SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended September 24, 1994
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-14016
MAXTOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 770123732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
211 River Oaks Parkway, San Jose, CA 95134
(Address of principal executive offices) (Zip Code)
(408) 432-1700
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 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.
X Yes No
30,000,001 shares of Common Stock and 19,489,000 shares of Class A
Common Stock were issued and outstanding as of October 28, 1994.
This quarterly report on Form 10-Q contains 57 pages of which this
is page number 1.
MAXTOR CORPORATION
FORM 10-Q
September 24, 1994
INDEX
Part I. Financial Information Page
Item 1. Consolidated Financial Statements
Consolidated Statements of Loss-
Three Months and Six Months Ended
September 24, 1994 and September 25, 1993 3
Consolidated Balance Sheets-
September 24, 1994 and March 26, 1994 4-5
Consolidated Statements of Cash Flows-
Six Months Ended September 24, 1994
and September 25, 1993 6-7
Notes to Consolidated Financial Statements 8-9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-16
Part II. Other Information
Item 1. Legal Proceedings 17
Item 6. Exhibits and Reports on Form 8-K 17
Signature Page 18
PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF LOSS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
--------------------- ---------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1994 1993 1994 1993
---------- ---------- ---------- ----------
Revenue $ 174,368 $ 313,546 $ 392,678 $ 574,120
Cost of revenue 191,064 323,999 385,350 602,582
---------- ---------- ---------- ----------
Gross margin (16,696) (10,453) 7,328 (28,462)
Operating expenses:
Research and development 14,589 26,684 28,625 57,360
Selling, general and
administrative 21,437 19,662 42,482 40,237
---------- ---------- ---------- ----------
Total operating expenses 36,026 46,346 71,107 97,597
---------- ---------- ---------- ----------
Loss from operations (52,722) (56,799) (63,779) (126,059)
Interest expense (2,445) (2,743) (4,416) (5,842)
Interest income 1,050 419 2,489 1,099
---------- ---------- ---------- ----------
Loss before income taxes (54,117) (59,123) (65,706) (130,802)
Provision for income taxes 600 500 1,200 1,000
---------- ---------- ---------- ----------
Net loss $ (54,717) $ (59,623) $ (66,906) $(131,802)
========== ========== ========== ==========
Net loss per share $ (1.09) $ (2.02) $ (1.34) $ (4.52)
========== ========== ========== ==========
Shares used in computing
net loss per share 50,256 29,404 50,091 29,145
========== ========== ========== ==========
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
Sept 24, March 26,
1994 1994
----------- -----------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ 72,830 $ 144,520
Short-term investments 60,084 74,911
Accounts receivable, net of
allowance for doubtful
accounts of $4,200 at
Sept. 24, 1994 and $3,653
at March 26, 1994 88,566 99,806
Inventories:
Raw materials 48,744 51,419
Work-in-process 14,241 19,196
Finished goods 44,527 25,408
----------- -----------
107,512 96,023
Prepaid expenses and other 7,213 7,936
----------- -----------
Total current assets 336,205 423,196
Property, plant and equipment, at cost:
Buildings 21,890 21,387
Machinery and equipment 168,621 195,820
Furniture and fixtures 16,425 18,195
Leasehold improvements 9,878 17,506
----------- -----------
216,814 252,908
Less accumulated depreciation
and amortization (164,573) (191,750)
----------- -----------
Net property, plant and
equipment 52,241 61,158
Other assets 6,919 8,021
----------- -----------
$ 395,365 $ 492,375
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Continued)
Sept 24, March 26,
1994 1994
----------- -----------
(Unaudited) (Audited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 30,000 $ 30,000
Accounts payable 118,347 137,566
Income taxes payable 7,747 7,530
Accrued payroll and payroll-
related expenses 15,815 11,720
Accrued warranty 23,686 27,281
Accrued special and restructuring 5,005 21,777
Accrued expenses 31,132 25,700
Long-term debt and capital lease
obligations due within one year 3,077 4,155
----------- -----------
Total current liabilities 234,809 265,729
Long-term debt and capital lease
obligations due after one year 105,923 107,393
Deferred tax liabilities 66 66
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value,
5,000,000 shares authorized;
no shares issued or outstanding - -
Class A common stock (convertible),
$0.01 par value, 19,480,000
shares authorized; issued and
outstanding: September 24, 1994
and March 26, 1994 -
19,480,000 shares 195 195
Common stock, $0.01 par value,
180,520,000 shares authorized;
issued and outstanding:
Sept. 24, 1994 -
30,988,149 shares;
March 26, 1994 -
30,425,242 shares 309 304
Additional paid-in capital 322,804 320,564
Retained earnings (deficit) (268,655) (201,749)
----------- -----------
54,653 119,314
Less notes receivable from
stockholders (86) (127)
----------- -----------
Total stockholders' equity 54,567 119,187
----------- -----------
$ 395,365 $ 492,375
=========== ===========
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
--------------------------
Sept. 24, Sept. 25,
1994 1993
------------ ------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net loss $ (66,906) $ (131,802)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 20,188 38,353
Loss on disposal of property,
plant and equipment 495 1,295
Change in assets and liabilities:
Accounts receivable 11,240 7,586
Inventories (11,489) 30,590
Prepaid expenses and other 723 804
Accounts payable (19,219) 14,425
Income taxes payable 217 637
Accrued payroll and payroll-
related expenses 4,095 1,065
Accrued warranty (3,595) 1,508
Accrued special and restructuring (16,772) -
Accrued expenses 5,432 (220)
------------ ------------
Total adjustments (8,685) 96,043
------------ ------------
Net cash used in operating activities (75,591) (35,759)
Cash flows from investing activities:
Purchases of short-term investments (30,091) -
Proceeds from maturity of short-term
investments 44,918 -
Purchase of property, plant and
equipment (13,016) (22,011)
Proceeds from disposal of property,
plant and equipment 2,172 349
Other 329 595
------------ ------------
Net cash provided by (used in)
investing activities 4,312 (21,067)
Cash flows from financing activities:
Proceeds from issuance of short-
term borrowings, net of payments - 31,842
Proceeds from issuance of debt 125 5,025
Principal payments on debt (2,562) (27,673)
Principal payments under capital
lease obligations (260) (443)
Proceeds from issuance of common
stock, net of notes receivable,
stock repurchases and tax benefits 2,286 3,159
------------ ------------
Net cash provided by (used in)
financing activities (411) 11,910
------------ ------------
Net change in cash and cash equivalents (71,690) (44,916)
Cash and cash equivalents at beginning
of period 144,520 135,324
------------ ------------
Cash and cash equivalents at end of
period $ 72,830 $ 90,408
============ ============
Supplemental disclosures of cash flow information:
(In thousands) Six Months Ended
- - -------------------------------------------------------------------
Sept. 24, Sept. 25,
1994 1993
- - -------------------------------------------------------------------
Cash paid (received) for: (Unaudited)
Interest $ 3,432 $ 6,444
Income taxes 574 815
Income tax refunds (11) (500)
- - -------------------------------------------------------------------
Supplemental information on non cash investing and financing
activities:
Capital lease obligations approximating $ 149,000 were incurred
during the six-month period ended September 24, 1994. There were no
capital obligations incurred in the six-month period ended September
25, 1993.
MAXTOR CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. Consolidated financial statements
The accompanying unaudited consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and
do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. The consolidated financial statements include the
accounts of Maxtor Corporation (Maxtor or the Company), its wholly-
owned subsidiaries, and Maxoptix Corporation (Maxoptix), a
corporation jointly-owned by Maxtor (62%) and Kubota Corporation of
Japan (33%). In connection with the sale of the assets of Storage
Dimensions, Inc. (SDI), formerly a wholly-owned subsidiary of the
Company, Maxtor acquired a 32.8% interest in the company formed for
the purpose of purchasing the net assets of SDI. Maxtor accounts
for its investment under the equity method. All significant
intercompany transactions have been eliminated in consolidation.
All adjustments of a normal recurring nature which, in the opinion
of management, are necessary for a fair statement of the results for
the interim periods have been made. It is recommended that the
interim financial statements be read in conjunction with the
Company's consolidated financial statements and notes thereto for
the fiscal year ended March 26, 1994. Interim results are not
necessarily indicative of the operating results expected for later
quarters or the full fiscal year.
2. Short-term borrowings
In September 1993, the Company obtained a secured, asset-based
revolving line of credit of $76.0 million. This line of credit
provides for borrowings up to $76.0 million based on eligible
receivables at various interest rates over a two-year term and is
secured by receivables, certain inventories and other assets. The
balance available for additional borrowings under this line of
credit at September 24, 1994 was approximately $12.4 million using
the September 24, 1994 borrowing base. As of September 24, 1994,
$30.0 million of borrowings and $1.3 million of letters of credit
were outstanding. The $30.0 million of borrowings were fully repaid
during the first fiscal week of October 1994. On June 17, 1994, the
Company received an amendment to its line of credit for a certain
financial ratio which is measured at the end of each quarter. With
such amendment, the Company was in compliance with all financial
ratios during the quarter ended June 25, 1994. On October 11, 1994,
the Company received an unconditional waiver of certain covenant
defaults that occurred as of the fiscal quarter ended September 24,
1994. This waiver enables the Company to borrow, if necessary,
through the current quarter ending December 24, 1994.
On October 31, 1994, the Company received another amendment to its
line of credit with respect to each of the financial covenants that
are measured at the end of each fiscal quarter and fiscal year end.
As noted in "Management's Discussion and Analysis of Financial
Condition and Results of Operations", the Company does not expect to
be profitable during the third quarter of fiscal year 1995. With
the amendment, the Company expects to be in compliance with its
financial covenants for the quarter ended December 24, 1994 and for
the foreseeable future. The Company also elected to reduce its line
of credit from $76.0 million to $50.0 million. The amendment also
extended the commitment on the revolving line of credit for an
additional year, thereby providing for borrowings over a two-year
term, ending September 1996. Borrowings are subject to availability
based on eligible receivables and the Company meeting financial
covenants.
3. Special & Restructuring
During the third quarter of fiscal year 1994, the Company decided to
discontinue certain products and manufacturing activities, and
recorded special charges amounting to $68.9 million in cost of
revenue. As of September 24, 1994, current liabilities included
accruals related to these special charges totaling approximately
$9.2 million. The Company anticipates that the net expenditure of
approximately $3.0 million of cash will be required during the
remainder of fiscal year 1995 to fund the remaining expenses
accrued. Such expenditures are expected to be funded by cash flows
from operations and investments.
The decisions described above reduced the scope of the Company's
product and manufacturing activities and, as a result, the Company
then initiated a restructuring plan which provides for the
consolidation and streamlining of certain operations and
administration. The Company recorded a restructuring charge of
$19.5 million in the third quarter of fiscal year 1994 related to
these activities which are expected to be completed within the
twelve-month period from the date of the charge. As of September
24, 1994, approximately $2.3 million of the $19.5 million charge
remained in current liabilities and is primarily associated with
facility consolidations, including lease and other obligations on
certain facility leases. The Company anticipates that the
completion of restructuring actions will require the expenditure of
approximately $2.3 million of cash during the remainder of fiscal
year 1995, which is expected to be funded by cash flows from
operations and investments.
4. Net loss per share
Net loss per share is based upon the weighted average number of
shares of all classes of common stock outstanding during the
quarters and six-month periods ended September 24, 1994 and
September 25, 1993.
5. Contingencies
As part of the acquisition of the MiniScribe business in June 1990,
the Company was assigned a patent license agreement between
MiniScribe and Rodime plc (Rodime) covering patents related to 3.5-
inch disk drives. The Company believes that the assignment was
valid; however, Rodime has taken the position that the assignment
was invalid and would not in any event cover 3.5-inch drives
manufactured and sold by the Company before the acquisition of
MiniScribe's assets. In February 1993, Maxtor commenced an action
for declaratory relief in the U. S. Bankruptcy Court in Denver,
Colorado seeking a judgment that the assignment was valid. Rodime
filed a denial and counterclaim for patent infringement. In April
1994, the relevant claims of the Rodime patent at issue in Rodime's
counterclaims were declared invalid in litigation between Rodime and
another disk drive manufacturer. The Company's litigation with
Rodime has been stayed pending Rodime's appeal of the finding of
invalidity. Certain other claims, including other patent
infringement claims, against the Company have arisen in the course
of its business. There is presently no litigation involving such
claims, and the Company believes the outcome of these claims and the
claim concerning Rodime described above will not have a material
adverse effect, if any, on the Company's financial position or
results of operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
(Tabular information: Dollars in millions, except per share amounts)
RESULTS OF OPERATIONS
General
Since its inception in 1982, Maxtor Corporation (Maxtor or the
Company) has been subject to the highly cyclical nature of the disk
drive industry. In fiscal year 1993, as a result of an industry-
wide increase in demand and the related stabilization in prices, the
Company grew its revenue to over $1.4 billion. However, during the
last four months of fiscal year 1993 and continuing into the third
quarter of fiscal year 1994, the disk drive industry experienced
intense price competition and excess industry capacity, which
resulted in lower revenue for the Company. In the fourth quarter of
fiscal year 1994 revenue declined in connection with the Company's
decision in the third quarter of fiscal year 1994 to discontinue
certain unprofitable products. In fiscal year 1994, the Company
reported revenue of approximately $1.2 billion. The Company
experienced further sequential declines in quarterly revenue in the
first and second quarters of fiscal year 1995. The first quarter's
decline was primarily as a result of the Company's inability to
obtain required volumes of a key component for its 7000 Series
product line supplied by a sole source vendor who was experiencing
production problems. The component shortage was resolved prior to
the end of the first quarter. Revenue for the second quarter of
fiscal year 1995 declined primarily as a result of industry-wide
pricing pressures coupled with the Company's product mix of
predominantly lower capacity products which were nearing end of
life. At the same time, the industry was transitioning to new,
higher capacity products.
The Company has incurred quarterly losses in each of the seven
consecutive quarters beginning with the fourth quarter of fiscal
year 1993 and continuing through the second quarter of fiscal year
1995. Such losses through the second quarter of fiscal year 1994
and continuing into the third quarter of fiscal year 1994 were
primarily the result of negative industry conditions and the
Company's inability to bring certain products to market in a timely
and cost effective manner. The negative industry conditions were
primarily the result of intense price competition and excess
industry capacity. In addition, the Company's losses were the
result of insufficient differentiation between the products of the
Company and its competitors, and efforts by its competitors to
increase market share. The Company began to experience an increase
in demand in the third quarter of fiscal year 1994, with most
products in short supply, concurrent easing of price reductions and
price increases on certain products. Although general industry
conditions improved during the latter half of fiscal year 1994 and
continued into the second quarter of fiscal year 1995, the Company
continued to incur losses in part as a result of continuing cost and
time-to-market issues with regard to its new products. In addition,
as noted above, the Company was unable to obtain required volumes of
key components in the first quarter of fiscal year 1995 which,
although resolved before the second quarter of fiscal year 1995,
contributed to lower revenues and losses in the second quarter when
the products were sold. During the second quarter, the disk drive
industry was transitioning to new, higher-capacity products while
the Company was shipping the lower-capacity products which were
delayed by the component shortage. This unanticipated shift in
market demand created additional pricing pressures on the Company's
lower-capacity products. Additionally, the high start-up costs
associated with developing and commencing volume production on the
new 1.8-inch form factor products also contributed to the quarterly
losses during that period. Although general industry conditions
improved during the latter half of fiscal year 1994 and into the
second quarter of fiscal year 1995, and most of the Company's
competitors were profitable during that period of time, the Company
has not been profitable, and does not expect to be profitable until
the Company is successful in bringing new products to market in a
timely and cost effective manner. In addition, the level of price
competition increased again in the last month of the first quarter
of fiscal year 1995 and continued through the second quarter of
fiscal year 1995. Although price erosion is not expected to be of
the same magnitude as experienced in the second quarter of fiscal
year 1995, the Company expects that price erosion will continue
through the third quarter of fiscal year 1995. For these reasons,
the Company does not expect to be profitable during the third
quarter of fiscal year 1995.
The disk drive industry is subject to rapid technological change and
short product life cycles as data storage manufacturers continually
strive for smaller form factors, larger storage capacities, higher
performance and lower cost. Shorter product life cycles also
increase the importance of the Company's ability to successfully
manage product transitions. The failure to adequately manage
product transitions could result in the loss of market
opportunities, decreased sales of existing products, cancellation of
products or product lines, the accumulation of obsolete and excess
inventory and unanticipated charges related to obsolete capital
equipment.
The Company's financial results continue to be heavily dependent on
the success of certain products, particularly the 7000 Series of
desktop product offerings. The Company's strategy in part is
focused on accelerating the end-of-life of certain older desktop
products and replacing them with new products developed on lower-
cost platforms. During the second quarter of fiscal year 1995, the
Company announced several new products, including new lower-cost,
inch-high, 3.5-inch 7000 Series product offerings intended to
replace certain older 7000 Series product offerings, as well as high
capacity, 3.5-inch, 1.0 and 1.2 gigabyte product offerings. The
latter product offerings are not expected to contribute to revenue
before the fourth quarter of fiscal year 1995. The Company's
ability to anticipate market trends and to successfully develop,
manufacture in volume and sell new products in a timely manner and
at favorable gross margins will be important factors affecting the
Company's future results and there can be no assurance that the
Company will be successful in such efforts. The Company has been
less successful than its competitors in managing product
transitions, and successful new products introduced by competitors
have tended to displace older products, including the Company's
products.
The disk drive industry is intensely competitive and significant
price erosion is typical during the life of a product. Industry
participants include both independent suppliers and large computer
manufacturers that both supply their own internal requirements and
sell disk drives to third parties. Sales by such large computer
manufacturers to third parties are an increasingly important factor
in the market. Bringing new products to market on a timely basis
has become increasingly critical to competing in this market
environment. When a new product is not brought to market on a
timely basis, the selling price of older products must be reduced in
order to compete effectively with competitors' new products, which
are being produced at lower costs. If competitors introduce
products which offer greater capacity, better performance, lower
prices or any combination of these factors, or if certain customers
produce more disk drives for internal use, the Company's results of
operations would be adversely affected.
As a result of volatile business conditions in the personal computer
(PC) industry, including the trend toward consolidation among PC
manufacturers, sales to original equipment manufacturers (OEMs) have
become increasingly important to the success of the disk drive
industry participants. Although the Company intends to continue in
its efforts to increase its share of this large OEM market,
particularly in the marketing of its new products, there can be no
assurance that the Company will be successful in such efforts. The
Company continues to be heavily dependent on the distribution
channel, which subjects the Company to pricing pressures and other
factors unique to that channel.
The Company's manufacturing process requires large volumes of high
quality components supplied by outside suppliers. The Company
periodically receives communication from vendors that they may be
unable to supply required volumes of certain key components. During
the first two months of fiscal year 1995, the Company was unable to
obtain required volumes of a key component for its 7000 Series
product line supplied by a sole source vendor who was experiencing
production problems. As previously mentioned, this shortage
adversely affected the Company's operating results for the first
quarter of fiscal year 1995.
While the Company has qualified and continues to qualify multiple
sources for many components, it is reliant on, and will continue to
be reliant on, single sources for many semi-custom and custom
integrated circuits and other key components. The Company does not
have long-term supply contracts with most of its single source
vendors, some of which are companies with limited financial and
operational resources. The Company intends to continue to pursue
qualification of alternative sources for single source components
where practicable; the Company believes, however, that it will have
to continue to utilize leading edge components which may only be
available from a single source. With the expansion of production
experienced by the disk drive industry during the last quarter of
fiscal year 1994 and continuing into the second quarter of fiscal
year 1995, shortages of certain key components for the disk drive
industry have increased, and the Company expects it is likely that
industry shortages of key components may continue into future
quarters. The Company will continue to aggressively work with its
vendor base to minimize its exposure. There can be no assurance,
however, that the Company will be successful in such efforts or that
in the future the Company's vendors will meet the Company's
requirements for required volumes of high-quality components in a
timely and cost effective manner.
- - -------------------------------------------------------------------
Three Months Ended Six Months Ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1994 1993 1994 1993
- - -------------------------------------------------------------------
Revenue $ 174.4 $ 313.5 $ 392.7 $ 574.1
Gross margin $ (16.7) $ (10.5) $ 7.3 $ (28.5)
As a percentage
of revenue (9.6%) (3.3%) 1.9% (5.0%)
Net loss $ (54.7) $ (59.6) $ (66.9) $ (131.8)
As a percentage
of revenue (31.4%) (19.0%) (17.0%) (23.0%)
Net loss per share $ (1.09) $ (2.02) $ (1.34) $ (4.52)
- - --------------------------------------------------------------------
Revenue
Revenue for the Company's second quarter of fiscal year 1995
decreased by 44.4% from the same quarter of the prior fiscal year,
primarily in connection with the Company's decision in the third
quarter of fiscal year 1994 to discontinue certain unprofitable
products. Unit volumes of the Company's 7000 Series disk drives,
which accounted for a significant portion of the Company's revenue
during both the second quarter of fiscal year 1995 and the second
quarter of fiscal year 1994, were relatively consistent during each
of those two quarterly periods. While there was a significant shift
in product mix from the older, lower capacity products to the higher
capacity 7000 Series product offerings during that period, average
unit selling prices, in terms of megabyte per dollar, dropped
substantially between the second quarters of fiscal year 1994 and
fiscal year 1995. During the second quarter of fiscal year 1995,
the Company's revenues were adversely affected by industry-wide
pricing pressures, excess industry capacity and a shift in product
mix. During the second quarter of fiscal 1995 product demand
shifted from the 170 megabyte/340 megabyte products to 210
megabyte/420 megabyte products, which reduced demand for the
Company's lower capacity products. In addition, as a result of the
Company being unable to obtain required volumes of a key component
from a sole source vendor for the 7000 Series product line during
the first quarter, as discussed earlier, a substantial portion of
the drives sold in the second quarter of fiscal year 1995 were the
lower capacity 170 megabyte and 340 megabyte products. These
products were likely to have been sold in the first quarter had the
component shortage not occurred. Comparing the six month period
ended September 24, 1994 with the six month period ended September
25, 1993, revenue was lower than expected during the first quarter
in particular as a result of a significant shortage in required
volumes of a key component as described previously, which coupled
with the industry-wide pricing pressures and a product mix comprised
primarily of lower capacity products nearing end of life in the
second quarter of fiscal year 1995, resulted in unit volumes and
revenues that declined substantially.
During the second quarter of fiscal year 1995, the Company had one
customer which accounted for approximately 10% of the Company's
revenue. This percentage may fluctuate in future periods and there
can be no assurance that it will not decline significantly. During
the second quarter of fiscal year 1994 one customer accounted for
approximately 36% of the Company's revenue.
As noted earlier, the Company continues to be heavily dependent on
the success of certain products. During fiscal year 1994, the
Company announced several new products, including additions to the
MobileMax family of PCMCIA-compatible storage products for mobile
computing applications. These new products did not contribute
significantly to revenue in the second quarter of fiscal year 1995,
and the Company anticipates that these products will not contribute
significantly to revenue in fiscal year 1995. As discussed earlier,
the Company announced several new products during the second quarter
of fiscal year 1995. The new lower-cost 7000 Series products have
already contributed to revenue in the second quarter of fiscal year
1995; the high capacity 3.5-inch product offerings are not expected
to contribute to revenue before the fourth quarter of fiscal year
1995. The Company's ability to increase revenues is dependent on
its ability to anticipate market trends and to successfully develop,
manufacture in volume and sell new products in a timely manner.
There can be no assurance that the Company will be successful in
such efforts.
Gross Margin
Gross margin as a percentage of revenue decreased to (9.6%) for the
second quarter of fiscal year 1995 from (3.3%) for the second
quarter of fiscal year 1994. For the first half of fiscal year
1995, gross margin as a percentage of revenue increased to 1.9% from
(5.0%) for the first half of the prior fiscal year.
The negative gross margin for the second quarter of fiscal year 1995
was primarily attributable to intense price competition,
particularly low-capacity products, and excess industry capacity, as
well as to cost and time-to-market issues with regard to certain of
the Company's products. In addition, there was an industry-wide
shift in product demand from 170/340 megabyte to 210/420 megabyte
products during the second quarter of fiscal year 1995, therefore,
pricing pressures were most severe in the 170 and 340 megabyte
product offerings as demand transitioned. The Company's product mix
for the second quarter of fiscal year 1995 was comprised primarily
of 170 and 340 megabyte products, a substantial portion of which had
remained in inventories at the end of the first quarter of fiscal
year 1995 as a result of the component shortage described earlier.
Further, the Company continues to be heavily dependent on the
aftermarket and is more susceptible to the pricing pressures
inherent to the distribution channel.
The Company's gross margin improved from (3.3%) for the second
quarter of fiscal year 1994 to 4.8% for the third quarter, excluding
special charges of $68.9 million, 11.4% for the fourth quarter of
fiscal year 1994 and 11.0% for the first quarter of fiscal year
1995, before it declined to (9.6%) for the second quarter of fiscal
year 1995. The improvement in gross margin through the first quarter
of fiscal year 1995 occurred primarily as a result of increased unit
sales volumes of certain products for which average unit selling
prices were relatively constant while average unit manufacturing
costs declined from quarter to quarter. In addition, gross margin
improved during the fourth quarter of fiscal year 1994 and first
quarter of fiscal year 1995 in connection with the Company's
decision in the third quarter of fiscal year 1994 to discontinue
certain unprofitable products. In addition to intense price
competition and Company's product mix issue, the Company incurred
charges in the second quarter of fiscal year 1995 amounting to
approximately $18 million related to the write-down of obsolete and
excess inventory and equipment for 170 megabyte and 340 megabyte
products nearing end of life, price protection, excess 1.8-inch
inventory, and a substantial return from an OEM customer.
As noted earlier, the level of price competition increased again in
the last month of the first quarter of fiscal year 1995 and
continued through the second quarter of fiscal year 1995. The
Company will continue its efforts to reduce its average unit
manufacturing costs and to introduce and produce in volume new
higher margin products in an effort to improve gross margin during
fiscal year 1995. However, there can be no assurance that average
unit selling prices will not decline at a more rapid rate or that
the Company will be successful in its efforts to improve gross
margin. In addition, given the cyclical nature of the disk drive
industry and the Company's dependence on the success of certain
products, as discussed earlier, there can be no assurance that the
Company will be able to improve or maintain its current gross
margin.
Operating expenses
- - --------------------------------------------------------------------
Three Months Ended Six Months Ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1994 993 1994 1993
- - --------------------------------------------------------------------
Research and development $ 14.6 $ 26.7 $ 28.6 $ 57.4
As a percentage
of revenue 8.4% 8.5% 7.3% 10.0%
Selling, general and
administrative $ 21.4 $ 19.7 $ 42.5 $ 40.2
As a percentage
of revenue 12.3% 6.3% 10.8% 7.0%
- - --------------------------------------------------------------------
Research and development (R&D) expenses for the second quarter and
first six months of fiscal year 1995 decreased from the same periods
of the prior fiscal year primarily due to the consolidation of the
Company's R&D activities in Longmont, Colorado during the fourth
quarter of fiscal year 1994 in connection with the Company's
restructuring plan. This consolidation eliminated the need for
certain facilities in San Jose, California, and also resulted in a
substantial reduction in headcount associated with R&D and related
activities previously conducted in San Jose. R&D spending in
absolute dollars is expected to increase during the remaining
quarters of fiscal year 1995 because the Company believes that it
must continue to make substantial investments in R&D since the
timely introduction and transition to volume production of new
products is essential to its future success. In addition, R&D
expenses may fluctuate in the future resulting from the cost of
acquiring rights to new technologies.
Selling, general and administrative expenses increased as a
percentage of revenue for the second quarter and first six months of
fiscal year 1995 compared to the same periods of the prior fiscal
year primarily due to the decline in the revenue base.
Interest expense and interest income
- - --------------------------------------------------------------------
Three Months Ended Six Months Ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1994 1993 1994 1993
- - --------------------------------------------------------------------
Interest expense $ 2.4 $ 2.7 $ 4.4 $ 5.8
Interest income $ 1.0 $ .4 $ 2.5 $ 1.1
- - --------------------------------------------------------------------
Interest expense decreased as a result of lower average borrowings
outstanding during the second quarter and first six months of fiscal
year 1995 as compared to the same periods of the prior fiscal year.
Interest income increased as a result of higher cash and short-term
investments balances during the second quarter and first six months
of fiscal year 1995 as compared to the prior fiscal year periods.
Provision for income taxes
- - --------------------------------------------------------------------
Three Months Ended Six Months Ended
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1994 1993 1994 1993
- - --------------------------------------------------------------------
Provision for
income taxes $ .6 $ .5 $ 1.2 $ 1.0
- - --------------------------------------------------------------------
The provision for income taxes consists primarily of foreign taxes.
The Company's effective tax rates for fiscal year 1995 and fiscal
year 1994 differ from the combined federal and state rates due to
the Company's U.S. operating losses not providing current tax
benefits, repatriation of foreign earnings absorbed by current year
losses, and valuation of temporary differences, offset in part by
the tax benefits associated with the Company's Singapore operations.
Income from the Singapore operations is not taxable in Singapore as
a result of the Company's pioneer tax status, and those earnings
which are permanently reinvested outside the United States are not
taxable in the United States.
LIQUIDITY AND CAPITAL RESOURCES
- - --------------------------------------------------------------------
Six Months Ended
Sept. 24, 1994
- - --------------------------------------------------------------------
Cash and cash equivalents $ 72.8
Short-term investments $ 60.1
Net cash used in operating activities $ 75.6
Net cash provided by investing activities $ 4.3
Net cash used in financing activities $ .4
- - --------------------------------------------------------------------
As of September 25, 1994, the Company had cash and cash equivalents
of $72.8 million as compared to $144.5 million as of March 26, 1994,
a decrease of $71.7 million. The Company had short-term investments
of $60.1 million as of September 25, 1994 as compared to $74.9
million as of March 26, 1994, a decrease of $14.8 million. The
combined decrease in the Company's cash and cash equivalents, and
short-term investments of $86.5 million was primarily the result of
operating activities, including a reduction in accounts payable and
accrued special and restructuring charges.
Of the net cash used in operating activities during the first six
months of fiscal year 1995, net loss less non-cash depreciation and
amortization accounted for approximately $46.7 million. In
addition, the decrease in accounts receivable, increase in inventory
and decreases in current liabilities together accounted for uses of
cash of approximately $30.1 million. The decrease in accounts
receivable primarily reflects lower sales levels in the quarter
ended September 24, 1994 than in the quarter ended March 26, 1994.
The increase in inventories reflects the impact of excess industry
capacity and a general oversupply of certain drives for the industry
mitigated in part by the Company's ongoing efforts to balance
production with demand and control inventory purchases. Despite the
Company's efforts to tightly control inventory levels, inventories
may increase in the future based on changes in market demand or
industry-wide production. Current liabilities decreased by
approximately $11 million primarily as a result of a decrease in
accounts payable related to managing the timing of inventory
purchases and payments, and the reduction of accrued special and
restructuring charges recorded by the Company in the third quarter
of fiscal year 1994.
Net cash provided by investing activities was primarily attributable
to $14.8 million of short-term investment maturities, net of
purchases, and $13.0 million of capital expenditures. A significant
portion of the capital expenditure activity was related to the
acquisition of manufacturing equipment. Depending on business
conditions, the Company currently expects to make capital
expenditures of approximately $30 to $40 million during fiscal year
1995, as compared to approximately $30 million during fiscal year
1994.
Net cash used in financing activities primarily reflects cash used
to reduce outstanding debt.
In September 1993, the Company obtained a secured, asset-based
revolving line of credit of $76.0 million. This line of credit
provides for borrowings up to $76.0 million based on eligible
receivables at various interest rates over a two-year term and is
secured by receivables, certain inventories and other assets. The
balance available for additional borrowings under this line of
credit at September 24, 1994 was approximately $12.4 million using
the September 24, 1994 borrowing base. As of September 24, 1994,
$30.0 million of borrowings and $1.3 million of letters of credit
were outstanding. The $30.0 million of borrowings were fully repaid
during the first fiscal week of October 1994. On June 17, 1994, the
Company received an amendment to its line of credit for a certain
financial ratio which is measured at the end of each quarter. With
such amendment, the Company was in compliance with all financial
ratios during the quarter ended June 25, 1994. On October 11, 1994,
the Company received an unconditional waiver of certain covenant
defaults that occurred as of the fiscal quarter ended September 24,
1994. This waiver enables the Company to borrow, if necessary,
through the current quarter ending December 24, 1994. On October
31, 1994, the Company received another amendment to its line of
credit with respect to each of the financial covenants that are
measured at the end of each fiscal quarter and fiscal year end. As
discussed earlier, the Company does not expect to be profitable
during the third quarter of fiscal year 1995. With the amendment,
the Company expects to be in compliance with its financial covenants
for the quarter ended December 24, 1994 and for the foreseeable
future. The Company also elected to reduce its line of credit from
$76.0 million to $50.0 million. The amendment also extended the
commitment on the revolving line of credit for an additional year,
thereby providing for borrowings over a two-year term, ending
September 1996. Borrowings are subject to availability based on
eligible receivables and the Company meeting financial covenants.
The Company believes that its balances of cash, cash equivalents,
and short-term investments, together with expected cash flow from
operations, equipment financing and line of credit borrowing
capabilities will be sufficient to fund the Company's working
capital and capital expenditure requirements through fiscal year
1995.
DIVIDEND POLICY
The Company has never paid cash dividends on its capital stock. It
is the present policy of the Board of Directors to retain earnings
for use in the business. The Company does not anticipate paying
cash dividends in the near future. Under the terms of the Company's
line of credit and term loan facilities, the Company may not declare
or pay any dividends without the prior consent of its lenders.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
As part of the acquisition of the MiniScribe business in June 1990,
the Company was assigned a patent license agreement between
MiniScribe and Rodime plc (Rodime) covering patents related to 3.5-
inch disk drives. The Company believes that the assignment was
valid; however, Rodime has taken the position that the assignment
was invalid and would not in any event cover 3.5-inch drives
manufactured and sold by the Company before the acquisition of
MiniScribe's assets. In February 1993, Maxtor commenced an action
for declaratory relief in the U.S. Bankruptcy Court in Denver,
Colorado seeking a judgment that the assignment was valid. Rodime
filed a denial and counterclaim for patent infringement. In April
1994, the relevant claims of the Rodime patent at issue in Rodime's
counterclaims were declared invalid in litigation between Rodime and
another disk drive manufacturer. The Company's litigation with
Rodime has been stayed pending Rodime's appeal of the finding of
invalidity. Certain other claims, including other patent
infringement claims, against the Company have arisen in the course
of its business. There is presently no litigation involving such
claims, and the Company believes the outcome of these claims and the
claim concerning Rodime described above will not have a material
adverse effect, if any, on the Company's financial position or
results of operations.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
b) Reports on Form 8-K:
None
c) Exhibits:
See Index to Exhibits on pages 19 to 27 hereof.
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 thereunto duly authorized.
MAXTOR CORPORATION
Date: November 7, 1994 By: /s/ Walter D. Amaral
-----------------------
Walter D. Amaral
Chief Financial Officer
INDEX TO EXHIBITS
Sequentially
Exhibit No. Description Numbered Pages
- - ----------- -------------------------------------------- --------------
3.1 (6) Certificate of Incorporation
3.2 (8) Certificate of Amendment of Certificate of
Incorporation of Maxtor Corporation, dated
December 23, 1987
3.3 (8) By-Laws as amended July 21, 1987
3.4 (21) Amended and Restated By-Laws of Maxtor
Corporation, A Delaware Company, effective
February 3, 1994
3.5 (21) Restated Certificate of Incorporation of
Maxtor Corporation effective February 3, 1994
4.1 (3) Form of Certificate of Shares of Registrant's
Common Stock
4.2 (7) Maxtor Corporation Rights Plan
4.3 (22) Amendment to Rights Agreement between
Registrant and the First National Bank of
Boston, dated September 10, 1993
10.1 (1) Omnilease Corporation Master Lease Agreement
No. 300362, dated as of January 14, 1983 and
addenda thereof
10.2 (1) Lease Agreement between Orchard Investment
Company No. 801, formerly Nelo, a California
general partnership and Registrant, dated
March 23, 1984
10.3 (1) Lease Commitment between Walter E. Heller
& Company and Registrant, dated as of
March 11, 1985
10.4 (1) Stock Purchase Agreement between Steven P.
Kitrosser and Registrant, dated May 21, 1985
10.5 (1) Stock Purchase Agreement between James
McCoy and Registrant, dated May 21, 1985
10.6 (1) Equipment Lease Agreement between Pacific
Western (formerly Pacific Valley) Bank
and Registrant, dated June 26, 1985
10.7 (1) Continuing Guaranty between Maxtor
Singapore Limited and Bank of America
N.T. & S.A., dated July 27, 1985
10.8 (9) Lease Agreement between John Arrillaga,
Separate Property Trust, Richard T.
Perry, Separate Property Trust and
Registrant, dated August 27, 1986
10.9 (3) Marketing and Distribution Agreement
between Ricoh Company, Ltd. and
Registrant, dated October 14, 1986
10.10 (3) Land Lease Agreement between Housing and
Development Board, Singapore and Maxtor
Singapore Limited, dated December 22,
1986
10.11 (3) Indenture dated February 16, 1987
10.12 (8) Stock Bonus Plan and Cash Bonus Plan
between Storage Dimensions, Inc. and
Registrant dated June 15, 1987
10.13 (8) Merger Agreement between MAXSUB II, Inc.,
and Storage Dimensions, Inc. dated
October 26, 1987
10.14 (3) 1986 Outside Directors' Stock Option Plan
10.15 (3) Commitment from Union Bank to Registrant
regarding letters of credit for the
benefit of the officers and directors of
the Registrant
10.16 (4) Agreement and Plan of Reorganization
10.17 (9) Revised Equipment Lease Agreement between
Capital Associates International, Inc.
and Registrant, dated September 28, 1988
10.18 (9) Credit Agreement between Bank of America
National Trust and Savings Association
and Registrant, dated October 18, 1988
10.19 (9) Equipment Lease Agreement between Pitney
Bowes Credit Corporation and Registrant,
dated November 2, 1988
10.20 (9) Equipment Lease Agreement between Concord
Leasing (Asia) Pte Ltd. and Maxtor
Singapore, Limited, dated November 16, 1988
10.21 (9) Lease Agreement between Maxtor Singapore,
Limited and Jurong Town Corporation,
dated November 16, 1988
10.22 (9) Lease Agreement between Greylands Business
Park Phase II and Storage Dimensions, Inc.,
dated December 14, 1988
10.23 (8) Stock Purchase Agreement among Registrant,
Storage Dimensions, Inc., David A. Eeg, Gene
E. Bowles, Jr., David P. Williams and David
Lance Robinson
10.24 (8) Fiscal 1988 Stock Option Plan
10.25 (8) Employee Stock Purchase Plan
10.26 (8) Dual Currency Loan Agreement between Maxtor
Singapore Limited, Maxtor Delaware, Maxtor
California and American Express Bank Limited
10.27 (8) Amended and Restated Fiscal 1985 Stock Option
Plan, including the Immediately Exercisable
Incentive Stock Option Agreement and the
Immediately Exercisable Nonqualified Stock
Option Agreement
10.28 (9) Loan Agreement between Probo Pacific Pte
Ltd. and Maxtor Singapore Limited, dated
March 20, 1989
10.29 (9) Loan Agreement between Concord Leasing
(Asia) Pte, Ltd. and Maxtor Singapore
Limited, dated April 14, 1989
10.30 (10) Product Discontinuance Agreement between
Matsushita Communication Industrial Co., Ltd.
(MCI) and Registrant, dated August 23, 1989
10.31 (10) Equipment Lease Agreement between Capital
Associates International, Inc. and
Registrant, dated October 17, 1989
10.32 (10) Maxoptix Corporation 1989 Stock Option Plan
10.33 (9) Forms for Promissory Note and Amended and
Restated Promissory Note
10.34 (10) Amended and Restated Credit Agreement
between Bank of America National Trust and
Savings Association and Registrant, dated
January 31, 1990
10.35 (10) Amendment to Lease Agreement between Orchard
Investment Company No. 801, formerly Nelo, a
California general partnership, and
Registrant, dated February 15, 1990
10.36 (10) Sublease Agreement between RACAL-VADIC, a
Division of Racal Data Communications, Inc.
("Sublessor"), and Storage Dimensions, Inc.
("Sublessee"), dated February 16, 1990
10.37 (10) Collateral Sharing and Subordination
Agreement between Registrant and Standard
Chartered Bank, dated April 5, 1990
10.38 (10) Loan and Security Agreement between
Registrant and MiniScribe Corporation,
dated April 5, 1990
10.39 (11) Agreement for the Sale and Purchase of
Shares in Tratford Pte. Ltd. between the
Registrant, MiniScribe Peripherals (Pte) Ltd.
and certain Individuals, dated May 8, 1990
10.40 (11) Agreement for the Sale and Purchase of
Shares in Silkmount Limited between
MaxSub Corporation, Silkmount Limited and
certain Individuals, dated May 18, 1990
10.41 (11) Assignment of Debt between Registrant,
MiniScribe (Hong Kong) Limited and
certain Individuals, dated May 18, 1990
10.42 (10) Asset Purchase Agreement between Registrant,
MiniScribe Corporation and Standard Chartered
Bank, dated May 30, 1990
10.43 (14) License Agreement with Rodime PLC, dated
December 8, 1987 assigned to Registrant
on June 29, 1990
10.44 (14) Patent Cross License Agreement with IBM
dated October 1, 1984 assigned to
Registrant effective June 30, 1990
10.45 (14) Lease Agreement between MiniScribe
Corporation and 345 Partnership dated
June 6, 1990, assigned to the Registrant
effective June 30, 1990
10.46 (14) Lease Agreement between Maxtor Colorado
and Pratt Partnership (Lot 1A), dated
July 5, 1990
10.47 (14) Lease Agreement between Maxtor Colorado
and Pratt Partnership (Lot 1C), dated
July 5, 1990
10.48 (14) Lease Agreement between Maxtor Colorado and
Pratt Partnership (Lot 4), dated July 5, 1990
10.49 (14) Agreement for the Purchase of Land and
Improvements between Registrant and Nixdorf,
dated August 16, 1990
10.50 (15) Grant Agreement dated 25 October 1990
between the Industrial Development Authority,
Maxtor Ireland Limited and Registrant
10.51 (12) Amendment of Agreement between Registrant,
Maxtor Colorado, Maxtor California and Standard
Chartered Bank, dated November 6, 1990
10.52 (14) Guarantee for Dastek between Registrant,
Dastek and Silicon Valley Bank, dated
November 30, 1990
10.53 (10) Judgment, William Lubliner vs. Maxtor
Corporation, James M. McCoy, William J.
Dobbin, B.J. Cassin, W. Charles Hazel and
George M. Scalise
10.54 (10) Settlement Agreement, William Lubliner vs.
Maxtor Corporation, et al
10.55 (10) Fiscal 1991 Profit Sharing Plan Document
10.56 (10) Board of Director Compensation Approved for
Fiscal 1991
10.57 (14) Resignation Agreement and General Release of
Claims between Alexander E. Malaccorto and
the Registrant, dated January 11, 1991
10.58 (14) Employment Agreement between James M. McCoy
and Registrant, dated January 17, 1991
10.59 (14) Resignation Agreement and General Release of
Claims between James N. Miler and the
Registrant, dated January 20, 1991
10.60 (14) Letter Agreement between George Scalise and
the Registrant, dated February 22, 1991
10.61 (14) Resignation Agreement and General Release of
Claims between Steven Strain and the
Registrant, dated February 22, 1991
10.62 (14) Foothill Capital Credit Facility between
Registrant, Certain of Its Subsidiaries
and Foothill Capital Corporation, dated
April 22, 1991
10.63 (14) Employment Agreement between Laurence
Hootnick and Registrant, dated May 3, 1991
10.64 (14) Employment Agreement between Roger Nordby
and Registrant, dated May 7, 1991
10.65 (14) Employment Agreement between Thomas F. Burniece
and the Registrant, dated May 12, 1991
10.66 (15) Amendment of the Registrant's Continuing
Guarantee in favor of Foothill Capital
Corporation, dated July 10, 1991
10.67 (15) Settlement, Resignation and General Release
of Claims between Registrant and Taroon C.
Kamdar, dated August 2, 1991
10.68 (15) Amendment of Registrant's Continuing
Guarantee in favor Foothill Capital
Corporation, dated August 9, 1991
10.69 (15) Amendment No. 1 to Lease by and between John
Arrillaga, Trustee, and Richard T. Peery,
Trustee, and Registrant, dated August 23, 1991
10.70 (15) Amendment of Registrant's Continuing
Guarantee in favor of Foothill Capital
Corporation, dated September 20, 1991
10.71 (13) Amendment of Agreement between Registrant,
Maxtor Colorado, Maxtor California and
Standard Chartered Bank, dated December 27,
1990, and further amended July 26, 1991 and
October 4, 1991
10.72 (15) Lease Agreement between Registrant and Devcon
Associates 31, dated December 6, 1991
10.73 (15) Deed of Partial Discharge and Release between
Barclays Bank PLC and Maxtor Singapore
Limited, dated December 19, 1991
10.74 (15) Agreement for Purchase and Sale of Assets
among Registrant, Read-Rite International,
Read-Rite Corporation and Maxtor Singapore
Limited, dated November 14, 1991, and amended
December 20, 1991
10.75 (15) Asset Purchase Agreement among Registrant,
Storage Dimensions, Inc. and USD Acquisition,
Inc., dated December 27, 1991
10.76 (15) Resignation Agreement and General Release of
Claims between Registrant and David S. Dury,
dated January 31, 1992
10.77 (15) Sublease between Registrant and Hauser
Chemical Research, Inc., dated March 23, 1992
10.78 (15) First Amendment to Lease Agreement between
PCA San Jose Associates and Registrant, dated
March 25, 1992
10.79 (15) Asset Purchase Agreement among Registrant,
Maxtor Singapore LTD., and Sequel, Inc., dated
March 12, 1992, and amended March 25, 1992
10.80 (5) Fiscal 1992 Stock Option Plan
10.81 (15) Form of Indemnity Agreement between the
Registrant and each of its Directors and
Executive Officers
10.82 (15) Maxtor/Sequel 8K/Panther Subcontract
Manufacturing and Warranty Services Agreement,
dated March 23, 1992
10.83 (15) Maxtor Corporation 1992 Employee Stock
Purchase Plan
10.84 (15) Maxtor Corporation 1991 Employee Stock
Purchase Plan
10.85 (15) Maxtor Corporation FY'93 Incentive Plan
Summary
10.86 (15) Fiscal 1992 Profit Sharing Plan Document
10.87 (17) Security Agreement between Registrant
and Chrysler Capital Corporation, dated
April 14, 1992
10.88 (17) Subordination, Non-Disturbance, Estoppel
and Attornment Agreement between Loma
Mortgage USA, Inc. and Registrant, dated
June 4, 1992
10.89 (17) Office Lease between Cabot Associates and
Registrant, dated July 23, 1992
10.90 (17) Revolving Credit Agreement among Registrant,
Barclays Bank PLC and The First National Bank
of Boston, dated as of September 9, 1992
10.91 (17) Security Agreement between Registrant and
the CIT Group/Equipment Financing, Inc.,
dated September 18, 1992
10.92 (17) Deed of Priorities among Maxtor (Hong Kong)
Limited and Registrant and General Electric
Capital Corporation, dated September 25, 1992
10.93 (17) Lease among Dares Developments (Woking)
Limited, Maxtor Europe Limited and
Registrant, dated October 1992
10.94 (16) Stock Purchase and Asset Acquisition
Agreement among David A. Eeg, Gene E. Bowles,
Jr., CP Acquisition, L.P. No. 4A, CP
Acquisition, L.P. No. 4B, Capital Partners,
Inc., FGS, Inc., Registrant, Storage
Dimensions, Inc. and SDI Acquisition
Corporation, dated December 4, 1992
10.95 (17) Loan and Security Agreement between
Registrant and Household Bank, f.s.b., dated
December 11, 1992
10.96 (17) Global Master Rental Agreement between
Comdisco, Inc. and Registrant, dated
December 16, 1992
10.97 (17) Amendment No. 1 to Lease between Devcon
Associates 31 and Registrant, dated
December 21, 1992
10.98 (17) Continuing Guaranty among Maxtor
Peripherals (S) Pte., Ltd., Barclays Bank
PLC and Registrant, dated January 26, 1993
10.99 (17) Amendment No. 2 to Lease between Devcon
Associates 31 and Registrant, dated
February 1, 1993
10.100 (17) Instrument of Resignation, Appointment and
Acceptance among Registrant, The First
National Bank of Boston and Bank of America
National Trust and Savings, dated as of
March 22, 1993
10.101 (17) Waiver and First Amendment to Credit
Agreement among Registrant, Barclays Bank
PLC and the First National Bank of Boston,
dated as of April 16, 1993
10.102 (17) Waiver and First Amendment to Continuing
Guaranty Among Registrant, Barclays Bank PLC
and the Lenders dated as of April 19, 1993
10.103 (17) Security Agreement between Registrant and
Barclays Bank PLC, dated April 16, 1993
10.104 (17) Lease Agreement between Registrant and Pratt
Partnership, dated April 30, 1993
10.105 (17) Agreement for Stock Transfer Services
between Registrant and The First National
Bank of Boston, dated May 6, 1993
10.106 (17) Maxtor Corporation CY93 Profit Sharing Plan
10.107 (17) Maxtor Corporation Management Incentive Plan
for CY93
10.108 (18) Production Agreement between International
Business Machines Corporation and Registrant,
dated July 27, 1993 (with certain information
deleted and indicated by blackout text)
10.109 (19) Letter of Intent between Registrant and
Hyundai Electronics Co., Ltd., dated
August 18, 1993
10.110 (20) Financing Agreement between Registrant and
The CIT Group/Business Credit, Inc., dated
September 16, 1993
10.111 (21) Form Letter Agreement between Registrant and
All of its Named Executive Officers, except
Laurence Hootnick, dated November 17, 1993
10.112 (21) Waiver to Financing Agreement among
Registrant and The CIT Group/Business Credit,
Inc., dated January 12, 1994
10.113 (21) Stock Purchase Agreement between Registrant
and Hyundai Electronics Industries Co., Ltd.,
Hyundai Heavy Industries Co., Ltd., Hyundai
Corporation, and Hyundai Merchant Marine Co.,
Ltd., dated September 10, 1993
10.114 (22) Confidential Resignation Agreement and
General Release of Claims between
Registrant and Thomas F. Burniece III,
dated February 4, 1994
10.115 (22) License Agreement between Registrant and
MiniStor Peripherals Corporation, dated
February 23, 1994
10.116 (22) Confidential Resignation Agreement and
General Release of Claims between Registrant
and John P. Livingston, dated April 8, 1994
10.117 (22) Tenancy Agreement between Barinet Company
Limited and Maxtor (Hong Kong) Limited,
dated April 26, 1994
10.118 (23) Confidential Resignation Agreement and
General Release of Claims between
Registrant and Laurence R. Hootnick, dated
June 14, 1994
10.119 (23) Confidential Resignation Agreement and General
Release of Claims between Registrant and
Mark Chandler, dated June 28, 1994
10.120 Amendment No.2 to Lease between John
Arrillaga & Richard T. Peery and
Registrant, dated June 28, 1994 28 - 29
10.121 Amendment No. 3 to Lease between Devcon
Associates 31 and Registrant, dated
June 28, 1994 30 - 33
10.122 Confidential Resignation Agreement
and General Release of Claims between
Registrant and Skip Kilsdonk, dated
September 7, 1994 34 - 39
10.123 Confidential Resignation Agreement
and General Release of Claims between
Registrant and Sallee Peterson,
dated September 23, 1994 40 - 43
10.124 Waiver to Financing Agreement among
Registrant and The CIT Group/Business
Credit, Inc., dated October 11, 1994 44 - 46
10.125 Amendment No. 1 to Financing Agreement
between Registrant and The CIT Group/Business
Credit, Inc., dated October 31, 1994 47 - 56
11.1 Computation of Net Income (Loss) Per Share 57
- - -------------------------------------------------------------------
(1) Incorporated by reference to exhibits to Registration
Statement No. 2-98568 effective August 7, 1985
(2) Incorporated by reference to exhibits to Registration
Statement No. 33-4092 effective April 2, 1986
(3) Incorporated by reference to exhibits to Registration
Statement No. 33-12123 effective February 26, 1987
(4) Incorporated by reference to exhibits to Registration
Statement No. 33-12768 effective April 23, 1987
(5) Incorporated by reference to exhibits to Registration
Statement No. 33-43172 effective October 7, 1992
(6) Incorporated by reference to exhibits to Registration
Statement No. 33-8607 effective September 10, 1986
(7) Incorporated by reference to exhibits of Form 8-K
filed February 8, 1988
(8) Incorporated by reference to exhibits to Annual Report
on Form 10-K effective June 24, 1988
(9) Incorporated by reference to exhibits to Annual Report
on Form 10-K effective June 24, 1989
(10) Incorporated by reference to exhibits to Annual Report
on Form 10-K effective June 1, 1990
(11) Incorporated by reference to exhibits of Form 8-K filed
July 13, 1990
(12) Incorporated by reference to exhibits of Form 8 filed
November 13, 1990
(13) Incorporated by reference to exhibits of Form 8 filed
January 8, 1991
(14) Incorporated by reference to exhibits to Annual Report
on Form 10-K effective July 15, 1991
(15) Incorporated by reference to exhibits to Annual Report
on Form 10-K effective June 25, 1992
(16) Incorporated by reference to exhibits of Form 8-K filed
January 8, 1993
(17) Incorporated by reference to exhibits to Annual Report
on Form 10-K effective May 27, 1993
(18) Incorporated by reference to exhibits of Form 10-Q
filed August 10, 1993
(19) Incorporated by reference to exhibits of Form 8-K
filed August 19, 1993
(20) Incorporated by reference to exhibits of Form 10-Q
filed November 8, 1993
(21) Incorporated by reference to exhibits of Form 10-Q
filed February 7, 1994
(22) Incorporated by reference to exhibits of Form 10-K
filed June 24, 1994
(23) Incorporated by reference to exhibits of Form 10-Q
filed August 5, 1994
Riveroaks 1
AMENDMENT NO. 2
TO LEASE
THIS AMENDMENT NO. 2 is made and entered into this 28th day of
June, 1994, by and between JOHN ARRILLAGA, Trustee, or his Successor
Trustee UTA dated 7/20/77 (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 MAXTOR CORPORATION, a
Delaware corporation, as TENANT,
RECITALS
A. WHEREAS, by Lease Agreement dated August 18, 1986 Landlord
leased all of that certain 75,790+/- square foot building located at
211 River Oaks Parkway, San Jose, California, the details of which
are more particularly set forth in said August 18, 1986 Lease
Agreement, and
B. WHEREAS, said Lease was extended by Letter Agreement dated
March 4, 1989 to extend the term one year, changing the Termination
Date from August 31, 1989 to August 31, 1990 and adjusted the Basic
Rent schedule and Aggregate Rent accordingly, and
C. WHEREAS, said Lease was extended by Letter Agreement dated
August 13, 1990 to extend the term one year, changing the
Termination Date from August 31, 1990 to August 31, 1991 and
adjusted the Basic Rent schedule and Aggregate Rent accordingly, and
D. WHEREAS, said Lease was assigned by Consent to Assignment
dated August 22, 1991 by Maxtor Corporation, a California
corporation ("Assignor") to Maxtor Corporation, a Delaware
corporation ("Assignee"), and
E. WHEREAS, said Lease was amended by Amendment No. I dated
August 23, 1991 to extend the term for three (3) years one (1) month
two (2) days, changing the Termination Date from August 31, 1991 to
October 2,,1994 and adjusted the Basic Rent schedule and Aggregate
Rent accordingly, and
F. WHEREAS, it is now the desire of the parties hereto to amend
the Lease by extending the Term of the Lease for three (3) years and
amending the Basic Rent schedule and Aggregate Rent 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 the
term of said Lease Agreement shall be extended for an additional
three (3) year period, changing the Termination Date from October 2,
1994 to October 2, 1997.
2. BASIC RENTAL: The monthly Basic Rental shall be adjusted as
follows:
On October 1, 1994 the sum of FIFTY EIGHT THOUSAND FIVE HUNDRED
FIFTY FIVE AND 56/100 DOLLARS ($58,555.56) shall be due,
representing the Basic Rental for the period October 1, 1994 to
October 31, 1994.
On November 1, 1994, the sum of FIFTY SIX THOUSAND EIGHT HUNDRED
FORTY TWO AND 50/100 DOLLARS ($56,842.50) shall be due, and a like
sum due on the first day of each month thereafter, through and
including September 1, 1997.
On October 1, 1997, the sum of THREE THOUSAND SEVEN HUNDRED
THIRTY SEVEN AND 59/100 DOLLARS ($3,737.59) shall be due,
representing the Basic Rental due for the period of October 1, 1997
through October 2, 1997.
The aggregate rental for the lease shall be increased by
$2,047,420.13 or from $6,143,093.77 to $8,190,513.90.
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and
conditions of said August 18, 1986 Lease Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Amendment No. 2 to Lease as of the day and year first hereinabove
set forth.
LANDLORD: TENANT:
JOHN ARRILLAGA SEPARATE MAXTOR CORPORATION
PROPERTY TRUST a Delaware corporation
By /s/ John Arrillaga By /s/ J. Larry Smart
----------------------- -------------------
John Arrillaga, Trustee
RICHARD T. PEERY SEPARATE Title: COO
PROPERTY TRUST ---------------
By: /s/ Richard Peery Dated: 7/15/94
------------------------- -------------
Richard T. Peery, Trustee
Charcot 4
AMENDMENT NO. 3
TO LEASE
THIS AMENDMENT NO. 3 is made and entered into this 28th day of
June, 1994, by and between DEVCON ASSOCIATES 3 1, a California
general partnership as LANDLORD, and MAXTOR CORPORATION, a Delaware
corporation, as TENANT.
RECITALS
A. WHEREAS, by Lease Agreement dated December 6, 1991 Landlord
leased to Tenant approximately 21,500+/- square feet of that certain
46,305+/- square foot building located at 2191 Zanker Road, San
Jose, California, the details of which are more particularly set
forth in said December 6, 1991 Lease Agreement (the "Lease"), and
B. WHEREAS, said Lease was amended by Amendment No. 1 dated
December 21, 1992 to increase the Leased Premises from 21,500+/- to
27,199+/- square feet effective January 1, 1993 and amend the Basic
Rent schedule and Aggregate Rent accordingly, and
C. WHEREAS, said Lease was amended by Amendment No. 2 dated
February 1, 1993 to increase the Leased Premises from 27,199 to
34,605+/- square feet effective February 1, 1993 and amend the Basic
Rent schedule and Aggregate Basic Rent accordingly, and
D. WHEREAS, it is now the desire of the parties hereto to amend
the Lease by extending the Term of the Lease for an additional two
(2) year five (5) month twenty nine (29) day period, adding an
Option to Terminate paragraph, and amending the Basic Rent schedule
and Aggregate Rent 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: Subject to Paragraph 3 below, it is agreed
between the parties that the term of said Lease shall be extended
for an additional two (2) year five (5) month twenty nine (29) day
period, changing the Termination Date from October 2, 1994 to March
31, 1997.
2. BASIC RENT SCHEDULE: The monthly Basic Rental shall be
adjusted as follows:
On October 1, 1994, the sum of SEVENTEEN THOUSAND THREE HUNDRED
TWO AND 50/100 DOLLARS ($17,302.50) shall be due, and a like sum due
on the first day of each month thereafter, through and including
March 1, 1997.
The Aggregate Basic Rent for the Lease shall be increased by
$517,937.31 or from $492,953.88 to $1,010,891.19.
3. TENANT'S OPTION TO TERMINATE LEASE PRIOR TO SCHEDULED
TERMINATION DATE: Landlord hereby grants to Tenant four Options to
Terminate this Lease on the dates specified below and subject to the
following terms and conditions:
A. TENANT'S OPTION TO TERMINATE LEASE EFFECTIVE MARCH 31, 1995:
Provided Tenant is not in default in any of the terms, covenants and
conditions of this Lease and any amendments thereto, Landlord hereby
grants to Tenant an Option to Terminate this Lease effective March
31, 1995, subject to the following terms and conditions:
I. Tenant shall give Landlord one hundred twenty (120) days
prior written notice of Tenant's exercise of said Option to
Terminate this Lease, which written notice must be received by
Landlord not later than December 1, 1994. In the event Tenant fails
to timely exercise Tenant's Option to Terminate as set forth herein
in writing, this Lease shall continue in full force and effect for
the full remaining term hereof, absent this Paragraph 3A, subject to
Paragraph 3B, 3C, and 3D below.
Charcot 4
II. In the event Tenant timely exercises Tenant's Option to
Terminate as set forth herein, this Lease shall terminate on March
31, 1995, with Tenant being responsible for the full performance of
all terms, covenants, and conditions of said Lease through the
effective date of termination as set forth above.
III. In the event Tenant timely exercises Tenant's Option to
Terminate as set forth herein, Tenant agrees to surrender the Leased
Premises to Landlord, free and clear of Tenant's occupancy or the
occupancy of any subtenants, as of the early termination date, and
shall comply with all clean-up requirements as outlined in Paragraph
5 "Acceptance and Surrender of Premises" of this Lease.
IV. The Option rights of Tenant under this Paragraph 3A are
granted for Tenant's personal benefit and may not be assigned or
transferred by Tenant, either voluntarily or by operation of law, in
any manner whatsoever. In the event that Landlord consents to a
sublease or assignment under Paragraph 16, the Option granted herein
shall be void and of no force and effect, whether or not Tenant
shall have purported to exercise such Option prior to such
assignment or sublease.
B. TENANT'S SECOND OPTION TO TERMINATE LEASE EFFECTIVE
SEPTEMBER 30, 1995: Provided Tenant is not in default in any of the
terms, covenants and conditions of this Lease and any amendments
thereto, and provided Tenant has not exercised its Option to
Terminate as provided for in Paragraph 3A above, Landlord hereby
grants to Tenant an Option to Terminate this Lease effective
September 30, 1995, subject to the following terms and conditions:
I. Tenant shall give Landlord one hundred twenty (120) days
prior written notice of Tenant's exercise of said Option to
Terminate this Lease, which written notice must be received by
Landlord not later than June 2, 1995. In the event Tenant fails to
timely exercise Tenant's Option to Terminate as set forth herein in
writing, this Lease shall continue in full force and effect for the
full remaining term hereof, absent this Paragraph 3B, subject to
Paragraph 3C and 3D below,
II. In the event Tenant timely exercises Tenant's Option to
Terminate as set forth herein, this Lease shall terminate on
September 30, 1995, with Tenant being responsible for the full
performance of all terms, covenants, and conditions of said Lease
through the effective date of termination as set forth above.
III. In the event Tenant timely exercises Tenant's Option to
Terminate as set forth herein, Tenant agrees to surrender the Leased
Premises to Landlord, free and clear of Tenant's occupancy or the
occupancy of any subtenants, as of the early termination date, and
shall comply with all clean-up requirements as outlined in Paragraph
5 "Acceptance and Surrender of Premises" of this Lease.
IV. The Option rights of Tenant under this Paragraph 3B are
granted for Tenant's personal benefit and may not be assigned or
transferred by Tenant, either voluntarily or by operation of low, in
any manner whatsoever. In the event that Landlord consents to a
sublease or assignment under Paragraph 16, the Option granted herein
shall be void and of no force and effect, whether or not Tenant
shall have purported to exercise such Option prior to such
assignment or sublease.
C. TENANT'S THIRD OPTION TO TERMINATE LEASE EFFECTIVE MARCH
31,1996: Provided Tenant is not in default in any of the terms,
covenants and conditions of this Lease and any amendments thereto,
and provided Tenant has not exercised its Option to Terminate as
provided for in Paragraph 3A and 3B above, Landlord hereby grants to
Tenant an Option to Terminate this Lease effective March 31, 1996,
subject to the following terms and conditions:
I. Tenant shall give Landlord one hundred twenty (120) days
prior written notice of Tenant's exercise of said Option to
Terminate this Lease, which written notice must be received by
Landlord not later than December 2, 1995. In the event Tenant fails
to timely exercise Tenant's Option to Terminate as set forth herein
in writing, this Lease shall continue in full force and effect for
the full remaining term hereof, absent this Paragraph 3C, subject to
Paragraph 3D below.
II. In the event Tenant timely exercises Tenant's Option to
Terminate as set forth herein, this Lease shall terminate on March
31, 1996, with Tenant being responsible for the full performance of
all terms, covenants, and conditions of said Lease through the
effective date of termination as set forth above.
III. In the event Tenant timely exercises Tenant's Option to
Terminate as set forth herein, Tenant agrees to surrender the Leased
Premises to Landlord, free and clear of Tenant's occupancy or the
occupancy of any subtenants, as of the early termination date, and
shall comply with all clean-up requirements as outlined in Paragraph
5 "Acceptance and Surrender of Premises" of this Lease.
IV. The Option rights of Tenant under this Paragraph 3C are
granted for Tenant's personal benefit and may not be assigned or
transferred by Tenant, either voluntarily or by operation of law, in
any manner whatsoever. In the event that Landlord consents to a
sublease or assignment under Paragraph 16, the Option granted herein
shall be void and of no force and effect, whether or not Tenant
shall have purported to exercise such Option prior to such
assignment or sublease.
D. TENANT'S FOURTH OPTION TO TERMINATE LEASE EFFECTIVE
SEPTEMBER 30.1996: Provided Tenant is not in default in any of the
terms, covenants and conditions of this Lease and any amendments
thereto, and provided Tenant has not exercised its Option to
Terminate as provided for in Paragraph 3A, 3B and 3C above, Landlord
hereby grants to Tenant an Option to Terminate this Lease effective
September 30, 1996, subject to the following terms and conditions:
I. Tenant shall give Landlord one hundred twenty (120) days
prior written notice of Tenant's exercise of said Option to
Terminate this Lease, which written notice must be received by
Landlord not later than June 2, 1996. In the event Tenant fails to
timely exercise Tenant's Option to Terminate as set forth herein in
writing, this Lease shall continue in full force and effect for the
full remaining term hereof, absent this Paragraph 3D.
II. In the event Tenant timely exercises Tenant's Option to
Terminate as set forth herein, this Lease shall terminate on
September 30, 1996, with Tenant being responsible for the full
performance of all terms, covenants, and conditions of said Lease
through the effective date of termination as set forth above.
III. In the event Tenant timely exercises Tenant's Option to
Terminate as set forth herein, Tenant agrees to surrender the Leased
Premises to Landlord, free and clear of Tenant's occupancy or the
occupancy of any subtenants, as of the early termination date, and
shall comply with all clean-up requirements as outlined in Paragraph
5 "Acceptance and Surrender of Premises" of this Lease.
IV. The Option rights of Tenant under this Paragraph 3D are
granted for Tenant's personal benefit and may not be assigned or
transferred by Tenant, either voluntarily or by operation of law, in
any manner whatsoever. In the event that Landlord consents to a
sublease or assignment under Paragraph 16, the Option granted herein
shall be void and of no force and effect, whether or not Tenant
shall have purported to exercise such Option prior to such
assignment or sublease.
EXCEPT AS MODIFIED HEREIN, all other terms, covenants, and
conditions of said December 6, 1991 Lease 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 first hereinabove
set forth.
LANDLORD: TENANT:
DEVCON ASSOCIATES 31, MAXTOR CORPORATION
a California general a Delaware corporation
partnership
JOHN ARRILLAGA SEPARATE
PROPERTY TRUST By /s/ J. Larry Smart
-------------------
By: /s/ John Arrillaga J. Larry Smart
--------------------- --------------------
John Arrillaga, Trustee Print or Type Name
Title: COO
--------------
Dated: 7/15/94
--------------
RICHARD T. PEERY SEPARATE
PROPERTY TRUST
By: /s/ R. T. Peery
--------------------------
Richard T. Peery, Trustee
By: /s/ Wayne Gianotti
----------------------
Wayne Gianotti
By: /s/ J. R. McCabe
-------------------
John R. McCabe
By: /s/ M. J. Eggers
------------------------------
Michael J. Eggers, Trustee for
the MICHAEL & BETH EGGERS LIVING
TRUST
CONFIDENTIAL RESIGNATION AGREEMENT
AND GENERAL RELEASE OF CLAIMS
-----------------------------
1. Skip Kilsdonk ("Employee") hereby resigns from his
employment with Maxtor Corporation ("Maxtor"), and his position as
an officer of Maxtor, effective August 26, 1994.
2. (a) In exchange for the release of claims set forth below,
upon expiration of the seven (7) day revocation period described
below Maxtor shall pay to Employee the sum of $135,000. Of this
sum, the parties agree to the following allocation:
(i) $100,000 for loss of wages; and
(ii) $35,000.00 for alleged pain, suffering, anxiety,
emotional distress, and personal injury allegedly
suffered and incurred by Employee arising from his
tort claims.
(b) The payment described in subparagraph 2.(a)(i) shall
be subject to applicable withholding, and Maxtor shall report to
appropriate government agencies the payment of $100,000.00 as wage
related. The payment described in subparagraph 2.(a)(ii) is
intended to compensate Employee for alleged pain, suffering,
anxiety, emotional distress, and personal injury allegedly suffered
and incurred by Employee arising from his tort claims. Employee
asserts that such payment is neither taxable nor subject to
withholding, and Maxtor agrees that it will neither withhold any
taxes from such payment, nor issue a W-2 or 1099 for such payment.
Employee understands and agrees that in the event any taxing
authority should reach a contrary determination, and conclude that
all or some portion of the settlement payments constitute taxable
income to Employee, he shall be solely responsible for the payment
of any income and other taxes that may be found to be owing. In
the event any taxing authority seeks and obtains payment or
reimbursement from Maxtor for any tax due on such settlement
payments, Employee shall fully reimburse and indemnify Maxtor for
any such taxes, all related interest, penalties and other costs so
assessed or incurred, including attorneys' fees for defending any
such claim and costs related thereto.
(c) After August 26, 1994, Employee will be eligible to
continue his health coverage at his own expense in accordance with
federal law, provided, however, that if Employee continues to use
Maxtor's health insurance program, Maxtor shall promptly reimburse
Employee his health insurance premiums for a nine-month period
after August 26, 1994. Employee shall also receive from Maxtor all
amounts held by Maxtor for him in his 401(K) account and all
amounts withheld to date for his account under the Maxpurchase 423
Plan. The amounts owing under the 401(k) and 423 Plans will be
paid to Employee in accordance with Maxtor's customary policy with
respect to employees who leave the company (i.e., 423 Plan funds
are distributed promptly following the date of resignation and
401(k) funds disbursed within 90 days thereafter). In addition to
the above amounts, Employee will receive payment for his accrued
vacation allowance, less applicable withholdings. Employee shall
be entitled to exercise as vested, for a period of six months after
August 26, 1994, all of his outstanding stock options, as shown on
the attached Exhibit A, whether or not otherwise vested as of
August 26, 1994.
(d) Maxtor shall arrange, at no cost to Employee, for
Employee to receive sixty days of executive outplacement services
from the firm of Drake Beam Morin Inc. Employee shall be entitled
to use such services at any time within one year of the date of
this Agreement.
(e) Employee acknowledges that he shall be entitled to no
compensation or benefits from Maxtor other than those expressly set
forth in this Agreement.
3. In exchange for the benefits described in paragraph 2
above, Employee does hereby for himself and his respective legal
successors and assignees, release and absolutely discharge Maxtor
and its shareholders, directors, employees, agents, attorneys,
legal successors, and assigns of and from any and all claims,
actions and causes of action, whether now known or unknown,
suspected, or unsuspected, which Employee now has, owns or holds,
or at any other time had, owned or held or shall or may have, own,
or hold against Maxtor based upon or arising out of any matter,
cause, fact, thing, act or omission whatsoever occurring or
existing at any time to and including the date hereof, including
but not limited to, any claims of wrongful discharge or age or
other discrimination under the Civil Rights Act, the Americans with
Disabilities Act, the Age Discrimination in Employment Act, the
Fair Employment and Housing Act, or any other applicable law, or
any other claims or alleged claims (all of which are hereinafter
included within the "Released Matters"). As used herein, "Maxtor"
includes any and all parents, divisions or subsidiaries of Maxtor
Corporation.
4. Employee acknowledges that he is familiar with Section 1542
of the California Civil Code which states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected his settlement with the
debtor.
Employee hereby waives any right or benefit which he has or may
have under Section 1542 of the California Civil Code to the full
extent that he may lawfully waive such rights and benefits
pertaining to the subject matter of this General Release of Claims
(the "Release"). Employee acknowledges that he may hereafter
discover claims or facts in addition to or different from those
that he now knows or believes to exist with respect to the subject
matter of this Release, and that it is his intention to fully,
finally and forever settle all of the Released Matters in exchange
for the benefits set forth above.
5. Employee acknowledges and agrees that he shall continue to
be bound by and comply with the terms of that certain Employee
Agreement Regarding Confidentiality and inventions between Maxtor
and Employee dated September 9, 1991. Maxtor and Employee shall
continue to be bound by the terms of the Indemnification Agreement
between Maxtor and Employee dated May 28, 1992 for the term stated
therein.
6. In the event Maxtor receives any requests for information
regarding Employee from potential employers, it will make
reasonable efforts to direct all such inquiries to Patricia
Roboostoff, Vice President Human Resources, or in her absence,
Walter Amaral, Vice President Finance. Ms. Roboostoff and Mr.
Amaral will make no negative or derogatory statements about
Employee, but will respond to such inquiries with the information
contained in Exhibit B.
7. Employee agrees that he shall not directly or indirectly
disclose any of the terms of this Agreement to anyone other than
his immediate family or counsel except as such disclosures may be
necessary for accounting or tax reporting purposes or as otherwise
may be required by law.
8. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes
all prior negotiations and agreements, with the exception of the
agreement described in paragraph 5. The prevailing party shall be
entitled to recover from the losing party its attorneys' fees and
costs incurred in any lawsuit or other action brought to enforce
any right arising out of this Agreement. This Agreement may not be
altered or amended except by a written document executed by Maxtor
and Employee.
EMPLOYEE UNDERSTANDS THAT HE SHOULD CONSULT WITH AN ATTORNEY PRIOR
TO SIGNING THIS AGREEMENT AND THAT HE IS GIVING UP ANY LEGAL CLAIMS
HE HAS AGAINST MAXTOR BY SIGNING THIS AGREEMENT, THAT HE MAY
CONSIDER THIS AGREEMENT FOR 21 DAYS AND MAY REVOKE IT AT ANY TIME
DURING THE SEVEN DAYS AFTER HE SIGNS IT AND THAT IT SHALL NOT
BECOME EFFECTIVE UNTIL THAT SEVEN-DAY PERIOD HAS PASSED. EMPLOYEE
FURTHER ACKNOWLEDGES THAT HE IS SIGNING THIS AGREEMENT KNOWINGLY,
WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS DESCRIBED IN
PARAGRAPH 2.
Dated: September 7, 1994 /s/ Skip Kilsdonk
-----------------
Skip Kilsdonk
Dated: September 7, 1994 MAXTOR CORPORATION
By: /s/ Walter D. Amaral
--------------------
Title: VP Finance & CFO
-----------------
EXHIBIT B
to
CONFIDENTIAL RESIGNATION
AGREEMENT AND GENERAL RELEASE OF CLAIMS
During the period September 1982 through March 1988, and again from
September 1991 through August 1994, Skip Kilsdonk was employed by
Maxtor Corporation in various marketing and product management
positions. Most recently Skip was Maxtor's Vice President of
Strategic Planning and Marketing.
During his employment, Skip made many contributions to Maxtor's
success. Most recently, Skip planned and director Maxtor's
successful entry into the PCMCIA market with the MobileMax(TM) line
of 1.8-inch disk drives and FLASH cards. Skip represented Maxtor
on the PCMCIA Board of Directors for three years and was its
Marketing Chairperson.
Skip has played a key role in Maxtor's success, and I would expect
him to make similar contributions in his future endeavors.
CONFIDENTIAL RESIGNATION AGREEMENT
AND GENERAL RELEASE OF CLAIMS
1. Sallee Peterson ("Employee") hereby resigns from her
employment with Maxtor Corporation ("Maxtor"), and from her position
as an officer of Maxtor, effective November 30, 1994.
2. (a) In exchange for the release of claims set forth below
and upon expiration of the seven (7) day revocation period described
below, Maxtor shall pay to Employee the sum of $113,400.00 (equal to
nine months' salary), less applicable tax withholdings.
(b) After November 30, 1994, Employee will be eligible to
continue her health coverage at her own expense in accordance with
federal law. If Employee continues to use Maxtor's health insurance
program, Maxtor shall promptly reimburse Employee her health
insurance premiums for a period of nine months following November
30, 1994. Employee shall also receive from Maxtor all amounts held
by Maxtor for her in her 401(K) account and all amounts withheld to
date for her account under the MaxPurchase 423 Plan. The amounts
owing under the 401(k) and 423 Plans will be paid to Employee in
accordance with Maxtor's customary policy with respect to employees
who leave the company (i.e., 423 Plan funds are distributed promptly
following the date of resignation and 401(k) funds disbursed within
90 days thereafter). In addition to the foregoing amounts, Employee
will receive payment for her accrued vacation allowance, less
applicable withholdings. Employee shall be entitled to exercise,
for a period of six months after November 30, 1994, all of her
outstanding stock options, as shown on the attached Exhibit A,
whether or not otherwise vested as of November 30, 1994.
(c) Maxtor shall arrange, at no cost to Employee, for
Employee to receive executive outplacement services from the firm of
Drake Beam Morin Inc. for a period of sixty consecutive days.
Employee shall be entitled to use such services during any
consecutive sixty-day period within one year of the date of this
Agreement.
(d) Employee acknowledges that she shall be entitled to no
compensation or benefits from Maxtor other than those expressly set
forth in this Agreement.
3. In exchange for the benefits described in paragraph 2 above,
Employee does hereby for herself and her respective legal successors
and assignees, release and absolutely discharge Maxtor and its
shareholders, directors, employees, agents, attorneys, legal
successors, and assigns of and from any and all claims, actions and
causes of action, whether now known or unknown, suspected, or
unsuspected, which Employee now has, owns or holds, or at any other
time had, owned or held or shall or may have, own, or hold against
Maxtor based upon or arising out of any matter, cause, fact, thing,
act or omission whatsoever occurring or existing at any time to and
including the date hereof, including but not limited to, any claims
of wrongful discharge or age or other discrimination under the Civil
Rights Act, the Americans with Disabilities Act, the Age
Discrimination in Employment Act, the Fair Employment and Housing
Act, or any other applicable law, or any other claims or alleged
claims (all of which are hereinafter included within the "Released
Matters"). As used herein, "Maxtor" includes any and all parents,
divisions or subsidiaries of Maxtor Corporation.
4. Employee acknowledges that she is familiar with Section 1542
of the California Civil Code which states as follows:
A general release does not extend to claims which the
creditor does not know or suspect to exist in her favor at
the time of executing the release, which if known by her
must have materially affected her settlement with the debtor.
Employee hereby waives any right or benefit which she has or may
have under Section 1542 of the California Civil Code to the full
extent that she may lawfully waive such rights and benefits
pertaining to the subject matter of this General Release of Claims
(the "Release"). Employee acknowledges that she may hereafter
discover claims or facts in addition to or different from those that
she now knows or believes to exist with respect to the subject
matter of this Release, and that it is her intention to fully,
finally and forever settle all of the Released Matters in exchange
for the benefits set forth above.
5. Employee acknowledges and agrees that she shall continue to
be bound by and comply with the terms of that certain Employee
Agreement Regarding Confidentiality and inventions between Maxtor
and Employee dated April 20, 1992.
6. Employee agrees that she shall not directly or indirectly
disclose any of the terms of this Agreement to anyone other than her
immediate family or counsel except as such disclosure may be
necessary for accounting or tax reporting purposes or as otherwise
may be required by law.
7. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all
prior negotiations and agreements, with the exception of the
agreement described in paragraph 5. The prevailing party shall be
entitled to recover from the losing party its attorneys' fees and
costs incurred in any lawsuit or other action brought to enforce any
right arising out of this Agreement. This Agreement may not be
altered or amended except by a written document executed by Maxtor
and Employee.
EMPLOYEE UNDERSTANDS THAT SHE SHOULD CONSULT WITH AN ATTORNEY PRIOR
TO SIGNING THIS AGREEMENT AND THAT SHE IS GIVING UP ANY LEGAL CLAIMS
SHE HAS AGAINST MAXTOR BY SIGNING THIS AGREEMENT, THAT SHE MAY
CONSIDER THIS AGREEMENT FOR 21 DAYS AND MAY REVOKE IT AT ANY TIME
DURING THE SEVEN DAYS AFTER SHE SIGNS IT AND THAT IT SHALL NOT
BECOME EFFECTIVE UNTIL THAT SEVEN-DAY PERIOD HAS PASSED. EMPLOYEE
FURTHER ACKNOWLEDGES THAT SHE IS SIGNING THIS AGREEMENT KNOWINGLY,
WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE BENEFITS DESCRIBED IN
PARAGRAPH 2.
Dated: 9/23/94 /s/ Sallee Peterson
--------- -------------------
Sallee Peterson
Dated: 9/23/94 MAXTOR CORPORATION
---------
By:/s/ G. H. Stevens
---------------------
Title: VP, General Counsel & Secretary
The CIT Group/
Business Credit
3rd Floor
300 South Grand Avenue
Los Angeles, CA 90071
Tel: 213 613-2575
Fax: 213 613-2588
October 11, 1994
Maxtor Corporation
211 River Oaks Parkway
San Jose, CA 95134
Ladies and Gentlemen:
Reference is made to the Financing Agreement between us dated
September 16, 1993, as amended from time to time (the "Agreement").
Capitalized terms used herein and not defined herein shall have the
meanings ascribed to such terms in the Agreement.
You have advised us that as of September 24, 1994, Maxtor
Corporation was not in compliance with the Net Worth, Leverage Ratio
and Operating Profit covenants as provided in Section 6 of the
Agreement.
We hereby confirm to you that we hereby waive these violations of
the Agreement for the period ending on the specified date.
In consideration of our agreement to issue the foregoing waivers,
and to compensate us for processing your request for such waivers,
you have agreed to pay us an Accommodation Fee of $75,000.00, which
will be due and payable upon our execution of this letter agreement
and its delivery to you. Payment shall be by means of a charge to
your loan account with us.
This letter agreement shall not constitute a waiver by us of any
other existing defaults under the Agreement, whether or not we have
knowledge of same, and shall not constitute a waiver of any other
defaults whatsoever.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
(as AGENT and LENDER)
By: /s/ Guy K. Fuchs
-----------------
Title: Vice President
TRICON CAPITAL CORPORATION
(Lender)
By: /s/ Jeffrey D. Weiss
---------------------
Title: Vice President
THE BANK OF NEW YORK COMMERCIAL
CORPORATION (Lender)
By: /s/ Robert V. Love
------------------
Title: Assistant Treasurer
Read and Agreed to:
Maxtor Corporation:
By: /s/ Melonie Brophy 10/11/94
-------------------------------
Title: Corporate Treasurer
The CIT Group/
Business Credit
3rd Floor
300 South Grand Avenue
Los Angeles, CA 90071
Tel: 213 613-2575
Fax: 213 613-2588
October 28, 1994
Maxtor Corporation
211 River Oaks Parkway
San Jose, CA 95134
Ladies and Gentlemen:
We refer to the Financing Agreement between us, dated September 16,
1993, as amended from time to time (the "Agreement"). Capitalized
terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
Pursuant to mutual understanding, the Agreement is hereby amended,
effective November 1, 1994, as follows:
1) Section 1 of the Agreement is hereby amended by deleting the
definition of Leverage Ratio in its entirety and substituting the
following in lieu thereof:
"Leverage Ratio shall mean the ratio determined by dividing Total
Liabilities by the sum of i) Net Worth, and ii) Subordinated Debt."
2) Paragraph 9 of Section 6 of the Agreement is hereby amended by
deleting it in its entirety and substituting the following in lieu
thereof:
"9. The Company shall have, on the last day of each fiscal quarter
during the applicable periods below, a Net Worth of not less than:
Fiscal Quarter Ending Net Worth
--------------------- --------------
a) December 24, 1994 $12,000,000.00
b) March 25, 1995 $ 3,000,000.00
c) June 24, 1995 $ 5,000,000.00
d) September 23, 1995 $ 7,000,000.00
e) December 23, 1995 $10,000,000.00
f) March 30, 1996 and for each
fiscal quarter thereafter $15,000,000.00"
3) Paragraph 12 of Section 6 of the Agreement is hereby amended by
deleting it in its entirety and substituting the following in lieu
thereof:
"12. The Company shall have, on the last day of each fiscal quarter
during the applicable periods below, Working Capital of not less
than:
Fiscal Quarter Ending Working Capital
--------------------- ---------------
a) December 24, 1994 $51,000,000.00
b) March 25, 1995 $31,000,000.00
c) June 24, 1995 and for each
fiscal quarter thereafter $25,000,000.00"
4) Paragraph 13 of Section 6 of the Agreement is hereby amended by
deleting it in its entirety and substituting the following in lieu
thereof:
"13. The Company shall have, on the last day of each fiscal
quarter during the applicable periods below, Maximum Working
Capital of not more than:
Fiscal Quarter Ending Maximum Working Capital
--------------------- -----------------------
December 24, 1994 and for each
fiscal quarter thereafter $110,000,000.00"
5) Paragraph 14 of Section 6 of the Agreement is hereby amended by
deleting it in its entirety and substituting the following in lieu
thereof:
"14. The Company shall have, on the last day of each fiscal
quarter during the applicable periods below, a Leverage Ratio of
not more than:
Fiscal Quarter Ending Leverage Ratio
--------------------- --------------
a) December 24, 1994 2.9 to 1
b) March 25, 1995 3.4 to 1
c) June 24, 1995 and for each
fiscal quarter thereafter 3.6 to 1
6) Paragraph 16 of Section 6 of the Agreement is hereby amended by
deleting it in its entirety and substituting the following in lieu
thereof:
"16. The Company shall have, on the last day of each applicable
period below, an Operating Profit of not less than:
Period Operating Profit
-------------------------------- ----------------
a) For the fiscal quarter ending
December 24, 1994 ($41,000,000.00)
b) For the two fiscal quarters
ending March 25, 1995 ($53,000,000.00)
c) For the fiscal quarter ending
June 24, 1995 and for each
fiscal quarter thereafter ($ 5,000,000.00)"
7) Paragraph 1 h) of Section 8 of the Agreement is hereby amended
by deleting it in its entirety and substituting the following in
lieu thereof:
"h) the Company does not have x) an Operating Profit of at least
$(117,000,000) for the fiscal year ended March 25, 1995 and y) an
Operating Profit of at least $10,000,000 for the fiscal year ended
March 30, 1996 and for any fiscal year thereafter, as determined
in accordance with GAAP."
Except as otherwise herein specifically provided, no other change,
amendment or modification in or to any of the other terms or
provisions of the Agreement is hereby intended or implied. If the
foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the enclosed copy of this
letter.
Very truly yours,
THE CIT GROUP/BUSINESS CREDIT, INC.
(as AGENT and LENDER)
By: /s/Guy K. Fuchs 10/31/94
----------------------------
Title: Vice President
TRICON CAPITAL CORPORATION, a unit of
Greyhound Financial Corporation
(Lender)
By: /s/ G. Alexander Cole
----------------------
Title: V.P.
THE BANK OF NEW YORK COMMERCIAL
CORPORATION (Lender)
By: /s/ Robert V. Love
---------------------
Title: Assistant Treasurer
Read and Agreed to:
Maxtor Corporation:
By: /s/ Melonie C. Brophy
----------------------
Title: Corporate Treasurer
The CIT Group/
Business Credit
3rd Floor
300 South Grand Avenue
Los Angeles, CA 90071
Tel: 213 613-2575
Fax: 213 613-2588
October 28, 1994
Maxtor Corporation
211 River Oaks Parkway
San Jose, CA 95134
Dear Ladies and Gentlemen:
We refer to the Financing Agreement, dated September 16, 1993, as
amended from time to time, between you, The CIT Group/Business
Credit, Inc. (herein "CITBC"), as Lender, TriCon Capital
Corporation, a unit of Greyhound Financial Corporation, as
Lender, the Bank of New York Commercial Corp., as Lender and
CITBC as Agent for the Lenders (herein the "Agreement").
Capitalized terms not defined herein are as defined in the
Agreement. Pursuant to mutual agreement, the Agreement is hereby
amended, effective November 1, 1994, as follows:
1. The word "first" in the definition of Early Termination Date
in Section 1 of the Agreement is hereby deleted and the word
"second" is hereby substituted in lieu thereof;
2. The word "first" in the second and fourth lines of the
definition of Early Termination Fee in Section 1 of the Agreement
is hereby deleted and the word "second" is hereby substituted, in
each instance, in lieu thereof;
3. The number "$76,000,000.00" in the definition of Line of
Credit in Section 1 of the Agreement is hereby deleted and the
number "$50,000,000.00" is hereby substituted in lieu thereof;
4. The word "second" in the second line of Section 10 of the
Agreement is hereby deleted and the word "third" is hereby
substituted in lieu thereof, and
5. The word "first" in the tenth line of Section 10 of the
Agreement is hereby deleted and the word "second" is hereby
substituted in lieu thereof.
In consideration of the amendment referred to in paragraph 4
above, the Company hereby agrees to pay a non-refundable fee of
$305,000.00 (the "Extension Fee") which fee shall be charged, as
of November 1, 1994, to the Company's revolving loan account.
If the foregoing is in accordance with your understanding, please
so indicate by signing and returning to us the enclosed copy of
this letter. Each of the Lenders have signed below to indicate
their concurrence with the foregoing.
Very truly yours,
THE CIT GROUP/
BUSINESS CREDIT, INC.
(AS AGENT)
By: /s/ Guy K. Fuchs
----------------------
Title: Vice President
THE CIT GROUP/
BUSINESS CREDIT, INC.
(AS LENDER)
By: /s/ Guy K. Fuchs
----------------------
Title: Vice President
TRICON CAPITAL
CORPORATION, a unit of
Greyhound Financial Corporation
(AS LENDER)
By: /s/ G. Alexander Cole
----------------------
Title: Vice President
THE BANK OF NEW YORK
COMMERCIAL CORPORATION
(AS LENDER)
By: /s/ Robert V. Love
-------------------------
Title: Assistant Treasurer
Read and Agreed to:
Maxtor Corporation:
By: /s/ Melonie Brophy
----------------------
Title: Corporate Treasurer
MAXTOR CORPORATION
EXHIBIT 11.1
COMPUTATION OF NET LOSS PER SHARE
For the Three Months and Six Months Ended
September 24, 1994 and September 25, 1993
(In thousands, except per share data)
Three Months Ended Six Months Ended
- - ----------------------------------------------------------------------------
Sept. 24, Sept. 25, Sept. 24, Sept. 25,
1994 1993 1994 1993
- - ----------------------------------------------------------------------------
PRIMARY & FULLY DILUTED
Weighted average number
of common shares
outstanding during
the period 50,256 29,404 50,091 29,145
---------- ---------- ---------- ----------
Net loss $ (54,717) $ (59,623) $.(66,906) $(131,802)
---------- ---------- ---------- ----------
Net loss per share $ (1.09) $ (2.02) $ (1.34) $ (4.52)
---------- ---------- ---------- ----------
