or to
defend any action or suit brought by a third party which challenges or concerns
the validity of any of its Licensed Patents. Neither party shall have any right
to institute any action or suit against third parties for infringement of any of
the other party's Licensed Patents. Neither party, nor any of its Subsidiaries,
is required to file any patent application, or to secure any patent or patent
rights, or to maintain any patent in force.
7.7 Each party shall, upon a request from the other party sufficiently
identifying any patent or patent application, inform the other party as to the
extent to which said patent or patent application is subject to the licenses and
other rights granted hereunder. If such licenses or other rights under said
patent or patent application are restricted in scope, copies of all pertinent
provisions of any contract or other arrangement creating such restrictions
shall, upon request, be furnished to the party making such request, unless such
disclosure is prevented by such contract, and in such event, a statement of the
nature of such restriction shall be provided.
7.8 If a third party has the right to grant licenses under a patent to a party
hereto (as a "Licensee") with the consent of the other party hereto, said other
party shall provide said third party with any consent required to enable said
third party to license said Licensee on whatever terms such third party may deem
appropriate. Each party hereby waives any right it may have to receive royalties
or other consideration from said third party as a result of said third party's
so licensing said Licensee within the scope of the licenses granted under
Section 2 of this Agreement.
7.9 This Agreement shall not be binding upon the parties until it has been
signed hereinbelow by or on behalf of each party. No amendment or modification
hereof shall be valid or binding upon the parties unless made in writing and
signed as aforesaid.
14
<PAGE>
7.10 If any section of this Agreement is found by competent authority to be
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of such section in every other respect and the
remainder of this Agreement shall continue in effect so long as the Agreement
still expresses the intent of the parties. However, if the intent of the parties
cannot be preserved, this Agreement shall be either renegotiated or terminated.
7.11 This Agreement shall be construed, and the legal relations between the
parties hereto shall be determined, in accordance with the law of the State of
New York, USA, as such law applies to contracts signed and fully performed in
New York.
7.12 The headings of sections are inserted for convenience of reference only and
are not intended to be a part of or to affect the meaning or interpretation of
this Agreement.
7.13 This Agreement supersedes the Patent License Agreement dated as of March
10, 1986 between IBM and QUANTUM, except for patent licenses granted under the
March 10, 1986 agreement which are more extensive in scope or in duration than
the licenses granted under this Agreement, and those patent licenses shall
remain in force and effect under the terms and conditions of the March 10, 1986
agreement.
This Agreement embodies the entire understanding of the parties with respect to
the Licensed Patents, and replaces any prior oral or written communications
between them.
Agreed to: Agreed to:
QUANTUM CORPORATION INTERNATIONAL BUSINESS
MACHINES CORPORATION
By: /s/ Gerard Schenkkan By: /s/ M.C. Phelps, Jr.
-------------------------- -----------------------------
T. Schenkkan M.C. Phelps, Jr.
Vice President Vice President
Corporate Development
15
EXHIBIT 11.1
QUANTUM CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(In thousands except per share data)
Three Months Ended
June 29, June 30,
1997 1996
------- -------
PRIMARY
Weighted average number of common
shares during the period 131,805 110,922
Incremental common shares attributable
to exercise of outstanding options 9,076 4,770
------- -------
Total shares 140,881 115,692
Net Income 96,514 3,843
Net income per share 0.69 0.03
------- -------
FULLY DILUTED
Weighted average number of common
shares during the period 131,806 110,924
Incremental common shares attributable
to exercise of outstanding options and
conversion of 6 3/8% convertible
subordinated debentures and 5%
convertible subordinated notes 9,079 39,464
------- -------
Total shares 140,885 150,388
Net income:
Net income 96,514 3,843
Add 6 3/8% convertible subordinated
debentures and 5% convertible
subordinated notes interest,
net of income tax effect 0 3,627
------- -------
Net income, as adjusted 96,514 7,470
Net income per share 0.69 0.05*
------- -------
* The primary net income per share is shown in the statements of income as
both primary and fully diluted, as the effect of the assumed conversion of
the subordinated debentures is anti-dilutive.
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF QUANTUM CORPORATION FOR THE QUARTER ENDED JUNE
29, 1997
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-29-1997
<CASH> 365,973
<SECURITIES> 0
<RECEIVABLES> 897,928
<ALLOWANCES> 10,539
<INVENTORY> 295,251
<CURRENT-ASSETS> 1,720,617
<PP&E> 409,802
<DEPRECIATION> 177,957
<TOTAL-ASSETS> 2,113,430
<CURRENT-LIABILITIES> 797,432
<BONDS> 282,044
3,888
0
<COMMON> 472,896
<OTHER-SE> 522,906
<TOTAL-LIABILITY-AND-EQUITY> 2,113,430
<SALES> 1,446,144
<TOTAL-REVENUES> 1,446,144
<CGS> 1,170,210
<TOTAL-COSTS> 1,170,210
<OTHER-EXPENSES> 139,475
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,035
<INCOME-PRETAX> 130,424
<INCOME-TAX> 33,910
<INCOME-CONTINUING> 96,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,514
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.61
</TABLE>
