UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
{X}Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended March 25, 1995
---------------
or
{ }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 77-0123732
- -------------------------------- --------------------
(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)
Registrant's telephone number, including area code: (408) 432-1700
---------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
----------------------------
(Title of class)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
----------
As of June 2, 1995, 32,800,361 shares of the registrant's Common Stock, $.01
par value, and 19,480,000 shares of the registrant's Class A Common Stock,
$.01 par value, were issued and outstanding, respectively. The aggregate
market value of the registrant's voting stock held by nonaffiliates of the
registrant as of June 2, 1995 was $167,229,804, based on the closing price
on NASDAQ National Market System reported for such date.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1995 Annual Meeting of Stockholders
(the Proxy Statement), to be filed within 120 days of the end of the fiscal
year ended March 25, 1995, are incorporated by reference in Part III hereof.
Except with respect to information specifically incorporated by reference in
this Form 10-K, the Proxy is not deemed to be filed as part hereof.
This Annual Report on Form 10-K contains 200 pages of which this is number
1. The Index to Exhibits begins on page 48.
PART I
Item 1. BUSINESS
Maxtor Corporation (Maxtor or the Company) was organized in 1982 and
develops, manufactures and markets mass-storage products for desktop and
mobile computer systems. Products range from 1.8-inch mobile storage
products to 3.5-inch AT drives for the desktop in capacities up to 1.2
gigabytes.
In March 1989, the Company and Kubota Corporation (Kubota) organized a
jointly-owned corporation, Maxoptix Corporation (Maxoptix). On December 26,
1994, the Company entered into an agreement for the sale of the Company's
interest in Maxoptix to Kubota Electronics America Corporation, a Delaware
company, whose ultimate parent is Kubota. Prior to the sale, Maxtor and
Kubota owned 67% and 33% interests in Maxoptix, respectively. The
transaction was completed on February 18, 1995. As consideration for the
sale, Maxtor received $1.5 million in cash and was relieved of certain
liabilities. The Company recorded a gain of approximately $10 million on
the sale.
In November 1994, the Company formed a new wholly-owned subsidiary, IMS
International Manufacturing ServicesTM, Ltd. (IMS), whose primary business
is contract manufacturing for electronic original equipment manufacturers
(OEMs). The Company's printed circuit board (PCB) assembly plant in Hong
Kong formed the foundation of the subsidiary, and a second plant was added
in Thailand in May 1995. IMS will not only supply the Company, but a
variety of customers, with PCB assemblies, sub-assemblies and fully
integrated box-build products.
In January 1995, the Company announced it had signed a memorandum of
understanding for creation of a manufacturing partnership with Hyundai
Electronics Industries Co., Ltd. (HEI). In May 1995, the Company entered
into a definitive agreement with HEI. Under the terms of the agreement, HEI
will manufacture Maxtor-designed hard disk drives for the Company. The two
companies plan to begin production at a Korean manufacturing site during
summer 1995. The additional manufacturing capacity provided by HEI is
intended to supplement current production capacity at the Company's
manufacturing plant in Singapore without any capital expenditure on Maxtor's
part. The two companies intend to participate in an ongoing exchange of
technology to enable HEI to assume a leadership role in disk drive
manufacturing and to enable Maxtor to obtain high-quality, low-cost
manufacturing capacity. As of June 22, 1995, no compensation has been paid
by the Company to HEI under this agreement.
PRODUCTS
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 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
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. 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. 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.
Desktop Personal Computer Products
The 7000 SeriesTM of 3.5-inch disk drives addresses the demand for
desktop personal computer (PC) disk drives and presently include a broad
range of capacity points from 270 megabytes (MBs) to 1.2 gigabytes (GBs).
Current product offerings primarily consist of products which were
introduced during fiscal year 1995.
The value line of 7000 Series 3.5-inch drives were announced initially in
the second quarter of fiscal year 1995 and were designed to meet the needs
of the highly price-sensitive entry level to mid-range desktop PC market.
Initial offerings included the 540MB 7540AV and the 270MB 7270AV. The
drives are ATA/IDE interface compatible and use the same technological
platform of the Company's previous generation of 7000 Series drives, but
were developed on a new, lower-cost electronics architecture.
In the fourth quarter of fiscal year 1995, the Company began shipping an
extension to its 7000 Series, the Excalibur Family of products, which are
intended to address the high-end PC market's storage-intensive applications,
such as CAD/CAE and multimedia. The 1.2 GB Excalibur 71260A and 1.0GB
Excalibur 71050A disk drives feature both enhanced IDE and SCSI interfaces,
allowing the Company's 7000 Series value line to be used in both ATA and
SCSI-based high-end systems. The design for these products adds a third
disk to the design of the 7000 Series platform and feature 429 MBs per disk.
Also in the fourth quarter of fiscal year 1995, the Company added the
850MB 7850AV and the 425MB 7425AV disk drives, two new capacity points in
the Company's 7000 Series value line of 3.5-inch disk drives. The 7850AV
combines the low-cost electronics architecture of previously introduced 7000
Series value line of drives with the integrated heads, disks and channel
technology developed for the high-end Excalibur 71260A and 71050A products.
In May 1995, the Company announced a further addition to the 7000 Series
of 3.5-inch disk drives. The DurangoTM Family of products is available in
capacities of 541MBs, 1.0GBs and 1.6GBs. This family of products offers ATA
disk areal density of 400 M/bits per square inch through a refinement of
thin film head technology referred to as proximity recording, which reduces
head flying height and improves head/media interface signal quality. The
1.6GB drive in particular is intended to meet the increasing storage demands
of power-users to fully utilize Internet services and operate storage-
intensive multimedia applications. The Company expects to commence volume
production of this family of products by the end of the first quarter of
fiscal year 1996. Should there be a delay in commencing volume production,
a subsequent inability to grow production volumes during fiscal year 1996 or
an inability to manufacture the products with competitive costs and quality
standards, the Company's results of operations would be adversely affected.
Mobile Computing Products
The MobileMaxTM Family of products is a line of data storage products
intended to address the needs of the emerging mobile computing market and
includes the 1.8-inch MobileMax Hard Drives, 1.8-inch MobileMax Lite Hard
Drives, MobileMax Flash Memory Cards, and the MobileMax DeskRunnerTM. The
growth of this product line has been primarily dependent on the growth of
the emerging mobile computing market. The market has been significantly
slower to develop than anticipated and the revenue generated by this family
of products has been less than anticipated. During the fourth quarter of
fiscal year 1995, the Company decided to curtail its research and
development efforts related to this particular product family in favor of
mainstream disk drive products with stronger market and revenue potential.
MARKETING AND CUSTOMERS
The Company markets and sells its products through a direct sales force
to original equipment manufacturers (OEMs), distributors and other emerging
sales channels such as computer specialty retailers and computer
superstores. As the market for Maxtor's products has become increasingly
segmented, diverse sales channels have developed for different products.
As a result of volatile business conditions in the personal computer (PC)
industry, including the trend toward consolidation among PC manufacturers,
sales to OEMs have become increasingly important to the success of the disk
drive industry participants. During the third and fourth quarters of fiscal
year 1995, the Company's OEM revenue increased to more than 50 percent of
total revenue. The Company attributes this growth in part to the Company's
value line 3.5-inch 7000 Series drives which were designed to meet the
performance and price requirements of the desktop PC market. Although the
Company intends to continue in its efforts to increase its share of the OEM
market for disk drives, particularly in the marketing of its new products,
there can be no assurance that the Company will be successful in such
efforts.
Although there was an increase in OEM revenue during the latter half of
fiscal year 1995, as mentioned above, the Company continues to be heavily
dependent on the distribution channel. The Company expanded its share of
the traditional commercial distribution and consumer retail markets during
fiscal year 1995. In particular, the Company signed six new major U.S.
retailers during the year, increasing the total number of U.S. retail
outlets carrying the Company's products to over 2,000 outlets. The Company
currently sells its retail-packaged products directly and through
distributors to major retail computer dealers, superstores, warehouse clubs,
aggregators and mass merchants nationwide. The Company believes that
distributors and retailers are important in supporting a large aftermarket,
and that the market for replacement drives in particular should result in
the growth of retail sales. Sales to distributors and retailers accounted
for approximately one-half of total revenue in fiscal years 1995 and 1994.
The Company's dependence on distributors and retailers is greater than most
other disk drive producers. This dependence subjects the Company to certain
pricing pressures and other factors unique to distribution, including
historically higher levels of product returns compared to the levels of
returns experienced with OEM customers.
During fiscal year 1995, no customer accounted for more than 10% of the
Company's revenue. During fiscal years 1994 and 1993, sales to
International Business Machines, Inc. (IBM) accounted for approximately 24%
and 14% of the Company's revenue, respectively.
As of June 2, 1995, the Company has 31 direct sales persons located in
ten offices in the United States, 14 direct sales persons in the Far East
located in six offices, and 11 direct sales persons in Europe located in
three offices. The Company's export sales represented 48%, 43% and 50% of
total revenue in fiscal years 1995, 1994 and 1993, respectively.
Approximately 38%, 35% and 57% of export sales were to the Far East in
fiscal years 1995, 1994 and 1993, respectively. The balance of export sales
was primarily to Europe in each of the three fiscal years.
For financial data relating to major customers and geographic information
refer to Part II, Item 8, Footnote 4 on page 30.
MANUFACTURING AND SUPPLIERS
The Company has sought to maintain the flexibility necessary to
accommodate the continuous changes in product mix and volume requirements
resulting from the short product life cycles characteristic of the disk
drive industry through a relatively low level of vertical integration and
utilizing capital equipment for the manufacture of multiple product lines.
The Company's disk drive manufacturing operations consist primarily of
the final assembly of high-level subassemblies and testing of completed
products. The Company manufactures all magnetic disk drive products in
volume production at its manufacturing facility located in Singapore and
conducts all PCB assembly in its facility in Hong Kong. As discussed
earlier, the Company added a plant in Thailand in May 1995 to support the
contract manufacturing activities of IMS. The Company recently entered into
a manufacturing partnership with HEI under which HEI will manufacture Maxtor-
designed hard disk drives for the Company at a Korean manufacturing site.
Initial production is expected to commence during summer 1995. The
additional manufacturing capacity provided by this HEI-owned facility
located in Korea is intended to supplement the current production capacity
at the Company's manufacturing plant in Singapore without any capital
expenditure on Maxtor's part. In addition to risks typically associated
with the concentration of vital operations, foreign manufacturing is subject
to additional risks, including changes in governmental policies,
transportation delays and interruptions, and the impositions of tariffs and
export controls. A disruption of manufacturing operations at the Company's
facilities could have an adverse effect on the Company's results of
operations and customer relations.
Pilot production of the Company's products, and cost reduction, quality
and product improvement engineering on current products are conducted in the
Company's Longmont, Colorado facilities. When a new product or a design
change to a current product is ready for volume production, it is
transferred from the Longmont, Colorado facilities to the Company's Far East
manufacturing facilities.
Since the Company's manufacturing operations consist primarily of the
final assembly of subassemblies, the quality and yield of the Company's
products are highly dependent on the Company's ability to obtain large
volumes of high-quality components and sub-assemblies. In the past, the
Company's operating results have been adversely affected by higher costs
relative to its competitors, production delays and quality problems
resulting from its inability to obtain certain key components and by the
failure of certain components to meet requisite quality standards. In the
first quarter of fiscal year 1995, in particular, the Company's revenue
declined primarily as a result of a shortage of a key component for the
Company's 7000 Series product line supplied by a sole source vendor who was
experiencing production problems. There can be no assurance that the
Company will not experience similar problems in the future.
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. The Company periodically receives communications from
vendors that they may be unable to supply required volumes of certain key
components. With the expansion of production experienced by the disk drive
industry during fiscal year 1995, shortages of certain key components for
the disk drive industry have increased. The Company has experienced
shortages during fiscal year 1995 and the Company expects it is likely that
industry shortages and cost increases of key components will 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.
In addition, there can be no assurance that the Company's operating results
or customer relationships will not be adversely affected by production
delays, including delays in bringing new products into volume production in
a timely manner, resulting from an interruption or reduction in its supply
of any key components, excessive rework costs associated with defective or
substandard components, or its inability to obtain continued reduction of
component costs.
RESEARCH AND DEVELOPMENT
As previously mentioned, the Company participates in an industry that is
characterized by rapid technological change and short product life cycles.
The Company's ability to compete effectively will depend on, among other
things, its ability to anticipate such change. To compete effectively, the
Company has and will continue to devote substantial resources to developing
high-quality products which address the needs of expanding segments of the
disk drive market and which can be produced in volume on a cost effective
basis.
The Company has focused its efforts on developing products that
incorporate components which may be shared by a broad range of products,
thereby reducing the time to develop a product and the cost of components.
The Company believes that the integration of low-cost manufacturing design
into the development of a broad range of the Company's products, combined
with its ability to utilize common platforms and electronics within product
families will enable the Company to compete more effectively.
The Company believes that success in developing smaller form factors,
increasing storage capacities, increasing performance and lowering cost
depends in part on developing and incorporating new data storage
technologies into the Company's products. While the Company believes that
it needs to utilize new technologies in order to achieve technology and
product leadership, to the extent that such development efforts result in
more advanced technology and components, it may be more difficult to
transition disk drives to volume manufacturing or to obtain acceptable
production yields.
In connection with the Company's restructuring plan initiated in the
fourth quarter of fiscal year 1994, the Company consolidated its research
and development (R&D) activities in Longmont, Colorado, which 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 expenses declined in
fiscal year 1995 as compared to fiscal year 1994 as a result of these
actions. In fiscal years 1995, 1994 and 1993, respectively, the Company's
R&D expenses amounted to $60.8 million, $97.2 million and $112.6 million,
respectively. In order to effectively implement its product strategy, the
Company intends to continue to make significant investments in R&D. R&D
spending in absolute dollars is expected to increase in fiscal year 1996
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 success. Although the
Company has no technology purchases currently planned, R&D expenses may
fluctuate in the future resulting from the cost of acquiring rights to new
technologies.
COMPETITION
The disk drive industry is intensely competitive and 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. The principal competitive
factors in the disk drive industry include time-to-volume production, price,
customer service, storage capacity, quality and performance. In addition,
smaller form factors, height, power consumption, ruggedness and interfaces
are important competitive factors. Many of the Company's competitors have
greater financial, marketing and technological resources than the Company
and there can be no assurance that the Company will be able to compete
effectively. In particular, most of the Company's competitors have
significantly higher cash reserves than the Company which may enable them to
better withstand the competitive factors inherent in the disk drive
industry.
Shorter product life cycles increase the importance of the Company's
ability to successfully manage product transitions. 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 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 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.
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 generally 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.
The Company presently competes primarily with independent manufacturers
of 3.5-inch disk drives, including companies such as Conner Peripherals,
Quantum, Seagate Technology and Western Digital. The Company also competes
directly and indirectly with disk drive divisions of large computer
manufacturers such as Fujitsu, Hewlett-Packard, Hitachi, NEC, Toshiba and
IBM. Should other major OEMs develop disk drive manufacturing capabilities,
the demand for the Company's products could be reduced.
BACKLOG
The Company's sales are primarily made for delivery of standard products
according to standard purchase orders. Delivery dates are specified by
purchase orders, such orders may be subject to change or cancellation by the
customer without significant penalties. The quantity actually purchased, as
well as the shipment schedules, therefore, are frequently revised to reflect
changes in the customer's needs. At times when price competition is intense
and price moves are frequent, the Company believes that most customers may
place purchase orders below their projected needs, or delay placing or even
cancel purchase orders with the expectation that future price reductions may
occur. Conversely, at times when industry-wide production is believed to be
insufficient to meet demand, the Company believes that certain customers may
place purchase orders beyond their projected needs in order to maintain a
greater portion of product allocation. In light of these factors, backlog as
of any particular date may not be indicative of the Company's actual
revenues for any succeeding period, and, therefore, are not material to an
evaluation of the Company's future revenue.
PATENTS AND LICENSES
The Company has been granted approximately 85 U.S. and foreign patents
related to disk drive products and technology. The Company has additional
patents pending in the United States and foreign countries. The Company has
entered into cross-license agreements with certain of its competitors and
has discussed entering into cross-licenses with others.
As in other sectors of the electronics industry, the disk drive industry
has been characterized by significant litigation relating to patent and
other intellectual property rights. Many patents have been issued in the
United States and foreign countries covering disk drive products and their
manufacture. These patents have been issued both to competitors of the
Company and to parties who are not disk drive vendors. The Company has
received notices from competitors and other patent holders claiming
infringement by the Company and litigation has been commenced related to one
such claim, made by Rodime plc (Rodime) and described below. There can be
no assurance that other litigation will not be commenced based upon such
claims or that additional claims of patent infringement will not be made
against the Company in the future, nor can there be any assurance that the
Company would be able to obtain a license under the patents asserted or that
any such license, if available, would be offered on terms acceptable to the
Company. Adverse resolution of litigation based upon claims of patent
infringement could subject the Company to substantial liabilities and
require the Company to refrain from manufacturing or selling certain of its
products in the country where the patents were issued.
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, a United Kingdom company, 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. See Legal Proceedings.
WARRANTY AND SERVICE
The Company currently warrants its products against defects in parts and
labor for varying periods from the date of shipment with an additional 3
months allowed for distributors to account for "shelf life". The 7000
Series of disk drives are warranted for a period of 12 or 24 months after
shipment depending on the product. MobileMax disk drives are warranted for
a period of 12 months after shipment.
Products are generally repaired or refurbished by the Company's Singapore
facility. The Company operates a European drive exchange center in Ireland,
a domestic drive exchange center in San Jose, California and an Asian drive
exchange center in Singapore.
EMPLOYEES
As of June 2, 1995, the Company had approximately 7,130 employees, of
whom approximately 1,190 were located in the United States, 70 in Europe and
5,870 in the Far East. Of the employees, approximately 6,130 were engaged
in manufacturing and quality assurance and 605 in research and development.
The Company believes that its future success will depend on its ability
to continue to attract and retain a team of highly motivated and skilled
individuals. None of the Company's employees are represented by a labor
organization. The Company believes that its employee relations are
positive.
EXECUTIVE OFFICERS
The following table lists the executive officers of the Company and their
ages as of June 2, 1995. There are no family relationships between any
director or executive officer of the Company. Executive officers serve at
the discretion of the Board of Directors.
Name Age Position with the Company
- ------------------------ --- ---------------------------------------------
Mong Hun Chung 46 Chairman of the Board
Dr. Chong Sup Park 47 President, Chief Executive Officer
and Director
Dr. Richard D. Balanson 46 Executive Vice President, Chief Technical
Officer and Director
Gary Galusha 50 Senior Vice President, Marketing and
Strategic Accounts
Katherine Curtin Young 55 Senior Vice President, Worldwide
Operations
Robert G. Behlman 51 President and Chief Executive Officer, IMS
International Manufacturing Services, Ltd.
Nathan Kawaye 42 Vice President, Finance, Corporate
Controller and Chief Accounting Officer
William M. Hake 42 Vice President, Worldwide Sales and Product
Line Management
Glenn H. Stevens 44 Vice President, General Counsel and
Secretary
Dr. Kimberly Cuff 36 Vice President, Human Resources
Nelson Diaz 45 Vice President, Quality
Mong Hun Chung was elected Chairman of the Board in February 1994. Mr.
Chung has been Chairman of the Board of Directors of Hyundai Electronics
Industries Co., Ltd. in Korea since January 1992. He was President of
Hyundai Electronics Industries Co., Ltd. in Korea from February 1984 to
December 1991. Currently, Mr. Chung is also Vice Chairman of Hyundai
Merchant Marine Co., Ltd. and holds directorship positions on the boards of
other Hyundai Business Group companies.
C.S. Park was elected President and Chief Executive Officer of Maxtor in
February 1995. Previously, Dr. Park was President and Chief Executive
Officer at Axil Computer, Inc., a workstation computer manufacturer, in San
Jose, He also held various management positions with Hyundai Electronics
Industries Co., Ltd., including the position of Senior Vice President,
Semiconductor Sales and Marketing, which he held from 1990 to 1992. From
1985 to 1989, Dr. Park was President and Chief Executive Officer of Hyundai
Electronics America.
Richard D. Balanson was elected a director of Maxtor in October 1994.
Dr. Balanson was appointed Executive Vice President and Chief Technical
Officer in October 1994. He joined Maxtor in August 1994 as Vice President
and Chief Technical Officer. Prior to joining Maxtor, Dr. Balanson was
President and Chief Operating Officer of Applied Magnetics Corporation from
1992 to 1994. From 1975 until 1992, he served in several managerial
positions with International Business Machines Corporation ("IBM"), where
his last position included the management of IBM's mid-range and high-end
disk drive development and manufacturing groups.
Gary Galusha joined the Company as Vice President, North American Sales
in July 1990 and served as Vice President, Worldwide Sales from January 1991
to January 1995, at which time he was named Senior Vice President, Marketing
and Strategic Accounts. Prior to joining the Company, Mr. Galusha served as
the vice president of U.S. and European sales and other positions, including
service as an officer, at MiniScribe from October 1986 until July 1990, at
which time Maxtor purchased the assets of MiniScribe subsequent to
MiniScribe's bankruptcy filing.
Katherine Curtin Young joined the Company as Senior Vice President of
Worldwide Materials in August 1994 and was promoted to Senior Vice
President, Worldwide Operations in January 1995. From February 1993 to July
1994, Ms. Young was president of worldwide supplier management at AST
Research Inc., a supplier of desktop, file server and notebook computers.
From September 1988 to January 1993, Ms. Young served as vice president,
corporate materials at Conner Peripherals, a disk drive manufacturer.
Robert G. Behlman joined the Company in November 1994 as President and
Chief Executive Officer of IMS. From May 1994 to October 1994, Mr. Behlman
had a private consulting business. From September 1992 to April 1994, Mr.
Behlman was chief operating officer at Sanmina Corp., an integrated contract
manufacturer. From August 1988 to August 1992, Mr. Behlman held various
executive management positions in marketing and operations at SCI Systems, a
contract manufacturer.
Nathan Kawaye joined the Company as Vice President, Finance and Financial
Planning & Analysis in November 1991. In October 1994, Mr. Kawaye was
appointed Vice President, Finance and Corporate Controller. In April 1995,
Mr. Kawaye was named Vice President, Finance, Corporate Controller and Chief
Accounting Officer. Prior to joining the Company, he served as vice
president, finance & administration and chief financial officer of Sigma
Circuits Incorporated, a printed circuit board manufacturer, from May 1989
to October 1991.
William M. Hake joined the Company as Vice President, Product Management
in July 1990. In January 1995, Mr. Hake was named Vice President, Worldwide
Sales and Product Line Management. From May 1989 to June 1990, Mr. Hake
served as the vice president of sales and marketing at MiniScribe. From July
1985 to July 1990, Mr. Hake held various sales, marketing and product
management positions, including service as an officer, at MiniScribe until
July 1990, at which time Maxtor purchased the assets of MiniScribe
subsequent to MiniScribe's bankruptcy filing.
Glenn H. Stevens joined the Company as Vice President, General Counsel
and Secretary in June 1994. From August 1992 to May 1994, Mr. Stevens had a
private law practice. From 1979 to August 1992, he held various legal
positions at U S West, Inc., a telecommunications products and services
provider, including chief counsel and secretary for its research and
development organization and chief intellectual property counsel for the
family of U S West companies.
Dr. Kimberly Cuff joined the Company as Vice President, Human Resources
in March 1995. From June 1985 to February 1995, Dr. Cuff held various
positions at Western Digital Corporation, a disk drive manufacturer, most
recently as director of human resources.
Nelson Diaz joined the Company as Vice President, Quality in March 1995.
From October 1976 to February 1995, Mr. Diaz held various positions at
Digital Equipment Corporation (DEC), a personal computer and information
systems supplier, including engineering, manufacturing and quality
management positions; his most recent position was division quality manager
of DEC's components division.
INDUSTRY SEGMENTS, FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES, AND
FINANCIAL INFORMATION
The Company operates in a single industry segment: the development,
manufacture and marketing of data storage products for desktop and mobile
computer systems. It has a worldwide sales, service and distribution
network. The Company markets and sells its products through a direct sales
force to OEMs, distributors and other emerging sales channels. For financial
information relating to foreign and domestic operations and export sales
refer to Part II, Item 8, Footnote 4, on page 30.
Item 2. PROPERTIES
The Company's administrative offices are located in San Jose, California
and its research and development facilities are located in Longmont,
Colorado. These facilities are leased. The Company's manufacturing
facilities include a disk drive manufacturing facility in Singapore and a
PCB assembly facility in Hong Kong. In May 1995, another facility was added
in Thailand to support the contract manufacturing activities of IMS. The
Company owns and occupies a 384,000 square-foot building in Singapore which
is situated on land leased through the year 2016 (subject to an option to
renew for an additional 30 years). All other facilities located in
Singapore, Hong Kong and Thailand are leased.
All of the Company's facilities are well maintained, suitable for the
advanced technological products and services of the Company. The Company
believes that its current facilities are sufficient to meet its expected
requirements.
Item 3. 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,
results of operations or cash flows.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of its fiscal year ended March 25, 1995.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Maxtor has two classes of stock issued and outstanding: common stock,
with a $.01 par value; and Class A common stock, also with a $.01 par value.
Maxtor common stock is designated on the National Market System of NASDAQ
under the symbol MXTR. There is no established public trading market for
Class A common stock.
As of June 2, 1995, Maxtor had 1,823 holders of record of common stock
and 4 holders of record of Class A common stock.
For the range of high and low closing prices in the National Market
System of NASDAQ for the fiscal quarters of the two most recent fiscal years
ended March 25, 1995 and March 26, 1994, refer to Part II, Item 6, Selected
Financial Information, on page 11
For the dividend policy of the Company, refer to Part II, Item 7,
Dividend Policy, on page 21.
Item 6. SELECTED FINANCIAL INFORMATION (In thousands, except per share
amounts)
<TABLE>
- -----------------------------------------------------------------------------
ANNUAL
- -----------------------------------------------------------------------------
<CAPTION>
Fiscal year March 25, March 26, March 27, March 28, March 30,
ended 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
Revenue $ 906,799 $1,152,615 $1,442,546 $1,037,481 $ 871,305
Income (loss)
from operations (76,026) (247,921) 53,968 12,304 (49,077)
Net income (loss) (82,222) (257,589) 46,112 7,149 (45,429)
Net income (loss)
per share:
- primary (1.63) (8.00) 1.46 0.27 (1.89)
- fully diluted (1.63) (8.00) 1.46 0.24 (1.89)
Total assets 381,847 492,375 579,113 445,182 453,856
Long-term debt and
capital lease
obligations due
after one year 101,967 107,393 119,868 110,744 128,066
Minority interest - - - 1,023 8,201
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
QUARTERLY (Unaudited)
- -----------------------------------------------------------------------------
<CAPTION>
Fiscal quarter March 25, Dec. 24, Sept. 24, June 25,
ended 1995 <F3> 1994 1994 1994
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
Revenue $ 275,947 $ 238,174 $ 174,368 $ 218,310
Gross margin 27,474 21,328 (16,696) 24,024
Net income (loss) 1,119 (16,435) (54,717) (12,189)
Net income (loss)
per share <F1> 0.02 (0.32) (1.09) (0.24)
Price range per
common share <F2> $6.3125-$4.0625 $5.75-$3.25 $5.50-$4.3125 $7.875-$4.6875
- ------------------------------------------------ ----------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------
<CAPTION>
Fiscal quarter March 26, Dec. 25, Sept. 25, June 26,
ended 1994 1993 1993 1993
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
Revenue $ 260,397 $ 318,098 $ 313,546 $ 260,574
Gross margin 29,696 (53,633) (10,453) (18,009)
Net loss (4,482) (121,305) (59,623) (72,179)
Net loss per
share <F1> (0.11) (4.12) (2.02) (2.50)
Price range per
common share <F2>$5.4375-$8.3125 $4.625-$6.75 $4.50-$6.6875 $6.0625-$8.0625
- -----------------------------------------------------------------------------
<FN>
<F1> Primary net income (loss) per share is the same as fully diluted net
income (loss) per share.
<F2> Price range is based on the quarterly high and low closing prices as
quoted from NASDAQ.
<F3> Net income included non-recurring income of approximately $10.2 million
primarily related to the gain on the sale of the Company's interest in
Maxoptix Corporation.
</FN>
</TABLE>
Item 7. 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.
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.
During most of fiscal year 1994, the disk drive industry experienced intense
price competition and excess industry capacity, which resulted in lower
revenue for the Company. This, coupled with the Company's decision in the
latter half of fiscal year 1994 to discontinue certain unprofitable
products, resulted in a decline in revenue from $1.4 billion for fiscal year
1993 to $1.2 billion for fiscal year 1994. Although competitive pricing
pressures continued during fiscal year 1995, general industry conditions
improved. However, the Company's fiscal year 1995 revenue continued to
decline to approximately $907 million as a result of a number of factors.
In the first quarter of fiscal year 1995 revenue declined primarily as a
result of a shortage of a key component for the Company's 7000 SeriesTM
product line supplied by a sole source vendor who was experiencing
production problems. During the second quarter, revenue continued to
decline 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 while the industry began transitioning to new, higher-
capacity products. As the year progressed, revenue increased in the third
and fourth fiscal quarters as a result of an improvement in product mix to
the Company's newer, higher-capacity products, as well as a substantial
increase in unit volumes. During the fourth quarter, however, pricing
pressures intensified for certain products and in certain markets,
offsetting in part the favorable impact of product mix and unit volume
growth. Although the Company expects that price erosion for certain
products will continue during fiscal year 1996 at a level near or below the
erosion experienced in the fourth quarter of fiscal year 1995, there can be
no assurance that price erosion will not increase substantially.
The Company incurred quarterly losses in each of the quarters of fiscal year
1994 and through the third quarter of fiscal year 1995. Such losses through
the third quarter of fiscal year 1994 were primarily the result of intense
price competition and excess industry capacity, as mentioned above, and the
Company's inability to bring certain products to market in a timely and cost
effective manner. The Company began to experience an increase in demand
during the third quarter of fiscal year 1994, with most products in short
supply and price reductions easing. Although general industry conditions
began to improve during that quarter and continued through fiscal year 1995,
the Company continued to incur losses. The Company's losses were due, in
part, to continuing cost and time-to-market issues with regard to its new
products, including the high start-up costs associated with developing and
commencing volume production on the 1.8-inch form factor products. In
addition, during fiscal year 1995, 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 mentioned
earlier. This shift in market demand created additional pricing pressures
on the Company's lower-capacity products.
Although most of the Company's competitors were profitable during the latter
half of fiscal year 1994 and through fiscal year 1995, the Company was not
profitable until the fourth quarter of fiscal year 1995. The Company's net
income of approximately $1.1 million for the fourth quarter of fiscal year
1995 included non-recurring income of approximately $10.2 million primarily
related to the gain on the sale of the Company's interest in Maxoptix
Corporation (Maxoptix). Given the uncertainties confronting the Company,
including pricing pressures and other competitive factors, component
availability, cost and time-to-market issues with regard to its new
products, and general industry conditions, the Company does not expect to be
profitable during the first quarter of fiscal year 1996 and the Company
cannot provide any assurance as to its profitability during fiscal year
1996.
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 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
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. 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. 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 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 generally 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. Many of the Company's competitors have greater financial and
other resources and broader product lines than the Company with which to
compete in this environment. Due to the narrowness of the Company's product
offerings relative to its competition, any delay in bringing a product to
market will have a more significant adverse effect on the Company's results
of operations than a similar delay would have on its competitors' results of
operations.
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 the
OEM market, there can be no assurance that the Company will be successful in
such efforts. Although there was a substantial increase in OEM revenue
during the latter half of fiscal year 1995 compared to the first half, the
Company continues to be heavily dependent on the distribution channel, which
subjects the Company to certain pricing pressures and other factors unique
to that channel, including historically higher levels of product returns
compared to the levels of returns experienced with OEM customers.
The quality and yield of the Company's products is highly dependent on the
Company's ability to obtain high-quality components and sub-assemblies, and
its internal manufacturing processes. In the past, the Company's operating
results have been affected by production delays and quality problems
resulting from its inability to obtain certain key components and by the
failure of certain components to meet requisite quality standards. However,
the Company has implemented a number of programs to improve the quality of
its key components and subassemblies, and its internal manufacturing
processes. As a result of these efforts, the Company has made significant
strides in improving the quality of its products. The Company believes that
it must continue to focus on product quality to improve its competitive
position in the disk drive industry.
The Company's manufacturing process requires large volumes of high-quality
and low-cost 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. 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 fiscal year 1995, shortages of certain key components for
the disk drive industry have increased, the Company has experienced
shortages during fiscal year 1995, and the Company expects that industry
shortages and increased costs of key components will continue into future
quarters. The Company will continue to aggressively work with its vendor
base to minimize its component supply 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 needs for required
volumes of high-quality components in a timely and cost effective manner.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
- ----------------------------------------------------------------------
(In millions) March 25, March 26,
Fiscal year ended 1995 1994 Change
- ----------------------------------------------------------------------
Revenue $ 906.8 $ 1,152.6 $ (245.8)
Gross margin $ 56.1 $ (52.4) $ 108.5
As a percentage of revenue 6.2% (4.5%)
Net loss $ (82.2) $ (257.6) $ 175.4
As a percentage of revenue (9.1%) (22.3%)
Net loss per share $ (1.63) $ (8.00) $ 6.37
- ----------------------------------------------------------------------
Revenue
Revenue for fiscal year 1995 decreased by 21.3% from the prior fiscal year
generally as a result of competitive pricing pressures, offset in part by an
increase in unit volumes and a shift in product mix to higher-capacity
product offerings. Average unit selling prices, in terms of megabyte per
dollar, dropped substantially during fiscal year 1995. The rate of
sequential quarter-to-quarter decline in average unit selling prices ranged
from approximately 15% - 20% for the first two quarters of fiscal year 1995,
to less than 10% for the third quarter of fiscal year 1995, and intensified
again during the fourth quarter of fiscal year 1995 to approximately 15%.
Unit volumes increased modestly during fiscal year 1995 with the most
significant growth occurring during the second half of the fiscal year.
Quarterly revenue declined during the first quarter of fiscal year 1995 from
the previous quarter as a result of the significant shortage in required
volumes of a key component described earlier and also as a result of the
Company's decision in the latter half of fiscal year 1994 to discontinue
certain unprofitable products. Quarterly revenue continued to decline
during the second quarter of fiscal year 1995 as the disk drive industry was
transitioning to new, higher-capacity products while the Company was
shipping the lower-capacity products nearing end-of-life which were delayed
by the component shortage. During the third quarter of fiscal year 1995
revenue increased over the second quarter of fiscal year 1995 as a result of
a reduction in the rate of decline of average unit selling prices, a 30%
increase in unit volumes and an improvement in product mix. The increase in
quarterly revenue continued for the fourth quarter of fiscal year 1995 as a
result of continued improvement in product mix coupled with an increase in
unit volumes of nearly 25% over the previous quarter, offset in part by
intensified pricing pressures on certain products.
During fiscal year 1995, the Company did not have any customer which
accounted for 10% or greater of the Company's revenue. During fiscal year
1994, the Company had one customer which accounted for approximately 24% of
the Company's revenue.
Gross margin
Gross margin as a percentage of revenue increased to 6.2% for fiscal year
1995 from (4.5%) for fiscal year 1994. During fiscal year 1994, the Company
recorded special charges amounting to $68.9 million in Cost of Revenue
consisting of estimated costs associated with the termination of certain
products, a reduction in manufacturing capacity, write downs of inventory
and equipment that were no longer productive, and related future commitments
to third parties. Excluding the special charges of $68.9 million, gross
margin for fiscal year 1994 was 1.4%.
The increase in gross margin for fiscal year 1995 as compared to the prior
fiscal year, excluding special charges of $68.9 million, was primarily
attributable to a shift in product mix to higher-capacity, higher-margin
products and a modest increase in unit volume, offset in part by competitive
pricing pressures. The increase in gross margin also is the result of the
Company's decision in the third quarter of the prior fiscal year to
discontinue certain unprofitable products.
During the first half of fiscal year 1995, product mix was primarily
comprised of the Company's older, lower-capacity products which were nearing
end-of-life and generally contributing at a zero gross margin. The
Company's product mix for the second half of fiscal year 1995 primarily was
comprised of its value-line 7000 Series one-inch drives which were developed
on a lower-cost platform and, to a lesser extent, the new, higher-capacity,
higher-margin, 850 megabyte - 1.2 gigabyte drives shipped in volume during
the fourth quarter. In part offsetting the improvement in gross margin, the
Company recorded a charge of $6.4 million to Cost of Revenue during the
fourth quarter of fiscal year 1995 for the write down of inventory and fixed
assets, and expensing certain commitments to third parties associated with
the Company's 1.8-inch product line. The charge resulted from the Company's
decision during the fourth quarter of fiscal year 1995 to discontinue
manufacturing and curtail development efforts related to this particular
product line in favor of mainstream disk drive products with stronger market
and revenue potential.
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 1996.
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, there can be no assurance that the Company will be
able to sustain its current gross margin.
Operating expenses
- -------------------------------------------------------------------------
(In millions) March 25, March 26,
Fiscal year ended 1995 1994 Change
- -------------------------------------------------------------------------
Research and development $ 60.8 $ 97.2 $ (36.4)
As a percentage of revenue 6.7% 8.4%
Selling, general and administrative $ 81.6 $ 78.9 $ 2.7
As a percentage of revenue 9.0% 6.8%
Restructuring and other $ (10.2) $ 19.5 $ (29.7)
As a percentage of revenue (1.1%) 1.7%
- -------------------------------------------------------------------------
Research and development (R&D)
R&D expenses decreased from 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 fiscal year
1996 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. Although the
Company has no technology purchases currently planned, R&D expenses may
fluctuate in the future resulting from the cost of acquiring rights to new
technologies.
Selling, general and administrative (SG&A)
SG&A expenses increased as a percentage of revenue in fiscal year 1995
compared to the prior fiscal year primarily due to the decline in the
revenue base. SG&A spending in absolute dollars increased modestly as a
result of higher advertising costs and an increase in bad debt expense,
offset in part by lower general and administrative costs, particularly
headcount related, as a result of the Company's restructuring plan initiated
during fiscal year 1994. The Company has ongoing efforts to control costs
and expenditures and reduce SG&A expenses in future quarters, however, there
can be no assurance that the Company will be successful in such efforts.
Restructuring and other
During the third quarter of fiscal year 1995 the Company entered into an
agreement for the sale of the Company's interest in Maxoptix to Kubota
Electronics America Corporation, a Delaware company, whose ultimate parent
is Kubota Corporation (Kubota). Prior to the sale, Maxtor and Kubota owned
67% and 33% interests in Maxoptix, respectively. The transaction was
completed during the fourth quarter of fiscal year 1995. As consideration
for the sale, the Company received $1.5 million in cash and was relieved of
certain liabilities. The Company recorded a gain of approximately $10.0
million on the sale.
The Company recorded a restructuring charge of $19.5 million in the third
quarter of fiscal year 1994. The restructuring plan provided for the
consolidation and streamlining of certain operations and administration.
The plan provided for a worldwide headcount reduction of approximately 500
employees, which was substantially completed during February 1994. The
Company's research and development activities were consolidated at its
Longmont, Colorado facilities, which eliminated the need for certain
facilities in San Jose, California. In addition, the Company's actions
eliminated the need for certain manufacturing facilities in Singapore. The
charge consisted of approximately $11.8 million in estimated costs related
to the worldwide reduction in headcount and approximately $7.7 million
associated with facility consolidations, including lease and other
obligations on certain facility leases. As of March 25, 1995, the Company
has completed all of its restructuring actions. As a result of these
actions, worldwide headcount was reduced by approximately 500 employees from
manufacturing, research and development, sales, marketing and administrative
functions and facilities space was reduced by approximately 350,000 square
feet. The Company's savings from operations as a result of these actions
amounted to approximately $9.0 million per quarter, beginning with the
quarter ended March 26, 1994. Certain actions were completed at a cost
which was slightly higher or lower than originally estimated. On a net
basis, total actual costs were lower than originally estimated by
approximately $0.2 million. The net adjustment of approximately $0.2
million was recorded to Restructuring and Other during the fourth quarter of
fiscal year 1995 upon completion of the Company's restructuring actions.
The following table presents a roll-forward reconciliation of the activity
in the restructuring accrual balance from December 25, 1993 to March 25,
1995:
Severances, Rent and
benefits other
and other facilities-
headcount- related
related charges
(In thousands) charges Total
- ----------------------------------------------------------------------------
December 1993 restructuring charges $ 11,769 $ 7,731 $ 19,500
Cash expenditures (8,891) (1,744) (10,635)
- ----------------------------------------------------------------------------
Balance at March 26, 1994 2,878 5,987 8,865
- ----------------------------------------------------------------------------
Cash expenditures (2,474) (5,682) (8,156)
Adjustments (404) 197 (207)
- ----------------------------------------------------------------------------
Balance at March 25, 1995 $ - $ 502 $ 502
============================================================================
At March 25, 1995, the Company had $502,000 of accrued restructuring charges
remaining related to recurring payments under certain non-cancelable
operating leases. The Company expects to expend cash for these items during
fiscal year 1996.
Interest expense and interest income
- -----------------------------------------------------------------
(In millions) March 25, March 26,
Fiscal year ended 1995 1994 Change
- -----------------------------------------------------------------
Interest expense $ 8.4 $ 10.1 $ (1.7)
Interest income $ 4.2 $ 2.3 $ 1.9
- -----------------------------------------------------------------
Interest expense decreased as a result of lower average borrowings
outstanding during fiscal year 1995 as compared to the prior fiscal year.
Interest income increased as a result of higher cash and short-term
investments balances during fiscal year 1995 as compared to the prior fiscal
year.
Provision for income taxes
- -----------------------------------------------------------------------
(In millions) March 25, March 26,
Fiscal year ended 1995 1994 Change
- -----------------------------------------------------------------------
Provision for income taxes $ 2.0 $ 1.9 $ 0.1
- -----------------------------------------------------------------------
The provision for income taxes consists primarily of foreign taxes. The
Company's effective tax rate for fiscal year 1995 differs from the combined
federal and state rate due to the repatriation of foreign earnings absorbed
by current year losses and the Company's U.S. operating losses not providing
current tax benefits, offset in part by the tax savings associated with the
Company's Singapore operations and valuation of temporary differences.
Income from the Singapore operations is not taxable in Singapore as a result
of the Company's pioneer tax status. The Company's effective tax rate for
fiscal year 1994 is below the combined federal and state rate due to the
repatriation of foreign earnings absorbed by current year losses, the
Company's U.S. operating losses not providing current tax benefits and
valuation of temporary differences, offset in part by the tax savings
associated with the Company's Singapore operations.
FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993
- -------------------------------------------------------------------------
(In millions) March 26, March 27,
Fiscal year ended 1994 1993 Change
- -------------------------------------------------------------------------
Revenue $ 1,152.6 $ 1,442.5 $ (289.9)
Gross margin $ (52.4) $ 265.1 $ (317.5)
As a percentage of revenue (4.5%) 18.4%
Net income (loss) $ (257.6) $ 46.1 $ (303.7)
As a percentage of revenue (22.3%) 3.2%
Net income (loss) per share $ (8.00) $ 1.46 $ (9.46)
- -------------------------------------------------------------------------
Revenue
Unit sales of the Company's 7000 Series disk drives accounted for a
significant portion of the Company's revenue during both fiscal years and
increased modestly during fiscal year 1994 over fiscal year 1993. However,
these product offerings, particularly 100-200 megabyte products, were
subject to intense price competition and excess industry capacity during
most of the first nine months of fiscal year 1994, which negatively impacted
per unit revenue in fiscal year 1994 despite the increase in unit volumes.
The Company began to experience an increase in demand during the third
quarter of fiscal year 1994, which continued through the fourth quarter of
fiscal year 1994 with most products in short supply, concurrent easing of
price reductions and certain price increases. While there was a significant
shift in product mix from the older, lower-capacity 3.5-inch and 5.25-inch
product offerings to the higher-capacity 7000 Series and MXTTM product
offerings, average unit selling prices, in terms of megabyte per dollar,
declined substantially between fiscal years 1993 and 1994. Revenue for
fiscal year 1993 included approximately $61.0 million generated by the
Company's wholly-owned subsidiary, Storage Dimensions, Inc. (SDI); no such
revenue was recognized in fiscal year 1994 due to the sale of SDI on
December 26, 1992. In addition, revenue for fiscal year 1994 did not
include $16.1 million, net, of non-recurring revenue recognized in fiscal
year 1993 related to certain royalty and licensing agreements.
During fiscal year 1994, the Company had one customer which accounted for
approximately 24% of the Company's revenue.
Gross margin
Gross margin as a percentage of revenue decreased significantly to (4.5)% in
fiscal year 1994 from 18.4% in fiscal year 1993. As discussed previously,
the Company recorded special charges amounting to $68.9 million in Cost of
Revenue in the third quarter of fiscal year 1994. Excluding the special
charges of $68.9 million, gross margin for fiscal year 1994 was 1.4%.
Excluding the non-recurring revenue of approximately $16.1 million, gross
margin was 17.5% for fiscal year 1993.
Excluding the impact of the special charges, the significant decline in
gross margin during fiscal year 1994 was primarily attributable to the
prevailing negative business conditions in the disk drive industry,
including intense price competition and excess industry capacity, as well as
to cost and time-to-market issues with regard to the Company's new products.
During the last four months of fiscal year 1993 and continuing into the
third quarter of fiscal year 1994, gross margin declined significantly due
to increased price competition on 100-200 megabyte 3.5-inch products, price
erosion on older products as they were being phased out, and costs
associated with the startup and initial production of the Company's MXT
products. Gross margin began to improve during the third and fourth fiscal
quarters of fiscal year 1994 from (3.3%) for the second quarter to 4.8% for
the third quarter, excluding the special charges of $68.9 million, to 11.4%
for the fourth quarter 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.
During most of the first nine months of fiscal year 1994, gross margin was
negatively impacted by the Company's failure to produce planned unit volumes
of its MXT products due to a quality problem involving a particular
supplier's component, plus higher costs than planned due to related design
and manufacturing issues, in addition to failure to produce planned unit
volumes of its 2.5-inch products due to design and component issues. A
temporary shutdown of production of the MXT product occurred during the
first quarter and resulted in an estimated loss of $25.0 million of revenue
and an accompanying negative gross margin for this product offering during
that quarter. This first quarter production shutdown of the MXT product
also adversely affected production costs in the second quarter of fiscal
year 1994 until efficient production levels were achieved. The design and
component issues related to the 2.5-inch product line resulted in a negative
gross margin for this product line during most of fiscal year 1994.
Operating expenses
- ---------------------------------------------------------------------------
(In millions) March 26, March 27,
Fiscal year ended 1994 1993 Change
- ---------------------------------------------------------------------------
Research and development $ 97.2 $ 112.6 $ (15.4)
As a percentage of revenue 8.4% 7.8%
Selling, general and administrative $ 78.9 $ 98.5 $ (19.6)
As a percentage of revenue 6.8% 6.8%
Restructuring and other $ 19.5 - $ 19.5
As a percentage of revenue 1.7% n/a
- ---------------------------------------------------------------------------
Research and development (R&D)
R&D expenses decreased from the prior fiscal year in absolute dollars
primarily due to the consolidation of the Company's R&D activities in
Longmont, Colorado 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 increased as a percentage of revenue as a result of the decreased
revenue base between fiscal years 1993 and 1994.
Selling, general and administrative (SG&A)
SG&A expenses declined in absolute dollars primarily due to the sale of the
assets of SDI, and were relatively unchanged as a percentage of revenue for
fiscal year 1994 compared to the prior fiscal year given the decline in the
revenue base during that period. SG&A for the first nine months of fiscal
year 1993 included expenses incurred by SDI until December 1992 at which
time the Company sold the assets of SDI. The decline in SG&A expenses also
reflected the Company's efforts to control and reduce expenditures.
Restructuring and other
As discussed previously, the Company recorded a restructuring charge of
$19.5 million in the third quarter of fiscal year 1994.
Interest expense, interest income, and minority interest in loss of joint
venture
- ------------------------------------------------------------------
(In millions) March 26, March 27,
Fiscal year ended 1994 1993 Change
- ------------------------------------------------------------------
Interest expense $ 10.1 $ 10.1 $ -
Interest income $ 2.3 $ 2.6 $ (.3)
Minority interest in loss
of joint venture $ - $ 1.0 $ (1.0)
- ------------------------------------------------------------------
The Company's minority interest account was related to Maxoptix. During the
second quarter of fiscal year 1993, the minority interest account was
reduced to zero. Thereafter, all operating losses incurred by Maxoptix were
fully allocated to Maxtor.
Provision for income taxes
- ------------------------------------------------------------------------
(In millions) March 26, March 27,
Fiscal year ended 1994 1993 Change
- ------------------------------------------------------------------------
Provision for income taxes $ 1.9 $ 1.3 $ .6
- ------------------------------------------------------------------------
The provision for income taxes consisted primarily of foreign taxes. The
Company's effective tax rate for fiscal year 1994 differed from the combined
federal and state rate 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 was not taxable in Singapore as a
result of the Company's pioneer tax status, and those earnings which were
permanently reinvested outside the United States were not taxable in the
United States. The Company's effective tax rate for fiscal year 1993 was
2.7%, which was below the combined federal and state rate due to the tax
benefits associated with the Company's Singapore operations, valuation of
temporary differences and the non-recurring reduction of taxes provided in
prior periods, offset by the Company's U.S. operating losses not providing
current tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------------------------------------
March 25,
(In millions) 1995
- -------------------------------------------------------------
Cash and cash equivalents $ 96.5
Short-term investments 12.0
Short-term borrowings 30.0
Net cash used in operating activities 80.2
Net cash provided by investing activities 29.5
Net cash provided by financing activities 2.7
- -------------------------------------------------------------
As of March 25, 1995, the Company had cash and cash equivalents of $96.5
million as compared to $144.5 million as of March 26, 1994, a decrease of
$48.0 million. The Company had short-term investments of $12.0 million as
of March 25, 1995 as compared to $74.9 million as of March 26, 1994, a
decrease of $62.9 million. The combined decrease in the Company's cash and
cash equivalents, and short-term investments of $110.9 million was primarily
the result of operating losses.
Of the net cash used in operating activities during fiscal year 1995, net
loss less non-cash depreciation and amortization accounted for approximately
$47.4 million. The increase in accounts receivable and the decrease in
current liabilities together accounted for net uses of cash of approximately
$24.0 million. The increase in accounts receivable primarily reflects a
higher concentration of sales during the last month of the quarter for the
quarter ended March 25, 1995 compared to the quarter ended March 26, 1994.
Current liabilities decreased by approximately $29.8 million primarily as a
result of the reduction of accrued special and restructuring charges
recorded by the Company in fiscal year 1994.
Net cash provided by investing activities was primarily attributable to
$62.9 million of short-term investment maturities, net of purchases, offset
by $32.6 million of capital expenditures. A significant portion of the
capital expenditure activity was related to the acquisition of manufacturing
equipment. Depending on business conditions, including the successful
introduction of new products, the Company currently expects to make capital
expenditures of approximately $60.0 million during fiscal year 1996. The
Company expects to fund these capital expenditures through bank and
equipment financing and cash flow from operations.
Net cash provided by financing activities primarily reflects proceeds from
the issuance of common stock under the Company's stock purchase plan and
stock option plans, offset in part by cash used to reduce outstanding debt.
In September 1993, the Company obtained a secured, asset-based revolving
line of credit. The original committed line of credit provided for
borrowings up to $76.0 million over a two-year term and is secured by
receivables, certain inventories and other assets. This revolving line of
credit includes sublines for letters of credit and bears interest at various
rates. Borrowings under this line of credit are limited to a percentage of
eligible receivables. The agreement includes covenants to maintain certain
financial ratios and precludes the Company from paying cash dividends. On
June 17, 1994, the Company received an amendment to its line of credit for
the minimum operating profit which is measured at the end of each quarter.
With such amendment, the Company was in compliance with all financial
covenants during the quarter ended June 25, 1994. On October 11, 1994, the
Company received an unconditional waiver of defaults of minimum operating
profit, minimum net worth and leverage ratio covenants defaults that
occurred as of the fiscal quarter ended September 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. The amendment 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. The
Company also elected to reduce its line of credit from $76.0 million to
$50.0 million. The Company was in compliance with its financial covenants
for the quarter and fiscal year ended March 25, 1995. As of March 25, 1995,
$30.0 million of borrowings and $1.3 million of letters of credit were
outstanding. The weighted average interest rate on the borrowings
outstanding was 10.75% and 7.75% at March 25, 1995 and March 26, 1994,
respectively. The $30.0 million of borrowings were fully repaid the first
week after fiscal year end. The balance available for additional borrowings
under this line of credit at March 25, 1995 was approximately $18.7 million
using the March 25, 1995 borrowing base.
As discussed earlier, the Company entered into an agreement for the sale of
the Company's interest in Maxoptix to Kubota during the third quarter of
fiscal year 1995. The transaction was completed during the fourth quarter
of fiscal year 1995. As consideration for the sale, the Company received
$1.5 million in cash and was relieved of certain liabilities. The Company
recorded a gain of approximately $10.0 million on the sale during the fourth
quarter of fiscal year 1995.
The liquidity of the Company was adversely affected during fiscal year 1995
by significant losses from operations and liquidity has been significantly
reduced compared to the same period last year. The Company is implementing
ongoing measures with the goal of improving liquidity. In addition to
attempting to improve operating margins on product sales through the
introduction of new products and reduction of manufacturing costs, the
Company remains focused on controlling other operating expenses. However,
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. If the Company is unable
to accomplish these measures, or if the results of these measures do not
meet expectations, the Company will be required to seek alternative sources
of liquidity, including additional sources of financing. The Company
recognizes that given the uncertainties of the disk drive industry and the
risks inherent in accomplishing the above measures, or if the results of
those measures do not meet expectations, it may be prudent to seek
additional sources of financing. The Company has initiated discussions with
various parties should it become necessary to seek additional sources of
financing. While the Company believes that additional sources of financing
would be available if needed, there can be no assurance that they would be
available on terms which are favorable to the Company.
Subject to unforeseen changes in general business conditions, the Company
believes that the combination of the measures described above and other
available actions, together with its balances of cash, cash equivalents, and
short-term investments, 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 1996.
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.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements Page
Financial Statements:
Consolidated Balance Sheets -
March 25, 1995 and March 26, 1994 23
Consolidated Statements of Income (Loss) -
Fiscal years ended March 25, 1995,
March 26, 1994 and March 27, 1993 24
Consolidated Statements of Stockholders' Equity -
Fiscal years ended March 25, 1995,
March 26, 1994 and March 27, 1993 25
Consolidated Statements of Cash Flows -
Fiscal years ended March 25, 1995,
March 26, 1994 and March 27, 1993 26 - 27
Notes to Consolidated Financial Statements 27 - 36
Report of Ernst & Young LLP, Independent Auditors 37
Financial Statement Schedules:
The following consolidated financial statement schedule of Maxtor
Corporation is filed as part of this Report and should be read in
conjunction with the Consolidated Financial Statements of Maxtor
Corporation.
Schedule II Valuation and qualifying accounts S-1
Schedules not listed above have been omitted since they are not
applicable or are not required or the information required to be set therein
is included in the Consolidated Financial Statements or notes thereto.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
- ----------------------------------------------------------------------
March 25, March 26,
ASSETS 1995 1994
- ----------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 96,518 $ 144,520
Short-term investments 11,998 74,911
Accounts receivable, net of allowance for
doubtful accounts of $3,850 at March 25,
1995 and $3,653 at March 26, 1994 111,530 99,806
Inventories:
Raw materials 40,528 51,419
Work-in-process 28,398 19,196
Finished goods 20,754 25,408
- ----------------------------------------------------------------------
89,680 96,023
Prepaid expenses and other 8,695 7,936
- ----------------------------------------------------------------------
Total current assets 318,421 423,196
Property, plant and equipment, at cost:
Buildings 22,575 21,387
Machinery and equipment 146,020 195,820
Furniture and fixtures 12,177 18,195
Leasehold improvements 9,262 17,506
- ----------------------------------------------------------------------
190,034 252,908
Less accumulated depreciation and
amortization (133,890) (191,750)
- ----------------------------------------------------------------------
Net property, plant and equipment 56,144 61,158
Other assets 7,282 8,021
- ----------------------------------------------------------------------
$ 381,847 $ 492,375
======================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------
Current liabilities:
Short-term borrowings $ 30,000 $ 30,000
Accounts payable 136,746 137,566
Income taxes payable 6,807 7,530
Accrued payroll and payroll-related
expenses 14,802 11,720
Accrued warranty 25,058 27,281
Accrued special and restructuring 635 21,777
Accrued expenses 18,972 25,700
Long-term debt and capital lease
obligations due within one year 2,957 4,155
- ----------------------------------------------------------------------
Total current liabilities 235,977 265,729
Long-term debt and capital lease
obligations due after one year 101,967 107,393
Deferred tax liabilities - 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, $0.01 par value,
19,480,000 shares authorized, issued
and outstanding 195 195
Common stock, $0.01 par value, 180,520,000
shares authorized; issued and outstanding:
March 25, 1995 - 32,217,287 shares;
March 26, 1994 - 30,425,242 shares 322 304
Additional paid-in capital 327,357 320,564
Accumulated deficit (283,971) (201,749)
- ----------------------------------------------------------------------
43,903 119,314
Less notes receivable from stockholders - (127)
- ----------------------------------------------------------------------
Total stockholders' equity 43,903 119,187
- ----------------------------------------------------------------------
$ 381,847 $ 492,375
======================================================================
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share amounts)
Fiscal year ended
- ----------------------------------------------------------------------
March 25, March 26, March 27,
1995 1994 1993
- ----------------------------------------------------------------------
Revenue $ 906,799 $ 1,152,615 $ 1,442,546
Cost of revenue 850,669 1,205,014 1,177,460
- ----------------------------------------------------------------------
Gross margin 56,130 (52,399) 265,086
- ----------------------------------------------------------------------
Operating expenses:
Research and development 60,769 97,168 112,621
Selling, general and
administrative 81,600 78,854 98,497
Restructuring and other (10,213) 19,500 -
- ----------------------------------------------------------------------
Total operating expenses 132,156 195,522 211,118
- ----------------------------------------------------------------------
Income (loss) from operations (76,026) (247,921) 53,968
Interest expense (8,379) (10,087) (10,140)
Interest income 4,216 2,283 2,557
Minority interest in loss of
joint venture - - 1,014
- ----------------------------------------------------------------------
Income (loss) before income
taxes (80,189) (255,725) 47,399
Provision for income taxes 2,033 1,864 1,287
- ----------------------------------------------------------------------
Net income (loss) $ (82,222) $ (257,589) $ 46,112
======================================================================
Net income (loss) per share $ (1.63) $ (8.00) $ 1.46
======================================================================
Shares used in computing net
income (loss) per share 50,583 32,203 31,534
======================================================================
See accompanying notes.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
- ----------------------------------------------------------------------------
<CAPTION>
Common Addi- Retained Notes Total
stock tional earnings receiv- stock-
paid-in (accumu- able holders'
capital lated from equity
----------------- deficit) stock-
Shares Amount holders
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
Balance, March 28,
1992 24,012,231 $240 $146,246 $ 9,728 $(429) $155,785
Issuance of common
stock under stock
option plans and
related tax benefit 2,075,738 21 12,767 - (167) 12,621
Payments on and
forgiveness of
notes receivable
from stockholders - - - - 379 379
Issuance of common
stock under stock
purchase plan 721,308 7 3,249 - - 3,256
Adjustment to common
stock held by
Standard
Chartered Bank - - 1,505 - - 1,505
Issuance of common
stock from
exercise of stock
rights 2,000,000 20 (20) - - -
Net income - - - 46,112 - 46,112
- ----------------------------------------------------------------------------
Balance, March 27,
1993 28,809,277 288 163,747 55,840 (217) 219,658
Issuance of common
stock under stock
option plans 792,920 8 3,362 - - 3,370
Payments on and
forgiveness of
notes receivable
from stockholders - - - - 90 90
Issuance of common
stock under stock
purchase plan 823,045 8 4,307 - - 4,315
Issuance of Class A
common stock, net
of issuance costs 19,480,000 195 149,148 - - 149,343
Net loss - - - (257,589) - (257,589)
- ----------------------------------------------------------------------------
Balance, March 26,
1994 49,905,242 499 320,564 (201,749) (127) 119,187
Issuance of common
stock under stock
option plans 1,112,825 11 4,133 - - 4,144
Payments on and
forgiveness of
notes receivable
from stockholders - - - - 127 127
Issuance of common
stock under stock
purchase plan 679,220 7 2,660 - - 2,667
Net loss - - - (82,222) - (82,222)
- ----------------------------------------------------------------------------
Balance, March 25,
1995 51,697,287 $517 $327,357 $(283,971) $ - $ 43,903
============================================================================
See accompanying notes.
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
- ----------------------------------------------------------------------------
<CAPTION>
Fiscal year ended
- ----------------------------------------------------------------------------
March 25, March 26, March 27,
1995 1994 1993
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
Increase (decrease) in cash
and cash equivalents
Cash flows from operating
activities:
Net income (loss) $ (82,222) $ (257,589) $ 46,112
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and amortization 34,865 85,865 62,028
Forgiveness of notes receivable
from stockholders 41 61 74
Change in non-current deferred
tax liabilities (66) (934) 1,000
Gain on sale of interest in
joint venture (10,005) - -
Loss on disposal of property,
plant and equipment 2,233 2,135 2,301
Minority interest in loss of
joint venture - - (1,023)
Other, net - - (796)
Changes in assets and
liabilities:
Accounts receivable (18,563) 49,591 (17,248)
Inventories (150) 59,320 (45,740)
Prepaid expenses and other (925) 2,739 (6,256)
Accounts payable 14,813 7,374 20,020
Income taxes payable (723) 2,866 (3,894)
Accrued payroll and payroll-
related expenses 3,573 (4,796) (1,066)
Accrued warranty (1,637) 11,192 1,657
Accrued special and
restructuring (21,142) 21,777 -
Accrued expenses (283) 3,947 12,706
- ----------------------------------------------------------------------------
Total adjustments 2,031 241,137 23,763
- ----------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (80,191) (16,452) 69,875
- ----------------------------------------------------------------------------
Cash flows from investing
activities:
Proceeds from sale of interest
in joint venture, net (1,463) - -
Proceeds from sale of subsidiary,
net of costs - - 15,842
Purchase of short-term investments - (74,911) -
Purchase of available-for-sale
investments (30,091) - -
Proceeds from maturity of
available-for-sale investments 93,004 - -
Purchase of property, plant
and equipment, net (32,612) (29,746) (91,700)
Proceeds from disposal of
property, plant and equipment 1,077 1,013 1,930
Other assets (417) (72) (1,686)
- ----------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 29,498 (103,716) (75,614)
- ----------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of debt,
including short-term borrowings 238 2,870 79,798
Principal payments on debt, includ-
ing capital lease obligations (4,444) (30,563) (30,092)
Proceeds from issuance of Class A
common stock - 149,343 -
Proceeds from issuance of common
stock, net of issuance of notes
receivable and stock repurchase 6,810 7,685 15,193
Payments on notes receivable
from stockholders 87 29 305
- ----------------------------------------------------------------------------
Net cash provided by financing
activities 2,691 129,364 65,204
- ----------------------------------------------------------------------------
Net change in cash and cash
equivalents (48,002) 9,196 59,465
Cash and cash equivalents at
beginning of period 144,520 135,324 75,859
- ----------------------------------------------------------------------------
Cash and cash equivalents at
end of period $ 96,518 $ 144,520 $ 135,324
============================================================================
See accompanying notes.
</TABLE>
<TABLE>
Fiscal year ended
- ----------------------------------------------------------------------------
<CAPTION>
March 25, March 26, March 27,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
Supplemental disclosures of cash
flow information:
Cash paid (received) during the
year for:
Interest $ 6,657 $ 9,985 $ 9,250
Income taxes 2,822 1,337 4,661
Income tax refunds (65) (1,824) (292)
Supplemental information on noncash
investing and financing activities:
Capital lease obligations $ 245 $ 122 $ 520
- ----------------------------------------------------------------------------
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The consolidated financial statements include the accounts of Maxtor
Corporation (Maxtor or the Company) and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
Cash, cash equivalents and short-term investments
The Company considers all highly liquid investments, which are purchased
with a maturity of three months or less, to be cash equivalents. Other
short-term investments consists of floating rate notes, certificates of
deposit and commercial paper. The Company generally purchases investments
with a maturity from three to twelve months.
Inventories
Inventories are stated at the lower of cost (computed on a first-in, first-
out basis) or market.
Depreciation and amortization
Depreciation and amortization are provided on the straight-line basis over
the estimated useful lives of the assets, which are generally from three to
five years, except for buildings which are depreciated over thirty years.
Assets under capital leases and leasehold improvements are amortized over
the shorter of the asset life or the remaining lease term. Capital lease
amortization is included with depreciation expense.
Revenue recognition and product warranty
Revenue is recognized upon product shipment. Revenue from sales to certain
distributors is subject to agreements providing limited rights of return, as
well as price protection on unsold merchandise. Accordingly, the Company
records reserves upon shipment for estimated returns, exchanges and credits
for price protection. The Company also provides for the estimated cost to
repair or replace products under warranty at the time of sale.
Accounting for income taxes
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS No. 109). The Company adopted the provisions of SFAS No. 109 in its
financial statements for fiscal year 1994. The adoption of SFAS No. 109 did
not have a material effect on the Company's consolidated financial position
or results of operations. Prior years were accounted for under Statement of
Financial Accounting Standards No. 96, "Accounting for Income Taxes," and
have not been restated.
Net income (loss) per share
Net loss per share is based upon the weighted average number of shares of
common and Class A common stock outstanding during each of fiscal years 1995
and 1994. For fiscal year 1993, net income per share is based upon the
weighted average number of shares of common stock and common stock
equivalents outstanding during the fiscal year. Common stock equivalents
include shares issuable upon the assumed exercise of stock options reflected
under the treasury stock method. The convertible subordinated debentures
are excluded from the calculation of primary and fully diluted earnings per
share as they had an anti-dilutive impact on net income per share in fiscal
year 1993.
Foreign currency translation and foreign currency financial instruments
The functional currency for all foreign operations is the U.S. dollar. As
such, all material foreign exchange gains or losses are included in the
determination of net income (loss). Approximately $1,014,000, $865,000 and
$659,000 of net foreign exchange losses were included in net income (loss)
in fiscal years 1995, 1994 and 1993, respectively. To reduce the impact of
foreign currency fluctuations on the Company's monetary asset and liability
positions, the Company enters into foreign currency forward exchange
contracts. Gains and losses are deferred and offset by gains and losses on
the underlying hedged exposures. See Note 2 for further disclosure
regarding the Company's derivative financial instruments.
Concentration of credit risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of accounts receivable,
cash equivalents and short-term investments. The Company's products are
sold worldwide to original equipment manufacturers (OEMs), distributors, and
other emerging sales channels such as computer specialty retailers and
computer superstores. Concentration of credit risk with respect to the
Company's trade receivables is limited by the Company's ongoing credit
evaluation process and the geographical dispersion of sales transactions,
therefore the Company generally requires no collateral from its customers.
The allowance for uncollectible accounts receivable is based upon the
expected collectibility of all accounts receivable. The Company has cash
equivalent and short-term investment policies that limit the amount of
credit exposure to any one financial institution and restrict placement of
these investments to financial institutions evaluated as highly credit-
worthy.
Fiscal year
The Company maintains a 52/53-week fiscal year cycle. Fiscal years 1995,
1994 and 1993 were each comprised of 52 weeks. Fiscal year 1996 will be
comprised of 53 weeks. The Company's fiscal year ends on the last Saturday
of March.
2. FINANCIAL INSTRUMENTS
Investments
Effective at the beginning of fiscal year 1995, the Company adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS No. 115). SFAS No. 115
requires the Company to determine the appropriate classification of its
investments in debt and equity securities at the time of purchase and to re-
evaluate such classification as of each balance sheet date. At March 27,
1994 and March 25, 1995, all investments in debt securities are classified
as available-for-sale, and as such are carried at fair value. The Company
has no investments in equity securities at March 25, 1995. Realized gains
and losses and declines in value judged to be other than temporary are
included in interest income. The cost of debt securities sold is based on
the specific identification method. As of March 25, 1995, unrealized gains
and losses on available-for-sale investments were not material. Realized
gains and losses on available-for-sale investments were not material for the
fiscal year ended March 25, 1995. Due to insignificant differences between
the cost and fair value of the Company's investments, the adoption of SFAS
No. 115 had no material effect on the Company's financial statements at
March 27, 1994. In accordance with SFAS No. 115, prior period financial
statements have not been restated.
The following is a summary of the Company's investments by major security
type at fair value as of March 25, 1995:
Gross Gross Estimated
unrealized unrealized fair
(In thousands) Cost gains losses value
- ----------------------------------------------------------------------
Money market instruments $ 78,194 $ - $ - $ 78,194
Floating rate notes 11,998 - - 11,998
- ----------------------------------------------------------------------
$ 90,192 $ - $ - $ 90,192
======================================================================
Included in cash and
cash equivalents $ 78,194 $ - $ - $ 78,194
Included in short-term
investments 11,998 - - 11,998
- ----------------------------------------------------------------------
$ 90,192 $ - $ - $ 90,192
======================================================================
Fair value disclosures
The fair values of cash and cash equivalents, and short-term investments
approximate cost due to the short period of time to maturity or due to
floating rate resets on investments. The carrying values of the note
receivable and the investment in affiliate, both of which are classified in
other assets, approximate their fair values. The fair value of the
Company's fixed rate debt is estimated based on the current rates offered to
the Company for similar debt instruments of the same remaining maturities.
The fair value of the Company's variable rate debt approximates its carrying
value as these instruments are repriced frequently at market rates. The
fair value of the Company's convertible subordinated debentures is based on
quoted market prices. The fair value of foreign currency forward exchange
contracts used for hedging purposes is estimated based on quoted market
prices.
The carrying values and fair values of the Company's financial instruments
are as follows:
(In thousands) March 25, 1995 March 26, 1994
- ----------------------------------------------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
- ----------------------------------------------------------------------
Cash and cash equivalents $ 96,518 $ 96,518 $ 144,520 $ 144,520
Short-term investments 11,998 11,998 74,911 74,911
Note receivable 4,000 4,000 4,000 4,000
Investment in affiliate 1,010 1,010 1,095 1,095
Short and long-term debt
- fixed rate 4,445 4,359 7,405 7,350
- variable rate 30,000 30,000 33,368 33,368
Convertible subordinated
debentures 100,000 55,000 100,000 66,000
Foreign currency forward
exchange contracts - 37 - 2
- ----------------------------------------------------------------------
Derivative financial instruments
The Company enters into currency forward contracts to manage foreign
currency exchange risk associated with the Company's manufacturing
operations in Singapore. The Company's policy is to hedge all material
transaction and translation exposures on a quarterly basis. Contracts are
generally entered into at the end of each fiscal quarter to reduce foreign
currency exposures for the following fiscal quarter. Contracts generally
have maturities of three months or less. Any gains or losses on these
instruments are accounted for in accordance with Statement of Financial
Accounting Standards No. 52, "Foreign Currency Translation", and are
generally included in Cost of Revenue. Deferred gains or losses
attributable to these instruments were not material as of March 25, 1995.
Notional amounts of outstanding currency forward contracts were $33,769,000
and $18,026,000, for fiscal years ended 1995 and 1994, respectively.
3. JOINT VENTURE AND INVESTMENT IN AFFILIATE
Joint venture
In March 1989, the Company and Kubota Corporation (Kubota) organized a
jointly-owned corporation, Maxoptix Corporation (Maxoptix). On December 26,
1994, the Company entered into an agreement for the sale of the Company's
interest in Maxoptix to Kubota Electronics America Corporation, a Delaware
company, whose ultimate parent is Kubota. Prior to the sale, Maxtor and
Kubota owned 67% and 33% interests in Maxoptix, respectively. The
transaction was completed on February 18, 1995. As consideration for the
sale, the Company received $1.5 million in cash and was relieved of certain
liabilities. The Company recorded a gain of approximately $10.0 million on
the sale. The results of operations of Maxoptix for fiscal years 1995, 1994
and 1993 have been immaterial to the Company's statements of income (loss),
balance sheets and statements of cash flows.
Investment in affiliate
On December 26, 1992, the Company sold the assets and liabilities of its
wholly-owned subsidiary, Storage Dimensions, Inc. (SDI). The consideration
received by the Company in connection with the transaction consisted of
$17,400,000 in cash, a $4,000,000 three-year subordinated promissory note
and a minority interest of 32.8% in the company formed for the purpose of
purchasing the assets of SDI. The Company recognized a nominal gain on the
transaction. The terms of the note were amended in fiscal year 1994 and
again in fiscal year 1995. The latter amendment provides for a deferral of
principal payments; the final payment is due in December 1996. Interest
payments continue to be due and paid monthly at a rate of 12% per annum on
the unpaid balance. Maxtor accounts for its investment under the equity
method of accounting. If SDI had not been included in the consolidated
financial statements during fiscal year 1993, the Company's results of
operations would have been as follows:
(In millions, except percentages Fiscal year ended
and per share amounts) March 27, 1993
- ---------------------------------------------------------------------
Revenue $ 1,388.2
Gross margin 246.2
As a percentage of revenue 17.7%
Income from operations $ 50.3
Net income 43.5
Net income per share $ 1.38
- ---------------------------------------------------------------------
4. MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
The Company operates in a single industry segment: the design, manufacture
and sale of data storage products for desktop and mobile computer systems.
It has a world-wide sales, service and distribution network. The Company
markets and sells its products through a direct sales force to OEMs,
distributors and other emerging sales channels such as computer specialty
retailers and computer superstores.
During fiscal year 1995, no customer accounted for more than 10% of the
Company's revenue. During fiscal years 1994 and 1993, one customer
accounted for approximately 24% and 14% of the Company's revenue,
respectively.
The Company had export sales of approximately 48%, 43%, and 50% of revenue
in fiscal years 1995, 1994 and 1993, respectively. Approximately 38%, 35%
and 57% of export sales were to the Far East in fiscal years 1995, 1994 and
1993, respectively. The balance of export sales was primarily to Europe in
each of the three fiscal years.
Operations outside the United States consist of manufacturing plants in
Singapore and Hong Kong that produce subassemblies and final assemblies for
the Company's disk drive products. The geographic breakdown of the
Company's activities for each of the three fiscal years in the period ended
March 25, 1995 is presented in the following table:
<TABLE>
<CAPTION>
(In thousands) U.S. Far East Eliminations Consolidated
Fiscal year ended
March 25, 1995
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------
Revenue from unaffiliated
customers $ 901,812 $ 4,987 $ - $ 906,799
Transfers between
geographic locations 35,268 874,746 (910,014) -
- ----------------------------------------------------------------------------------
Revenue 937,080 879,733 (910,014) 906,799
- ----------------------------------------------------------------------------------
Income (loss) from operations (135,848) 59,558 264 (76,026)
- ----------------------------------------------------------------------------------
Identifiable assets 338,139 293,096 (249,388) 381,847
- ----------------------------------------------------------------------------------
Fiscal year ended
March 26, 1994
- ----------------------------------------------------------------------------------
Revenue from unaffiliated
customers $ 1,150,146 $ 2,469 $ - $ 1,152,615
Transfers between
geographic locations 75,233 1,169,240 (1,244,473) -
- ----------------------------------------------------------------------------------
Revenue 1,225,379 1,171,709 (1,244,473) 1,152,615
- ----------------------------------------------------------------------------------
Income (loss) from operations (305,824) 57,903 - (247,921)
- ----------------------------------------------------------------------------------
Identifiable assets 470,787 306,574 (284,986) 492,375
- ----------------------------------------------------------------------------------
Fiscal year ended
March 27, 1993
- ----------------------------------------------------------------------------------
Revenue from unaffiliated
customers $ 1,440,737 $ 1,809 $ - $ 1,442,546
Transfers between
geographic locations 81,412 1,265,548 (1,346,960) -
- ----------------------------------------------------------------------------------
Revenue 1,522,149 1,267,357 (1,346,960) 1,442,546
- ----------------------------------------------------------------------------------
Income (loss) from operations (55,882) 109,257 593 53,968
- ----------------------------------------------------------------------------------
Identifiable assets 619,439 464,697 (505,023) 579,113
- ----------------------------------------------------------------------------------
</TABLE>
Revenue from unaffiliated customers is based on the location of the
customer. Transfers between geographic locations are accounted for at
amounts that are above cost. Such transfers are eliminated in the
consolidated financial statements. Identifiable assets are those assets
that can be directly associated with a particular geographic location
through acquisition and/or utilization. In determining each of the
geographic locations' income (loss) from operations and identifiable assets,
the expenses and assets relating to general corporate or headquarter
activities are included in the amounts for the geographic locations where
they were incurred, acquired or utilized.
5. LINES OF CREDIT, DEBT AND CAPITAL LEASE OBLIGATIONS
Lines of credit, debt and capital lease obligations consist of the
following:
March 25, March 26,
(In thousands) 1995 1994
- ----------------------------------------------------------------------
5.75% Convertible Subordinated Debentures
due March 1, 2012 $ 100,000 $ 100,000
Short-term borrowings, interest payable at
a rate of 1.75% above bank's prime rate
per annum (9.0% at March 25, 1995) 30,000 30,000
Term loans, principal payable in varying
monthly, quarterly and semi-annual
installments through October 1996;
interest payable at rates ranging
from 5.5% to 8.46% per annum;
secured by equipment 1,844 3,139
Term loans, principal payable in varying
monthly, bi-monthly and quarterly
installments through December 1996;
interest payable at rates ranging from
7.15% to 9.5% per annum; secured by
equipment 2,601 7,634
Capital lease obligations 479 775
- ----------------------------------------------------------------------
134,924 141,548
Less amounts due within one year 32,957 34,155
- ----------------------------------------------------------------------
Due after one year $ 101,967 $ 107,393
======================================================================
Future aggregate maturities (exclusive of capital lease obligations) are as
follows:
Fiscal year ending (In thousands)
- -------------------------------------------------------------
1996 $ 32,668
1997 1,777
1998 5,000
1999 5,000
2000 5,000
Later years 85,000
- -------------------------------------------------------------
Total $ 134,445
=============================================================
The 5.75% Convertible Subordinated Debentures (Debentures) are convertible
at any time prior to maturity, unless previously redeemed, into shares of
common stock of the Company at a conversion rate of 25 shares per each
$1,000 principal amount of Debentures (equivalent to a conversion price of
$40 per share), subject to adjustment in certain events. Interest on the
Debentures is payable on March 1 and September 1 of each year. The
Debentures, at the option of the Company, are redeemable at 101.150% of the
principal amount as of March 25, 1995 and thereafter at prices adjusting to
the principal amount on or after March 1, 1997, plus accrued interest. The
Debentures are entitled to a sinking fund of $5,000,000 principal amount of
Debentures, payable annually beginning March 1, 1998, which is calculated to
retire at least 70% of the Debentures prior to maturity. The Debentures are
subordinated in right to payment to all senior indebtedness.
In September 1993, the Company obtained a secured, asset-based revolving
line of credit. The original committed line of credit provided for
borrowings up to $76.0 million over a two-year term and is secured by
receivables, certain inventories and other assets. This revolving line of
credit includes sublines for letters of credit and bears interest at various
rates. Borrowings under this line of credit are limited to a percentage of
eligible receivables. The agreement includes covenants to maintain certain
financial ratios and precludes the Company from paying cash dividends. On
June 17, 1994, the Company received an amendment to its line of credit for
the minimum operating profit covenant which is measured at the end of each
quarter. With such amendment, the Company was in compliance with all
financial covenants during the quarter ended June 25, 1994. On October 11,
1994, the Company received an unconditional waiver of defaults of minimum
operating profit, minimum net worth and leverage ratio covenants that
occurred as of the fiscal quarter ended September 24, 1994. On October 31,
1994, the Company received another amendment to its line of credit with
respect to all of the financial covenants, all of which are measured at the
end of each fiscal quarter and fiscal year end. The amendment 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. The
Company also elected to reduce its line of credit from $76.0 million to
$50.0 million. The Company was in compliance with its financial covenants
for the quarter and fiscal year ended March 25, 1995. As of March 25, 1995,
$30.0 million of borrowings and $1.3 million of letters of credit were
outstanding. The weighted average interest rate on the borrowings
outstanding was 10.75% and 7.75% at March 25, 1995 and March 26, 1994,
respectively. The $30.0 million of borrowings were fully repaid the first
week after fiscal year end. The balance available for additional borrowings
under this line of credit at March 25, 1995 was approximately $18.7 million
using the March 25, 1995 borrowing base.
The Company leases certain equipment under long-term leases. These leases
have been accounted for as installment purchases and, accordingly,
capitalized costs of $1,845,000 and $4,317,000 have been included in
machinery and equipment at March 25, 1995 and March 26, 1994, respectively.
Accumulated amortization of the leased equipment amounted to $1,352,000 and
$3,558,000 at March 25, 1995 and March 26, 1994, respectively.
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its principal facilities and certain machinery
and equipment under operating lease arrangements. The future minimum annual
rental commitments as of March 25, 1995 are as follows:
Fiscal year ending (In thousands)
- --------------------------------------------------------------
1996 $ 12,514
1997 6,724
1998 3,700
1999 3,288
2000 2,694
Later years 13,234
- --------------------------------------------------------------
Total $ 42,154
==============================================================
The above commitments extend through fiscal year 2017. Rental expense was
approximately $16,998,000, $15,668,000 and $12,804,000 for fiscal years
1995, 1994 and 1993, respectively.
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,
results of operations or cash flows.
7. RELATED PARTY TRANSACTIONS
During fiscal year 1994, the Company entered into an agreement (the
Agreement) for the creation of a strategic relationship with Hyundai
Electronics Industries Co., Ltd. and several related members of the Hyundai
Business Group (Hyundai). Under the terms of the Agreement, Hyundai
invested approximately $150 million in the Company and received
approximately 19.5 million shares of Class A common stock, constituting
approximately 40% of the Company's outstanding voting stock at that date.
The Agreement specifies the conditions for conversion of the Class A common
stock into the Company's common stock. The special series of common stock
entitles Hyundai to representation on the Company's Board of Directors
proportionate to its share of ownership and certain voting rights. The
Agreement also provides that Hyundai may not acquire more than 45% of the
Company except in a tender for all outstanding shares or in certain other
cases.
In January 1995, the Company announced it had signed a memorandum of
understanding for the creation of a manufacturing partnership with Hyundai
Electronics Industries Co., Ltd. (HEI). In May 1995, the Company announced
it had finalized a definitive agreement with HEI. Under the terms of the
agreement, HEI will manufacture Maxtor-designed hard disk drives for the
Company. The two companies plan to begin volume production within several
months at a Korean manufacturing site. The additional manufacturing
capacity provided by HEI is intended to supplement current production
capacity at the Company's manufacturing facility in Singapore without any
capital expenditure on Maxtor's part. The two companies plan to participate
in an ongoing exchange of technology to enable HEI to assume a leadership
role in disk drive manufacturing for Maxtor and to enable Maxtor to obtain
high-quality, low-cost manufacturing capacity.
8. STOCKHOLDERS' EQUITY
Stock options
At March 25, 1995, the Company has approximately 3,180,000 shares available
for grant under the Fiscal 1988, 1992, 1995 Stock Option Plans and the 1986
Outside Directors Stock Option Plans (the Plans). The Company's 1985 Plan
expired during fiscal year 1995. Since inception of the Plans, the Company
has reserved 15,815,000 shares of common stock for issuance under the Plans.
The Plans generally provide for non-qualified stock options to be granted to
eligible employees, consultants, contractors and employee directors of the
Company at a price not less than 85% of the fair market value at the date of
grant, as determined by the Board of Directors. Officers and directors of
the Company are eligible for stock option grants under the 1988 and the 1995
Plans but are not eligible for stock option grants under the 1992 Plan. The
1995 Plan, which was approved by the Company's stockholders on August 18,
1994, provides for the grant of incentive stock options as well as non-
qualified stock options and provides for options to be granted at a price
not less than the fair market value at the date of grant.
Options granted under the Plans are generally immediately exercisable, and
shares purchased on the exercise thereof are subject to monthly vesting over
a one-, three- or four-year period. Shares that are not vested at the date
of termination of employment may be repurchased by the Company at the lower
of the original purchase price or the fair market value at the time of
repurchase. Options granted prior to September 1991 may be exercised within
five years from the date of grant and options granted thereafter may be
exercised within ten years from the date of grant.
The 1986 Outside Directors Stock Option Plan provides for nonqualified stock
options to be granted to non-employee directors of the Company at fair
market value at the date of grant. Options are exercisable 90 days from the
date of grant and vest monthly over a four-year period provided the grantee
remains in service as a director. Options may be exercised within ten years
from the date of grant.
The following table summarizes option activity through March 25, 1995:
<TABLE>
<CAPTION>
Options outstanding
----------------------------------
Share Average
(In thousands, except share available price per Aggregate
and per share amounts) for grant Shares share value
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
Balance at March 28, 1992 437,500 8,101,092 $ 4.89 $ 39,600
Shares reserved 1,388,439 - - -
Options granted (1,604,129) 1,604,129 10.92 17,517
Options exercised - (2,075,738) 5.61 (11,636)
Options canceled 808,709 (808,709) 5.65 (4,571)
- -------------------------------------------------------------------------------
Balance at March 27, 1993 1,030,519 6,820,774 6.00 40,910
Shares reserved 1,600,000 - - -
Options granted (1,566,031) 1,566,031 6.32 9,891
Options exercised - (792,920) 4.24 (3,365)
Options canceled 1,742,008 (1,742,008) 5.80 (10,104)
- -------------------------------------------------------------------------------
Balance at March 26, 1994 2,806,496 5,851,877 6.38 37,332
Shares reserved 2,015,000 - - -
Options granted (2,752,075) 2,752,075 4.51 12,400
Options exercised - (1,112,825) 3.78 (4,209)
Options canceled 1,338,162 (1,338,162) 6.49 (8,690)
Cancellation of 1985 Stock
Option Plan (227,071) - - -
- -------------------------------------------------------------------------------
Balance at March 25, 1995 3,180,512 6,152,965 $ 5.99 $ 36,833
===============================================================================
</TABLE>
Of the options outstanding, 2,938,225 were vested as of March 25, 1995.
There were no shares outstanding subject to repurchase as of March 25, 1995,
March 26, 1994 and March 27, 1993.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan provides that substantially all employees
may purchase the Company's common stock at a price equal to 85% of its fair
market value on certain specified dates via a payroll deduction plan. The
number of shares reserved for future issuance under this Plan totals
approximately 676,645 shares.
Stockholder's Rights Plan
In January 1988, the Board of Directors adopted a stockholder rights plan
which granted to holders of record one stock purchase right per share of
common stock which becomes exercisable upon the occurrence of certain
triggering events. Such events would include the acquisition of 20% or more
of the Company's outstanding shares or the commencement of a tender or
exchange offer for 25% or more of the Company's outstanding shares of common
stock.
Should a triggering event occur, holders of such rights would be entitled to
purchase Maxtor common stock at an exercise price of $50 per share. If the
Company is acquired in a merger or other business combination, each right
then exercisable will entitle its holder to purchase that number of shares
of the acquiring company's common stock that has a market value equal to
twice the right's exercise price. If a 20% or greater stockholder acquires
the Company through a transaction in which the Company and its common stock
survive, or engages in certain self-dealing transactions with the Company,
each holder of a right, other than the 20% stockholder, will have the right
to receive, upon payment of the exercise price, that number of shares of the
Company's common stock having a market value at the time of the transaction
equal to two times the exercise price. Such rights do not extend to any
holder whose action triggered the rights. The stockholder rights plan was
amended effective upon the closing of the transaction with Hyundai to
provide for certain provisions applicable to Hyundai.
The rights expire in January 1998 and may be redeemed prior to that time at
the option of the Board of Directors for nominal consideration subject to
certain time limitations. Until a triggering event occurs, the rights will
not trade separately from the related Maxtor common shares.
9. INCOME TAXES
The provision for income taxes consists of the following:
(In thousands) March 25, March 26, March 27,
Fiscal year ended 1995 1994 1993
- --------------------------------------------------------------------
Current:
Federal $ - $ - $ (4,018)
State - - 1,326
Foreign 2,099 2,798 2,979
- --------------------------------------------------------------------
2,099 2,798 287
Deferred:
Foreign (66) (934) 1,000
- --------------------------------------------------------------------
Total $ 2,033 $ 1,864 $ 1,287
====================================================================
The provision for income taxes differs from the amount computed by applying
the statutory rate of 35% for fiscal years 1995 and 1994 (34% for fiscal
year 1993) to income (loss) before income taxes. The principal reasons for
this difference are listed in the following table:
(In thousands) March 25, March 26, March 27,
Fiscal year ended 1995 1994 1993
- ----------------------------------------------------------------------
Tax at federal statutory rate $ (28,066) $ (89,504) $ 16,116
State income tax, net of
federal benefit - - 875
Tax savings from foreign
operations (19,732) (19,281) (16,035)
Repatriated foreign earnings
absorbed by current year losses 33,045 74,855 -
U.S. loss not providing current
tax benefit 32,663 14,627 8,064
Valuation of temporary differences (17,142) 18,995 (3,965)
Reduction of taxes provided in
prior years - - (4,018)
Other 1,265 2,172 250
- ----------------------------------------------------------------------
Total $ 2,033 $ 1,864 $ 1,287
======================================================================
Deferred income taxes reflect the tax effect of temporary differences
between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income taxes purposes. The
significant components of the Company's deferred tax assets and liabilities
under SFAS No. 109 are as follows:
(In thousands) March 25, March 26,
Fiscal year ended 1995 1994
- ----------------------------------------------------------------------
Deferred tax assets:
Inventory valuation account $ 9,276 $ 10,940
Depreciation 2,977 9,079
Sales related reserves 11,112 10,842
Net operating loss carryforwards 87,746 59,978
Tax credit carryforwards 18,543 5,963
Accrued special and restructuring - 8,938
Other 2,084 3,921
- ----------------------------------------------------------------------
Total deferred tax assets 131,738 109,661
Valuation allowance for deferred tax assets 124,760 96,847
- ----------------------------------------------------------------------
Net deferred tax assets $ 6,978 $ 12,814
======================================================================
Deferred tax liabilities:
Unremitted earnings of certain foreign
entities $ 6,978 $ 12,814
- ----------------------------------------------------------------------
Total deferred tax liabilities $ 6,978 $ 12,814
======================================================================
Approximately $12,346,000 of the valuation allowance is attributable to
stock options, the benefit of which will be credited to additional paid-in
capital when realized.
Pretax income from foreign operations was approximately $62,200,000,
$61,000,000 and $110,000,000 in fiscal years 1995, 1994 and 1993,
respectively. The Company currently enjoys a tax holiday for its operations
in Singapore that expires on June 30, 1995. This holiday can be extended
until June 30, 1997 provided the Company meets certain conditions. The
Company is confident it can meet these conditions and receive an extension
through June 30, 1997. The net impact of this tax holiday was to increase
net income by approximately $15,000,000 in each of fiscal years 1995 and
1994 and $28,000,000 in fiscal year 1993. This equates to $0.29, $0.47 and
$0.89 per share fully diluted, for fiscal years 1995, 1994 and 1993,
respectively.
At March 25, 1995, for federal income tax purposes, the Company had net
operating loss carryforwards of $251,000,000 which will expire beginning in
fiscal year 1997 and tax credit carryforwards of approximately $18,500,000
which will expire beginning in fiscal year 1999. Certain changes in stock
ownership can result in a limitation on the amount of net operating loss and
tax credit carryovers that can be utilized each year. The Company
determined it has undergone such an ownership change. Consequently,
utilization of approximately $134,000,000 of net operating loss
carryforwards and the deduction equivalent of approximately $12,900,000 of
tax credit carryforwards will be limited to approximately $12,000,000 per
year.
The Company has reached settlement of certain issues with the Internal
Revenue Service. As a result of this settlement, the Company's fiscal year
1993 provision for income taxes reflects a $4,000,000 reduction of taxes
provided in prior periods.
10. SPECIAL ITEMS AND RESTRUCTURING
In the fourth quarter of fiscal year 1995, the Company recorded a non-
recurring gain of approximately $10.0 million related to the sale of the
Company's interest in Maxoptix to Kubota (see Note 3).
During fiscal year 1994, the Company experienced significant production
delays with certain product lines as a result of both design and vendor
problems and determined that it was unable to bring to market profitable
successor products to certain existing products. The Company therefore
decided to discontinue certain products and manufacturing activities, and
recorded special charges amounting to $68.9 million in Cost of Revenue in
the third quarter of fiscal year 1994. The charges consisted of estimated
costs associated with the termination of certain products, a reduction in
manufacturing capacity, write downs of inventory and equipment that were no
longer productive, and related future commitments to third parties. The
charges were comprised of approximately $45.4 million of inventory-related
expenses, approximately $19.8 million of equipment-related expenses, and
approximately $3.7 million of other associated expenses. As of March 25,
1995, all actions have been substantially completed. As of March 25, 1995,
approximately $1.5 million remained accrued for payments related to certain
non-cancelable operating leases for equipment, vendor cancellation charges
and warranty-related costs associated with certain discontinued products.
The Company expects to expend cash for these items during the first half of
fiscal year 1996.
The decisions described above reduced the scope of the Company's product and
manufacturing activities and, as a result, the Company initiated a
restructuring plan which provided 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 actions. The plan provided for a worldwide headcount reduction of
approximately 500 employees, which was substantially completed during
February 1994. The Company's research and development activities were
consolidated at its Longmont, Colorado facilities, which eliminated the need
for certain facilities in San Jose, California. In addition, the Company's
actions eliminated the need for certain manufacturing facilities in
Singapore. The charge consisted of approximately $11.8 million in estimated
costs related to the worldwide reduction in headcount and approximately $7.7
million associated with facility consolidations, including lease and other
obligations on certain facility leases.
As of March 25, 1995, the Company has completed all of its restructuring
actions. As a result of these actions, worldwide headcount was reduced by
approximately 500 employees from manufacturing, research and development,
sales, marketing and administrative functions, and facilities space was
reduced by approximately 350,000 square feet. The Company's savings from
operations as a result of these actions amounted to approximately $9.0
million per quarter, beginning with the quarter ended March 26, 1994.
Certain actions were completed at a cost which was slightly higher or lower
than originally estimated. On a net basis, costs were lower than originally
estimated by approximately $0.2 million. The net adjustment of
approximately $0.2 million was recorded to Restructuring and Other during
the fourth quarter of fiscal year 1995 upon completion of the Company's
restructuring actions.
The following table presents a roll-forward reconciliation of the activity
in the restructuring accrual balance from December 25, 1993 to March 25,
1995:
Severances, Rent and
benefits and other
other head- facilities-
count-related related
(In thousands) charges charges Total
- ----------------------------------------------------------------------
December 1993 restructuring
charges $ 11,769 $ 7,731 $ 19,500
Cash expenditures (8,891) (1,744) (10,635)
- ----------------------------------------------------------------------
Balance at March 26, 1994 2,878 5,987 8,865
- ----------------------------------------------------------------------
Cash expenditures (2,474) (5,682) (8,156)
Adjustments (404) 197 (207)
- ----------------------------------------------------------------------
Balance at March 25, 1995 $ - $ 502 $ 502
======================================================================
At March 25, 1995, the Company had $502,000 of accrued restructuring charges
remaining related to recurring payments under certain non-cancelable
operating leases. The Company expects to expend cash for these items during
fiscal year 1996.
Fiscal year 1993 consolidated income from operations includes non-recurring
revenue of approximately $10.0 million and $6.1 million recognized in the
first and third quarters of fiscal year 1993, respectively, which was
primarily related to certain royalty and licensing agreements.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the accompanying consolidated balance sheets of Maxtor
Corporation as of March 25, 1995 and March 26, 1994, and the related
consolidated statements of income (loss), stockholders' equity and cash
flows for each of the three fiscal years in the period ended March 25, 1995.
Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Maxtor Corporation at March 25, 1995 and March 26, 1994, and the
consolidated results of its operations and its cash flows for each of the
three fiscal years in the period ended March 25, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
San Jose, California
April 19, 1995
ERNST & YOUNG LLP
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 of Form 10-K with respect to
identification of directors is incorporated by reference to the information
contained in the section captioned "Election of Directors" in the Proxy
Statement. For information with respect to the executive officers of the
Company, see "Executive Officers" at the end of Item 1, Part I of this
report.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by reference
to the information contained in the section captioned "Executive
Compensation and Other Matters" in the Proxy Statement.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by reference
to the information contained in the section captioned "Stock Ownership of
Management and Certain Beneficial Owners" in the Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by reference
to the information contained in the section captioned "Certain Relationships
and Related Transactions" in the Proxy Statement.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements and Financial Statement Schedules - See Index
to Consolidated Financial Statements under Item 8 on page 22 of this report.
(2) Exhibits
See Index to Exhibits on pages 48 to 57 hereof.
(b) Reports on Form 8-K
None.
UNDERTAKING
Undertaking to Comply with Rules Governing Form S-8
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, as
amended, the undersigned registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into the Company's
Registration Statements on Form S-8 Nos. 33-2206, 33-18323, 33-18324, 33-
21514, 33-21518, 33-28427 and 33-32190.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the
City of San Jose, State of California, on the 22nd day of June, 1995.
MAXTOR CORPORATION
(Registrant)
By /s/ Dr. Chong Sup Park
---------------------------
Dr. Chong Sup Park
President, Chief Executive
Officer, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Dr. Chong Sup Park President, Chief Executive June 22, 1995
- --------------------------- Officer, Director -------------
Dr. Chong Sup Park
/s/ Nathan Kawaye Vice President, Finance, June 22, 1995
- --------------------------- Corporate Controller, -------------
Nathan Kawaye Chief Accounting Officer
/s/ Mong Hun Chung Chairman of the Board June 22, 1995
- --------------------------- -------------
Mong Hun Chung
/s/ Dr. Richard D. Balanson Director June 22, 1995
- --------------------------- -------------
Dr. Richard D. Balanson
/s/ In Baik Jeon Director June 22, 1995
- --------------------------- -------------
In Baik Jeon
/s/ Gregory M. Gallo Director June 22, 1995
- --------------------------- -------------
Gregory M. Gallo
/s/ Director June , 1995
- --------------------------- -------------
Charles Hill
/s/ Ryal Poppa Director June 22, 1995
- --------------------------- -------------
Ryal Poppa
MAXTOR CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Allowance for Doubtful Accounts
- --------------------------------------------------------------------
Additions
Balance at Charged to Balance at
Beginning Costs and Deductions End of
Year Ended of Period Expenses (1) Period
- --------------------------------------------------------------------
March 27, 1993 $ 4,900 $ 2,708 $ 3,418 $ 4,190
March 26, 1994 $ 4,190 $ 253 $ 790 $ 3,653
March 25, 1995 $ 3,653 $ 1,092 $ 895 $ 3,850
(1) Uncollectible accounts written off, net of recoveries.
S-1
INDEX TO EXHIBITS
Exhbit No. Description Sequentially
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 of 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,
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
amoung 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 (24) Amendment No.2 to Lease between John Arrillaga &
Richard T. Peery and Registrant, dated June 28, 1994
10.121 (24) Amendment No. 3 to Lease between Devcon Associates
31 and Registrant, dated June 28, 1994
10.122 (24) Confidential Resignation Agreement and General
Release of Claims between Registrant and Skip
Kilsdonk, dated September 7, 1994
10.123 (24) Confidential Resignation Agreement and General
Release of Claims between Registrant and Sallee
Peterson, dated September 23, 1994
10.124 (24) Waiver to Financing Agreement among Registrant
and The CIT Group/Business Credit, Inc., dated
October 11, 1994
10.125 (24) Amendment No. 1 to Financing Agreement between
Registrant and The CIT Group/Business Credit,
Inc., dated October 31, 1994
10.126 (27) License agreement between Registrant and NEC
Corporation, dated October 18, 1994
10.127 (27) Lease Agreement for Premises Located at 1821
Lefthand Circle, Suite D, between Registrant and
Pratt Land Limited Liability Company, dated
October 19, 1994
10.128 (27) Lease Agreement for Premises Located at 1841
Lefthand Circle between Registrant and Pratt Land
Limited Liability Company, dated October 19, 1994
10.129 (27) Lease Agreement for Premises Located at 1851
Lefthand Circle between Registrant and Pratt Land
Limited Liability Company, dated October 19, 1994
10.130 (27) Lease Agreement for Premises Located at 2121 Miller
Drive between Registrant and Pratt Land Limited
Liability Company, dated October 19, 1994
10.131 (27) Lease Agreement for Premises Located at 2190 Miller
Drive between Registrant and Pratt Land Limited
Liability Company, dated October 19, 1994
10.132 (27) Confidential Resignation Agreement and General
Release of Claims between Registrant and Patricia
M. Roboostoff, dated November 30, 1994
10.133 (27) Stock Purchase Agreement between Registrant,
Maxoptix Corporation and Kubota Electronics
America Corporation, dated December 26, 1994
10.134 Confidential Resignation Agreement and General 58 - 63
Release of Claims between Registrant and Larry
J. Smart, dated Feburuary 7, 1995
10.135 Lease Agreement by and between 345 Partnership 64 - 100
and Registrant, dated February 24, 1995
10.136 Lease Agreement for Premises Located at 1900 101 - 121
Pike Road, Suite A, Longmont, CO, between
Registrant as Tenant and Pratt Land Limited
Liability Company as Landlord, dated
February 24, 1995
10.137 Lease Agreement for Premises Located at 2040 122 - 142
Miller Drive, Suite A, B, & C between Registrant
as Tenant and Pratt Land Limited Liability
Company as Landlord, dated February 24, 1995
10.138 Manufacturing and Purchase Agreement by and 143 - 168
Between Registrant and Hyundai Electronics
Industries Co., Ltd., dated April 27, 1995
(with certain information deleted and
indicated by blank spaces)
10.139 Lease Agreement for Premises Located at 2040 169 - 192
Miller Drive, Suites D, E, & F, Longmont, CO,
between Registrant as Tenant and Pratt Management
Company, LLC as Landlord
11.1 Computation of Net Loss Per Share 193
20.1 (25) Maxtor Corporation 1995 Stock Option Plan
20.2 (26) Maxtor Corporation Individual Stock Option
Agreement, dated November 8, 1994
21.1 Subsidiaries of Maxtor Corporation, incorporated 194
in Delaware ("Maxtor")
23.1 Consent of Ernst & Young LLP, Independent Auditors 195
27 Financial Data Schedule 196
- ---------------------------------------------------------------------------
(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
(24) Incorporated by reference to exhibits of Form 10-Q filed November 8, 1994
(25) Incorporated by reference to exhibits to Registration Statement No. 33-
56405 effective November 10, 1994
(26) Incorporated by reference to exhibits to Registration Statement No. 33-
56407 effective November 10, 1994
(27) Incorporated by reference to exhibits of Form 10-Q filed February 7, 1995
FOR SETTLEMENT PURPOSES ONLY
CONFIDENTIAL RESIGNATION AGREEMENT
AND GENERAL RELEASE OF CLAIMS
This Confidential Resignation Agreement and General Release of Claims
("Agreement") is made by and between J. Larry Smart ("Smart"), and
Maxtor Corporation, a Delaware corporation ("Maxtor").
WHEREAS, Smart was employed by Maxtor on March 9, 1994 as Chief
Operating Officer, and appointed to the positions of President and Chief
Executive Officer pursuant to the terms of an offer letter dated August
16, 1994 and elected a director of Maxtor on August 18, 1994; and
WHEREAS, it is now the desire and intention of Smart and Maxtor to
terminate their employment relationship on an amicable basis, and that
Smart shall resign from his positions as President and Chief Executive
Officer, and as a Director of Maxtor and its subsidiaries; and
WHEREAS, it is the desire and intention of Maxtor to provide Smart
with certain compensation and benefits that he would not otherwise be
entitled to receive upon the termination of his employment with Maxtor,
and to settle and resolve all claims and disputes which Smart has or may
have against Maxtor;
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration as set forth below, the sufficiency of
which each party hereby acknowledges, Smart and Maxtor agree as follows:
1. Smart hereby resigns from his employment with Maxtor effective
February 16, 1995 (the "Resignation Date").
2. Smart hereby resigns from his positions as President and Chief
Executive Officer of Maxtor and as a director of Maxtor and its
subsidiaries effective as of the Resignation Date.
3. Upon expiration of the seven-day revocation period described
below, Maxtor agrees to provide Smart with the following compensation
and benefits:
(a) Maxtor shall pay to Smart the sum of $333,333.00.
(b) Smart will be eligible to continue his health coverage at his
own expense in accordance with federal law (COBRA), and if Smart
continues to use Maxtor's health insurance program, Maxtor shall
reimburse Smart his health insurance premiums for a ten-month period
following the Resignation Date. Smart 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 Maxtor's 1992 Employee Stock
Purchase Plan. The amounts owing under the 401(k) and Stock Purchase
Plans will be paid to Smart in accordance with Maxtor's customary policy
with respect to employees who leave Maxtor. In addition to the above
amounts, Smart will receive payment for amounts accrued pursuant to
Maxtor's Paid Time Off Policy.
(c) With respect to the stock options granted to Smart by Maxtor
as shown on Exhibit A hereto, Smart shall be entitled to exercise shares
vested as of the Resignation Date until May 17, 1995 notwithstanding any
other exercise time limit set forth in the stock option agreements
between Maxtor and Smart. Such options will continue to be governed by
and subject to all other terms and conditions of the applicable Maxtor
stock option plans and stock option agreements between Smart and Maxtor.
(d) On February 8, 1995, Maxtor will issue a press release
announcing Smart's resignations as described in paragraph 2. Smart
shall have the right to review such announcement prior to its release,
and Maxtor will consider any reasonable revisions Smart may propose to
statements concerning Smart.
(e) At the same time (or shortly after) the press release
described in subsection (d) is issued, Maxtor will issue a memorandum to
Maxtor employees announcing Smart's resignation. Smart shall have the
right to review such announcement prior to its release, and Maxtor will
consider any reasonable revisions Smart may propose to statements
concerning Smart.
(f) Smart shall be entitled to travel once to Longmont, Colorado
at Maxtor's expense to retrieve his personal belongings.
Smart understands and acknowledges that he shall not be entitled to any
compensation or benefits from Maxtor other than those expressly set
forth in this paragraph.
4. In exchange for the compensation and benefits described in
Paragraph 3, Smart and his successors and assigns release and absolutely
discharge Maxtor and its shareholders, present and former directors,
present and former officers, employees, agents, investors, attorneys,
successors and assigns of and from any and all claims, actions and
causes of action, whether now known or unknown, which Smart now has, or
at any other time had, or shall or may have 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
effective date hereof, including, but not limited to, any claims
relating to or arising out of his employment with Maxtor or the
termination of that employment such as breach of contract, wrongful
termination or age, sex, disability or other discrimination under the
Civil Rights Act of 1964, the Age Discrimination In Employment Act of
1967, the Fair Employment and Housing Act, the Americans With
Disabilities Act or any other applicable law. As used in this
paragraph, "Maxtor" includes any and all divisions, subsidiaries or
affiliated entities of Maxtor Corporation. The foregoing releases of
claims shall not affect Smart's right to be indemnified by Maxtor in
accordance with the Indemnity Agreement between Smart and Maxtor, dated
as of March 29, 1994, or its by-laws, from any claims made against Smart
which relate to or arise out of the course and scope of Smart's
employment.
5. Smart acknowledges that he has read section 1542 of the Civil
Code of the State of California which states:
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.
Smart waives any right which he has or may have under section 1542 to
the full extent that he may lawfully waive such rights with respect to
this general release of claims.
6. Smart acknowledges and agrees that he shall continue to be bound
by and comply with the terms of any proprietary rights or
confidentiality agreements between Maxtor and Smart.
7. Smart 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 disclosure may be required for
accounting or tax reporting purposes. Maxtor agrees that it shall not
directly or indirectly disclose any of the terms of this Agreement to
anyone other than its officers, directors, employees having a need to
know or counsel, except as such disclosure may be required for
accounting or tax reporting purposes or as otherwise required by law,
including securities reporting law.
8. Smart agrees that he shall not, at any time in the future, make
any critical or disparaging statements about Maxtor or any of its
officers, directors, employees, affiliates or products to any other
person or entity. This paragraph shall not prevent Smart from
truthfully testifying in response to a validly-issued subpoena or as
otherwise may be required by law. Smart shall provide Maxtor with at
least five days' notice prior to complying with any such legal
requirement.
9. Smart agrees to make himself available to Maxtor through
February 28, 1995, for the purposes of providing information and
assistance, and transitioning his duties and responsibilities. After
February 28, 1995, Smart agrees that he will cooperate with Maxtor in
any matters involving Maxtor or its subsidiaries or affiliates
concerning issues as to which Smart had specific involvement, knowledge
or responsibility, or where subsequent assistance, information and
cooperation is reasonably necessary or appropriate.
10. Smart has returned or will return to Maxtor's General Counsel or
Chief Financial Officer by February 16, 1995, all Maxtor information and
Maxtor property, in whatever form or medium, including, but not limited
to, reports, files, memoranda, records, credit cards, keys, passes,
computer access codes, software, and any other Maxtor information or
property which is in his possession or control and which he prepared,
helped to prepare or acquired in connection with his employment.
Employee will not retain any copies, duplicates, reproductions or
excerpts of same. Employee will also terminate any access which he has
to Maxtor computers, including any access from his residence or other
locations outside Maxtor facilities. As used herein, the term "Maxtor
information" shall include information received from third parties in
confidence or as to which third parties may possess other proprietary
rights, and other Maxtor technical, business, marketing, legal or
financial information.
11. 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.
12. The members of the Board of Directors of Maxtor (other than
Smart) have approved the principal economic terms of this Agreement.
Notwithstanding any provision above, the parties hereto shall have no
continuing obligations under this Agreement after the Resignation Date,
except those obligations described in paragraphs 3, 4, 6, 7, 8, 9, 10
and 11.
13. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and supersedes all
prior negotiations and agreements, whether written or oral, with the
exception of any stock option plans or agreements or indemnity
agreements between the parties and any agreements described in paragraph
6. This Agreement may not be modified except by a document signed by an
authorized officer of Maxtor and Smart.
SMART 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. SMART FURTHER UNDERSTANDS
THAT HE MAY HAVE 21 DAYS TO CONSIDER THIS AGREEMENT, THAT HE MAY REVOKE
IT AT ANY TIME DURING THE 7 DAYS AFTER HE SIGNS IT, AND THAT IT SHALL
NOT BECOME EFFECTIVE UNTIL THAT 7-DAY PERIOD HAS PASSED. SMART
ACKNOWLEDGES THAT HE IS RESIGNING FROM MAXTOR AND FROM HIS POSITIONS AS
AN OFFICER AND DIRECTOR OF MAXTOR AND ITS SUBSIDIARIES, AND SIGNING THIS
AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE
COMPENSATION AND BENEFITS DESCRIBED IN PARAGRAPH 2.
Dated: February 7, 1995 /s/ J. Larry Smart
---------------------
J. Larry Smart
Dated: February 7, 1995 MAXTOR CORPORATION
By: /s/ Walter D. Amaral
-------------------------
Sr. Vice President and
Its: Chief Financial Officer
--------------------------
LEASE AGREEMENT
THIS LEASE AGREEMENT, made and entered into this 24 day of February,
19 95 by and between 345 Partnership hereinafter referred to as
"LANDLORD" and Maxtor Corporation hereinafter referred to as "TENANT";
WITNESSETH:
In consideration of the covenants, terms, conditions, agreements and
payments as hereinafter set forth, the parties hereto covenant and agree
as follows:
1. LEASED PREMISES/SIZE
A. Leased Premises
Landlord hereby leases unto Tenant the following described
leased premises:
The west office area (40,000 sq. ft. 1st & 2nd floor) 345 Francis
Street in Longmont, Colorado. See Exhibit A
B. Square Footage
Landlord and Tenant agree that the total square footage of the
leased premises is 40,000 square feet. The total square footage of the
building improvements, including the square footage of the leased
premises, is 150,000 square feet. For the purpose of calculating
Tenant's proportional share of costs and expenses of the improvements
which are to be paid pursuant to the terms hereof, the said square
footage figures have been and shall be used and shall be deemed
conclusive. A diagram showing the general outline of the leased
premises is attached hereto and incorporated herein by this reference as
Exhibit A. For purposes of this Lease the leased premises are
considered to be a part of the following improvements:
Benson Industrial Park, Longmont, CO consisting of three buildings
- -------------------------------------------------------------------
located at 1510 Florida Avenue (72,315 sq. ft.), 410 S. Sunset St.
- -------------------------------------------------------------------
(56,710 sq. ft.) and 345 Francis St. (150,000 sq. ft.) for a
- -------------------------------------------------------------------
total of 279,025 sq. ft..
- -------------------------------------------------------------------
2. TERM
A. Initial Term
The term of this Lease shall commence at 12:00 noon on the 31st
day of May, 1995, and unless terminated or extended as herein provided
for, shall end at 12:00 noon on the 31st day of December, 1999 .
B. Possession
Tenant shall be entitled to possession of the premises upon
commencement of the term of the lease as set forth in paragraph 2(A)
above. In no event shall Tenant take possession prior to satisfaction
of Tenant's insurance requirements set forth below. If Landlord fails
to give possession of the premises on the initial commencement date
because of the holding over or retention of possession by any other
tenant, subtenant, or occupant; or if the premises are located in a
building being constructed, repaired, or renovated because such building
or work has not been sufficiently completed to make the premises ready
for occupancy; or because a certificate of occupancy has not been issued
or procured; or because of any other reason, Landlord shall not be
subject to any liability for failure to give possession on said date and
the validity of this Lease shall not be impaired nor shall the Lease
terminate, nor shall the failure of giving possession be construed in
any way to extend the term of this Lease provided that if Tenant is not
in any way responsible for the inability to obtain possession and
Landlord fails to deliver possession within ninety (90) days after the
commencement date of this Lease set forth in Paragraph 2(A), this Lease
shall automatically terminate. If, and only if, Tenant is not in any
way responsible for the inability to obtain possession, the rent payable
hereunder shall be abated until the earlier of: (a) the date specified
in a notice from Landlord to Tenant that the premises will be
substantially ready for Tenant's occupancy; or (b) the date Tenant first
does business from or takes possession or commences use of the leased
premises.
3. RENT/DEPOSIT
A. Initial Basic Rent
Until adjusted as provided in Paragraph 4, Tenant hereby
covenants and agrees to pay to Landlord at the address of Landlord as
set forth herein a basic annual rent of Two Hundred Twenty Four
Thousand Seven Hundred Ninety-Six & no/100 U.S. Dollars ( $224,796.00 )
payable without deduction, set off, demand, or notice in equal monthly
installments (basic monthly rental of Eighteen Thousand Seven Hundred
Thirty-Three & no/100 U.S. Dollars ( $18,733.00) in advance on the first
day of each calendar month. The basic annual rent is calculated at the
rate of Five & 62/100 U.S. Dollars ( $5.62 ) per square foot of the
leased premises per annum.
B. Receipt
Landlord acknowledges receipt of the sum of Eighteen Thousand
Seven Hundred Thirty-Three & no/100 U.S. Dollars ( $18,733.00 ) paid by
Tenant upon the execution hereof being in payment of June 1995 basic
rent .
C. Proration of Rent for Partial Months
If the lease term begins on other than the first day of a
month, rent from such date until the first day of the next succeeding
calendar month shall be prorated on the basis of the actual number of
days in such calendar month and shall be payable in advance. If the
lease term terminates on other than the last day of the calendar month,
rent from the first day of such calendar month until such termination
date shall be prorated on the basis of the actual number of days in such
month, and shall be payable in advance.
D. Partial Payments of Rent
No payment by Tenant or receipt by Landlord of an amount less
than the basic monthly rental provided for herein shall be deemed to be
other than on account of the earliest rent then due, nor shall any
endorsement or statement on any check or any letter accompanying any
check or payment of rent be deemed an accord and satisfaction, and
Landlord may accept such check or other payment without prejudice to
Landlord's right to recover the balance of all rent then due, and/or to
pursue any or all other remedies provided for in this Lease, in law,
and/or in equity including, but not limited to, eviction of Tenant.
E. Security/Damage Deposit
Tenant has deposited, per FIRST AMENDMENT TO LEASE AGREEMENT,
the sum of Eighty One Thousand Three Hundred Fifty-Four no/100-- U.S.
Dollars ( $81,354.00 ) with the Landlord, the receipt of which is hereby
acknowledged (except that if such payment is made by check this receipts
subject to collection) as security for the complete and faithful
performance by Tenant of each and every item, covenant, and condition of
this Lease including, but not limited to, payment of rent and care of
leased premises as set forth in Paragraph 11 hereof. In the event that
Tenant defaults in any of the terms, agreements, covenants, and
conditions of this Lease, Landlord, at its sole discretion, may use,
apply or retain the whole or any part of the security/damage deposit for
payment of any damage to the leased premises or the building in which
the leased premises are a part or other losses, cost, or rent in default
or for any other sum which Landlord expends or incurs by reason of
Tenant's breach or default of this Lease. Landlord, at Landlord's sole
discretion, may commingle all or any portion of the security/damage
deposit with Landlord's other funds and may use and/or deposit any
portion or all of the security/damage deposit in an interest bearing or
non-interest bearing account. The security/damage deposit is not, and
shall not be deemed or construed to be, an advance payment or partial
payment of rent or any other cost due from Tenant pursuant to this
Lease. After each application or retention of all or any part of the
security/damage deposit by Landlord and upon Landlord's oral or written
demand to Tenant, Tenant shall pay to Landlord the amount of the
security/damage deposit so applied or retained so that the total amount
of the security/damage deposit during the term of this Lease or any
renewal thereof shall be equal to its original amount, and in the event
that Tenant fails to pay the amount requested by Landlord with ten (10)
days after Landlord's written request, Tenant shall be in default of
this Lease. The security/damage deposit, less any amounts used, applied
or retained under the terms of this Lease will be mailed to Tenant
within sixty (60) days after the later of the following to occur: (a)
the termination of this Lease; or (b) after delivery to Landlord of the
entire possession of the leased premises defined in Paragraph hereof.
In the event that this lease terminates prior to expiration of the
initial term as set forth in Paragraph 2(A) hereof, the security/damage
deposit shall be retained by Landlord and shall not be returned to
Tenant.
4. ANNUAL ADJUSTMENTS OF RENT
At the option of Landlord as of each or any annual anniversary
date of this Lease, the basic monthly rental due under the terms hereof
shall be adjusted by the percentage increase in the U.S. Bureau of Labor
Statistics Consumer Price Index for all urban consumers, U.S. City
Average - all items (commonly referred to as the Cost of Living Index)
as provided herein. The increased monthly rental as so determined shall
commence and be due as of the annual anniversary date for which it is
adjusted. The rent to be paid pursuant to this Lease shall never be
decreased and in no event shall the basic monthly rental be less than
the amount set forth in Paragraph 3(A) of this Lease. In the event that
Landlord elects to adjust the rent as provided for in this Paragraph 4,
but for any reason does not notify Tenant on or before the annual
anniversary date, Tenant shall: (a) continue to pay, as provided
herein, the basic monthly rental due immediately before the annual
anniversary date until notified of the amount of the new adjusted
monthly rental; (b) begin paying the new basic monthly rental on the
first day of the calendar month after notification of the amount of the
new adjusted monthly rental; and (c) on the first day of the calendar
month after notification of the new adjusted monthly rental pay the
total amount of the increase in the monthly rental due for each month
prior to such notification beginning with the annual anniversary date
for which the rent is adjusted.
In the event the Landlord elects to adjust the basic monthly
rental by the increase in the Cost of Living Index, as provided in this
Paragraph 4, the new basic monthly rental to be paid shall be the amount
arrived at by multiplying the basic monthly rental in Paragraph 3(A) by
a fraction, the numerator of which shall be the last Cost of Living
Index published before the anniversary date for which the rent is being
adjusted, and the denominator for which shall be the last Cost of Living
Index published before the commencement date of this Lease as set forth
in Paragraph 2(A). In the event said Cost of Living Index ceases to be
made available, Landlord shall have prepared, by a public or private
concern, a similar index, the cost for which shall be a common area
expense. Notwithstanding the foregoing, the parties agree that the
increase in base rental for each year shall be not less than three
percent (3%) nor more than seven percent (7%) of the base rental for the
previous year, each year for such purposes to commence on the
anniversary of the commencement date.
5. TAXES - REAL PROPERTY - SPECIAL ASSESSMENTS
A. Responsibility
For each year during the term hereof any extension hereof,
Tenant shall pay as additional rental their proportionate share of all
real estate taxes assessed against the improvements of which the leased
premises are part. For purposes of this Lease the term "real estate
taxes" shall refer to all general and special real estate taxes, all
special assessments, mall assessments, if any, and all other taxes,
fees, rates, charges, levies or assessments levied upon or assessed
against the real property or the improvements of which the leased
premises are a part by any governmental, quasi-governmental, or private
authority or any tax or assessment specifically imposed in lieu of such
taxes, fees, rates, charges, levies or assessments, but excluding any
income, profit, or business tax charged or levied against Landlord.
Reasonable expenses, including attorneys' fees incurred by Landlord in
contesting or in determining whether or not to contest the levying,
imposition, or amount of any such real estate taxes or in obtaining or
attempting to obtain reduction of any real estate taxes, shall be added
to and included int he amount of any such real estate taxes. Landlord
shall have no obligation to contest, object to or litigate the levying
or imposition of any real estate taxes and may settle, compromise,
consent to, waive or otherwise determine in Landlord's discretion any
real estate taxes without consent or approval of Tenant. Tenant shall
pay its proportionate share of real estate taxes as set forth above
within ten (10) days after Landlord notified Tenant of the amount of
real estate taxes due from Tenant, and such amount shall be considered
additional rent under the terms hereof. In the event the first and last
years of this lease are not calendar years, the liability of Tenant for
real estate taxes under the terms of this Paragraph 5 shall be prorated
with Tenant being liable for those number of days during which this
Lease was in effect.
B. Estimated Annual Real Estate Taxes
Landlord shall estimate annual real estate taxes relating to
leased premises and compute as additional rent based upon the estimated
annual real estate taxes. The additional rent is payable in equal
monthly installments, in advance, on the first day of each month,
commencing at the time fixed for the commencement of this lease as
provided for herein. Landlord shall readjust the additional rent
annually based upon the actual cost for the preceding period and shall
refund any excess paid by the Tenant to the Tenant.
C. Increase in Taxes Due to Tenant Improvements
Should real estate taxes assessed against the improvements of
which the leased premises are a part increase due to the construction of
improvements by, or for the benefit of, the Tenant, Tenant shall pay as
additional rent all of such increase in taxes which is attributable to
the value of the Tenant improvements.
6. TAXES - PERSONAL PROPERTY - RESPONSIBILITY
Tenant shall be responsible and pay for any and all taxes and/or
assessments levied and/or assessed against any furniture, fixtures,
equipment and items of a similar nature installed and/or located in or
about the leased premises by Tenant.
7. UTILITIES - RESPONSIBILITY
Tenant shall be responsible for obtaining and shall pay as and
when the same become due and payable, all charges for heat, gas, water,
sewer, electric services and any other utility service used or consumed
in the improvements of which the leased premises are a part. If any of
the utilities are not separately metered or assessed to the leased
premises or are only partially separately metered or assessed to the
leased premises and are used in common with other tenants of or portions
of the improvements of which the leased premises are a part, Tenant
shall pay to Landlord, as additional rent under the terms hereof, their
proportionate share of the amount of such utilities that are used in
common with other tenants in the improvements of which the leased
premises are a part. Within ten (10) days after presentation of a
statement from Landlord showing the amount of such utility service
charges for which Tenant is responsible, Tenant shall pay to Landlord
the amount set forth in said statement. In the event Landlord pays all
or any of the utility services for which Tenant is responsible, pursuant
to the terms hereof, and if such utility services are separately metered
or assessed to the leased premises or partially separately metered or
assessed to the leased premises, Tenant shall pay to Landlord within ten
(10) days of being presented with a statement from Landlord, as
additional rent under the terms hereof, the amount of said statement in
addition to the above prorated share of such utility services that are
used in common in the improvements. No interruption, malfunction or
failure in the supply of any utility to the leased premises or the
improvements of which the leased premises are a part shall constitute an
actual or constructive eviction or a breach by Landlord of any of its
obligations hereunder, or render Landlord liable for damages or entitle
Tenant to be relieved from any of Tenant's obligations hereunder,
including the obligation to pay rent or grant Tenant any right of set
off or recoupment, except that Tenant's obligation to pay rent shall be
abated in the event the interruption, malfunction or failure directly
results from the intentional or grossly negligent act of Landlord. Upon
termination of this Lease or abandonment of the leased premises, Tenant
shall terminate, cancel or transfer to another party as directed by
Landlord any and all utilities including water, sewer, gas, heat,
electric services, telephone services, and any other utility service
used or consumed which are the responsibility of or listed with the
utilities service companies in the name of Tenant and Tenant hereby
irrevocably appoints and constitutes Landlord as its agent and attorney
in fact to effect such cancellation, termination, transfer or assignment
of such utility services if Landlord in its sole discretion elects to do
so, if Tenant fails to do so on or before the termination date.
8. HOLDING OVER
In the event that Tenant shall not immediately surrender
possession of the premises at the termination of this Lease, Tenant
shall become a tenant from month to month, only if rent is paid to and
accepted by Landlord in advance at the rate of rental payable under just
prior to the termination of this Lease. Unless and until Landlord
accepts such rental from Tenant, Landlord shall be entitled to retake or
recover possession of the premises as provided in case of default on the
part of Tenant and Tenant shall be liable to Landlord for any loss or
damage it may sustain by reason of Tenant's failure to surrender
possession of the premises immediately upon expiration of the term of
this Lease, or, if applicable, the last properly exercised extended term
hereof as provided in Paragraph 34. No holding over by Tenant shall
operate to renew or extend this Lease, other than as provided in
Paragraph 34, without the written consent of Landlord to such renewal or
extension having been first obtained. If Tenant shall fail to surrender
possession of the premises immediately upon such term expiration, Tenant
hereby agrees that all obligations, including those for rent, of Tenant
and all rights of Landlord applicable during the term of this Lease
shall be equally applicable during such period of subsequent occupancy
whether or not the month to month tenancy shall have been created as
aforesaid. For purposes of this Lease, Tenant shall be deemed to have
not surrendered possession of the leased premises if Tenant has failed
to cancel, terminate, assign, or transfer any of the utility services as
provided in Paragraph 7 hereof, and if any utility service company fails
or refuses to accept the power of attorney of Landlord set forth in
Paragraph 7, or if Tenant exercises or refuses to release any other
control or authority over, or with regard to, the leased premises
regardless of whether or not Tenant is in physical possession of the
leased premises including, but not being limited to, failure to return
keys, failure to remove personal property from the leased premises, or
failure to cancel telephone service to the leased premises or to the
improvements of which the leased premises are a part.
9. MODIFICATIONS OR EXTENSIONS
No modification, termination or extension of this Lease shall be
binding unless in writing, signed by the parties hereto and endorsed
hereon or attached hereto.
10. SIGNS/CONSTRUCTION - LANDLORD'S APPROVAL - TENANT'S
RESPONSIBILITY
A. Signs
Tenant shall not erect any sign in, on or near the leased
premises, or the improvements of which the leased premises are a part
regardless of size or value without the prior written consent of
Landlord, and all such signs approved by the Landlord pursuant hereto
shall strictly conform to Landlord's requirements and specifications for
the sign and placement and attachment thereof.
B. Construction - Tenant's Responsibility
During the term of this Lease, and subject to the provision of
Paragraph 10(C) hereof, Tenant may, at Tenant's expense, erect inside
partitions, add to existing electric power service, add telephone
outlets, add light fixtures, install additional heating and/or air
conditioning, or make such other changes or alterations to the leased
premises as Tenant may desire, provided that prior to commencement of
any such work, Tenant shall submit to Landlord a set of fully detailed
drawings and specifications for proposed alteration, prepared by a
licensed architect or engineer. Landlord may refuse to consent to the
alterations because of the inadequacy of the drawings and
specifications. At the end of this Lease, all such fixtures,
equipment, additions and/or alterations (except trade fixtures installed
by Tenant and specifically listed in Exhibit B which is attached hereto
and incorporated herein) shall be and shall remain the property of
Landlord; provided, however, Landlord shall have the option to require
Tenant to remove any or all such fixtures including trade fixtures,
equipment, additions and/or alterations and restore the leased premises
to the condition existing immediately prior to such change and/or
installation, normal wear and tear excepted, all at Tenant's cost and
expense. All such work shall conform to all applicable governmental
requirements and shall be done in a good and workmanlike manner and
shall consist of new materials unless agreed to otherwise by Landlord.
Any and all repairs, changes and/ or modifications to the leased
premises shall be the responsibility of and at the cost of Tenant.
C. Construction - Landlord's Approval
Tenant shall not make any improvement, addition, deletion,
change, construction or alteration to the interior or exterior of the
leased premises or the improvements, without the written approval of
Landlord being obtained by Tenant prior to the commencement of such
work, which approval shall not be unreasonably withheld or delayed.
D. Roof
Prior to the cutting of any holes in the roof and/or any
exterior surfaces and prior to any work being performed and/or any
equipment being installed on the roof or exterior of the building or
leased premises by Tenant, Tenant shall obtain the written approval of
Landlord, which approval shall not be unreasonably withheld or delayed.
Any repairs required as a result of work by Tenant shall be the
responsibility of Tenant, and all costs thereof shall be paid by Tenant.
E. Security/Bond for Work
As a condition to the granting of any approval required
pursuant hereto, Landlord shall have the right to require Tenant to
furnish a bond or other security reasonably acceptable to Landlord
sufficient in the reasonable opinion of Landlord to assure completion of
any payment for all such work to be so performed.
F. No Approval or Security for Work - Landlord's Remedies
Landlord's right or option to inspect the leased premises or
the improvements of which the leased premises are a part or to provide
management or on-site supervision of the leased premises or the
improvements or any actual such inspection, management or on-site
supervision shall not be a waiver of Landlord's right to withhold
written approval of any work to be done by Tenant as provided in this
Paragraph 10 nor of Landlord's right to require Tenant to furnish a bond
or other security pursuant to Paragraph 10(E). Landlord's right to
withhold or deny such written approval of Tenant's proposed or actual
improvement, addition, deletion, change, construction or alteration and
to require and receive from Tenant a bond or other security as provided
in Paragraph 10(E) shall be waived only if Landlord specifically and in
writing, signed by Landlord, waives either or both such rights under
this Paragraph 10. In the event that Tenant commences any improvement,
addition, deletion, change, construction or alteration as provided in
Paragraph 10 without the written approval of Landlord prior to the
commencement of such work, and/or fails to furnish a bond or other
security acceptable to Landlord pursuant to Paragraph 10(E), Landlord
shall be entitled to exercise any of its remedies as provided in this
Lease for default by Tenant as well as any remedies available to
Landlord in law or in equity including injunctive relieve and eviction
of Tenant.
11. CARE OF LEASED PREMISES - RESPONSIBILITY
During the term of this Lease, Tenant agrees to keep and maintain
the interior of the leased premises in good clean condition and repair
at Tenant's cost and expense. Tenant further agrees to return the
leased premises at the end of the term to Landlord in as good condition
as when received. Tenant further agrees to be responsible for any
repairs and/or maintenance required for any part of the improvements of
which the leased premises are a part and its fixtures and equipment
where such repair and/or maintenance is necessitated by actions,
inactions and/or activities conducted on the leased premises by Tenant
and/or Tenant's licensees, invitees, employees, contractors, servants
and/or legal representatives.
12. MAINTENANCE FOR COMMON AREA, EXTERIOR AND HVAC.
Except as herein otherwise provided for, Landlord shall maintain
or shall obtain the services of a third party to maintain the roof, HVAC
systems, and exterior of the building, the exterior grounds and all
common areas of the improvements of which the leased premises are a
part, including without limitation parking lots, green areas, sidewalks,
common entrances, and common corridors, in good repair and condition.
Tenant shall be responsible for and pay as additional rent their
proportionate share of the total operating cost incurred in such
operations, maintenance, and repairs excluding only items of expense
commonly known and designated as carrying charges. Such total operating
costs shall include but not be limited to the cost and expenses incurred
for preventative maintenance; repairs; utilities, HVAC filters and
compressors, sealing, striping, janitorial services; building security;
snow removal (Tenant is responsible for snow removal of less than 2"),
lawn mowing, gardening, watering, shrub care and replacement, and
removal of trash, rubbish, garbage and other refuse; parking area
maintenance, sign maintenance, depreciation on the machinery and
equipment used in such services, maintenance and repairs; the cost of
personnel to implement such services, to direct parking and to police
the common areas; and an amount for the management of the improvements
of which the leased premises are a part not to exceed five percent (5%)
of the total rent, including on-premises supervision if elected at the
sole option of Landlord, which management service may be supplied at the
option of Landlord by Landlord or by a managing agent for the Landlord.
In the event that Landlord elects to retain the services of a third-
party managing agent with respect to the management of the improvements
of which the leased premises are a part, the amount billed by said
managing agent to Landlord shall be included as one of the operating
costs as set forth hereinabove. Landlord shall estimate such
maintenance costs and compute the additional rent initially based upon
such estimate. Such additional rent is payable in equal monthly
installments, in advance, on the first day of each month, commencing at
the time fixed for the commencement of this Lease as provided for
herein. Landlord shall readjust such additional rent annually based
upon the actual cost for the preceding period and shall refund any
excess paid by the Tenant to the Tenant within sixty (60) days of
readjustment.
For the first year of the lease, Landlord agrees that the total of
the maintenance fees referred to in this paragraph will not exceed $.80
per square foot annually.
13. GOVERNING LAWS AND CARE OF GROUNDS - TENANT
Tenant shall abide by and conform to all present and future laws
and ordinances of any governmental or quasi-government-al authority
having jurisdiction over the leased premises. Tenant shall not allow
any accumulation of trash or debris on the leased premises or within any
portion of the improvements of which the leased premises are a part.
All receiving and delivery of goods and merchandise and all removal of
garbage and refuse shall be made only by way of the rear and/or other
service door provided therefore. In the event the leased premises shall
have no such door, then these matters shall be handled in a manner
satisfactory to Landlord. No storage of any material outside of the
leased premises shall be allowed unless first approved by Landlord in
writing, and then in only such areas as are reasonably designated by
Landlord. Tenant shall not commit or suffer any unlawful act or waste
on the leased premises nor shall Tenant permit any nuisance to be
maintained in the leased premises or permit any disorderly conduct,
common noise or other activity having a tendency to annoy unreasonably
or disturb any occupant of any part of the improvements of which the
leased premises are a part and/or any occupants of any adjoining or
neighborhood property.
14. LIABILITY FOR OVERLOAD
Tenant shall be liable for the cost of any damage to the leased
premises caused by Tenant, the improvements of which the leased premises
are a part, or the sidewalks and pavements adjoining the same resulting
from the movement of heavy articles. Tenant shall not unduly load or
overload the floors of any part of the leased premises or the
improvements of which the leased premises are a part.
15. GLASS AND DOOR RESPONSIBILITY
All glass and doors on the leased premises shall be the
responsibility of the Tenant. Any replacement or repair shall be
promptly completed by and at the expense of the Tenant.
16. RULES AND REGULATIONS
Landlord reserves the right to adopt and promulgate rules and
regulations applicable to the leased premises and the land and
improvements of which the leased premises are a part of from time to
time to amend or supplement said rules or regulations. Written notice
of such rules and regulations and amendments and supplements thereto
shall be given to Tenant, and Tenant agrees to comply with and observe
such rules and regulations and amendments and supplements thereto,
provided, however, that the same shall apply uniformly to all tenants of
the improvements of which the leased premises are a part and shall not
conflict with the terms of this Lease.
17. USE OF PREMISES
Tenant shall use the leased premises for office, manufacturing and
storage, which shall include the sale and offering for sale of all of
the goods, wares and merchandise and the performance of such services as
are usually incidental to such business but Tenant shall refrain from
the sale of merchandise and performance of services not usually
incidental to such businesses. The operation of any other business on
the leased premises is hereby expressly prohibited. Nothing in this
Lease shall be construed as granting Tenant an exclusive right to the
sale or furnishing of any particular merchandise or service. No auction,
fire or bankruptcy sales may be conducted in the leased premises or on
the improvements or on real property of which the leased premises are a
part without the prior written approval of Landlord. Tenant shall not
carry any stock of goods or do anything in or about the leased premises
which will, in any way, void or make voidable or tend to increase the
rates for any insurance on the leased premises and/or the improvements
of which the leased premises are a part and/or the real property on
which said improvements are located. Tenant agrees to pay, as
additional rent, an amount equal to any increase in the insurance
premiums that may be charged during the term of this Lease for the
amount of the insurance carried by Landlord on the total improvements of
which the leased premises are a part when such increase results from
activities carried on by Tenant on the leased premises or the
improvements or real property of which the leased premises are a part,
whether or not Landlord has consented to the same.
18. INSURANCE - RESPONSIBILITY OF TENANT
Tenant shall procure, pay for and maintain comprehensive public
liability insurance providing coverage from any loss or damage
occasioned by an accident or casualty, about or adjacent to the leased
premises which policy shall be written on an "Occurrence Basis" with
limits of not less than $1,000,000 liability coverage and $1,000,000
property damage coverage. In addition thereto, Tenant shall maintain
all risk insurance on its personal property located on the leased
premises and covering all of Tenant's leasehold improvements, fixtures
and alterations, in an amount not less than 100% of the full replacement
cost.
Certificates of such insurance listing Landlord as an additional
insured shall be delivered by Tenant to Landlord at any and all times
requested by Landlord and shall provide that said coverage shall not be
changed, modified, reduced or cancelled with-out thirty (30) days prior
written notice thereof being given to Landlord.
19. INSURANCE - RESPONSIBILITY OF LANDLORD
The Landlord shall have and maintain in effect at all times, fire,
extended coverage and vandalism and malicious mischief, and general
liability insurance in such amounts as shall be determined appropriate
by Landlord. Within thirty (30) days after notification of the amount
of the premium for such insurance, Tenant shall pay to Landlord, as
additional rent due under the terms hereof, their proportionate share of
the amount of such premium. If necessary, the amount due pursuant to
this Paragraph 19 shall be prorated on the basis of the ratio of the
portion of the term of this Lease within the term of the policy for
which the premium charge has been made to the total term of the policy
for which the premium charge has been made.
Landlord shall estimate annual insurance relating to leased
premises and compute as additional rent based upon the estimated annual
insurance. The additional rent is payable in equal monthly
installments, in advance, on the first day of each month, commencing at
the time fixed for the commencement of this Lease as provided for
herein. Landlord shall readjust the additional rent annually based upon
the actual cost for the preceding period and shall refund any excess
paid by the Tenant to the Tenant.
20. REGULATIONS ON USE - TENANT'S RESPONSIBILITY
It shall be Tenant's sole and exclusive responsibility to meet all
fire regulations of any governmental unit having jurisdiction over the
leased premises as such regulations affect Tenant's operations, all at
Tenant's sole cost and expense. Tenant further agrees not to install
any electrical equipment that overloads any electrical paneling,
circuitry or wiring and further agrees to comply with the requirements
of the insurance underwriter and any governmental authorities having
jurisdiction thereof.
21. DAMAGE TO LEASED PREMISES/IMPROVEMENTS
In the event of any damage to the leased premises or the
improvements of which the leased premises are a part, including the
equipment of the improvements or in the event of malfunction or other
failure of such equipment, Tenant agrees to give Landlord notice of such
damage, malfunction or failure as soon as possible after receiving
notice of such damage, malfunction or failure. In the event the leased
premises and/or the improvements of which the leased premises are a part
shall be totally destroyed by fire or other casualty or so badly damaged
that, in the opinion of the Landlord, it is not feasible to repair or
rebuild same, Landlord shall have the option and right to terminate this
Lease upon written notice to Tenant. If the leased premises shall be
partially damaged by fire or other casualty, except if caused by
Tenant's negligence or misconduct, and said leased premises are not
rendered untenantable thereby, as determined by Landlord, an appropriate
reduction (determined by Landlord) of the rent shall be allowed for the
unoccupied portion of the leased premises until repair thereof shall be
substantially completed. If the leased premises are rendered
untenantable thereby, except if caused by Tenant's negligence or
misconduct, Tenant may, at its election, terminate this Lease by written
notice to Landlord within fifteen (15) days after the day of the damage.
If Tenant elects not to terminate the Lease and the damage was not
caused by Tenant's negligence or misconduct, the rent shall abate in
proportion to the loss of use of the leased premises by Tenant during
such untenantability. If the damage was caused by Tenant's negligence
or misconduct, Tenant shall remain liable for the full rent and other
charges and obligations hereunder, unless Landlord determines repair or
reconstruction is not feasible and Landlord exercises its above option
to terminate this Lease.
22. INSPECTION OF AND RIGHT OF ENTRY TO LEASED PREMISES
A. Tenant has inspected the leased premises and accepts the same
in the condition that exists as of the date hereof except as follows:
1. None
No representation or warranty express or implied has been made by or on
behalf of Landlord as to the condition of the leased premises or as to
the use that may be made of same.
B. Landlord and/or Landlord's agents and employees shall have
the right to enter the leased premises at all times during regular
business hours and at all times during emergencies, to examine the
leased premises, to make such repairs, alterations, improvements or
additions as Landlord may deem necessary or desirable, and Landlord
shall be allowed to take all materials into and upon said premises that
may be required therefore without the same constituting an eviction of
Tenant in whole or in part, and, except as may be otherwise provided in
this Lease, the rent reserved shall in no way abate while such repairs,
alterations, improvements or additions are being made, and Landlord
shall not be liable to Tenant for reason of loss or interruption of
business of Tenant or otherwise. Except in the case of an emergency,
Tenant may require and provide an employee of Tenant to accompany
Landlord's employees or agents at all times on the premises, and, upon
Tenant's request, Landlord shall obtain signatures from all employees
and/or agents entering the premises to a reasonable confidentiality
agreement provided by Tenant. In the event of forcible entry into the
leased premises by Landlord or Landlord's agents, employees, invitee or
licensees as a result of any emergency, Tenant shall pay all costs or
damages and agrees to indemnify and hold harmless Landlord for any
liability, costs or damages, including attorneys' fees, which result
from Tenant's negligence or use or occupation of the leased premises,
excepting Landlord's gross negligence or willful misconduct. Landlord
reserves the right, at any time during the term hereof, to exhibit the
leased premises to any prospective purchaser of the improvements of
which the leased premises are a part and/or to place upon the leased
premises, and/or the improvements of which the leased premises are a
part, a notice or sign indicating the property is for sale or mortgage
financing or posting notices of non responsibility under any mechanic's
lien law, and during the six (6) months prior to the expiration of the
term of this Lease or any renewal thereof, Landlord may exhibit the
premises to prospective tenants and may place upon the leased premises
and/or the improvements notices indicating the leased premises are for
lease.
23. DEFAULT - REMEDIES OF LANDLORD
A. Default/Repossession or Reletting
If the Tenant shall fail to make any payment of rent within the
due date set forth herein or, if after 30 days written notice of
default, Tenant shall remain in default in the keeping of any of the
terms, covenants, or conditions of this Lease to be kept and/or
performed by Tenant, Landlord may immediately, or at any time thereafter
declare this Lease terminated and reenter the leased premises, remove
all persons and property therefrom, without being liable to indictment,
detainer, and repossess and enjoy the leased premises, together with all
additions thereto or alterations and improvements thereof. Landlord
may, at its option, elect to treat this Lease as still in effect and
relet the leased premises or any part thereof for the account of Tenant.
The Landlord shall receive and collect the rents therefor and apply the
same first to the payment of such expenses as Landlord may have incurred
in recovering possession and for putting the same in good order and
condition for rental, and expense and commissions and charges paid by
Landlord in reletting the leased premises. Any such reletting may be
for the remainder of the term of this Lease or for a longer or shorter
period. Whether or not the leased premises or any part thereof be
relet, Tenant shall pay the Landlord the rent and all other charges
required to be paid by Tenant up to the time of the expiration of this
Lease or of such recovered possession, as the case may be, and
thereafter, Tenant, if required by Landlord, shall pay to Landlord until
the end of the term of this Lease, the equivalent of the amount of all
rent reserved herein and all other charges required to be paid by
Tenant, less the net amount received by Landlord for such reletting, if
any. If the leased premises shall be reoccupied by Landlord, then, from
and after the date of repossession, Tenant shall be discharged of any
obligations to Landlord under the provisions hereof for the payment of
rent. In event of any default by Tenant, and regardless of whether the
leased premises shall be relet or possessed by Landlord, any fixtures,
additions, furniture, and the like then on the leased premises may be
retained by Landlord.
B. Tenant - Bankruptcy or Insolvency
In the event an assignment of Tenant's business or property
shall be made for the benefit of creditors, or, if the Tenant's
leasehold interest under the terms of this Lease shall be levied upon by
execution or seized by virtue of any writ of any court of law, or, if
application be made for the appointment of a receiver for the business
or property of Tenant, or, if a petition in bankruptcy shall be filed by
or against Tenant, then and in any such case at Landlord's option with
or without notice, Landlord may terminate this Lease and immediately
retake possession of the leased premises without the same working any
forfeiture of the obligations of Tenant hereunder.
C. Abandonment - Tenant's Property
In the event Tenant is in default under the terms hereof, and
by the sole determination of Landlord, has abandoned the leased
premises, Landlord shall have the right to remove all the Tenant's
property from the leased premises and dispose of said property in such
manner as determined best by Landlord, all at the cost and expense of
Tenant and without liability of Landlord for the actions so taken.
D. Personal Property Lien
Tenant hereby grants to Landlord a lien on and security
interest in all of Tenant's personal property and fixtures (and proceeds
thereof) now or hereinafter located in the leased premises or the
improvements of which the leased premises are a part for the payment of
all rentals, charges and expenses due or to become due pursuant hereto.
Tenant hereby specifically waives any and all exemptions to such lien
allowable by law. Upon default of Tenant in the payment of any rental
expense or other charge due under the terms hereof, Landlord may take
possession of any or all of the said personal property and fixtures
either to its own use or for the purpose of selling said property at a
public or private sale, and out of the money derived from such sale
Landlord shall pay the amount due Landlord for the said rent expenses
and charges and all costs growing out of the enforcement of this lien,
including reasonable attorneys' fees, paying the surplus, if any, to
Tenant. If the property or any portion thereof is offered for sale,
Landlord may become the purchaser of the property.
E. Remedies Non-inclusive
In addition to any remedy granted to Landlord by the terms
hereof, Landlord shall have available any and all rights and remedies
available by statute, in law or in equity. No remedy herein or
otherwise conferred upon or reserved to Landlord shall be considered
inclusive of any other remedy but shall be cumulative and shall be in
addition to every other remedy given hereunder whether now or hereafter
existing at law or in equity or by statute. Further, all or any powers
and remedies given by this Lease to Landlord may be exercised from time
to time and as often as occasion may arise or as may be deemed expedient
by Landlord.
F. Landlord's Delay or Omission
No delay or omission of Landlord to exercise any right or power
arising from any breach or default shall impair any such right or power
or shall be considered to be a waiver of any such breach or default or
acquiescence thereof. The acceptance of rental or any part thereof by
Landlord shall not be deemed to be a waiver of any breach or default of
any of the covenants herein contained or of any of the rights of
Landlord to any remedies herein given.
G. Notice Waiver
Except for the notice specifically provided for in this Lease
or required by Colorado statute, Tenant hereby waives any and all notice
provided in law or in equity, including notice of forcible detainer,
unlawful detainer, forcible entry and detainer, unlawful entry and
detainer, and notice of default. In the event that Landlord elects to
give Tenant any such notice, including, but not limited to, a Demand for
Payment of Rent or Possession, such notice shall not be construed as a
termination of Tenant's obligations under this Lease, unless
specifically stated in the notice, and Landlord shall be entitled to
enforce all of its rights provided herein without limitation, including,
but not limited to, its right to continue to receive rent and other
payments due from Tenant and to enforce the provisions set forth in
Paragraph 23(A) herein.
H. Landlord's Liability
Notwithstanding anything to the contrary contained herein,
Landlord's liability under this Lease for any cause including without
limitation Landlord's own negligence or willful default, shall be
limited to Landlord's interest in the improvements of which the leased
premises are a part.
24. LEGAL PROCEEDINGS - RESPONSIBILITY
In the event of any proceeding at law or in equity wherein
Landlord, without being in default as to its covenants under the terms
hereof, shall be made a party to any litigation by reason of Tenant's
interest in the leased premises or, in the event Landlord shall be
required to commence any legal proceedings relating to the leased
premises and/or Tenant's occupancy thereof and/or Tenant's relation
thereto and/or to enforce Tenant's agreements and covenants herein,
Landlord shall be allowed and Tenant shall be liable for and shall pay
all costs and expenses incurred by Landlord, including reasonable
attorneys' fees and such costs and expenses shall be additional rent.
In the event Tenant, without being in default as to its covenants under
the terms hereof, shall be required to commence any legal proceedings to
enforce Landlord's agreements and covenants herein, Tenant shall be
allowed and Landlord shall be liable for and shall pay all costs and
expenses incurred by Tenant including reasonable attorneys' fees.
25. HOLD HARMLESS BY TENANT
Tenant hereby indemnifies and holds Landlord harmless from and
against any and all liability, claims, losses, damages, expenses, costs,
judgments and/or demands arising from the conduct of Tenant on the
leased premises and/or on account of any operation, action or inaction
by Tenant and/or from any breach or default on the part of Tenant or any
act of negligence of Tenant, its agents, contractors, servants,
employees, licensees or invitees; or any accident, injury or death to
any person or damage to any property in or about the leased premises
except where solely caused by the gross negligence or intentional act or
omission of Landlord, its employees or agents.
26. ASSIGNMENT, SUBLETTING OR LEASEHOLD MORTGAGE
Tenant shall not assign the Lease nor mortgage the lease-hold.
Tenant shall not sublet the leased premises without the Landlord's prior
review of the proposed sublease and written consent. If this Lease is
assigned, or if the leased premises or any part thereof is sublet, or
occupied by anyone other than the Tenant, the Landlord may, after
default by the Tenant, collect rent from the assignee, subtenant, or
occupant and apply the net amount collected against all rent herein
reserved. No such assignment, subletting, occupancy, or collection
shall be deemed a waiver of this covenant, or the acceptance of the
assignee, subtenant, or occupant as tenant, or a release of Tenant from
further performance by the Tenant of the covenants in this Lease. The
consent by the Landlord to an assignment or subletting shall not be
construed to relieve the Tenant from obtaining the consent in writing of
the Landlord to any further assignment or subletting.
27. SALE OF TENANT'S BUSINESS
In the event that Tenant sells its business which is conducted on
the leased premises, Tenant shall notify Landlord of such sale no less
than sixty (60) days and no more than one hundred twenty (120) days
before the scheduled closing date. Within thirty (30) days after
receipt of such notification, Landlord and the proposed purchaser of
Tenant's business, hereinafter Buyer, shall enter into and execute a new
lease for the remainder, after the actual closing date, of the then
current term of this Lease, which new lease shall contain the same
terms, conditions, and agreements as contained in this Lease provided
that, at Landlord's sole discretion, the then current basic monthly
rental shall be increased by no more than ten percent (10%) of such
rental and provided further that Buyer shall have an option to extend
the term of the new lease only for such additional terms as remain for
potential exercise by Tenant pursuant to Paragraph 34 hereof. All other
terms and conditions of this Lease shall be agreed to by Buyer in the
new lease including, by way of clarification and not limitation, the
adjustment of the base rental set forth in Paragraph 4 hereof. In the
event such new lease is entered into and executed by Landlord and Buyer
within thirty (30) days after receipt of notification of sale by
Landlord from Tenant as set forth hereinabove, this Lease shall
terminate on the date of closing of the sale of Tenant's business to
Buyer. In the event that such new lease is not entered into and
executed by Landlord and Buyer within the said thirty (30) days after
receipt of notice of sale by Landlord or in the event that the sale of
Tenant's business to Buyer does not close, this Lease shall not
terminate but shall continue in full force and effect and the new lease
shall be unenforceable. Any new lease entered into pursuant to this
Paragraph 27 shall be contingent upon the closing of the sale from
Tenant to Buyer. For purposes of this paragraph, the sale of tenant's
corporate stock shall not be deemed to be a sale of Tenant's business.
28. WARRANTY OF TITLE
Landlord covenants it has good right to lease the leased premises
in the manner described herein and that Tenant shall peaceably and
quietly occupy and enjoy the premises during the term of the Lease. The
individual executing this Lease on behalf of Landlord has authority to
do so, and Tenant may rely on that authority without independent
investigation.
29. ACCESS
Landlord shall provide Tenant non-exclusive access to the leased
premises through and across land and/or other improvements owned by
Landlord. During the term of this Lease, Landlord shall have the right
to designate and/or change all such non-exclusive access and other
common facilities of the land and/or improvements of which the leased
premises are a part.
30. GOVERNMENTAL ACQUISITION OF PROPERTY
The parties agree that Landlord shall have complete freedom of
negotiation and settlement of all matters pertaining to the acquisition
of the real property and improvements thereon of which the leased
premises are a part, it being understood and agreed that any financial
settlement respecting land or improvements thereon or portions thereof
or rights therein to be taken whether resulting from negotiation and
agreement or condemnation proceedings, shall be the exclusive property
of Landlord, there being no sharing whatsoever between Landlord and
Tenant of any sum received and Tenant hereby waives any and all claim
thereto. After the taking of the property, Landlord shall attempt to
provide the same amount of square feet of land area and usable building
space for Tenant's operations in the immediate vicinity of the leased
premises and in the event Landlord cannot so do, this Lease shall
terminate automatically, but Tenant shall not receive payment of any
form of compensation. The taking of real property, improvements
thereon, portions thereof, or rights therein as noted herein shall not
be considered as a breach or default of this Lease by Landlord, nor give
rise to any claims in Tenant for damages or compensation from Landlord.
Tenant may separately claim and recover from the condemning authority
the value of any personal property owned by Tenant which is taken and
any relocation expenses owed to Tenant by the condemning authority.
31. CHANGES AND ADDITIONS TO IMPROVEMENTS - LANDLORD
Landlord reserves the right at any time to make alterations or
additions to the improvements of which the leased premises are a part
and/or to build additions or other structures unto, or adjoining, said
improvements. Landlord also reserves the right to construct other
buildings and/or improvements in the immediate area of the improvements
in which the leased premises are located and to make alterations or
additions thereto, all as Landlord shall determine. Easements for light
and air are not included in the leasing of the leased premises to
Tenant. Landlord further reserves the exclusive right to the roof of
the improvements of which the leased premises are a part except as
provided for in this Lease. Landlord also reserves the right at any
time to relocate, vary and/or adjust the size of any of the
improvements, parking areas or other common areas relating to and/or
including the land and/or improvements of which the leased premises are
a part, provided, however, that all such changes shall be in compliance
with the minimum requirements, or with the approval of, govern-mental
authorities having jurisdiction over the property.
32. SUBORDINATION
The Tenant agrees that its lease rights will be subordinate to
those of any lending institutions making any loan upon the real property
of which the leased premises are a part. Although not necessary to
effect such subordination, Tenant further agrees to sign all documents
reflecting this subordination when and if requested by the Landlord and
to deliver all such documents with Tenant's signature to Landlord with
ten (10) calendar days after Landlord requests Tenant to sign such
documents. Tenant hereby appoints Landlord as its attorney-in-fact,
irrevocably, to execute and deliver any such instrument on Tenant's
behalf if Tenant has not delivered such executed instrument to Landlord
within the ten day period. Landlord agrees that if effectuation of
subordination becomes necessary, Landlord will obtain and deliver to
Tenant a reasonable attornment and non-disturbance agreement for
execution by Tenant and the lending institution.
33. ESTOPPED CERTIFICATE (See Exhibit C)
Tenant shall, and agrees to, execute, acknowledge and deliver to
Landlord, at any time within ten (10) calendar days after request by
Landlord, a statement in writing certifying, if such be the case, that
this Lease is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as
modified), the date of commencement of this Lease, the dates on which
rent has been paid, and such other information as Landlord shall
reasonably request. It is acknowledged by Tenant that any such
statement is intended to be delivered by Landlord to and to be relied
upon by purchasers, prospective purchasers, mortgagees, prospective
mortgagees, beneficiaries and prospective beneficiaries under deeds of
trust, or assignees thereof.
34. OPTION TO RENEW
Upon full and complete performance of all the terms, covenants and
conditions of this Lease by Tenant and payment of all rental and other
amounts due under the terms hereof, Tenant shall be given the option to
renew this Lease for three (3) separate additional terms of five
(5) years each . In the event Tenant desires to exercise said option,
Tenant shall give written notice of such fact to Landlord not less than
one hundred eighty (180) days prior to the expiration of the then
current term of this Lease. In the event of such exercise, this Lease
shall be deemed to be extended for the additional period; provided,
however, Landlord shall have the right to increase the basic monthly
rental as provided in this lease. Landlord shall further have the right
to make any further adjustments and/or assessment of charges against
Tenant as herein provided for. In the event of exercise of said option,
any funds retained by Landlord as herein provided for shall be continued
to be so held subject to the same terms and conditions.
35. ATTORNMENT
In the event of a foreclosure or voluntary or involuntary sale or
conveyance of the improvements of which the leased premises are a part,
such sale or conveyance shall operate to release Landlord from any
future liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, and in such event, Tenant
agrees to look solely to the responsibility of the successor in interest
to Landlord in and to this Lease. Subject to the provisions of
Paragraph 32, the Lease shall not be affected by any such foreclosure,
sale or conveyance and Tenant agrees to attorn to the purchaser,
assignee or successor in interest of Landlord.
36. MECHANICS LIENS - REMOVAL BY TENANT
The Landlord shall not be liable for any labor or materials
furnished or to be furnished to the Tenant upon credit, and no mechanics
or other lien for any such labor or materials shall attach to or affect
the reversion or other estate or interest of the Landlord in and to the
leased premises or to the Tenant's leasehold estate or to the
improvements of which the leased premises are a part. Whenever any
mechanics lien shall have been filed against the leased premises or the
improvements of which the leased premises are a part, based upon any act
or interest of the Tenant or of anyone claiming through the Tenant, or
if any security agreement shall have been filed for or affecting any
materials, machinery, or fixtures used in the construction, repair or
operation thereof or annexed thereto by the Tenant, the Tenant shall
immediately take such action by bonding, deposit or payment as will
remove the lien as provided for in this Section 36 or security
agreement. If the Tenant has not removed the lien within thirty (30)
days after notice by Landlord to the Tenant, the Landlord may pay the
amount of such mechanics lien or security agreement or discharge the
same by deposit, and the amount so paid or deposited, with interest
thereon, shall be deemed additional rent reserved under this Lease, and
shall be payable forthwith with interest at the rate of eighteen percent
(18%) per annum from the date of such advance, and shall be subject to
the same remedies to the benefit of Landlord as in the case of default
in the payment of rent as herein provided.
37. ENVIRONMENTAL MATTERS
A. Definitions
(1) Hazardous Material. Hazardous Material means any
substance:
(a) which is or becomes defined as a "hazardous material,"
"hazardous waste," "hazardous substance," "regulated substance,"
pollutant or contaminant under any federal, state or local statute,
regulation, rule, order, or ordinance or amendments thereto; or
(b) the presence of which on the leased premises causes or
threatens to cause a nuisance upon the premises or to adjacent
properties or poses or threatens to pose a hazard to the health or
safety of persons on or about the leased premises or requires
investigation or remediation under any federal, state or local statute,
regulation, rule, order, or ordinance or amendments thereto.
(2) Environmental Requirements. Environmental Requirements
means all applicable present and future statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals, plans,
authorization, concessions, franchises, and similar items, of all
governmental agencies, departments, commissions, boards, bureaus, or
instrumentalities, of the United States, states and political
subdivisions thereof and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to the protection of
human health or the environment.
(3) Environmental Damages. Environmental Damages means all
claims, judgments, injuries, damages (including without limitation
damages for diminution in the value of the leased premises and adjoining
property and for the loss of business from the leased premises and
adjoining property), losses, penalties, fines, liabilities (including
strict liability), encumbrances, liens, costs, and expenses of
investigation and defense of any claim, and of any good faith settlement
of judgment, or whatever kind or nature, contingent or otherwise,
matured or unmatured, foreseeable or unforeseeable, including without
limitation reasonable attorneys' fees and disbursements and consultants'
fees, any of which are incurred at any time as a result of the existence
of "Hazardous Material" upon, about, beneath the leased premises or
migrating or threatening to migrate to or from the leased premises or
the existence of a violation of "Environmental Requirements" pertaining
to the leased premises.
B. Obligation to Indemnify, Defend and Hold Harmless
(1) Tenant, its successors, assigns and guarantors, agree to
indemnify, defend, reimburse and hold harmless the following persons
from and against any and all "Environmental Damages" arising from
activities of Tenant or its employees, agents, or invitees which (a)
result in the presence of "Hazardous Materials" upon, about or beneath
the leased premises or migrating to or from the leased premises, or (b)
result in the violation of any "Environmental Requirements" pertaining
to the leased premises and the activities thereon:
(a) Landlord;
(b) any other person who acquires a portion of the leased
premises in any manner, including but not limited to through purchase,
at a foreclosure sale or otherwise through the exercise of the rights
and remedies of Landlord under this Lease; and
(c) the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees,
affiliates, lessees, mortgages, trustees, heirs, devisees, successors,
assigns and invitees of such persons.
(2) This obligation shall include, but not be limited to, the
burden and expense of defending all claims, suits and administrative
proceedings (with counsel reasonably approved by the indemnified
parties), and conducting all negotiations of any description, and paying
and discharging, when and as the same become due, any and all judgments,
penalties or other sums due against such indemnified persons. Tenant,
at it sole expense, may employ additional counsel of its choice to
associate with counsel representing Landlord.
(3) The obligations of Tenant in this section shall survive
the expiration or termination of this Lease.
C. Notification
If Tenant shall become aware of or receive notice or other
communication concerning any actual, alleged, suspected or threatened
violation of "Environmental Requirements," or liability of Tenant for
"Environmental Damages" in connection with the leased premises or past
or present activities of any person thereon, or that any representation
set forth in this Agreement is not or is no longer accurate, then Tenant
shall deliver to Landlord, within ten days of the receipt of such
notice, or communication or correcting information by Tenant, a written
description of such information or condition, together with copies of
any documents evidencing same.
D. Negative Covenants
(1) No Hazardous Material on Premises. Except in strict
compliance with all Environmental Requirements, Tenant shall not cause,
permit or suffer any "Hazardous Material" to be brought upon, treated,
kept, stored, disposed of, discharged, released, produced, manufactured,
generated, refined or used upon, about or beneath the leased premises or
any portion thereof by Tenant, its agents, employees, contractors,
tenants or invitees, or any other person without prior written consent
of Landlord.
(2) No Violations of Environmental Requirements. Tenant shall
not cause, permit or suffer the existence or the commission by Tenant,
its agents, employees, contractors, or invitees, or by any other person
of a violation of any "Environmental Requirements" upon, about or
beneath the leased premises or any portion thereof.
E. Right to Inspect
Landlord shall have the right in its sole and absolute
discretion, but not the duty, to enter and conduct an inspection of the
leased premises at any reasonable time to determine whether Tenant is
complying with the terms of this Lease, including but not limited to the
compliance of the leased premises and the activities thereon with
"Environmental Requirements" and the existence of "Environmental
Damages." Tenant hereby grants to Landlord the right to enter the
leased premises and to perform such tests on the leased premises as are
reasonably necessary in the opinion of Landlord to conduct such reviews
and investigations. Landlord shall use reasonable efforts to minimize
interference with the business of Tenant but Landlord shall not be
liable for any interference caused thereby. Tenant shall provide to
Landlord copies of all manifests, permits, reports, test results, and
analyses submitted to any environmental agency within ten (10) days of
submittal.
F. Right to Remediate
Should Tenant fail to perform or observe any of its obligations
or agreements pertaining to "Hazardous Materials" or "Environmental
Requirements," then Landlord shall have the right, but not the duty,
without limitation upon any of the rights of Landlord pursuant to this
Lease, to enter the leased premises personally or through its agents,
consultants or contractors and perform the same. Tenant agrees to
indemnify Landlord for the costs thereof and liabilities therefrom as
set forth in section A above.
38. GUARANTEE AND FINANCIAL STATEMENTS
This Lease, and Tenant's performance hereunder, shall be
personally guaranteed by N/A jointly and severally, by the execution of
the Guarantee Agreement set forth herein. A current financial statement
of Tenant and of any party so guaranteeing this Lease shall be provided
to Landlord upon execution hereof and annually thereafter if requested
by Landlord.
39. INTEREST ON PAST DUE OBLIGATIONS
Any amount due to Landlord not paid when due shall bear interest
at one and one half percent (1 1/2%) per month from due date until paid.
Payment of such interest shall not excuse or cure any default by Tenant
under this Lease.
40. LATE CHARGE
The Landlord shall have the right to collect from Tenant, in
addition to any amounts due under Paragraph 39 above, a monthly
collection service charge for any payment due to Landlord hereunder
which is delinquent ten (10) days or longer, said charge being Twenty
Five and No/100 dollars ($25.00) or three percent (3%) of said payments,
whichever sum shall be greater.
41. MEMORANDUM OF LEASE - RECORDING
The parties hereto agree that either this Lease or any memorandum
hereof may be recorded only by and in the sole discretion of Landlord.
42. NOTICE PROCEDURE
All notices, demands and requests which may or are required to be
given by either party to the other shall be in writing and such that are
to be given to Tenant shall be deemed to have been properly served if
delivered personally to Tenant or an employee of Tenant or sent to
Tenant by United States registered or certified mail, return receipt
requested, properly sealed, stamped and addressed to Tenant at Maxtor
Corporation, 2190 Miller Drive,
Longmont, Colorado, 80501 or at such other place as Tenant may from
time to time designate in a written notice to Landlord; and, such as are
to be given to Landlord shall be deemed to have been properly given if
personally delivered to Landlord or if sent to Landlord, by United
States registered or certified mail, return receipt requested, properly
sealed, stamped and addressed to Landlord at 345 Partnership, 4599 N
Broadway, Boulder, Colorado, 80304 Attn: Richard R. Wilson or at such
other place as Landlord may from time to time designate in a written
notice to Tenant. Any notice given by mailing shall be effective as of
the date of mailing.
43. CONTROLLING LAW
All the terms, conditions, and agreements of this Lease shall be
construed and governed by the laws of the State of Colorado. Any
dispute between the parties hereto arising out of the relationship as
Landlord and Tenant pursuant to this Lease shall be resolved pursuant to
the laws of the State of Colorado and any litigation regarding such
disputes shall be instituted and pursued in Boulder, Colorado and in no
other jurisdiction.
44. BINDING UPON SUCCESSORS - DUPLICATE EXECUTION
The delivery of this completed lease form to Tenant shall not be
deemed an offer to lease to Tenant unless this Lease is signed by
Landlord. Once this Lease is signed by both Tenant and Landlord, the
covenants and agreements herein contained shall bind and inure to the
benefit of Landlord and Tenant and their respective successors. This
Lease shall be signed by the parties in duplicate, each of which shall
be a complete and effective original Lease. Tenant hereby acknowledges
receipt of one of these duplicate original Leases.
45. PARTIAL INVALIDITY
If any term, covenant or condition of this Lease or the
application thereof to any person or circumstances shall, to any extent,
be invalid or unenforceable, the remainder of this Lease or the
application of such term, covenant or condition to persons and
circumstances other than those to be affected by such invalidity or
unenforceability and each and every other term. covenant and condition
of this Lease shall be valid and shall be enforced to the fullest extent
permitted by law. It is also the intention of the parties to this Lease
that in lieu of each clause and provision of this Lease that is illegal,
invalid, or unenforceable, there be added as part of this Lease a clause
or provision as may be possible in order to make that clause legal,
valid and enforceable.
46. MISCELLANEOUS
All marginal notations and paragraph headings are for purposes of
reference and shall not affect the true meaning and intent of the terms
hereof. Throughout this Lease, wherever the words "Landlord" and
"Tenant" are used, they shall include the apply to the singular, plural
persons, both male and female, companies, partnerships and corporations
and in reading said Lease, the necessary grammatical changes required to
make the provisions hereof mean and apply as aforesaid shall be made in
the same manner as though originally included in said lease.
IN WITNESS WHEREOF, the parties have executed this Lease in duplicate
as of the date hereof.
LANDLORD:
345 PARTNERSHIP
By: /s/ Richard R. Wilson
------------------------
Richard R. Wilson
Managing Partner
------------------------
TENANT:
MAXTOR CORPORATION
By: /s/ Walter D. Amaral
-------------------------
Walter D. Amaral
V.P. Finance & CFO
-------------------------
GUARANTEE
For and in consideration of the execution of this Lease by the
parties hereto and other good and valuable considerations, the receipt
and sufficiency of which is hereby acknowledged, the under-signed by the
execution hereof, personally guarantee, jointly and severally and, as
Guarantor(s), agree to perform any and all obligations and to pay any
and all payments of Tenant as herein set forth and contained.
IN WITNESS WHEREOF, the undersigned have executed this document as of
the date hereof.
N/A N/A
- --------------------------- -------------------------
Guarantor Guarantor
EXHIBIT A
FLOOR PLAN OF 345 FRANCIS ST.
EXHIBIT B
(INTENTIONALLY LEFT BLANK)
ESTOPPEL CERTIFICATE (BY SPACE TENANT)
EXHIBIT C
Loan No. 235491
Premises West office area (40,000 sq. ft.) 345 Francis St.
---------------------------------------------------
Longmont, Colorado
---------------------------------------------------
Lease Dated
-------------------------------------------------
between 345 Partnership , Lessor,
------------------------------------------
and Maxtor Corporation , Lessee,
----------------------------------------------
commencing May 31, 19 95.
---------------------------------------
The undersigned, the Tenant under the above Lease, hereby certifies to
Union Central Life Insurance Company, the holder or proposed holder of a
Lien Instrument upon the above property; that said Lease is presently in
full force and effect and unmodified except as indicated at the end of
this Certificate*; that the undersigned has accepted possession of said
property and that any improvements required by the terms of said Lease
to be made by the Lessor have been completed to the satisfaction of the
undersigned; that no rent under said Lease has been paid more than 30
days in advance of its due date; that the address for notices to be sent
to the undersigned is as set forth in said Lease, or set forth below;
and that the undersigned, as of this date, has no charge, lien or claim
of set off under said Lease or otherwise, against rents or other charges
due or to become due thereunder.
The undersigned further agrees with Union Central Life Insurance
Company that from and after the date hereof, the undersigned will not
seek to terminate said Lease by reason of any act or omission of the
Landlord until the undersigned shall have given written notice of such
act or omission to the holder of said Lien Instrument (at such holder's
address furnished in said Instrument or last furnished to the
undersigned) and until a reasonable period of time shall have elapsed
following the giving of such notice, during which period such holder
shall have the right, but shall not be obligated, to remedy such act or
omission.
Dated: 2/24 , 1995 /s/ Walter D. Amaral
--------------- -------------------
STATE OF COLORADO )
) SS.
COUNTY OF BOULDER )
The foregoing instrument was acknowledged before me this 30th day of
----
March, 1995, by Richard R. Wilson.
- ----- - --------------------
Witness my hand and official seal.
My commission expires: 10/23/97
------------
/s/ Nancy Julian
--------------------
Notary Public
Address: 4599 N Broadway
Boulder, CO 80304
--------------------------
STATE OF CALIFORNIA )
) ss.
COUNTY OF SANTA CLARA )
The foregoing instrument was acknowledged before me this 24th day of
----
February, 1995 , by Walter D. Amaral .
- --------- - ------------------
Witness my hand and official seal.
My commission expires: 6/5/98
-------
/s/ Sharon Spehar
---------------------
Notary Public
Address: 2509 Alveswood Circle
San Jose CA 95131
------------------------------
TABLE OF CONTENTS
LEASED PREMISES/SIZE 1
Leased Premises 1
Square Footage 1
TERM 2
Initial Term 2
Possession 2
RENT/DEPOSIT 2
Initial Basic Rent 2
Receipt 3
Proration of Rent for Partial Months 3
Partial Payments of Rent 3
Security/Damage Deposit 3
ANNUAL ADJUSTMENTS OF RENT 4
TAXES - REAL PROPERTY - SPECIAL ASSESSMENTS 5
Responsibility 5
Estimated Annual Real Estate Taxes 6
Increase in Taxes Due to Tenant Improvements 6
TAXES - PERSONAL PROPERTY - RESPONSIBILITY 6
UTILITIES - RESPONSIBILITY 6
HOLDING OVER 7
MODIFICATIONS OR EXTENSIONS 8
SIGNS/CONSTRUCTION - LANDLORD'S APPROVAL - TENANT'S
RESPONSIBILITY 8
Signs 8
Construction - Tenant's Responsibility 8
Construction - Landlord's Approval 9
Roof 9
Security/Bond for Work 9
No Approval or Security for Work - Landlord's Remedies 9
CARE OF LEASED PREMISES - RESPONSIBILITY 10
MAINTENANCE FOR COMMON AREA, EXTERIOR AND HVAC. 10
GOVERNING LAWS AND CARE OF GROUNDS - TENANT 11
LIABILITY FOR OVERLOAD 11
GLASS AND DOOR RESPONSIBILITY 12
RULES AND REGULATIONS 12
USE OF PREMISES 12
INSURANCE - RESPONSIBILITY OF TENANT 13
INSURANCE - RESPONSIBILITY OF LANDLORD 13
REGULATIONS ON USE - TENANT'S RESPONSIBILITY 14
DAMAGE TO LEASED PREMISES/IMPROVEMENTS 14
INSPECTION OF AND RIGHT OF ENTRY TO LEASED PREMISES 14
DEFAULT - REMEDIES OF LANDLORD 15
Default/Repossession or Reletting 15
Tenant - Bankruptcy or Insolvency 16
Abandonment - Tenant's Property 16
Personal Property Lien 17
Remedies Non-inclusive 17
Landlord's Delay or Omission 17
Notice Waiver 17
Landlord's Liability 18
LEGAL PROCEEDINGS - RESPONSIBILITY 18
HOLD HARMLESS BY TENANT 18
ASSIGNMENT, SUBLETTING OR LEASEHOLD MORTGAGE 19
SALE OF TENANT'S BUSINESS 19
WARRANTY OF TITLE 20
ACCESS 20
GOVERNMENTAL ACQUISITION OF PROPERTY 20
CHANGES AND ADDITIONS TO IMPROVEMENTS - LANDLORD 21
SUBORDINATION 21
ESTOPPEL CERTIFICATE 21
OPTION TO RENEW 22
ATTORNMENT 22
MECHANICS LIENS - REMOVAL BY TENANT 22
ENVIRONMENTAL MATTERS 23
Definitions 23
Hazardous Material 23
Environmental Requirements 23
Environmental Damages 23
Obligation to Indemnify, Defend and Hold Harmless 24
Notification 25
Negative Covenants 25
No Hazardous Material on Premises 25
No Violations of Environmental Requirements 25
Right to Inspect 25
Right to Remediate 26
GUARANTEE AND FINANCIAL STATEMENTS 26
INTEREST ON PAST DUE OBLIGATIONS 26
LATE CHARGE 26
MEMORANDUM OF LEASE - RECORDING 26
NOTICE PROCEDURE 27
CONTROLLING LAW 27
BINDING UPON SUCCESSORS - DUPLICATE EXECUTION 27
PARTIAL INVALIDITY 27
MISCELLANEOUS 28
FIRST AMENDMENT TO LEASE AGREEMENT
This Amendment modifies and amends that Lease Agreement dated June 6,
1990, assigned and assumed on June 30, 1990, by and between 345
Partnership, as Landlord, and Maxtor Corporation, formerly known as
Maxtor Colorado Corporation, as Tenant.
WHEREAS, Tenant has requested that Landlord waive and release
Landlord's rights as provided in paragraph 23.D. of the Lease Agreement
in order to permit Tenant to pledge merchandise, inventory, machinery,
equipment and furnishings to secure a loan;
IN CONSIDERATION OF the premises, covenants, terms and payments as
hereinafter set forth, the parties agree as follows:
1. Paragraph 23.D. "Personal Property Lien" of the Lease Agreement
shall be and hereby is waived and deleted from the terms and conditions
of said Lease Agreement.
2. Upon execution of this Amendment, Tenant shall pay to Landlord
$81,345.00 as a security/damage deposit subject to all of the terms and
conditions contained in paragraph 3.E. of the Lease Agreement. At any
time during the Term of the Lease, Tenant may substitute for the
security/damage deposit a confirmed, irrevocable letter of credit in
like amount (on a U. S. bank acceptable to Landlord). Such letter of
credit shall be immediately payable, in whole or in part, upon the
occurrence(s) of the presentation of an affidavit by Landlord describing
conditions as set forth in paragraph 3.E. of the Lease Agreement which
would otherwise permit the Landlord to draw on the security/damage
deposit. Partial and repeated payments shall be authorized in the
letter of credit.
The effective date of this First Amendment to Lease Agreement shall
be the date it is executed by Landlord.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed as of the date set forth below.
LANDLORD: TENANT:
345 PARTNERSHIP MAXTOR CORPORATION
By: /s/ Richard R. Wilson By: /s/ Walter D. Amaral
------------------------ -----------------------
Richard R. Wilson
Title: General Partner Title: VP Finance & CFO
------------------- ------------------
Date: 3-30-95 Date: 2-24-95
------------------- ------------------
-29-
LEASE AGREEMENT
FOR PREMISES LOCATED AT
1900 PIKE ROAD, SUITE A
LONGMONT, COLORADO
BETWEEN
MAXTOR CORPORATION
AS TENANT
AND
PRATT LAND LIMITED LIABILITY COMPANY
AS LANDLORD
TABLE OF CONTENTS
LEASE
1. PREMISES LEASED; DESCRIPTION
2. PRESENT CONDITION OF PROPERTY
3. TERM
3.1 Initial Term
3.2 Option to Extend
3.3 Delivery of Possession
4. RENT
4.1 Base Rental
4.2 Escalation of Base Rental
4.3 Maintenance Expense for Grounds, Snow Removal, Exterior and HVAC
4.4 Private Security Service
4.5 Late Charges
4.6 Security Deposit
4.7 Proration of Rent for Partial Months
5. TAXES - REAL PROPERTY - PAID BY TENANT - PROTEST
6. TAXES - TENANT'S PERSONAL PROPERTY - PAID BY TENANT
7. UTILITIES - TENANT TO OBTAIN AND PAY FOR
8. HOLDING OVER
9. MODIFICATIONS OR EXTENSIONS
10. ALTERATION - CHANGES AND ADDITIONS - RESPONSIBILITY - NO HOLES IN
ROOF - NO NEW EQUIPMENT ON ROOF
11. MECHANIC'S LIENS
12. UNIFORM SIGNS; NO "FOR RENT" SIGNS
13. MAINTENANCE AND REPAIRS OF THE BUILDING; LANDLORD NOT LIABLE FOR
DAMAGE TO CONTENTS
14. CONDITION UPON SURRENDER - RETURN OF KEYS
15. CARE OF GROUNDS; STORAGE OUTSIDE THE BUILDING; NO WASTE, NO
NUISANCE; COMPLIANCE WITH LAWS; FUTURE RULES AND REGULATIONS
16. LIABILITY FOR OVERLOAD
17. NO USE OF PREMISES IN VIOLATION OF INSURANCE POLICIES
18. INSURANCE
18.1 All Risk Insurance
18.2 General Liability Insurance
18.3 Tenant Improvements
18.4 Other Insurance
18.5 Waiver of Subrogation
18.6 Other Provisions Regarding Tenant's Insurance
18.7 Changes in Standard Policies
19. FIRE REGULATIONS - TENANT RESPONSIBILITY
20. REPLACEMENT OF BUILDING - CASUALTY DAMAGE
21. ENVIRONMENTAL MATTERS
21.1 Definitions
21.1.1 Hazardous Material
21.1.2 Environmental Requirements
21.1.3 Environmental Damages
21.2 Tenant's Obligation to Indemnify, Defend and Hold Harmless
21.3 Tenant's Obligation to Remediate
21.4 Notification
21.5 Negative Covenants
21.5.1 No Hazardous Material on Premises
21.5.2 No Violations of Environmental Requirements
21.5.3 No Environmental or Other Liens
21.6 Landlord's Right to Inspect and to Audit Tenant's Records
21.7 Landlord's Right to Remediate
21.8 Landlord's Obligation to Remediate
21.9 Landlord's Obligation to Indemnify, Defend and Hold Harmless
Concerning Environmental Matters
21.10 Survival of Environmental Obligations
22. ENTRY BY LANDLORD
23. DEFAULT - REMEDIES BY LANDLORD
23.1 Default Defined
23.2 Landlord's Remedies in the Event of Default
23.3 Tenant to Surrender Peaceably
23.4 No Termination by Re-Entry
23.5 Injunction
23.6 Remedies Listed are Cumulative and Non-Exclusive
23.7 Interest on Sums Past Due
23.8 Attorneys' Fees
23.9 Time to Cure Certain Non-Monetary Defaults
23.10 Landlord Default
24. LEGAL PROCEEDINGS AGAINST TENANT BY THIRD PARTIES; TENANT TO PAY
LANDLORD'S FEES
25. INDEMNIFICATION BY TENANT AND BY LANDLORD
26. ASSIGNMENT OR SUBLETTING
27. LANDLORD'S WARRANTY OF TITLE; QUIET ENJOYMENT
28. ADDITIONAL DEVELOPMENT OF PROPERTY - RIGHTS OF LANDLORD
29. GOVERNMENTAL ACQUISITION OF THE PREMISES
30. SUBORDINATION OF THE LEASEHOLD TO MORTGAGES
31. TENANT'S GUARANTEE AND FINANCIAL STATEMENTS
32. MEMORANDUM OF LEASE - RECORDING
33. NO WAIVER OF BREACH; ACCEPTANCE OF PARTIAL PAYMENTS OF RENT
34. CONTROLLING LAW
35. INUREMENTS
36. TIME
37. ADDRESSES; EMPLOYER IDENTIFICATION NUMBERS; METHOD OF GIVING NOTICE
38. PARAGRAPH HEADINGS; GRAMMAR
39. ADDITIONAL PROVISIONS
EXHIBIT A: SITE PLAN
LEASE
THIS LEASE, made and entered into this 24th day of February, 1995 by
and between PRATT LAND LIMITED LIABILITY COMPANY, a Colorado limited
liability company, hereinafter referred to as "Landlord," and MAXTOR
CORPORATION, hereinafter referred to as "Tenant,"
W I T N E S S E T H:
In consideration of the covenants, terms, conditions, agreements, and
payments as hereinafter set forth, the parties hereto covenant and agree
as follows:
1. PREMISES LEASED; DESCRIPTION. Landlord hereby leases unto Tenant
the following described premises containing approximately 15,000 square
feet of building floor space measured to the outside of the walls,
including overhangs, canopies and loading docks, and to approximately
1/2 the thickness of common walls; commonly known as 1900 Pike Road,
Suite A, in the City of Longmont, County of Boulder, State of Colorado,
a more detailed description of which is Lot 1, Replat A, Lots 2, 3, and
10, and the west 95' of Lots 4 and 9, Longs Peak Industrial Park, County
of Boulder, State of Colorado, a diagram of which is attached as Exhibit
A (hereinafter referred to as the "premises"); the leasing of which is
made according to the terms of this Agreement; together with all
appurtenances thereto, and all fixtures attached thereto, in present
condition, and together with nonexclusive reasonable access across any
other land owned by Landlord as may be required for use of the premises
by Tenant, with such access to be on such roadways, sidewalks, and other
common areas of which the premises are a part, or of any such adjacent
lands owned by Landlord, as Landlord may from time to time designate.
2. PRESENT CONDITION OF PROPERTY. Tenant has examined, and accepts
the building, improvements, and any fixtures on the premises, in present
condition. No representation, statement, or warranty, express or
implied, has been made by or on behalf of Landlord as to the condition
of the premises, or as to the use that may be made of same. In no event
shall Landlord be liable for any defect in the premises which are
discernible by Tenant's examination thereof or for any limitation on the
use of the premises. Tenant shall not be deemed to have accepted the
Tenant improvements to be constructed by Landlord until it shall have
had a reasonable opportunity to inspect the same.
3. TERM.
3.1 Initial Term. The term of this lease shall commence at
12:00 noon on March 1, 1995 (the "Commencement Date"), and unless
terminated as herein provided for, shall end at 12:00 noon on the 1st
day of March, 2000. The Commencement Date as set forth in this
Paragraph 3.1 shall be subject to those adjustments of the Commencement
Date, if any, set forth in Paragraph 3.3 which relate to the performance
of construction on the premises.
3.2 Option to Extend. Upon full and complete performance of all
the terms, covenants, and conditions herein contained by Tenant and
payment of all rental due under the terms hereof, Tenant shall be given
the option to renew this lease for three (3) additional terms of sixty
(60) months each. Each such option shall be exercisable only by
delivery of Tenant's signed written notice of extension to Landlord not
less than 180 days prior to the expiration of the then-existing lease
term. In the event of such exercise, this lease shall be deemed to be
extended for the additional period pursuant to all the terms and
conditions set forth herein, including (but not as a limitation) those
provisions for increase of the base rental set forth in Paragraph 4.2.2.
In the event of exercise of said Option, any funds held by Landlord
pursuant hereto shall continue to be so held subject to the terms and
conditions relating to same.
3.3 Delivery of Possession. Except as above provided with
respect to construction of Tenant Improvements, Tenant shall be entitled
to possession of the premises at noon on the Commencement Date, as
defined in Paragraph 3.1. Tenant may, with approval by Landlord in its
sole discretion, have access to the premises during tenant improvement
construction for the purpose of moving in Tenant-owned furniture,
fixtures, equipment and inventory. This access and the items so moved
in shall not in any way impede the construction of the tenant
improvements, nor shall Landlord, its agent, employees, sub-contractors,
or any other person on the premises whether invited or not invited, be
liable for the protection, care or security of Tenant owned items. This
paragraph shall not be construed so as to permit Tenant to occupy the
premises prior to the satisfaction of all requirements for Tenant's
insurance set forth below.
4. RENT. Tenant shall pay to Landlord, at the address of Landlord
as herein set forth, the following as rental for the premises:
4.1 Base Rental.
The base rental for the full term hereof shall be SIX HUNDRED
THIRTY SEVEN THOUSAND FIVE HUNDRED AND NO/100THS Dollars ($637,500.00),
payable in monthly installments [basic monthly rental of TEN THOUSAND
SIX HUNDRED TWENTY-FIVE AND NO/100THS Dollars ($10,625.00)] in advance
on the first day of each month during the term hereof.
4.2 Escalation of Base Rental.
4.2.1 On the first anniversary of the commencement date of this
lease, and annually thereafter, the base rental payable by Tenant shall
be increased to an amount determined by multiplying the basic monthly
rental by a fraction, the denominator of which shall be the most recent
Consumer Price Index figure, as hereinafter defined, published prior to
the Commencement Date, and the numerator of which shall be the most
recent Consumer Price Index figure published prior to the particular
anniversary date; provided, however, that in no event shall the rent for
any month after such anniversary be less than the rent for the month
immediately preceding such anniversary. As used herein, the term
"Consumer Price Index" shall mean the Consumer Price Index, All Urban
Consumers, All Items, Denver, Colorado (1982-84 = 100), or the successor
of that Index, as published by the Bureau of Labor Statistics, U.S.
Department of Labor. Should Landlord lack sufficient data to make the
proper determination on the date of any adjustment, Tenant shall
continue to pay the monthly rent payable immediately prior to the
adjustment date. As soon as Landlord obtains the necessary data,
Landlord shall determine the rent payable from and after such adjustment
date and shall notify Tenant of the adjustment in writing. Should the
monthly rent for the period following the adjustment date exceed the
amount previously paid by Tenant for that period, Tenant shall forthwith
pay the difference to Landlord. Should the Consumer Price Index as
above described cease to be published, a reasonably comparable successor
index shall be selected by Landlord. If Tenant objects to the successor
index, the dispute will be resolved and a successor index designated by
arbitration pursuant to the rules and procedures of the American
Arbitration Association.
4.2.2 Notwithstanding the foregoing, the parties agree that the
increase in base rental for each year shall be not less than two and one-
half percent (2.5%) nor more than seven percent (7%) of the base rental
for the previous year, each year for such purposes to commence on the
anniversary of the Commencement Date.
4.2.3 Landlord may in its sole discretion, waive the escalation
provided for in Paragraph 4.2.1 or Paragraph 4.2.2 for any particular
year, years, or part of a year. No such waiver shall preclude Landlord
from applying the escalation to any subsequent year or part of a year,
and from making the subsequent application as if all subsequent
escalations had been duly made to the maximum permissible extent.
4.3 Maintenance Expense for Grounds, Snow Removal, Exterior and
HVAC. Tenant shall pay the cost of having Landlord maintain the HVAC
systems and the exterior of the premises including parking lots, green
areas, sidewalks, entrances, and corridors (but not the exterior
surfaces of the building, other than glass). Cost of maintaining such
areas shall include, but shall not be limited to, repairs, preventative
maintenance, HVAC filters and compressors, sealing, striping, lawn
mowing, snow removal (Tenant is responsible for snow removal of less
than 2"), gardening, shrub care and replacements, lawn watering, parking
area maintenance, electricity for lighting, sign maintenance,
depreciation of equipment used for the foregoing purposes and other
costs related to the premises or common areas. Landlord shall perform
such maintenance and charge the cost thereof to Tenant, which shall be
paid as additional rent within 10 days after delivery of Landlord's
invoice. Landlord shall keep reasonable records of such cost, which
shall be available for Tenant's inspection during normal business hours.
Certain items of such maintenance (such as landscape maintenance and
snow removal) are performed by Landlord on numerous areas owned and/or
maintained by Landlord, in addition to the premises, and the cost
thereof cannot be precisely ascribed to the premises. As to such
services which are performed on areas in addition to the premises, the
cost for all areas so serviced shall be allocated to the premises in
proportion to the square feet of building floor space in the premises
compared to the square feet of building floor space in the entire area
to which such services are provided.
For the first year of the lease, Landlord agrees that the total of
the maintenance fees referred to in this paragraph will not exceed $0.80
per square foot annually.
4.4 Private Security Service. Landlord may engage a private
security service, as an independent contractor, to patrol an area which
includes the premises. Tenant shall be included in the selection
process. If Landlord does so employ a private security service, which
the tenant has approved, the cost thereof shall be treated in the same
manner as Maintenance Expense and paid by Tenant as Additional Rent
under the same provisions as are applicable to Maintenance Expense.
Tenant shall have no obligation to participate under this Section 4.4,
if Tenant's portion of the cost of such services is more than the amount
that Tenant has been paying for such service.
Landlord shall have absolutely no obligation to engage a private
security service and shall not be liable for any damages or loss which
might have been averted had a private security service been engaged. If
Landlord does engage a private security service, Landlord shall not be
liable for any damages or loss which may result from actions, inactions,
non-performance or quality of performance by the security service. If
the Tenant desires a higher level of security services than Landlord
provides, or wishes to obtain an agreement that there will be liability
for actions, inactions, non-performance or quality of performance by a
security service, Tenant may itself engage such security service as
Tenant chooses, at Tenant's sole expense.
Nothing herein shall limit any action by Tenant against any person or
entity providing private security service, provided that Landlord shall
not be party to, or liable for any judgment entered in such an action,
as a defendant, cross defendant, third-party .defendant, or otherwise.
4.5 Late Charges. Tenant will pay a late charge equal to five
percent of any monthly rental payment or other payment not paid when
due, which payment shall be in addition to any interest elsewhere
provided for.
4.6 Security Deposit. Landlord acknowledges receipt of the sum
of TEN THOUSAND SIX HUNDRED TWENTY-FIVE AND NO/100THS Dollars
($10,675.00) paid by Tenant upon the execution hereof or a letter of
credit for the same amount, to be retained by Landlord as security for
the performance of all of the terms and conditions of this lease
Agreement to be performed by Tenant, including payment of all rental due
under the terms hereof. Landlord shall not owe Tenant any interest on
the deposit. At Landlord's election, deductions may be made by Landlord
from the amount so retained for the reasonable cost of repairs to the
premises which should have been performed by Tenant, for any rental
payment or other sum delinquent under the terms hereof, and for any sum
used by Landlord in any manner to cure any default in the performance of
Tenant under the terms of this lease. In the event deductions are so
made during the rental term, upon notice by Landlord, Tenant shall
redeposit such amounts so expended so as to maintain the security
deposit in the amount as herein provided for, within 10 days after
receipt of such written demand from Landlord. Nothing herein contained
shall limit the liability of Tenant as to any repairs or maintenance of
the premises; and nothing herein shall limit the obligation of Tenant
promptly to pay all sums otherwise due under this lease and to comply
with all the terms and conditions hereof. The security deposit, less
any sums withheld by Landlord pursuant to the terms hereof, shall be
repaid to Tenant within sixty days after the date of termination of the
lease.
4.7 Proration of Rent for Partial Months. If the lease term
begins on other than the first day of a month, base rent and additional
rent from such date until the first day of the next succeeding calendar
month shall be prorated on the basis of the actual number of days in
such calendar month and shall be payable in advance. If the lease term
terminates on other than the last day of the calendar month, rent from
the first day of such calendar month until such termination date shall
be prorated on the basis of the actual number of days in such month, and
shall be payable in advance.
5. TAXES - REAL PROPERTY - PAID BY TENANT - PROTEST. Tenant shall
pay as additional rent, all real estate taxes and assessments, as
shall, from and after the date hereof, be assessed upon the premises and
any appurtenances or improvements thereto. Tenant shall pay one-twelfth
(1/12) of such estimated additional rent, in advance, with each monthly
rental payment. Landlord shall reasonably estimate such taxes and
advise Tenant in writing of the amount to be paid each month. Such
payments shall be separately accounted for by Landlord, (and may be
deposited with any holder of a mortgage or deed of trust on the
premises) and shall be used to make prompt payment of such taxes as they
come due. If the estimated payments made by Tenant are not sufficient
to fully pay such taxes as they come due, Tenant shall pay to Landlord
any amount necessary to make up the deficiency within ten (10) days of
notice from Landlord. Landlord shall have no obligation to pay any
interest to Tenant on such additional rent, but Landlord shall give
Tenant an annual accounting showing credit for such payments made by
Tenant, and debits for payments made by Landlord or Landlord's lender.
If Tenant fails to make any required payment to Landlord, Landlord may,
but shall not be required to, pay any such tax and shall become entitled
to repayment from Tenant without demand, together with interest thereon
as elsewhere provided. The real estate taxes and assessments for the
year in which the term of this lease shall begin, as well as for the
year in which the lease shall end, shall be apportioned so that Tenant
shall pay only the portions that correspond with the portions of such
years as are within such lease term. In the event that the premises are
assessed for tax purposes as a part of a larger parcel, the tax on the
entire parcel shall be prorated in proportion to the number of square
feet of building floor space on each portion of the entire parcel.
Upon written request from Tenant, Landlord shall protest the tax
assessment on the premises, to the extent that Landlord, in good faith,
believes that such protest is justifiable and likely to be successful.
In the event of any such protest Tenant shall nevertheless pay to
Landlord the taxes as assessed, and Tenant shall be entitled to the
appropriate share of any refund. Tenant shall not protest any real
property tax assessment on the premises.
6. TAXES - TENANT'S PERSONAL PROPERTY - PAID BY TENANT. Tenant
shall be responsible for and timely pay any and all personal property
taxes assessed against any furniture, fixtures, equipment and items of a
similar nature installed and/or located in or about the premises by
Tenant.
7. UTILITIES - TENANT TO OBTAIN AND PAY FOR. Landlord shall not be
required to furnish to Tenant any utility services of any kind, such as
but not limited to, water, hot water, heat, gas, electricity, light,
telephone, cable TV and power. Tenant shall obtain and pay all charges
for gas, electricity, light, heat, power, water (and lawn watering), and
telephone, cable TV or other communication services or other utilities
used, rendered, or supplied, upon or in connection with the premises.
Tenant irrevocably appoints Landlord as Tenant's attorney-in-fact solely
for the purpose of terminating Tenant's account with any provider of
such utilities, if the premises are abandoned by Tenant or if the lease
is terminated.
8. HOLDING OVER. If, after expiration of the term of this lease,
Tenant shall remain in possession of the premises and continue to pay
rent without a written agreement as to such possession, then Tenant
shall be deemed a month-to-month Tenant and the rental rate during such
holdover tenancy shall be equivalent to one hundred fifteen percent
(115%) the monthly rental paid for the last month of tenancy under this
lease. Such month-to-month tenancy may be terminated by the Landlord at
noon on any day which is more than twenty-nine (29) days after date of
delivery of Landlord's written notice of termination to Tenant.
9. MODIFICATIONS OR EXTENSIONS. No holding over by Tenant shall
operate to renew or extend this lease without the written consent of
Landlord. No modification of this lease shall be binding unless
endorsed hereon or otherwise written and signed by the respective
parties.
10. ALTERATION - CHANGES AND ADDITIONS - RESPONSIBILITY - NO HOLES
IN ROOF - NO NEW EQUIPMENT ON ROOF. Tenant may, during the term of this
lease, at Tenant's expense, erect inside partitions, add to existing
electric power service, add telephone outlets or other communication
services, add light fixtures, install additional heating and/or air
conditioning or make such other changes or alterations as Tenant may
desire, provided that prior to commencement of any such work, Tenant
shall submit to Landlord a set of fully detailed working drawings and
specifications for the proposed alteration, prepared by a licensed
architect or engineer. If Tenant so requests, Landlord will have the
drawings and specifications prepared for Tenant, at Tenant's expense,
utilizing Landlord's in-house staff. Tenant will pay Landlord's
customary hourly charges for such services, as additional rent, to be
paid within 10 days after delivery of invoice. In particular, but not
as a limitation, the working drawings must fully detail changes to
mechanical, wiring and electrical, lighting, plumbing and HVAC systems
to Landlord's satisfaction. Landlord may refuse to consent to the
alterations because of the inadequacy of the drawings and
specifications. Tenant may not commence the alterations until
Landlord's written consent has been given. If the drawings and
specifications are adequate, to Landlord's sole satisfaction, then
Landlord will not unreasonably withhold its consent to the alterations,
except that Landlord may withhold its consent to new or altered openings
(holes) in the roof, or placement of additional equipment on the roof,
as follows. Landlord may withhold its consent to new openings in the
roof or placement of additional equipment on the roof unless Landlord,
in its sole discretion, is satisfied that the risk of increased leakage
or risk of more frequent repairs or maintenance of the roof is
acceptable to Landlord. Any new or altered opening in the roof, or
placement of additional equipment thereon, shall be considered an
alteration which requires the prior written consent of Landlord. If
within thirty (30) days after such plans and specifications are
submitted by Tenant to Landlord for such approval, Landlord shall have
not given Tenant notice of disapproval, stating the reason for such
disapproval, such plans and specifications shall be considered approved
by Landlord. As a condition of approval for such alternations, Landlord
shall have the right to require Tenant to furnish adequate bond or other
security acceptable to Landlord for performance of and payment for the
work to be performed. At the end of this lease, all such fixtures,
equipment, additions and/or alterations (except trade fixtures installed
by Tenant) shall be and remain the property of Landlord, provided,
however, Landlord shall have the option to require Tenant to remove any
or all such fixtures, equipment, additions, and/or alterations and
restore the premises to the condition existing immediately prior to such
change and/or installation, normal wear and tear excepted, all at
Tenant's cost and expense. All work done by Tenant shall conform to
appropriate city, county and state building codes and health standards
and OSHA standards and Tenant shall be responsible for obtaining and
paying for building permits.
If any such work done by Tenant causes damage to the structural
portion, exterior finish or roof of the premises, then the costs of
repair of such damage, and of all further maintenance and repairs to
such structural portion, exterior finish or roof during the term of the
lease shall thereafter be the responsibility of Tenant.
Neither Landlord's right of entry, nor any actual inspection by
Landlord, nor Landlord's actual knowledge of any alteration accomplished
or in progress shall constitute a waiver of Landlord's rights concerning
alterations by Tenant.
11. MECHANIC'S LIENS. Tenant shall pay all costs for construction
done by it or caused to be done by it on the premises as permitted by
this lease. Tenant shall keep the building, other improvements and land
of which the premises are a part free and clear of all mechanic's liens
resulting from construction by or for Tenant. Tenant shall have the
right to contest the correctness or validity of any such lien if,
immediately on demand by Landlord, Tenant deposits with Landlord and/or
any appropriate court or title insurance company a bond or sum of money
sufficient to allow issuance of title insurance against the lien and/or
to comply with the statutory requirements for discharge of the lien
found in 38-22-130 and 131, Colorado Revised Statutes, or any
successor statutory provision. Landlord shall have the right to require
Tenant's contractor(s), subcontractors and materialmen to furnish to
both Tenant and Landlord adequate lien waivers on work or materials paid
for, in connection with all periodic or final payments, by endorsement
on checks, making of joint checks, or otherwise, and Landlord shall have
the right to review invoices prior to payment. Landlord reserves the
right to post notices on the premises that Landlord is not responsible
for payment of work performed and that Landlord's interest is not
subject to any lien.
12. UNIFORM SIGNS; NO "FOR RENT" SIGNS. It is Landlord's intent to
maintain uniformity of signs throughout the area where signs may be
controlled by Landlord. Tenant shall place no signs on the premises
(except inside Tenant's portion of the building on the premises) without
prior written consent of Landlord, which consent shall not be
unreasonably withheld.
Tenant may not put any signs on the premises indicating that the same
are for rent, or available for assignment or sublease, and may put no
signs of real estate brokers on the premises.
13. MAINTENANCE AND REPAIRS OF THE BUILDING; LANDLORD NOT LIABLE FOR
DAMAGE TO CONTENTS. Landlord shall be responsible for maintenance and
repairs of the structural portions, the roof and the exterior finish of
the building (other than glass) on the premises at the sole cost and
expense of Landlord; provided, however, that if any such maintenance or
repairs are necessitated by the acts of Tenant or its employees, agents,
contractors, sub-contractors, licensees, invitees or guests, Tenant
shall reimburse Landlord for the cost of same, as additional rent, to be
paid within 10 days after delivery of invoice. All other maintenance,
repairs and replacements shall be performed by Tenant, at its own
expense, including all necessary maintenance, repairs and replacements
to pipes, plumbing systems, electrical systems, window or other glass,
doors, fixtures, interior decorations, and all other appliances and
appurtenances. Such repairs and replacements, interior and exterior,
ordinary as well as extraordinary, shall be made promptly, as and when
necessary, so that the premises are maintained in first class condition.
All such maintenance, repairs and replacements shall be in quality and
class at least equal to the original work. On default of Tenant in
making such maintenance, repairs or replacements, Landlord may, but
shall not be required to, make such repairs and replacements for
Tenant's account, and the expense shall constitute and be collectable as
additional rent, together with interest thereon as hereinafter provided.
Notwithstanding the Landlord's obligations elsewhere set forth in
this lease, under no circumstances shall Landlord be liable for damage
to the contents of the building or consequential damages to Tenant
resulting from roof or window leaks or failure, or leakage of any water
pipe or gas pipe, failure of any communications system or alarm, failure
or leakage or discharge by any sprinkler system or other fire
suppression system, power surges, power shortages or outage, sewer
failure or sewage backup, or failure or malfunction of any heating or
cooling system. The term "contents" shall include, but shall not be
limited to, improvements made by Tenant, and data bases and other
information stored or contained in computers, hard or floppy disks,
tapes, computer chips and other memory or storage devices. The term
"consequential damages" shall include, but not be limited to, Tenant's
inability to perform any contract on which Tenant is bound, loss of
sales, loss of profit, or loss of business reputation or goodwill.
14. CONDITION UPON SURRENDER - RETURN OF KEYS. Tenant shall vacate
the premises in the same condition as when received on the date hereof,
ordinary wear and tear excepted, and shall remove all of Tenant's
property, so that Landlord can repossess the premises not later than
noon on the day upon which this lease or any extension hereof ends,
whether upon notice, holdover or otherwise. The Landlord shall have the
same rights to enforce this covenant by ejectment and for damages or
otherwise as for the breach of any other conditions or covenant of this
lease. Upon termination of the lease, Tenant shall deliver to Landlord
keys which operate all locks on the exterior or interior of the
premises, including, without limitation, keys to locks on cupboards and
closets. Tenant shall retrieve all keys to the premises which Tenant
has delivered to employees or others, and include same with the keys
delivered to Landlord.
15. CARE OF GROUNDS; STORAGE OUTSIDE THE BUILDING; NO WASTE; NO
NUISANCE; COMPLIANCE WITH LAWS; FUTURE RULES AND REGULATIONS. Tenant
shall use the premises for office, research and development, and light
manufacturing, and other uses appurtenant thereto. Except as otherwise
provided herein, Tenant will maintain the grounds which are part of the
premises, keeping them free from accumulation of trash or debris and
will be responsible for snow removal up to two inches of snow. Tenant
shall conform to all present and future laws and ordinances of any
governmental authority having jurisdiction over the premises, and will
make no use in violation of same. No outside storage shall be allowed
unless first approved by Landlord in writing and then only in such areas
as are designated as storage areas by Landlord. Tenant shall not commit
or suffer any waste on the premises. Tenant shall not permit any
nuisance to be maintained on the premises nor permit any disorderly
conduct, noise or other activity having a tendency to annoy or to
disturb occupants of any other part of the property of which the
premises are a part and/or of any adjoining property.
As part of a common scheme for orderly development, use and
protection, of its various properties and those properties adjacent to
the premises, Landlord may impose upon Tenant reasonable rules and
regulations concerning parking and vehicle traffic; locations at which
deliveries are to be made and access thereto; trash disposal; use of
common areas such as recreation areas, corridors, and sidewalks; signs
and directories; use of communication wires or cables which are used in
common but which may be inadequate fully to serve all the demands placed
upon them; provided that such rules and regulations shall be uniform in
their application and shall not violate the express terms of this lease
elsewhere set forth.
16. LIABILITY FOR OVERLOAD. Tenant shall be liable for the cost of
any damage to the premises or the building or the sidewalks and
pavements adjoining the same which results from the movement of heavy
articles or heavy vehicles or utility cuts made by or on behalf of
Tenant. Tenant shall not overload the floors or any other part of the
premises.
17. NO USE OF PREMISES IN VIOLATION OF INSURANCE POLICIES. Tenant
shall make no use of the premises which would void or make voidable any
insurance upon the premises.
18. INSURANCE.
18.1 All Risk Insurance. Tenant shall keep the building and
improvements insured throughout the term of this lease against losses
covered by an "All Risk" policy, as defined in the insurance industry,
which shall also cover 1) loss of rental and 2) deposit of Hazardous
Materials on the premises by those acts of third parties which
constitute vandalism. The deductible amount shall not exceed $50,000.
18.2 General Liability Insurance. Tenant agrees to carry
comprehensive general liability insurance in the minimum total amount of
ONE MILLION Dollars ($1,000,000.00 ) for each occurrence of bodily
injury and ONE MILLION Dollars ($1,000,000.00) for each occurrence of
property damage. Tenant shall supply to Landlord certificates of
insurance as provided in Paragraph 18.6. In the event Tenant fails to
secure such insurance or to give evidence to Landlord of such insurance
by depositing with Landlord certificates as provided below, Landlord may
purchase such insurance in Tenant's name and charge Tenant the premiums
therefor. Bills for the premiums therefor shall be deemed and paid as
additional rent due within 10 days after delivery of invoice. The
Landlord shall be an additional named insured on the policy.
18.3 Tenant Improvements. Tenant agrees to carry insurance
covering all of Tenant's leasehold improvements, alterations, additions
or improvements, trade fixtures, merchandise and personal property from
time to time in, on or upon the premises, in an amount not less than one
hundred percent (100%) of the full replacement cost of such items from
time to time during the term of this lease, providing protection against
any peril included within an "All-Risk" policy, with a deductible amount
not to exceed $10,000. Any policy proceeds shall be used for the repair
or replacement of the property damaged or destroyed unless this lease
shall cease and terminate due to destruction of the premises as provided
below.
18.4 Other Insurance. Tenant agrees to carry insurance against
such other hazards and in such amounts as the holder of any mortgage or
deed of trust to which the lease is subordinate may require from time to
time.
18.5 Waiver of Subrogation. Landlord and Tenant grant to each
other on behalf of any insurer providing fire and extended insurance
coverage to either of them covering the premises, improvements thereon,
and contents thereof, a waiver of any right of subrogation or recovery
of any payments of loss under such insurance, such waiver to be
effective so long as each is empowered to grant such waiver under the
terms of its insurance policy, and to give all necessary notice of such
waiver to its insurance carriers.
18.6 Other Provisions Regarding Tenant's Insurance. All
insurance required of Tenant in this lease shall be effected under
enforceable policies issued by insurers of recognized good financial
condition licensed to do business in this State. At least fifteen (15)
days prior to the expiration date of any such policy, a certificate
evidencing a new or renewal policy shall be delivered by Tenant to
Landlord. Within fifteen (15) days after the premium on any policy
shall become due and payable, Landlord shall be furnished with
satisfactory evidence of its payment. To the extent obtainable, all
policies shall contain an agreement that notwithstanding any act or
negligence of Tenant which might otherwise result in forfeiture of such
insurance, such policies shall not be canceled except upon ten (10) days
prior written notice to Landlord, and that the coverage afforded thereby
shall not be affected by the performance of any work in or about the
premises.
If Tenant provides any insurance required of Tenant by this lease in
the form of a blanket policy, Tenant shall furnish satisfactory proof
that such blanket policy complies in all respects with the provisions of
this lease, and that the coverage thereunder is at least equal to the
coverage which would be provided under a separate policy covering only
the premises.
18.7 Changes in Standard Policies. If the definition of
insurance industry policy language relating to "All-Risk" insurance or
other term changes, the insurance requirements hereunder shall be
modified to conform to the existing insurance industry language;
however, the dollar amount of the coverages required under this lease
shall not be less than those existing at the time of the effective
beginning date of this lease.
19. FIRE REGULATIONS - TENANT RESPONSIBILITY. It shall be Tenant's
sole and exclusive responsibility to meet all fire regulations of any
governmental unit having jurisdiction over the premises to the extent
such regulations affect Tenant's operations, at Tenant's sole expense.
20. REPLACEMENT OF BUILDING - CASUALTY DAMAGE. If the premises are
damaged or destroyed by fire or other cause at any time after the date
of commencement of this lease, Landlord shall proceed with due diligence
to repair or restore the same to the same condition as existed before
such damage or destruction, and as soon as possible thereafter but in no
event more than 180 days from the date of damage or destruction will
give possession to the Tenant of the premises without diminution or
change of location. If Landlord does not complete all repairs and
restoration within 180 days, Tenant may at its reasonable discretion
terminate the lease. Provided, however, that in case of total
destruction of the premises by fire, or in case the premises are so
badly damaged that, in the opinion of the Landlord, it is not feasible
to repair or rebuild the same, then, either Tenant or Landlord shall
have the right to terminate this lease instead of rebuilding the
improvements; provided, however, that the terminating party shall give
the other party written notice of its intention to terminate, said
notice to be served not later than thirty (30) days after the occurrence
of the damage to the property. In the event the premises are rendered
temporarily untenantable because of fire or other casualty, base monthly
rent shall abate on the untenantable area until the premises are
restored to their former condition, abatement to be based on the square
feet of building floor space in the untenantable area compared to the
total square feet of building floor space on the premises. Provided,
however, that to the extent the damage or destruction results from the
negligence or other action of Tenant or its employees, agents,
contractors, subcontractors, invitees, guests or licensees, Tenant shall
pay for the restoration or repair, to the extent the cost of same is not
covered by insurance.
21. ENVIRONMENTAL MATTERS.
21.1 Definitions.
21.1.1 Hazardous Material. Hazardous Material means any
substance:
(a) the presence of which requires investigation, notice or
remediation under any federal, state or local statute, regulation,
ordinance, order, action, policy or common law; or
(b) which is or becomes defined as a "hazardous material,"
"hazardous waste," "hazardous substance," "regulated substance,"
"pollutant" or "contaminant" under any federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. 9601 et seq.), Toxic Substances Control Act
(15 U.S.C. _ 2601 et seq.), the Colorado Underground Storage Tank Act
(Colo. Rev. Stat. 25-18-101 et seq.), and/or the Resource Conservation
and Recovery Act (42 U.S.C. _ 6901 et seq.); or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, the State of Colorado or any political subdivision thereof; or
(d) the presence of which on the premises causes or threatens
to cause a nuisance upon the premises or to adjacent properties or poses
or threatens to pose a hazard to the health or safety of persons on or
about the premises; or
(e) which contains gasoline, diesel fuel or other petroleum
hydrocarbons; or
(f) which contains polychlorinated biphenyls (PCBs), asbestos
or urea formaldehyde foam insulation; or
(g) radon gas.
21.1.2 Environmental Requirements. Environmental
Requirements means all applicable present and future statutes,
regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises, and similar
items, of all governmental agencies, departments, commissions, boards,
bureaus, or instrumentalities of the United States, states and political
subdivisions thereof and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to the protection of
human health or the environment, including, without limitation:
(a) All requirements, including but not limited to those
pertaining to reporting, licensing, permitting, investigation, and
remediation of emissions, discharges, releases, or threatened releases
of Hazardous Materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid,
liquid, or gaseous in nature, into the air, surface water, groundwater,
or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature; and
(b) All requirements pertaining to the protection of the
health and safety of employees or the public.
21.1.3 Environmental Damages. Environmental Damages means
all claims, judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs, and expenses
of investigation and defense of any claim, whether or not such claim is
ultimately defeated, and of any good faith settlement or judgment, of
whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation reasonable
attorneys' fees and disbursements and consultants' and witnesses' fees,
any of which are incurred at any time as a result of the existence of
Hazardous Material upon, about, beneath the premises or migrating or
threatening to migrate to or from the premises, or the existence of a
violation of Environmental Requirements pertaining to the premises,
including without limitation:
(a) Damages for personal injury, or injury to property or
natural resources occurring upon or off of the premises, foreseeable or
unforeseeable, including, without limitation, lost profits,
consequential damages, the cost of demolition and rebuilding of any
improvements on real property, interest and penalties including but not
limited to claims brought by or on behalf of employees of Tenant;
(b) Fees incurred for the services of attorneys, consultants,
contractors, experts, laboratories and all other costs incurred in
connection with the investigation or remediation of such Hazardous
Materials or violation of Environmental Requirements including, but
not limited to, the preparation of any feasibility studies or reports or
the performance of any cleanup, remediation, removal, response,
abatement, containment, closure, restoration or monitoring work required
by any federal, state or local governmental agency or political
subdivision or court, or reasonably necessary to make full economic use
of the premises and any other property in a manner consistent with its
current use or otherwise expended in connection with such conditions,
and including without limitation any attorneys' fees, costs and expenses
incurred in enforcing this agreement or collecting any sums due
hereunder;
(c) Liability to any third person or governmental agency to
indemnify such person or agency for costs expended in connection with
the items referenced herein; and
(d) Diminution in the value of the premises and adjoining
property, and damages for the loss of business and restriction on the
use of or adverse impact on the marketing of rentable or usable space or
of any amenity of the premises and adjoining property.
21.2 Tenant's Obligation to Indemnify, Defend and Hold Harmless.
Tenant, its successors, assigns and guarantors, agree to indemnify,
defend, reimburse and hold harmless the following persons from and
against any and all Environmental Damages arising from activities of
Tenant or its employees, agents, contractors, subcontractors, or guests,
licensees, or invitees which (1) result in the presence of Hazardous
Materials upon, about or beneath the premises or migrating to or from
the premises, or (2) result in the violation of any Environmental
Requirements pertaining to the premises and the activities thereon:
21.2.1 Landlord;
21.2.2 any other person who acquires an interest in the
premises in any manner, including but not limited to purchase at a
foreclosure sale or otherwise; and
21.2.3 the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees,
affiliates, lessees, mortgagees, trustees, heirs, devisees, successors,
assigns, guests and invitees of such persons.
This obligation shall include, but not be limited to, the burden and
expense of the indemnified parties in defending all claims, suits and
administrative proceedings, including attorneys' fees and expert witness
and consulting fees, even if such claims, suits or proceedings are
groundless, false or fraudulent, and conducting all negotiations of any
description, and paying and discharging, when and as the same become
due, any and all judgments, penalties or other sums due against such
indemnified persons, and all such expenses incurred in enforcing the
obligation to indemnify. Tenant, at its sole expense, may employ
additional counsel of its choice to associate with counsel representing
the indemnified parties.
21.3 Tenant's Obligation to Remediate. Notwithstanding the
obligation of Tenant to indemnify Landlord pursuant to this agreement,
Tenant shall, upon demand of Landlord, and at its sole cost and expense,
promptly take all actions to remediate the premises which are reasonably
necessary to mitigate Environmental Damages or to allow full economic
use of the premises, or are required by Environmental Requirements,
which remediation is necessitated by the 1) introduction of a Hazardous
Material upon, about or beneath the premises or 2) a violation of
Environmental Requirements, either of which is caused by the actions of
Tenant, its employees, agents, contractors, subcontractors, guests,
invitees or licensees. Such actions shall include, but not be limited
to, the investigation of the environmental condition of the premises,
the preparation of any feasibility studies, reports or remedial plans,
and the performance of any cleanup, remediation, containment, operation,
maintenance, monitoring or restoration work, whether on or off of the
premises. Tenant shall take all actions necessary to restore the
premises to the condition existing prior to the introduction of
Hazardous Material upon, about or beneath the premises, notwithstanding
any lesser standard of remediation allowable under applicable law or
governmental policies. All such work shall be performed by one or more
contractors, selected by Tenant and approved in advance and in writing
by Landlord. Tenant shall proceed continuously and diligently with such
investigatory and remedial actions, provided that in all cases such
actions shall be in accordance with all applicable requirements of
governmental entities. Any such actions shall be performed in a good,
safe and workmanlike manner and shall minimize any impact on the
business conducted at the premises. Tenant shall pay all costs in
connection with such investigatory and remedial activities, including
but not limited to all power and utility costs, and any and all taxes or
fees that may be applicable to such activities. Tenant shall promptly
provide to Landlord copies of testing results and reports that are
generated in connection with the above activities, and copies of any
correspondence with any governmental entity related to such activities.
Promptly upon completion of such investigation and remediation, Tenant
shall permanently seal or cap all monitoring wells and test holes to
industrial standards in compliance with applicable federal, state and
local laws and regulations, remove all associated equipment, and restore
the premises to the maximum extent possible, which shall include,
without limitation, the repair of any surface damage, including paving,
caused by such investigation or remediation hereunder. Provided,
however, that Tenant shall not be obligated to remediate environmental
damages which result from seepage of Hazardous Materials onto the
premises from adjacent property unless the presence on the adjacent
property was caused by Tenant or its employees, agents, contractors,
subcontractors, guests, invitees or licensees.
21.4 Notification. If Tenant shall become aware of or receive
notice or other communication concerning any actual, alleged, suspected
or threatened violation of Environmental Requirements, or liability of
Tenant for Environmental Damages in connection with the premises or past
or present activities of any person thereon, or that any representation
set forth in this agreement is not or is no longer accurate, including
but not limited to notice or other communication concerning any actual
or threatened investigation, inquiry, lawsuit, claim, citation,
directive, summons, proceeding, complaint, notice, order, writ, or
injunction, relating to same, then Tenant shall deliver to Landlord,
within ten days of the receipt of such notice or communication by
Landlord, a written description of said violation, liability, correcting
information, or actual or threatened event or condition, together with
copies of any such notice or communication. Receipt of such notice
shall not be deemed to create any obligation on the part of Landlord to
defend or otherwise respond to any such notification or communication.
21.5 Negative Covenants.
21.5.1 No Hazardous Material on Premises. Except in strict
compliance with all Environmental Requirements, Tenant shall not cause,
permit or suffer any Hazardous Material to be brought upon, treated,
kept, stored, disposed of, discharged, released, produced, manufactured,
generated, refined or used upon, about or beneath the premises by
Tenant, its agents, employees, contractors, subcontractors, guests,
licensees or invitees, or any other person. Tenant shall deliver to
Landlord copies of all documents which Tenant provides to any
governmental body in connection with compliance with Environmental
Requirements with respect to the premises, such delivery to be
contemporaneous with provision of the documents to the governmental
agency.
21.5.2 No Violations of Environmental Requirements. Tenant
shall not cause, permit or suffer the existence or the commission by
Tenant, its agents, employees, contractors, subcontractors or guests,
licensees or invitees, or by any other person of a violation of any
Environmental Requirements upon, about or beneath the premises or any
portion thereof.
21.5.3 No Environmental or Other Liens. Tenant shall not
create or suffer or permit to exist with respect to the premises, any
lien, security interest or other charge or encumbrance of any kind,
including without limitation, any lien imposed pursuant to section
107(f) of the Superfund Amendments and Reauthorization Act of 1986 (42
U.S.C. section 9607(1) or any similar state statute to the extent that
such lien arises out of the actions of Tenant, its agents, employees,
contractors, subcontractors or guests, licensees or invitees.
21.6 Landlord's Right to Inspect and to Audit Tenant's Records.
Landlord shall have the right in its sole and absolute discretion, but
not the duty, to enter and conduct an inspection of the premises and to
inspect and audit Tenant's records concerning Hazardous Materials at any
reasonable time to determine whether Tenant is complying with the terms
of the lease, including but not limited to the compliance of the
premises and the activities thereon with Environmental Requirements and
the existence of Environmental Damages as a result of the condition of
the premises or surrounding properties and activities thereon. If
Landlord has reasonable cause to believe Tenant is in default with
respect to any of the provisions of this lease related to Hazardous
Materials, Environmental Requirements or Environmental Damages, then
Landlord shall have the right, but not the duty, to retain at the sole
expense of Tenant an independent professional consultant to enter the
premises to conduct such an inspection and to inspect and audit any
records or reports prepared by or for Tenant concerning such compliance.
Tenant hereby grants to Landlord the right to enter the premises and to
perform such tests on the premises as are reasonably necessary in the
opinion of Landlord to assist in such audits and investigations.
Landlord shall use reasonable efforts to minimize interference with the
business of Tenant by such tests inspections and audits, but Landlord
shall not be liable for any interference caused thereby.
21.7 Landlord's Right to Remediate. Should Tenant fail to
perform or observe any of its obligations or agreements pertaining to
Hazardous Materials or Environmental Requirements, then Landlord shall
have the right, but not the duty, without limitation upon any of the
rights of Landlord pursuant to this agreement, to enter the premises
personally or through its agents, consultants or contractors and perform
the same. Tenant agrees to indemnify Landlord for the costs thereof and
liabilities therefrom as set forth in Paragraph 21.2.
21.8 Landlord's Obligation to Remediate. Landlord agrees to
remediate all Environmental Damages 1) caused by Landlord, its agents,
employees, contractors, subcontractors, guests, licensees or invitees,
or 2) not so caused but arising prior to Commencement Date hereof and
not caused by Tenant, its agents, employees, contractors,
subcontractors, guests, licensees or invitees.
21.9 Landlord's Obligation to Indemnify, Defend and Hold
Harmless Concerning Environmental Matters. Landlord, its successors,
assigns and guarantors, agree to indemnify, defend, reimburse and hold
harmless the following persons from and against any and all
Environmental Damages arising from activities of Landlord or its
employees, agents, contractors, subcontractors or guests, licensees,
invitees; or which occurred prior to the Commencement Date (and were not
caused by Tenant, its agents, employees, contractors, subcontractors,
guests, licensees or invitees) which (1) result in the presence of
Hazardous Materials upon, about or beneath the premises or migrating to
or from the premises, or (2) result in the violation of any
Environmental Requirements pertaining to the premises and the activities
thereon:
21.9.1 Tenant;
21.9.2 the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees,
affiliates, lessees, mortgagees, trustees, heirs, devisees, successors,
assigns and invitees of Tenant.
This obligation shall include, but not be limited to, the burden and
expense of the indemnified parties in defending all claims, suits and
administrative proceedings, including attorneys' fees and expert witness
and consulting fees, even if such claims, suits or proceedings are
groundless, false or fraudulent, and conducting all negotiations of any
description, and paying and discharging, when and as the same become
due, any and all judgments, penalties or other sums due against such
indemnified persons, and all such expenses incurred in enforcing the
obligation to indemnify. Landlord, at its sole expense, may employ
additional counsel of its choice to associate with counsel representing
Tenant.
21.10 Survival of Environmental Obligations. The obligations of
Landlord and Tenant as set forth in Paragraph 21 and all of its
subparagraphs shall survive termination of this lease.
22. ENTRY BY LANDLORD. Landlord, or its authorized representative,
and/or any lender or prospective lender, shall have the right to enter
the premises during the lease term at all reasonable times during usual
business hours for purposes of inspection, and/or the performance of any
maintenance, repairs or replacement therein. Landlord shall give Tenant
such advance notice of entry as is reasonable in light of the purpose
for the entry. Landlord shall have the right to enter the premises and
show the same to a prospective tenant during the last 180 days of this
lease or any extended term, unless the term shall have been extended by
mutual written agreement or delivery of notice of exercise of any option
to extend. In all circumstances, Landlord shall use its best efforts to
conduct its business while in Tenant premises as not to interfere with
Tenant's operations or use of the premises.
23. DEFAULT - REMEDIES OF LANDLORD.
23.1 Default Defined. Any one or more of the following events
(each of which is herein sometimes called "event of default") shall
constitute a default:
23.1.1 Tenant defaults in the due and punctual payment of any
rent, taxes, tax deposits, insurance premiums, maintenance fees or other
sums required to be paid by Tenant under this lease when and as the same
shall become due and payable;
23.1.2 Tenant abandons the premises;
23.1.3 Tenant defaults in the performance of or compliance with
any of the covenants, agreements, terms and conditions contained in this
lease other than those referred to in the foregoing Paragraph 23.1.1,
and such default shall continue for a period of 30 days after written
notice thereof from Landlord to Tenant, and shall not be cured as
permitted by Paragraph 23.9;
23.1.4 Tenant files a voluntary petition in bankruptcy or is
adjudicated a bankrupt or insolvent, or takes the benefit of any
relevant legislation that may be in force for bankrupt or insolvent
debtors or files any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief for itself under any present or future federal, state or
other statute, law or regulation, or proceedings are taken by Tenant
under any relevant Bankruptcy Act in force in any jurisdiction available
to Tenant, or Tenant seeks or consents to or acquiesces in the
appointment of any trustee, receiver or liquidator of Tenant or of all
or any substantial part of its properties or of the premises, or makes
any general assignment for the benefit of creditors;
23.1.5 A petition is filed against Tenant seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal, state
or other statute, law or regulation, and shall remain undismissed for an
aggregate of 120 days, or if any trustee, receiver or liquidator of
Tenant or of all or any substantial part of its properties or of the
premises is appointed without the consent or acquiescence of Tenant and
such appointment remains unvacated for an aggregate of 120 days.
23.2 Landlord's Remedies in the Event of Default. In the event
of any event of default, Landlord shall have the option, without further
notice to Tenant or further demand for performance exercise any one or
more of the following remedies (and any other remedy available at law or
in equity):
23.2.1 If Tenant has been late in payment of rent or other
sums due on four or more occasions during any period of one year,
Landlord, without terminating this lease, may 1) require that all future
payments be made by bank cashier's check, and/or 2) require an
additional security deposit in the amount of the then-current base rent
for two months, and/or 3) require that rent for each month be paid on or
before the 15th day of the preceding month. Such requirement shall be
imposed by Landlord's written notice delivered to Tenant. The
additional security deposit shall be paid within 10 days after delivery
of the notice. The Landlord may or may not exercise the remedies
provided in this Paragraph 23.2.1, in its sole discretion. The exercise
of the remedies provided in this Paragraph 23.2.1 shall not be required
prior to the exercise of any other available remedy.
23.2.2 To institute suit against Tenant to collect each
installment of rent or other sum as it becomes due or to enforce any
other obligation under this lease even though the premises be left
vacant subject to Landlord's obligation to mitigate damages.
23.2.3 As a matter of right, to procure the appointment of a
receiver for the premises by any court of competent jurisdiction upon ex
parte application. All rents, issues and profits, income and revenue
from the premises shall be applied by such receiver to the payment of
the rent, together with any other obligations of the Tenant under this
lease.
23.2.4 To re-enter and take possession of the premises and
all personal property therein and to remove Tenant and Tenant's agents
and employees therefrom, and either:
1) terminate this lease and sue Tenant for damages for
breach of the obligations of Tenant to Landlord under this lease; or
2) without terminating this lease, relet, assign or sublet
the premises and personal property, as the agent and for the account of
Tenant in the name of Landlord or otherwise, upon the terms and
conditions Landlord deems fit with the new Tenant for such period (which
may be greater or less than the period which would otherwise have
constituted the balance of the term of this lease) as Landlord may deem
best, and collect any rent due upon any such reletting providing that if
the new lease term shall be greater than Tenant's original term, Tenant
shall be released from any and all further obligation upon the
expiration of Tenant's original term save for amounts accrued upon the
expiration of Tenant's original term. In this event, the rents received
on any such reletting shall be applied first to the expenses of
reletting and collecting, including, without limitation, all
repossession costs, reasonable attorneys' fees, and real estate brokers'
commissions, alteration costs and expenses of preparing said premises
for reletting, and thereafter toward payment of the rental and of any
other amounts payable by Tenant to Landlord. If the sum realized shall
not be sufficient to pay the rent and other charges due from Tenant,
then within five days after demand, Tenant will pay to Landlord any
deficiency as it accrues. Landlord may sue therefor as each deficiency
shall arise if Tenant shall fail to pay such deficiency within the time
limited.
23.3 Tenant to Surrender Peaceably. In the event Landlord
elects to re-enter or take possession of the premises, Tenant shall quit
and peaceably surrender the premises to Landlord, and Landlord may enter
upon and re-enter the premises and possess and repossess itself thereof,
by force, summary proceedings, ejectment or otherwise, and may
dispossess and remove Tenant and may have, hold and enjoy the premises
and the right to receive all rental income of and from the same.
23.4 No Termination by Re-Entry. No re-entry or taking of
possession by Landlord shall be construed as an election on Landlord's
part to terminate or accept surrender of this lease unless Landlord's
written notice of such intention is delivered to Tenant.
23.5 Injunction. In the event of any breach by Tenant of any of
the agreements, terms, conditions or covenants contained in this lease,
Landlord, in addition to any and all other rights, shall be entitled to
enjoin such breach and shall have the right to invoke any right and
remedy allowed at law or in equity or by statute or otherwise for such
breach as though re-entry, summary proceedings, and other remedies were
not provided for in this lease.
23.6 Remedies Listed are Cumulative and Non-Exclusive. The
enumeration of the foregoing remedies does not exclude any other
remedy, but all remedies are cumulative and shall be in addition to
every other remedy now or hereafter existing at law or in equity,
including, but not limited to, the remedies provided in Paragraph 24
concerning Landlord's security interest in Tenant's personalty and
Landlord's right to remove same.
23.7 Interest on Sums Past Due. All rent and all other amounts
due from Tenant hereunder shall bear interest at the rate of twelve
(12%) percent per annum compounded quarter-annually from their
respective due dates until paid, provided that this shall in no way
limit, lessen or affect any claim for damages by Landlord for any breach
or default by Tenant.
23.8 Attorneys' Fees. Reasonable attorneys' fees, expert
witness fees, consulting fees and other expenses incurred by either
party by reason of the breach by either party in complying with any of
the agreements, terms, conditions or covenants of this lease shall
constitute additional sums to be paid to the prevailing party on
demand.
23.9 Time to Cure Certain Non-Monetary Defaults. In the event
of any default other than failure to pay a sum of money, for which
notice has been given as provided herein, which because of its nature
can be cured but not within the period of grace heretofore allowed, then
such default shall be deemed remedied, if the correction thereof shall
have been commenced within said grace period or periods and shall, when
commenced, be diligently prosecuted to completion.
23.10 Landlord Default. If Landlord is in default under any of
its obligations and the default continues for thirty (30) days after
written notice from Tenant (subject to extension pursuant to 23.9),
Tenant may pursue all remedies at law or in equity. Tenant may, but
shall not be required to, correct such default for the Landlord's
account , and the expense shall be promptly paid within ten (10) days
by Landlord; however, in no event shall Tenant have the right to rental
abatement, offset of expenses against rental, or the right to terminate
this lease, subject to Tenant's legal or equitable remedies.
Tenant may not offset any sum due or assertedly due from Landlord to
Tenant against any sum due from Tenant to Landlord.
Tenant agrees that if Tenant obtains a judgment against Landlord
arising out of Landlord's obligations under this lease, such judgment
may be satisfied only by execution and sale of Landlord's interest in
the premises leased hereby. Tenant may not seek execution against other
property of Landlord, nor pursue any judgment, execution or other remedy
against the partners or other owners of Landlord or any of their
property. Immediately upon receipt of Landlord's written request,
Tenant will release any property (other than the premises leased hereby)
from the lien of any judgment obtained by Tenant against Landlord
arising out of Landlord's obligations under this lease.
24. LEGAL PROCEEDINGS AGAINST TENANT BY THIRD PARTIES; TENANT TO PAY
LANDLORD'S FEES. In the event of any proceeding at law or in equity
wherein Landlord, without being in default as to its covenants under the
terms hereof, shall be made a party to any litigation by reason of
Tenant's interest in the premises, or, in the event Landlord shall be
required to commence any legal proceedings relating to the premises and
Tenant's occupancy thereof and Tenant's relation thereto, but only after
notice to and consent by Tenant, Landlord shall be allowed and Tenant
shall be liable for and shall pay all costs and expenses incurred by
Landlord, including reasonable attorneys' fees, expert witness fees and
consultant's fees.
25. INDEMNIFICATION BY TENANT AND BY LANDLORD. The Tenant shall
indemnify and save harmless Landlord of and from liability for damages
or claims against Landlord, including costs, attorneys' fees and
expenses of Landlord in defending against the same, on account of
injuries to any person or property, if the injuries are caused by the
negligence or willful misconduct of Tenant, its agents, servants or
employees, or of any other person entering upon the premises under
express or implied invitation of Tenant or if such injuries are the
result of the violation by Tenant, its agents, servants, or employees,
of laws, ordinances, other governmental regulations, or of the terms of
this lease.
The Landlord shall indemnify and save harmless Tenant of and from
liability for damages or claims against Tenant, including costs,
attorneys' fees and expenses of Tenant in defending against the same, on
account of injuries to any person or property, if the injuries are
caused by the negligence or willful misconduct of Landlord, its agents,
servants or employees, or of any other person entering upon the premises
under express or implied invitation of Landlord or where such injuries
are the result of the violation by Landlord, its agents, servants or
employees, of laws, ordinances, other governmental regulations, or of
the terms of this lease..
Landlord provides recreation facilities for the use of employees of
Tenant and other occupants within the property developed by Landlord,
which property presently includes LONG'S PEAK INDUSTRIAL PARK, FIRST,
SECOND and THIRD FILINGS, and portions of ST. VRAIN CENTRE, both in the
City of Longmont and County of Boulder, Colorado, and will include such
additional property in the immediate vicinity thereof as may be
developed by Landlord. The term "recreation facilities" includes, at
present, a fitness trail with 34 exercise stations, volleyball courts,
basketball courts, and a park, and will include such additional
facilities as Landlord may provide.
Tenant shall indemnify and save harmless Landlord of and from
Liability for damages or claims against Landlord, including costs,
attorneys' fees and expenses of Landlord in defending against the same,
on account of any injury to (or death of) an employee of Tenant arising
out of use of the recreation facilities, unless such death or injury is
caused by Landlord's gross negligence or willful misconduct
26. ASSIGNMENT OR SUBLETTING. Tenant shall not assign, mortgage, or
encumber this lease, nor sublet or permit the premises or any part
thereof to be used by others, without the prior written consent of
Landlord in each instance, which consent shall not be unreasonably
withheld.
In connection with an assignment, sublease or encumbrance Landlord
may require the submittal of detailed financial information about the
prospective subtenant or assignee, to be reviewed by Landlord, and may
require a guarantee of the obligations of the prospective subtenant or
assignee, and may require detailed financial information about the
guarantor, to be reviewed by Landlord; and there may be alterations to
this lease and alterations to the building which are necessary to
consummate the transaction. The Landlord may require Tenant or the
prospective assignee or sub-tenant to pay for the alterations to the
building, and may require that Landlord perform same. In addition,
Landlord may charge a fee of two percent of base rent for the first five
years of the lease, due in full upon Landlord's consent, as payment to
Landlord for such investigations, lease alterations and similar matters.
No two percent fee will be charged in connection with an assignment or
sublease to an assignee or subtenant who is "affiliated" with Tenant.
"Affiliated" means under common voting control, directly or indirectly.
A sale or transfer of control of a majority of the votes which may be
cast to elect Tenant's board of directors or other governing body shall
be deemed to be an assignment of this lease, requiring Landlord's
consent if the sale or transfer is essentially accomplished in a single
transaction.
If this lease is assigned, or if the premises or any part thereof is
sublet, or occupied by anyone other than Tenant, Landlord may, after
default by Tenant, collect rent from the assignee, sub-tenant, or
occupant and apply the net amount collected against all rent herein
reserved. No such assignment, subletting, occupancy, or collection
shall be deemed a waiver of this covenant, or the acceptance of the
assignee, sub-tenant, or occupant as tenant, or a release of Tenant from
further performance by Tenant of the covenants in this lease. The
consent by Landlord to an assignment or subletting shall not be
construed to relieve Tenant (or any subsequent tenant) from obtaining
the consent in writing of Landlord to any further assignment or
subletting. This provision shall not apply to a sale or transfer of
control to Hyundai Electronic Industries Co. Ltd. and /or any of it's
affiliates.
27. LANDLORD'S WARRANTY OF TITLE; QUIET ENJOYMENT. Landlord
covenants it has good right to lease the premises in the manner
described herein and that Tenant shall peaceably and quietly have, hold,
occupy, and enjoy the premises during the term of the lease; except as
provided in Paragraph 31 concerning subordination to mortgage lenders.
28. ADDITIONAL DEVELOPMENT OF PROPERTY - RIGHTS OF LANDLORD.
Landlord does reserve, during the term of this lease, the right to go
upon and deal with the premises or part thereof for the purpose of
implementing a common development plan for the project of which the
premises are a part, and to install non-exclusive sidewalks, paths,
roadways and other street improvements for use by vehicles, pedestrians,
and for parking; to undertake such drainage programs to handle
underground and surface drainage water and to make any other changes
and/or improvements as Landlord shall deem advisable in the exercise of
its sole discretion; provided, however, any such action by Landlord
shall not unreasonably interfere with the rights of Tenant hereunder.
29. GOVERNMENTAL ACQUISITION OF THE PREMISES. The parties agree
that Landlord shall have sole and exclusive authority to negotiate and
settle all matters pertaining to the acquisition of all or part of the
premises by a governmental agency by eminent domain or threat thereof
(condemnation), and to convey all or any part of the premises under
threat of condemnation, and the lease shall terminate as to any area so
conveyed. It is agreed that any compensation for land and/or buildings
to be taken whether resulting from negotiation and agreement or
condemnation proceedings, shall be the exclusive property of Landlord,
and that there shall be no sharing whatsoever between Landlord and
Tenant of any such sum. Such taking of property shall not be
considered as a breach of this lease by Landlord, nor give rise to any
claims in Tenant for damages or compensation from Landlord. Tenant may
separately claim and recover from the condemning authority the value of
any personal property owned by Tenant which is taken, and any relocation
expenses owed to Tenant by the condemning authority. If the taken
portion of the premises consists only of areas where no building is
constructed, and the land area of the premises is reduced by less than
ten percent, and the parking area available for use by Tenant is reduced
by less than five percent, and there is no material change in Tenant's
access to the premises, then there shall be no change in the terms of
the lease. If no building area is taken but the foregoing limits on
parking area reductions are exceeded, then Tenant may terminate the
lease unless Landlord provides sufficient reasonably adjacent parking
area so that the total available parking area is reduced by less than
five percent. If any portion of the building on the premises is taken,
then Landlord, at its election, may replace the square footage taken
with space in the same building, or may provide land and building area
essentially the same as the premises in a reasonably adjacent location,
within 10 days after the conveyance or taking, under the same terms and
conditions as contained in this lease, and this lease shall be in full
force and effect as to the new premises. If Landlord does not so
provide reasonable space, then Tenant shall have two options. First,
Tenant may terminate the lease by written notice delivered to Landlord
within 60 days after the conveyance or taking. Second, Tenant may
retain the remaining portion of the premises, under all the terms and
conditions hereof, but the base rental shall be reduced in proportion to
the number of square feet of building floor space taken compared to the
number of square feet of building floor space on the premises prior to
the taking.
30. SUBORDINATION OF THE LEASEHOLD TO MORTGAGES. This lease shall
be subject and subordinate in priority at all times to the lien of any
existing and/or hereafter executed mortgages and trust deeds encumbering
the premises. Although no instrument or act on the part of Tenant shall
be necessary to effectuate such subordination, Tenant will execute and
deliver such further instruments subordinating this lease to the lien of
any such mortgages or trust deeds as may be desired by the mortgagee or
holder of such trust deeds. Tenant hereby appoints Landlord as his
attorney in fact, irrevocably, to execute and deliver any such
instrument for Tenant. Tenant further agrees at any time and from time
to time upon not less than ten (10) days prior written request by
Landlord, to execute, acknowledge, and deliver to Landlord an estoppel
affidavit in form acceptable to Landlord and the holder of any existing
or contemplated mortgage or deed of trust encumbering the premises.
Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (1) that this lease is in full force and effect,
without modification except as may be represented by Landlord; (2) that
there are no uncured defaults in Landlord's performance; and (3) that
not more than one (1) month's rent has been paid in advance. Further,
upon request, Tenant shall supply to Landlord a corporate resolution
certifying that the party signing this statement on behalf of Tenant is
properly authorized to do so, if Tenant is a corporation. Tenant agrees
to provide Landlord within ten business days of Landlord's request,
Tenant's most recently completed financial statements and such other
financial information as reasonably requested by Landlord in order to
verify Tenant's financial condition to satisfy requirements of
Landlord's existing or contemplated lender or mortgagee.
Tenant agrees with lender and Landlord that if there is a foreclosure
of any such mortgage or deed of trust and pursuant to such foreclosure,
the Public Trustee or other appropriate officer executes and delivers a
deed conveying the premises to the lender or its designee, or in the
event Landlord conveys the premises to the lender or its designee in
lieu of foreclosure, Tenant will attorn to such grantee of the premises,
rather than to Landlord, to perform all of Tenant's obligations under
the lease, and Tenant shall have no right to terminate the lease by
reason of the foreclosure or deed given in lieu thereof.
Landlord will include in the terms of any mortgage or deed of trust
on the premises a provision that if Tenant is not in default under the
terms of this lease and Tenant is then in possession of the premises,
Tenant's rights of quiet enjoyment arising out of the lease shall not be
affected or disturbed by lender in the event of a default by Landlord
and any sale of the premises through foreclosure of any deed of trust or
otherwise.
31. MEMORANDUM OF LEASE - RECORDING. This lease shall not be
recorded in the office of the County Clerk and Recorder of Boulder
County, except by Landlord as a financing statement. In order to effect
public recordation, the parties hereto may, at the time this lease is
executed, agree to execute a Memorandum of lease incorporating therein
by reference the terms of this lease, but deleting therefrom any
expressed statement or mention of the amount of rent herein reserved,
which instrument may be recorded by either party in the office of the
Clerk and Recorder of Boulder County.
32. NO WAIVER OF BREACH; ACCEPTANCE OF PARTIAL PAYMENTS OF RENT. No
assent, or waiver expressed or implied, or failure to enforce, as to any
breach of any one or more of the covenants or agreements herein shall be
deemed or taken to be a waiver of any succeeding or additional breach.
Payment by Tenant or receipt by Landlord of an amount less than the
rent or other payment provided for herein shall not be deemed to be
other than a payment on account of the earliest rent then due, nor shall
any endorsement or statement on any check or any letter accompanying any
check or payment of rent be deemed an accord and satisfaction, and
Landlord may accept such check or other payment without prejudice to
Landlord's right to recover the balance of all rent then due, and/or to
pursue any or all other remedies provided for in this lease, in law,
and/or in equity including, but not limited to, eviction of Tenant.
Specifically, but not as a limitation, acceptance of a partial payment
of rent shall not be a wavier of any default by Tenant.
33. CONTROLLING LAW. The lease, and all terms hereunder shall be
governed by the laws of the State of Colorado, exclusive of its
conflicts of laws rules.
34. INUREMENTS. The covenants and agreements herein contained
shall bind and inure to the benefit of Landlord and Tenant and their
respective successors. This lease shall be signed by the parties in
duplicate, each of which shall be a complete and effective original
lease.
35. TIME. Time is of the essence in this lease in each and all of
its provisions in which performance is a factor.
36. ADDRESSES; EMPLOYER IDENTIFICATION NUMBERS; METHOD OF GIVING
NOTICE. The street address of Landlord is 1960 Industrial Circle,
Longmont, CO 80501. The mailing address of Landlord is P. O. Box 1937,
Longmont, CO 80502-1937. All payments, notices and communications which
are sent to Landlord via United States mail shall be addressed to the
mailing address. Only payments, notices and communications which are
hand delivered or delivered by private courier service shall be
addressed to the street address.
Tenant's street address is 1900 Pike Road, Longmont, Colorado 80501.
Tenant's mailing address is 2190 Miller Drive, Longmont, Colorado 80501.
Any notice to Tenant may be delivered to the above addresses or to the
premises. A copy of any notice should be sent to Vice President and
General Consul, 211 River Oaks Parkway, San Jose, California 95136.
Landlord's current fax number is (303)776-4946. Tenant's current fax
number is 303-678-2165. Any written notice required hereby may be
delivered by fax, U.S. mail, private courier service, or hand delivery.
Notice shall be effective at time of delivery to the address or fax
number shown.
Either party may change its street or mailing address, or fax number,
for purposes hereof, by written notice delivered to the other. The
federal employer identification number of Landlord is 84 0954 078. The
federal identification number of Tenant is 77-0123732.
38. PARAGRAPH HEADINGS; GRAMMAR. All paragraph headings are made
for the purposes of ease of location of terms and shall not affect or
vary the terms hereof. Throughout this lease, wherever the words,
"Landlord" and "Tenant" are used they shall include and imply to the
singular, plural, persons both male and female, and all sorts of
entities and in reading said lease, the necessary grammatical changes
required to make the provisions hereof mean and apply as aforesaid shall
be made in the same manner as though originally included in said lease.
39. ADDITIONAL PROVISIONS:
FLEXIBILITY CLAUSE: In the event Tenant's requirement for
space increases or decreases during the term of this lease, including
any extended term thereof, Tenant may notify Landlord of its adjusted
space requirement, in which event Landlord shall, within 120 days after
such notice, increase or decrease the square footage available to Tenant
so as to reasonably meet the Tenants new needs (as is reasonably
devisable by Landlord), either using the premises or other comparable
space of Landlord reasonably acceptable by Tenant. Tenant may not
decrease space in existing premises leased from the Landlord and lease
space in Boulder County owned by a third party, unless the Landlord
cannot accommodate the Tenant's overall space requirements. In such
event, Landlord and Tenant shall amend this lease accordingly, or enter
into a new lease upon rental rates and other terms which are similar to
those of this Lease and reasonably acceptable to both parties and
terminate this lease. Tenant may exercise the right described in this
paragraph multiple times, but not more than once in any twelve month
period. Not withstanding language to the contrary that might be found
elsewhere in this lease, the Tenant will be allowed to exercise the
right described in this paragraph without incurring of cost or other
penalties sometimes associated with early terminations, Tenant will be
expected to return the premises to Landlord pursuant to the terms and
conditions of Paragraph 14 of this Lease Agreement. This provision
shall not apply to 345 S. Francis, Longmont, Colorado.
IN WITNESS WHEREOF, the Parties have executed this lease as of the
date hereof.
LANDLORD: PRATT LAND LIMITED LIABILITY COMPANY
By: /s/ Susan M. Pratt
-----------------------
Susan M. Pratt, Manager
TENANT: MAXTOR CORPORATION
By: /s/ Walter D. Amaral
-------------------------
Title: V.P. Finance & CFO
----------------------
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
The foregoing instrument was acknowledged before me this 2nd day of
March, 1995 by Susan Pratt, Manager, Pratt Land Limited Liability
Company.
Witness my hand and official seal.
My commission expires: May 3, 1997
-------------
/s/ Elizabeth H. Oram
---------------------
Notary Public
STATE OF CALIFORNIA )
) ss.
COUNTY OF SANTA CLARA)
The foregoing instrument was acknowledged before me this 24th day of
February, 1995 by WALTER D. AMARAL , Maxtor Corporation.
Witness my hand and official seal.
My commission expires: 6/5/98
/s/ Sharon L. Spehar
--------------------
Notary Public
-15-
LEASE AGREEMENT
FOR PREMISES LOCATED AT
2040 MILLER DRIVE, Suite A, B, & C
LONGMONT, COLORADO
BETWEEN
MAXTOR CORPORATION
AS TENANT
AND
PRATT LAND LIMITED LIABILITY COMPANY
AS LANDLORD
TABLE OF CONTENTS
LEASE
1. PREMISES LEASED; DESCRIPTION
2. PRESENT CONDITION OF PROPERTY
3. TERM
3.1 Initial Term
3.2 Option to Extend
3.3 Delivery of Possession
4. RENT
4.1 Base Rental
4.2 Escalation of Base Rental
4.3 Maintenance Expense for Grounds, Snow Removal, Exterior and HVAC
4.4 Private Security Service
4.5 Late Charges
4.6 Security Deposit
4.7 Proration of Rent for Partial Months
5. TAXES - REAL PROPERTY - PAID BY TENANT - PROTEST
6. TAXES - TENANT'S PERSONAL PROPERTY - PAID BY TENANT
7. UTILITIES - TENANT TO OBTAIN AND PAY FOR
8. HOLDING OVER
9. MODIFICATIONS OR EXTENSIONS
10. ALTERATION - CHANGES AND ADDITIONS - RESPONSIBILITY - NO HOLES IN
ROOF - NO NEW EQUIPMENT ON ROOF
11. MECHANIC'S LIENS
12. UNIFORM SIGNS; NO "FOR RENT" SIGNS
13. MAINTENANCE AND REPAIRS OF THE BUILDING; LANDLORD NOT LIABLE FOR
DAMAGE TO CONTENTS
14. CONDITION UPON SURRENDER - RETURN OF KEYS
15. CARE OF GROUNDS; STORAGE OUTSIDE THE BUILDING; NO WASTE, NO
NUISANCE; COMPLIANCE WITH LAWS; FUTURE RULES AND REGULATIONS
16. LIABILITY FOR OVERLOAD
17. NO USE OF PREMISES IN VIOLATION OF INSURANCE POLICIES
18. INSURANCE
18.1 All Risk Insurance
18.2 General Liability Insurance
18.3 Tenant Improvements
18.4 Other Insurance
18.5 Waiver of Subrogation
18.6 Other Provisions Regarding Tenant's Insurance
18.7 Changes in Standard Policies
19. FIRE REGULATIONS - TENANT RESPONSIBILITY
20. REPLACEMENT OF BUILDING - CASUALTY DAMAGE
21. ENVIRONMENTAL MATTERS
21.1 Definitions
21.1.1 Hazardous Material
21.1.2 Environmental Requirements
21.1.3 Environmental Damages
21.2 Tenant's Obligation to Indemnify, Defend and Hold Harmless
21.3 Tenant's Obligation to Remediate
21.4 Notification
21.5 Negative Covenants
21.5.1 No Hazardous Material on Premises
21.5.2 No Violations of Environmental Requirements
21.5.3 No Environmental or Other Liens
21.6 Landlord's Right to Inspect and to Audit Tenant's Records
21.7 Landlord's Right to Remediate
21.8 Landlord's Obligation to Remediate
21.9 Landlord's Obligation to Indemnify, Defend and Hold Harmless
Concerning Environmental Matters
21.10 Survival of Environmental Obligations
22. ENTRY BY LANDLORD
23. DEFAULT - REMEDIES BY LANDLORD
23.1 Default Defined
23.2 Landlord's Remedies in the Event of Default
23.3 Tenant to Surrender Peaceably
23.4 No Termination by Re-Entry
23.5 Injunction
23.6 Remedies Listed are Cumulative and Non-Exclusive
23.7 Interest on Sums Past Due
23.8 Attorneys' Fees
23.9 Time to Cure Certain Non-Monetary Defaults
23.10 Landlord Default
24. LEGAL PROCEEDINGS AGAINST TENANT BY THIRD PARTIES; TENANT TO PAY
LANDLORD'S FEES
25. INDEMNIFICATION BY TENANT AND BY LANDLORD
26. ASSIGNMENT OR SUBLETTING
27. LANDLORD'S WARRANTY OF TITLE; QUIET ENJOYMENT
28. ADDITIONAL DEVELOPMENT OF PROPERTY - RIGHTS OF LANDLORD
29. GOVERNMENTAL ACQUISITION OF THE PREMISES
30. SUBORDINATION OF THE LEASEHOLD TO MORTGAGES
31. TENANT'S GUARANTEE AND FINANCIAL STATEMENTS
32. MEMORANDUM OF LEASE - RECORDING
33. NO WAIVER OF BREACH; ACCEPTANCE OF PARTIAL PAYMENTS OF RENT
34. CONTROLLING LAW
35. INUREMENTS
36. TIME
37. ADDRESSES; EMPLOYER IDENTIFICATION NUMBERS; METHOD OF GIVING NOTICE
38. PARAGRAPH HEADINGS; GRAMMAR
39. ADDITIONAL PROVISIONS
EXHIBIT A: SITE PLAN
LEASE
THIS LEASE, made and entered into this 24th day of February, 1995,
by and between PRATT LAND LIMITED LIABILITY COMPANY, a Colorado limited
liability company, hereinafter referred to as "Landlord," and MAXTOR
CORPORATION, hereinafter referred to as "Tenant,"
W I T N E S S E T H:
In consideration of the covenants, terms, conditions, agreements, and
payments as hereinafter set forth, the parties hereto covenant and agree
as follows:
1. PREMISES LEASED; DESCRIPTION. Landlord hereby leases unto Tenant
the following described premises containing approximately 31,123 square
feet of building floor space measured to the outside of the walls,
including overhangs, canopies and loading docks, and to approximately
1/2 the thickness of common walls; commonly known as 2040 Miller Drive,
Suites A, B, and C, in the City of Longmont, County of Boulder, State of
Colorado, a more detailed description of which is Part of Lot 7, Longs
Peak Industrial Park, Second Filing, County of Boulder, State of
Colorado, a diagram of which is attached as Exhibit A (hereinafter
referred to as the "premises"); the leasing of which is made according
to the terms of this Agreement; together with all appurtenances thereto,
and all fixtures attached thereto, in present condition, and together
with nonexclusive reasonable access across any other land owned by
Landlord as may be required for use of the premises by Tenant, with such
access to be on such roadways, sidewalks, and other common areas of
which the premises are a part, or of any such adjacent lands owned by
Landlord, as Landlord may from time to time designate.
2. PRESENT CONDITION OF PROPERTY. Tenant has examined, and accepts
the building, improvements, and any fixtures on the premises, in present
condition. No representation, statement, or warranty, express or
implied, has been made by or on behalf of Landlord as to the condition
of the premises, or as to the use that may be made of same. In no event
shall Landlord be liable for any defect in the premises which are
discernible by Tenant's examination thereof or for any limitation on the
use of the premises. Tenant shall not be deemed to have accepted the
Tenant improvements to be constructed by Landlord until it shall have
had a reasonable opportunity to inspect the same.
3. TERM.
3.1 Initial Term. The term of this lease shall commence at
12:00 noon on March 1, 1995 (the "Commencement Date"), and unless
terminated as herein provided for, shall end at 12:00 noon on the 1st
day of March, 2000. The Commencement Date as set forth in this
Paragraph 3.1 shall be subject to those adjustments of the Commencement
Date, if any, set forth in Paragraph 3.3 which relate to the performance
of construction on the premises.
3.2 Option to Extend. Upon full and complete performance of all
the terms, covenants, and conditions herein contained by Tenant and
payment of all rental due under the terms hereof, Tenant shall be given
the option to renew this lease for three (3) additional terms of sixty
(60) months each. Each such option shall be exercisable only by
delivery of Tenant's signed written notice of extension to Landlord not
less than 180 days prior to the expiration of the then-existing lease
term. In the event of such exercise, this lease shall be deemed to be
extended for the additional period pursuant to all the terms and
conditions set forth herein, including (but not as a limitation) those
provisions for increase of the base rental set forth in Paragraph 4.2.2.
In the event of exercise of said Option, any funds held by Landlord
pursuant hereto shall continue to be so held subject to the terms and
conditions relating to same.
3.3 Delivery of Possession. Except as above provided with
respect to construction of Tenant Improvements, Tenant shall be entitled
to possession of the premises at noon on the Commencement Date, as
defined in Paragraph 3.1. Tenant may, with approval by Landlord in its
sole discretion, have access to the premises during tenant improvement
construction for the purpose of moving in Tenant-owned furniture,
fixtures, equipment and inventory. This access and the items so moved
in shall not in any way impede the construction of the tenant
improvements, nor shall Landlord, its agent, employees, sub-contractors,
or any other person on the premises whether invited or not invited, be
liable for the protection, care or security of Tenant owned items. This
paragraph shall not be construed so as to permit Tenant to occupy the
premises prior to the satisfaction of all requirements for Tenant's
insurance set forth below.
4. RENT. Tenant shall pay to Landlord, at the address of Landlord
as herein set forth, the following as rental for the premises:
4.1 Base Rental.
The base rental for the full term hereof shall be ONE MILLION ONE
HUNDRED SIXTY SEVEN THOUSAND ONE HUNDRED TWELVE AND NO/100THS Dollars
($1,167,112.00), payable in monthly installments [basic monthly rental
of NINETEEN THOUSAND FOUR HUNDRED FIFTY-ONE AND 88/100THS Dollars
($19,451.88)] in advance on the first day of each month during the term
hereof.
4.2 Escalation of Base Rental.
4.2.1 On the first anniversary of the commencement date of this
lease, and annually thereafter, the base rental payable by Tenant shall
be increased to an amount determined by multiplying the basic monthly
rental by a fraction, the denominator of which shall be the most recent
Consumer Price Index figure, as hereinafter defined, published prior to
the Commencement Date, and the numerator of which shall be the most
recent Consumer Price Index figure published prior to the particular
anniversary date; provided, however, that in no event shall the rent for
any month after such anniversary be less than the rent for the month
immediately preceding such anniversary. As used herein, the term
"Consumer Price Index" shall mean the Consumer Price Index, All Urban
Consumers, All Items, Denver, Colorado (1982-84 = 100), or the successor
of that Index, as published by the Bureau of Labor Statistics, U.S.
Department of Labor. Should Landlord lack sufficient data to make the
proper determination on the date of any adjustment, Tenant shall
continue to pay the monthly rent payable immediately prior to the
adjustment date. As soon as Landlord obtains the necessary data,
Landlord shall determine the rent payable from and after such adjustment
date and shall notify Tenant of the adjustment in writing. Should the
monthly rent for the period following the adjustment date exceed the
amount previously paid by Tenant for that period, Tenant shall forthwith
pay the difference to Landlord. Should the Consumer Price Index as
above described cease to be published, a reasonably comparable successor
index shall be selected by Landlord. If Tenant objects to the successor
index, the dispute will be resolved and a successor index designated by
arbitration pursuant to the rules and procedures of the American
Arbitration Association.
4.2.2 Notwithstanding the foregoing, the parties agree that the
increase in base rental for each year shall be not less than two and one-
half percent (2.5%) nor more than seven percent (7%) of the base rental
for the previous year, each year for such purposes to commence on the
anniversary of the Commencement Date.
4.2.3 Landlord may in its sole discretion, waive the escalation
provided for in Paragraph 4.2.1 or Paragraph 4.2.2 for any particular
year, years, or part of a year. No such waiver shall preclude Landlord
from applying the escalation to any subsequent year or part of a year,
and from making the subsequent application as if all subsequent
escalations had been duly made to the maximum permissible extent.
4.3 Maintenance Expense for Grounds, Snow Removal, Exterior and
HVAC. Tenant shall pay the cost of having Landlord maintain the HVAC
systems and the exterior of the premises including parking lots, green
areas, sidewalks, entrances, and corridors (but not the exterior
surfaces of the building, other than glass). Cost of maintaining such
areas shall include, but shall not be limited to, repairs, preventative
maintenance, HVAC filters and compressors, sealing, striping, lawn
mowing, snow removal (Tenant is responsible for snow removal of less
than 2"), gardening, shrub care and replacements, lawn watering, parking
area maintenance, electricity for lighting, sign maintenance,
depreciation of equipment used for the foregoing purposes and other
costs related to the premises or common areas. Landlord shall perform
such maintenance and charge the cost thereof to Tenant, which shall be
paid as additional rent within 10 days after delivery of Landlord's
invoice. Landlord shall keep reasonable records of such cost, which
shall be available for Tenant's inspection during normal business hours.
Certain items of such maintenance (such as landscape maintenance and
snow removal) are performed by Landlord on numerous areas owned and/or
maintained by Landlord, in addition to the premises, and the cost
thereof cannot be precisely ascribed to the premises. As to such
services which are performed on areas in addition to the premises, the
cost for all areas so serviced shall be allocated to the premises in
proportion to the square feet of building floor space in the premises
compared to the square feet of building floor space in the entire area
to which such services are provided.
For the first year of the lease, Landlord agrees that the total of
the maintenance fees referred to in this paragraph will not exceed $0.80
per square foot annually.
4.4 Private Security Service. Landlord may engage a private
security service, as an independent contractor, to patrol an area which
includes the premises. Tenant shall be included in the selection
process. If Landlord does so employ a private security service, which
the tenant has approved, the cost thereof shall be treated in the same
manner as Maintenance Expense and paid by Tenant as Additional Rent
under the same provisions as are applicable to Maintenance Expense.
Tenant shall have no obligation to participate under this Section 4.4,
if Tenant's portion of the cost of such services is more than the amount
that Tenant has been paying for such service.
Landlord shall have absolutely no obligation to engage a private
security service and shall not be liable for any damages or loss which
might have been averted had a private security service been engaged. If
Landlord does engage a private security service, Landlord shall not be
liable for any damages or loss which may result from actions, inactions,
non-performance or quality of performance by the security service. If
the Tenant desires a higher level of security services than Landlord
provides, or wishes to obtain an agreement that there will be liability
for actions, inactions, non-performance or quality of performance by a
security service, Tenant may itself engage such security service as
Tenant chooses, at Tenant's sole expense.
Nothing herein shall limit any action by Tenant against any person or
entity providing private security service, provided that Landlord shall
not be party to, or liable for any judgment entered in such an action,
as a defendant, cross defendant, third-party .defendant, or otherwise.
4.5 Late Charges. Tenant will pay a late charge equal to five
percent of any monthly rental payment or other payment not paid when
due, which payment shall be in addition to any interest elsewhere
provided for.
4.6 Security Deposit. Landlord acknowledges receipt of the sum
of NINETEEN THOUSAND FOUR HUNDRED FIFTY-ONE AND 88/100THS Dollars
($19,451.88) paid by Tenant upon the execution hereof or a letter of
credit for the same amount, to be retained by Landlord as security for
the performance of all of the terms and conditions of this lease
Agreement to be performed by Tenant, including payment of all rental due
under the terms hereof. Landlord shall not owe Tenant any interest on
the deposit. At Landlord's election, deductions may be made by Landlord
from the amount so retained for the reasonable cost of repairs to the
premises which should have been performed by Tenant, for any rental
payment or other sum delinquent under the terms hereof, and for any sum
used by Landlord in any manner to cure any default in the performance of
Tenant under the terms of this lease. In the event deductions are so
made during the rental term, upon notice by Landlord, Tenant shall
redeposit such amounts so expended so as to maintain the security
deposit in the amount as herein provided for, within 10 days after
receipt of such written demand from Landlord. Nothing herein contained
shall limit the liability of Tenant as to any repairs or maintenance of
the premises; and nothing herein shall limit the obligation of Tenant
promptly to pay all sums otherwise due under this lease and to comply
with all the terms and conditions hereof. The security deposit, less
any sums withheld by Landlord pursuant to the terms hereof, shall be
repaid to Tenant within sixty days after the date of termination of the
lease.
4.7 Proration of Rent for Partial Months. If the lease term
begins on other than the first day of a month, base rent and additional
rent from such date until the first day of the next succeeding calendar
month shall be prorated on the basis of the actual number of days in
such calendar month and shall be payable in advance. If the lease term
terminates on other than the last day of the calendar month, rent from
the first day of such calendar month until such termination date shall
be prorated on the basis of the actual number of days in such month, and
shall be payable in advance.
5. TAXES - REAL PROPERTY - PAID BY TENANT - PROTEST. Tenant shall
pay as additional rent, all real estate taxes and assessments, as
shall, from and after the date hereof, be assessed upon the premises and
any appurtenances or improvements thereto. Tenant shall pay one-twelfth
(1/12) of such estimated additional rent, in advance, with each monthly
rental payment. Landlord shall reasonably estimate such taxes and
advise Tenant in writing of the amount to be paid each month. Such
payments shall be separately accounted for by Landlord, (and may be
deposited with any holder of a mortgage or deed of trust on the
premises) and shall be used to make prompt payment of such taxes as they
come due. If the estimated payments made by Tenant are not sufficient
to fully pay such taxes as they come due, Tenant shall pay to Landlord
any amount necessary to make up the deficiency within ten (10) days of
notice from Landlord. Landlord shall have no obligation to pay any
interest to Tenant on such additional rent, but Landlord shall give
Tenant an annual accounting showing credit for such payments made by
Tenant, and debits for payments made by Landlord or Landlord's lender.
If Tenant fails to make any required payment to Landlord, Landlord may,
but shall not be required to, pay any such tax and shall become entitled
to repayment from Tenant without demand, together with interest thereon
as elsewhere provided. The real estate taxes and assessments for the
year in which the term of this lease shall begin, as well as for the
year in which the lease shall end, shall be apportioned so that Tenant
shall pay only the portions that correspond with the portions of such
years as are within such lease term. In the event that the premises are
assessed for tax purposes as a part of a larger parcel, the tax on the
entire parcel shall be prorated in proportion to the number of square
feet of building floor space on each portion of the entire parcel.
Upon written request from Tenant, Landlord shall protest the tax
assessment on the premises, to the extent that Landlord, in good faith,
believes that such protest is justifiable and likely to be successful.
In the event of any such protest Tenant shall nevertheless pay to
Landlord the taxes as assessed, and Tenant shall be entitled to the
appropriate share of any refund. Tenant shall not protest any real
property tax assessment on the premises.
6. TAXES - TENANT'S PERSONAL PROPERTY - PAID BY TENANT. Tenant
shall be responsible for and timely pay any and all personal property
taxes assessed against any furniture, fixtures, equipment and items of a
similar nature installed and/or located in or about the premises by
Tenant.
7. UTILITIES - TENANT TO OBTAIN AND PAY FOR. Landlord shall not be
required to furnish to Tenant any utility services of any kind, such as
but not limited to, water, hot water, heat, gas, electricity, light,
telephone, cable TV and power. Tenant shall obtain and pay all charges
for gas, electricity, light, heat, power, water (and lawn watering), and
telephone, cable TV or other communication services or other utilities
used, rendered, or supplied, upon or in connection with the premises.
Tenant irrevocably appoints Landlord as Tenant's attorney-in-fact solely
for the purpose of terminating Tenant's account with any provider of
such utilities, if the premises are abandoned by Tenant or if the lease
is terminated.
8. HOLDING OVER. If, after expiration of the term of this lease,
Tenant shall remain in possession of the premises and continue to pay
rent without a written agreement as to such possession, then Tenant
shall be deemed a month-to-month Tenant and the rental rate during such
holdover tenancy shall be equivalent to one hundred fifteen percent
(115%) the monthly rental paid for the last month of tenancy under this
lease. Such month-to-month tenancy may be terminated by the Landlord at
noon on any day which is more than twenty-nine (29) days after date of
delivery of Landlord's written notice of termination to Tenant.
9. MODIFICATIONS OR EXTENSIONS. No holding over by Tenant shall
operate to renew or extend this lease without the written consent of
Landlord. No modification of this lease shall be binding unless
endorsed hereon or otherwise written and signed by the respective
parties.
10. ALTERATION - CHANGES AND ADDITIONS - RESPONSIBILITY - NO HOLES
IN ROOF - NO NEW EQUIPMENT ON ROOF. Tenant may, during the term of this
lease, at Tenant's expense, erect inside partitions, add to existing
electric power service, add telephone outlets or other communication
services, add light fixtures, install additional heating and/or air
conditioning or make such other changes or alterations as Tenant may
desire, provided that prior to commencement of any such work, Tenant
shall submit to Landlord a set of fully detailed working drawings and
specifications for the proposed alteration, prepared by a licensed
architect or engineer. If Tenant so requests, Landlord will have the
drawings and specifications prepared for Tenant, at Tenant's expense,
utilizing Landlord's in-house staff. Tenant will pay Landlord's
customary hourly charges for such services, as additional rent, to be
paid within 10 days after delivery of invoice. In particular, but not
as a limitation, the working drawings must fully detail changes to
mechanical, wiring and electrical, lighting, plumbing and HVAC systems
to Landlord's satisfaction. Landlord may refuse to consent to the
alterations because of the inadequacy of the drawings and
specifications. Tenant may not commence the alterations until
Landlord's written consent has been given. If the drawings and
specifications are adequate, to Landlord's sole satisfaction, then
Landlord will not unreasonably withhold its consent to the alterations,
except that Landlord may withhold its consent to new or altered openings
(holes) in the roof, or placement of additional equipment on the roof,
as follows. Landlord may withhold its consent to new openings in the
roof or placement of additional equipment on the roof unless Landlord,
in its sole discretion, is satisfied that the risk of increased leakage
or risk of more frequent repairs or maintenance of the roof is
acceptable to Landlord. Any new or altered opening in the roof, or
placement of additional equipment thereon, shall be considered an
alteration which requires the prior written consent of Landlord. If
within thirty (30) days after such plans and specifications are
submitted by Tenant to Landlord for such approval, Landlord shall have
not given Tenant notice of disapproval, stating the reason for such
disapproval, such plans and specifications shall be considered approved
by Landlord. As a condition of approval for such alternations, Landlord
shall have the right to require Tenant to furnish adequate bond or other
security acceptable to Landlord for performance of and payment for the
work to be performed. At the end of this lease, all such fixtures,
equipment, additions and/or alterations (except trade fixtures installed
by Tenant) shall be and remain the property of Landlord, provided,
however, Landlord shall have the option to require Tenant to remove any
or all such fixtures, equipment, additions, and/or alterations and
restore the premises to the condition existing immediately prior to such
change and/or installation, normal wear and tear excepted, all at
Tenant's cost and expense. All work done by Tenant shall conform to
appropriate city, county and state building codes and health standards
and OSHA standards and Tenant shall be responsible for obtaining and
paying for building permits.
If any such work done by Tenant causes damage to the structural
portion, exterior finish or roof of the premises, then the costs of
repair of such damage, and of all further maintenance and repairs to
such structural portion, exterior finish or roof during the term of the
lease shall thereafter be the responsibility of Tenant.
Neither Landlord's right of entry, nor any actual inspection by
Landlord, nor Landlord's actual knowledge of any alteration accomplished
or in progress shall constitute a waiver of Landlord's rights concerning
alterations by Tenant.
11. MECHANIC'S LIENS. Tenant shall pay all costs for construction
done by it or caused to be done by it on the premises as permitted by
this lease. Tenant shall keep the building, other improvements and land
of which the premises are a part free and clear of all mechanic's liens
resulting from construction by or for Tenant. Tenant shall have the
right to contest the correctness or validity of any such lien if,
immediately on demand by Landlord, Tenant deposits with Landlord and/or
any appropriate court or title insurance company a bond or sum of money
sufficient to allow issuance of title insurance against the lien and/or
to comply with the statutory requirements for discharge of the lien
found in 38-22-130 and 131, Colorado Revised Statutes, or any
successor statutory provision. Landlord shall have the right to require
Tenant's contractor(s), subcontractors and materialmen to furnish to
both Tenant and Landlord adequate lien waivers on work or materials paid
for, in connection with all periodic or final payments, by endorsement
on checks, making of joint checks, or otherwise, and Landlord shall have
the right to review invoices prior to payment. Landlord reserves the
right to post notices on the premises that Landlord is not responsible
for payment of work performed and that Landlord's interest is not
subject to any lien.
12. UNIFORM SIGNS; NO "FOR RENT" SIGNS. It is Landlord's intent to
maintain uniformity of signs throughout the area where signs may be
controlled by Landlord. Tenant shall place no signs on the premises
(except inside Tenant's portion of the building on the premises) without
prior written consent of Landlord, which consent shall not be
unreasonably withheld.
Tenant may not put any signs on the premises indicating that the same
are for rent, or available for assignment or sublease, and may put no
signs of real estate brokers on the premises.
13. MAINTENANCE AND REPAIRS OF THE BUILDING; LANDLORD NOT LIABLE FOR
DAMAGE TO CONTENTS. Landlord shall be responsible for maintenance and
repairs of the structural portions, the roof and the exterior finish of
the building (other than glass) on the premises at the sole cost and
expense of Landlord; provided, however, that if any such maintenance or
repairs are necessitated by the acts of Tenant or its employees, agents,
contractors, sub-contractors, licensees, invitees or guests, Tenant
shall reimburse Landlord for the cost of same, as additional rent, to be
paid within 10 days after delivery of invoice. All other maintenance,
repairs and replacements shall be performed by Tenant, at its own
expense, including all necessary maintenance, repairs and replacements
to pipes, plumbing systems, electrical systems, window or other glass,
doors, fixtures, interior decorations, and all other appliances and
appurtenances. Such repairs and replacements, interior and exterior,
ordinary as well as extraordinary, shall be made promptly, as and when
necessary, so that the premises are maintained in first class condition.
All such maintenance, repairs and replacements shall be in quality and
class at least equal to the original work. On default of Tenant in
making such maintenance, repairs or replacements, Landlord may, but
shall not be required to, make such repairs and replacements for
Tenant's account, and the expense shall constitute and be collectable as
additional rent, together with interest thereon as hereinafter provided.
Notwithstanding the Landlord's obligations elsewhere set forth in
this lease, under no circumstances shall Landlord be liable for damage
to the contents of the building or consequential damages to Tenant
resulting from roof or window leaks or failure, or leakage of any water
pipe or gas pipe, failure of any communications system or alarm, failure
or leakage or discharge by any sprinkler system or other fire
suppression system, power surges, power shortages or outage, sewer
failure or sewage backup, or failure or malfunction of any heating or
cooling system. The term "contents" shall include, but shall not be
limited to, improvements made by Tenant, and data bases and other
information stored or contained in computers, hard or floppy disks,
tapes, computer chips and other memory or storage devices. The term
"consequential damages" shall include, but not be limited to, Tenant's
inability to perform any contract on which Tenant is bound, loss of
sales, loss of profit, or loss of business reputation or goodwill.
14. CONDITION UPON SURRENDER - RETURN OF KEYS. Tenant shall vacate
the premises in the same condition as when received on the date hereof,
ordinary wear and tear excepted, and shall remove all of Tenant's
property, so that Landlord can repossess the premises not later than
noon on the day upon which this lease or any extension hereof ends,
whether upon notice, holdover or otherwise. The Landlord shall have the
same rights to enforce this covenant by ejectment and for damages or
otherwise as for the breach of any other conditions or covenant of this
lease. Upon termination of the lease, Tenant shall deliver to Landlord
keys which operate all locks on the exterior or interior of the
premises, including, without limitation, keys to locks on cupboards and
closets. Tenant shall retrieve all keys to the premises which Tenant
has delivered to employees or others, and include same with the keys
delivered to Landlord.
15. CARE OF GROUNDS; STORAGE OUTSIDE THE BUILDING; NO WASTE; NO
NUISANCE; COMPLIANCE WITH LAWS; FUTURE RULES AND REGULATIONS. Tenant
shall use the premises for office, research and development, light
manufacturing, and other uses appurtenant thereto. Except as otherwise
provided herein, Tenant will maintain the grounds which are part of the
premises, keeping them free from accumulation of trash or debris and
will be responsible for snow removal up to two inches of snow. Tenant
shall conform to all present and future laws and ordinances of any
governmental authority having jurisdiction over the premises, and will
make no use in violation of same. No outside storage shall be allowed
unless first approved by Landlord in writing and then only in such areas
as are designated as storage areas by Landlord. Tenant shall not commit
or suffer any waste on the premises. Tenant shall not permit any
nuisance to be maintained on the premises nor permit any disorderly
conduct, noise or other activity having a tendency to annoy or to
disturb occupants of any other part of the property of which the
premises are a part and/or of any adjoining property.
As part of a common scheme for orderly development, use and
protection, of its various properties and those properties adjacent to
the premises, Landlord may impose upon Tenant reasonable rules and
regulations concerning parking and vehicle traffic; locations at which
deliveries are to be made and access thereto; trash disposal; use of
common areas such as recreation areas, corridors, and sidewalks; signs
and directories; use of communication wires or cables which are used in
common but which may be inadequate fully to serve all the demands placed
upon them; provided that such rules and regulations shall be uniform in
their application and shall not violate the express terms of this lease
elsewhere set forth.
16. LIABILITY FOR OVERLOAD. Tenant shall be liable for the cost of
any damage to the premises or the building or the sidewalks and
pavements adjoining the same which results from the movement of heavy
articles or heavy vehicles or utility cuts made by or on behalf of
Tenant. Tenant shall not overload the floors or any other part of the
premises.
17. NO USE OF PREMISES IN VIOLATION OF INSURANCE POLICIES. Tenant
shall make no use of the premises which would void or make voidable any
insurance upon the premises.
18. INSURANCE.
18.1 All Risk Insurance. Tenant shall keep the building and
improvements insured throughout the term of this lease against losses
covered by an "All Risk" policy, as defined in the insurance industry,
which shall also cover 1) loss of rental and 2) deposit of Hazardous
Materials on the premises by those acts of third parties which
constitute vandalism. The deductible amount shall not exceed $50,000.
18.2 General Liability Insurance. Tenant agrees to carry
comprehensive general liability insurance in the minimum total amount of
ONE MILLION Dollars ($1,000,000.00 ) for each occurrence of bodily
injury and ONE MILLION Dollars ($1,000,000.00) for each occurrence of
property damage. Tenant shall supply to Landlord certificates of
insurance as provided in Paragraph 18.6. In the event Tenant fails to
secure such insurance or to give evidence to Landlord of such insurance
by depositing with Landlord certificates as provided below, Landlord may
purchase such insurance in Tenant's name and charge Tenant the premiums
therefor. Bills for the premiums therefor shall be deemed and paid as
additional rent due within 10 days after delivery of invoice. The
Landlord shall be an additional named insured on the policy.
18.3 Tenant Improvements. Tenant agrees to carry insurance
covering all of Tenant's leasehold improvements, alterations, additions
or improvements, trade fixtures, merchandise and personal property from
time to time in, on or upon the premises, in an amount not less than one
hundred percent (100%) of the full replacement cost of such items from
time to time during the term of this lease, providing protection against
any peril included within an "All-Risk" policy, with a deductible amount
not to exceed $10,000. Any policy proceeds shall be used for the repair
or replacement of the property damaged or destroyed unless this lease
shall cease and terminate due to destruction of the premises as provided
below.
18.4 Other Insurance. Tenant agrees to carry insurance against
such other hazards and in such amounts as the holder of any mortgage or
deed of trust to which the lease is subordinate may require from time to
time.
18.5 Waiver of Subrogation. Landlord and Tenant grant to each
other on behalf of any insurer providing fire and extended insurance
coverage to either of them covering the premises, improvements thereon,
and contents thereof, a waiver of any right of subrogation or recovery
of any payments of loss under such insurance, such waiver to be
effective so long as each is empowered to grant such waiver under the
terms of its insurance policy, and to give all necessary notice of such
waiver to its insurance carriers.
18.6 Other Provisions Regarding Tenant's Insurance. All
insurance required of Tenant in this lease shall be effected under
enforceable policies issued by insurers of recognized good financial
condition licensed to do business in this State. At least fifteen (15)
days prior to the expiration date of any such policy, a certificate
evidencing a new or renewal policy shall be delivered by Tenant to
Landlord. Within fifteen (15) days after the premium on any policy
shall become due and payable, Landlord shall be furnished with
satisfactory evidence of its payment. To the extent obtainable, all
policies shall contain an agreement that notwithstanding any act or
negligence of Tenant which might otherwise result in forfeiture of such
insurance, such policies shall not be canceled except upon ten (10) days
prior written notice to Landlord, and that the coverage afforded thereby
shall not be affected by the performance of any work in or about the
premises.
If Tenant provides any insurance required of Tenant by this lease in
the form of a blanket policy, Tenant shall furnish satisfactory proof
that such blanket policy complies in all respects with the provisions of
this lease, and that the coverage thereunder is at least equal to the
coverage which would be provided under a separate policy covering only
the premises.
18.7 Changes in Standard Policies. If the definition of
insurance industry policy language relating to "All-Risk" insurance or
other term changes, the insurance requirements hereunder shall be
modified to conform to the existing insurance industry language;
however, the dollar amount of the coverages required under this lease
shall not be less than those existing at the time of the effective
beginning date of this lease.
19. FIRE REGULATIONS - TENANT RESPONSIBILITY. It shall be Tenant's
sole and exclusive responsibility to meet all fire regulations of any
governmental unit having jurisdiction over the premises to the extent
such regulations affect Tenant's operations, at Tenant's sole expense.
20. REPLACEMENT OF BUILDING - CASUALTY DAMAGE. If the premises are
damaged or destroyed by fire or other cause at any time after the date
of commencement of this lease, Landlord shall proceed with due diligence
to repair or restore the same to the same condition as existed before
such damage or destruction, and as soon as possible thereafter but in no
event more than 180 days from the date of damage or destruction will
give possession to the Tenant of the premises without diminution or
change of location. If Landlord does not complete all repairs and
restoration within 180 days, Tenant may at its reasonable discretion
terminate the lease. Provided, however, that in case of total
destruction of the premises by fire, or in case the premises are so
badly damaged that, in the opinion of the Landlord, it is not feasible
to repair or rebuild the same, then, either Tenant or Landlord shall
have the right to terminate this lease instead of rebuilding the
improvements; provided, however, that the terminating party shall give
the other party written notice of its intention to terminate, said
notice to be served not later than thirty (30) days after the occurrence
of the damage to the property. In the event the premises are rendered
temporarily untenantable because of fire or other casualty, base monthly
rent shall abate on the untenantable area until the premises are
restored to their former condition, abatement to be based on the square
feet of building floor space in the untenantable area compared to the
total square feet of building floor space on the premises. Provided,
however, that to the extent the damage or destruction results from the
negligence or other action of Tenant or its employees, agents,
contractors, subcontractors, invitees, guests or licensees, Tenant shall
pay for the restoration or repair, to the extent the cost of same is not
covered by insurance.
21. ENVIRONMENTAL MATTERS.
21.1 Definitions.
21.1.1 Hazardous Material. Hazardous Material means any
substance:
(a) the presence of which requires investigation, notice or
remediation under any federal, state or local statute, regulation,
ordinance, order, action, policy or common law; or
(b) which is or becomes defined as a "hazardous material,"
"hazardous waste," "hazardous substance," "regulated substance,"
"pollutant" or "contaminant" under any federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. 9601 et seq.), Toxic Substances Control Act
(15 U.S.C. _ 2601 et seq.), the Colorado Underground Storage Tank Act
(Colo. Rev. Stat. 25-18-101 et seq.), and/or the Resource Conservation
and Recovery Act (42 U.S.C. _ 6901 et seq.); or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, the State of Colorado or any political subdivision thereof; or
(d) the presence of which on the premises causes or threatens
to cause a nuisance upon the premises or to adjacent properties or poses
or threatens to pose a hazard to the health or safety of persons on or
about the premises; or
(e) which contains gasoline, diesel fuel or other petroleum
hydrocarbons; or
(f) which contains polychlorinated biphenyls (PCBs), asbestos
or urea formaldehyde foam insulation; or
(g) radon gas.
21.1.2 Environmental Requirements. Environmental
Requirements means all applicable present and future statutes,
regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises, and similar
items, of all governmental agencies, departments, commissions, boards,
bureaus, or instrumentalities of the United States, states and political
subdivisions thereof and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to the protection of
human health or the environment, including, without limitation:
(a) All requirements, including but not limited to those
pertaining to reporting, licensing, permitting, investigation, and
remediation of emissions, discharges, releases, or threatened releases
of Hazardous Materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid,
liquid, or gaseous in nature, into the air, surface water, groundwater,
or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature; and
(b) All requirements pertaining to the protection of the
health and safety of employees or the public.
21.1.3 Environmental Damages. Environmental Damages means
all claims, judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs, and expenses
of investigation and defense of any claim, whether or not such claim is
ultimately defeated, and of any good faith settlement or judgment, of
whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation reasonable
attorneys' fees and disbursements and consultants' and witnesses' fees,
any of which are incurred at any time as a result of the existence of
Hazardous Material upon, about, beneath the premises or migrating or
threatening to migrate to or from the premises, or the existence of a
violation of Environmental Requirements pertaining to the premises,
including without limitation:
(a) Damages for personal injury, or injury to property or
natural resources occurring upon or off of the premises, foreseeable or
unforeseeable, including, without limitation, lost profits,
consequential damages, the cost of demolition and rebuilding of any
improvements on real property, interest and penalties including but not
limited to claims brought by or on behalf of employees of Tenant;
(b) Fees incurred for the services of attorneys, consultants,
contractors, experts, laboratories and all other costs incurred in
connection with the investigation or remediation of such Hazardous
Materials or violation of Environmental Requirements including, but
not limited to, the preparation of any feasibility studies or reports or
the performance of any cleanup, remediation, removal, response,
abatement, containment, closure, restoration or monitoring work required
by any federal, state or local governmental agency or political
subdivision or court, or reasonably necessary to make full economic use
of the premises and any other property in a manner consistent with its
current use or otherwise expended in connection with such conditions,
and including without limitation any attorneys' fees, costs and expenses
incurred in enforcing this agreement or collecting any sums due
hereunder;
(c) Liability to any third person or governmental agency to
indemnify such person or agency for costs expended in connection with
the items referenced herein; and
(d) Diminution in the value of the premises and adjoining
property, and damages for the loss of business and restriction on the
use of or adverse impact on the marketing of rentable or usable space or
of any amenity of the premises and adjoining property.
21.2 Tenant's Obligation to Indemnify, Defend and Hold Harmless.
Tenant, its successors, assigns and guarantors, agree to indemnify,
defend, reimburse and hold harmless the following persons from and
against any and all Environmental Damages arising from activities of
Tenant or its employees, agents, contractors, subcontractors, or guests,
licensees, or invitees which (1) result in the presence of Hazardous
Materials upon, about or beneath the premises or migrating to or from
the premises, or (2) result in the violation of any Environmental
Requirements pertaining to the premises and the activities thereon:
21.2.1 Landlord;
21.2.2 any other person who acquires an interest in the
premises in any manner, including but not limited to purchase at a
foreclosure sale or otherwise; and
21.2.3 the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees,
affiliates, lessees, mortgagees, trustees, heirs, devisees, successors,
assigns, guests and invitees of such persons.
This obligation shall include, but not be limited to, the burden and
expense of the indemnified parties in defending all claims, suits and
administrative proceedings, including attorneys' fees and expert witness
and consulting fees, even if such claims, suits or proceedings are
groundless, false or fraudulent, and conducting all negotiations of any
description, and paying and discharging, when and as the same become
due, any and all judgments, penalties or other sums due against such
indemnified persons, and all such expenses incurred in enforcing the
obligation to indemnify. Tenant, at its sole expense, may employ
additional counsel of its choice to associate with counsel representing
the indemnified parties.
21.3 Tenant's Obligation to Remediate. Notwithstanding the
obligation of Tenant to indemnify Landlord pursuant to this agreement,
Tenant shall, upon demand of Landlord, and at its sole cost and expense,
promptly take all actions to remediate the premises which are reasonably
necessary to mitigate Environmental Damages or to allow full economic
use of the premises, or are required by Environmental Requirements,
which remediation is necessitated by the 1) introduction of a Hazardous
Material upon, about or beneath the premises or 2) a violation of
Environmental Requirements, either of which is caused by the actions of
Tenant, its employees, agents, contractors, subcontractors, guests,
invitees or licensees. Such actions shall include, but not be limited
to, the investigation of the environmental condition of the premises,
the preparation of any feasibility studies, reports or remedial plans,
and the performance of any cleanup, remediation, containment, operation,
maintenance, monitoring or restoration work, whether on or off of the
premises. Tenant shall take all actions necessary to restore the
premises to the condition existing prior to the introduction of
Hazardous Material upon, about or beneath the premises, notwithstanding
any lesser standard of remediation allowable under applicable law or
governmental policies. All such work shall be performed by one or more
contractors, selected by Tenant and approved in advance and in writing
by Landlord. Tenant shall proceed continuously and diligently with such
investigatory and remedial actions, provided that in all cases such
actions shall be in accordance with all applicable requirements of
governmental entities. Any such actions shall be performed in a good,
safe and workmanlike manner and shall minimize any impact on the
business conducted at the premises. Tenant shall pay all costs in
connection with such investigatory and remedial activities, including
but not limited to all power and utility costs, and any and all taxes or
fees that may be applicable to such activities. Tenant shall promptly
provide to Landlord copies of testing results and reports that are
generated in connection with the above activities, and copies of any
correspondence with any governmental entity related to such activities.
Promptly upon completion of such investigation and remediation, Tenant
shall permanently seal or cap all monitoring wells and test holes to
industrial standards in compliance with applicable federal, state and
local laws and regulations, remove all associated equipment, and restore
the premises to the maximum extent possible, which shall include,
without limitation, the repair of any surface damage, including paving,
caused by such investigation or remediation hereunder. Provided,
however, that Tenant shall not be obligated to remediate environmental
damages which result from seepage of Hazardous Materials onto the
premises from adjacent property unless the presence on the adjacent
property was caused by Tenant or its employees, agents, contractors,
subcontractors, guests, invitees or licensees.
21.4 Notification. If Tenant shall become aware of or receive
notice or other communication concerning any actual, alleged, suspected
or threatened violation of Environmental Requirements, or liability of
Tenant for Environmental Damages in connection with the premises or past
or present activities of any person thereon, or that any representation
set forth in this agreement is not or is no longer accurate, including
but not limited to notice or other communication concerning any actual
or threatened investigation, inquiry, lawsuit, claim, citation,
directive, summons, proceeding, complaint, notice, order, writ, or
injunction, relating to same, then Tenant shall deliver to Landlord,
within ten days of the receipt of such notice or communication by
Landlord, a written description of said violation, liability, correcting
information, or actual or threatened event or condition, together with
copies of any such notice or communication. Receipt of such notice
shall not be deemed to create any obligation on the part of Landlord to
defend or otherwise respond to any such notification or communication.
21.5 Negative Covenants.
21.5.1 No Hazardous Material on Premises. Except in strict
compliance with all Environmental Requirements, Tenant shall not cause,
permit or suffer any Hazardous Material to be brought upon, treated,
kept, stored, disposed of, discharged, released, produced, manufactured,
generated, refined or used upon, about or beneath the premises by
Tenant, its agents, employees, contractors, subcontractors, guests,
licensees or invitees, or any other person. Tenant shall deliver to
Landlord copies of all documents which Tenant provides to any
governmental body in connection with compliance with Environmental
Requirements with respect to the premises, such delivery to be
contemporaneous with provision of the documents to the governmental
agency.
21.5.2 No Violations of Environmental Requirements. Tenant
shall not cause, permit or suffer the existence or the commission by
Tenant, its agents, employees, contractors, subcontractors or guests,
licensees or invitees, or by any other person of a violation of any
Environmental Requirements upon, about or beneath the premises or any
portion thereof.
21.5.3 No Environmental or Other Liens. Tenant shall not
create or suffer or permit to exist with respect to the premises, any
lien, security interest or other charge or encumbrance of any kind,
including without limitation, any lien imposed pursuant to section
107(f) of the Superfund Amendments and Reauthorization Act of 1986 (42
U.S.C. section 9607(1) or any similar state statute to the extent that
such lien arises out of the actions of Tenant, its agents, employees,
contractors, subcontractors or guests, licensees or invitees.
21.6 Landlord's Right to Inspect and to Audit Tenant's Records.
Landlord shall have the right in its sole and absolute discretion, but
not the duty, to enter and conduct an inspection of the premises and to
inspect and audit Tenant's records concerning Hazardous Materials at any
reasonable time to determine whether Tenant is complying with the terms
of the lease, including but not limited to the compliance of the
premises and the activities thereon with Environmental Requirements and
the existence of Environmental Damages as a result of the condition of
the premises or surrounding properties and activities thereon. If
Landlord has reasonable cause to believe Tenant is in default with
respect to any of the provisions of this lease related to Hazardous
Materials, Environmental Requirements or Environmental Damages, then
Landlord shall have the right, but not the duty, to retain at the sole
expense of Tenant an independent professional consultant to enter the
premises to conduct such an inspection and to inspect and audit any
records or reports prepared by or for Tenant concerning such compliance.
Tenant hereby grants to Landlord the right to enter the premises and to
perform such tests on the premises as are reasonably necessary in the
opinion of Landlord to assist in such audits and investigations.
Landlord shall use reasonable efforts to minimize interference with the
business of Tenant by such tests inspections and audits, but Landlord
shall not be liable for any interference caused thereby.
21.7 Landlord's Right to Remediate. Should Tenant fail to
perform or observe any of its obligations or agreements pertaining to
Hazardous Materials or Environmental Requirements, then Landlord shall
have the right, but not the duty, without limitation upon any of the
rights of Landlord pursuant to this agreement, to enter the premises
personally or through its agents, consultants or contractors and perform
the same. Tenant agrees to indemnify Landlord for the costs thereof and
liabilities therefrom as set forth in Paragraph 21.2.
21.8 Landlord's Obligation to Remediate. Landlord agrees to
remediate all Environmental Damages 1) caused by Landlord, its agents,
employees, contractors, subcontractors, guests, licensees or invitees,
or 2) not so caused but arising prior to Commencement Date hereof and
not caused by Tenant, its agents, employees, contractors,
subcontractors, guests, licensees or invitees.
21.9 Landlord's Obligation to Indemnify, Defend and Hold
Harmless Concerning Environmental Matters. Landlord, its successors,
assigns and guarantors, agree to indemnify, defend, reimburse and hold
harmless the following persons from and against any and all
Environmental Damages arising from activities of Landlord or its
employees, agents, contractors, subcontractors or guests, licensees,
invitees; or which occurred prior to the Commencement Date (and were not
caused by Tenant, its agents, employees, contractors, subcontractors,
guests, licensees or invitees) which (1) result in the presence of
Hazardous Materials upon, about or beneath the premises or migrating to
or from the premises, or (2) result in the violation of any
Environmental Requirements pertaining to the premises and the activities
thereon:
21.9.1 Tenant;
21.9.2 the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees,
affiliates, lessees, mortgagees, trustees, heirs, devisees, successors,
assigns and invitees of Tenant.
This obligation shall include, but not be limited to, the burden and
expense of the indemnified parties in defending all claims, suits and
administrative proceedings, including attorneys' fees and expert witness
and consulting fees, even if such claims, suits or proceedings are
groundless, false or fraudulent, and conducting all negotiations of any
description, and paying and discharging, when and as the same become
due, any and all judgments, penalties or other sums due against such
indemnified persons, and all such expenses incurred in enforcing the
obligation to indemnify. Landlord, at its sole expense, may employ
additional counsel of its choice to associate with counsel representing
Tenant.
21.10 Survival of Environmental Obligations. The obligations of
Landlord and Tenant as set forth in Paragraph 21 and all of its
subparagraphs shall survive termination of this lease.
22. ENTRY BY LANDLORD. Landlord, or its authorized representative,
and/or any lender or prospective lender, shall have the right to enter
the premises during the lease term at all reasonable times during usual
business hours for purposes of inspection, and/or the performance of any
maintenance, repairs or replacement therein. Landlord shall give Tenant
such advance notice of entry as is reasonable in light of the purpose
for the entry. Landlord shall have the right to enter the premises and
show the same to a prospective tenant during the last 180 days of this
lease or any extended term, unless the term shall have been extended by
mutual written agreement or delivery of notice of exercise of any option
to extend. In all circumstances, Landlord shall use its best efforts to
conduct its business while in Tenant premises as not to interfere with
Tenant's operations or use of the premises.
23. DEFAULT - REMEDIES OF LANDLORD.
23.1 Default Defined. Any one or more of the following events
(each of which is herein sometimes called "event of default") shall
constitute a default:
23.1.1 Tenant defaults in the due and punctual payment of any
rent, taxes, tax deposits, insurance premiums, maintenance fees or other
sums required to be paid by Tenant under this lease when and as the same
shall become due and payable;
23.1.2 Tenant abandons the premises;
23.1.3 Tenant defaults in the performance of or compliance with
any of the covenants, agreements, terms and conditions contained in this
lease other than those referred to in the foregoing Paragraph 23.1.1,
and such default shall continue for a period of 30 days after written
notice thereof from Landlord to Tenant, and shall not be cured as
permitted by Paragraph 23.9;
23.1.4 Tenant files a voluntary petition in bankruptcy or is
adjudicated a bankrupt or insolvent, or takes the benefit of any
relevant legislation that may be in force for bankrupt or insolvent
debtors or files any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief for itself under any present or future federal, state or
other statute, law or regulation, or proceedings are taken by Tenant
under any relevant Bankruptcy Act in force in any jurisdiction available
to Tenant, or Tenant seeks or consents to or acquiesces in the
appointment of any trustee, receiver or liquidator of Tenant or of all
or any substantial part of its properties or of the premises, or makes
any general assignment for the benefit of creditors;
23.1.5 A petition is filed against Tenant seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal, state
or other statute, law or regulation, and shall remain undismissed for an
aggregate of 120 days, or if any trustee, receiver or liquidator of
Tenant or of all or any substantial part of its properties or of the
premises is appointed without the consent or acquiescence of Tenant and
such appointment remains unvacated for an aggregate of 120 days.
23.2 Landlord's Remedies in the Event of Default. In the event
of any event of default, Landlord shall have the option, without further
notice to Tenant or further demand for performance exercise any one or
more of the following remedies (and any other remedy available at law or
in equity):
23.2.1 If Tenant has been late in payment of rent or other
sums due on four or more occasions during any period of one year,
Landlord, without terminating this lease, may 1) require that all future
payments be made by bank cashier's check, and/or 2) require an
additional security deposit in the amount of the then-current base rent
for two months, and/or 3) require that rent for each month be paid on or
before the 15th day of the preceding month. Such requirement shall be
imposed by Landlord's written notice delivered to Tenant. The
additional security deposit shall be paid within 10 days after delivery
of the notice. The Landlord may or may not exercise the remedies
provided in this Paragraph 23.2.1, in its sole discretion. The exercise
of the remedies provided in this Paragraph 23.2.1 shall not be required
prior to the exercise of any other available remedy.
23.2.2 To institute suit against Tenant to collect each
installment of rent or other sum as it becomes due or to enforce any
other obligation under this lease even though the premises be left
vacant subject to Landlord's obligation to mitigate damages.
23.2.3 As a matter of right, to procure the appointment of a
receiver for the premises by any court of competent jurisdiction upon ex
parte application. All rents, issues and profits, income and revenue
from the premises shall be applied by such receiver to the payment of
the rent, together with any other obligations of the Tenant under this
lease.
23.2.4 To re-enter and take possession of the premises and
all personal property therein and to remove Tenant and Tenant's agents
and employees therefrom, and either:
1) terminate this lease and sue Tenant for damages for
breach of the obligations of Tenant to Landlord under this lease; or
2) without terminating this lease, relet, assign or sublet
the premises and personal property, as the agent and for the account of
Tenant in the name of Landlord or otherwise, upon the terms and
conditions Landlord deems fit with the new Tenant for such period (which
may be greater or less than the period which would otherwise have
constituted the balance of the term of this lease) as Landlord may deem
best, and collect any rent due upon any such reletting providing that if
the new lease term shall be greater than Tenant's original term, Tenant
shall be released from any and all further obligation upon the
expiration of Tenant's original term save for amounts accrued upon the
expiration of Tenant's original term. In this event, the rents received
on any such reletting shall be applied first to the expenses of
reletting and collecting, including, without limitation, all
repossession costs, reasonable attorneys' fees, and real estate brokers'
commissions, alteration costs and expenses of preparing said premises
for reletting, and thereafter toward payment of the rental and of any
other amounts payable by Tenant to Landlord. If the sum realized shall
not be sufficient to pay the rent and other charges due from Tenant,
then within five days after demand, Tenant will pay to Landlord any
deficiency as it accrues. Landlord may sue therefor as each deficiency
shall arise if Tenant shall fail to pay such deficiency within the time
limited.
23.3 Tenant to Surrender Peaceably. In the event Landlord
elects to re-enter or take possession of the premises, Tenant shall quit
and peaceably surrender the premises to Landlord, and Landlord may enter
upon and re-enter the premises and possess and repossess itself thereof,
by force, summary proceedings, ejectment or otherwise, and may
dispossess and remove Tenant and may have, hold and enjoy the premises
and the right to receive all rental income of and from the same.
23.4 No Termination by Re-Entry. No re-entry or taking of
possession by Landlord shall be construed as an election on Landlord's
part to terminate or accept surrender of this lease unless Landlord's
written notice of such intention is delivered to Tenant.
23.5 Injunction. In the event of any breach by Tenant of any of
the agreements, terms, conditions or covenants contained in this lease,
Landlord, in addition to any and all other rights, shall be entitled to
enjoin such breach and shall have the right to invoke any right and
remedy allowed at law or in equity or by statute or otherwise for such
breach as though re-entry, summary proceedings, and other remedies were
not provided for in this lease.
23.6 Remedies Listed are Cumulative and Non-Exclusive. The
enumeration of the foregoing remedies does not exclude any other
remedy, but all remedies are cumulative and shall be in addition to
every other remedy now or hereafter existing at law or in equity,
including, but not limited to, the remedies provided in Paragraph 24
concerning Landlord's security interest in Tenant's personalty and
Landlord's right to remove same.
23.7 Interest on Sums Past Due. All rent and all other amounts
due from Tenant hereunder shall bear interest at the rate of twelve
(12%) percent per annum compounded quarter-annually from their
respective due dates until paid, provided that this shall in no way
limit, lessen or affect any claim for damages by Landlord for any breach
or default by Tenant.
23.8 Attorneys' Fees. Reasonable attorneys' fees, expert
witness fees, consulting fees and other expenses incurred by either
party by reason of the breach by either party in complying with any of
the agreements, terms, conditions or covenants of this lease shall
constitute additional sums to be paid to the prevailing party on
demand.
23.9 Time to Cure Certain Non-Monetary Defaults. In the event
of any default other than failure to pay a sum of money, for which
notice has been given as provided herein, which because of its nature
can be cured but not within the period of grace heretofore allowed, then
such default shall be deemed remedied, if the correction thereof shall
have been commenced within said grace period or periods and shall, when
commenced, be diligently prosecuted to completion.
23.10 Landlord Default. If Landlord is in default under any of
its obligations and the default continues for thirty (30) days after
written notice from Tenant (subject to extension pursuant to 23.9),
Tenant may pursue all remedies at law or in equity. Tenant may, but
shall not be required to, correct such default for the Landlord's
account , and the expense shall be promptly paid within ten (10) days
by Landlord; however, in no event shall Tenant have the right to rental
abatement, offset of expenses against rental, or the right to terminate
this lease, subject to Tenant's legal or equitable remedies.
Tenant may not offset any sum due or assertedly due from Landlord to
Tenant against any sum due from Tenant to Landlord.
Tenant agrees that if Tenant obtains a judgment against Landlord
arising out of Landlord's obligations under this lease, such judgment
may be satisfied only by execution and sale of Landlord's interest in
the premises leased hereby. Tenant may not seek execution against other
property of Landlord, nor pursue any judgment, execution or other remedy
against the partners or other owners of Landlord or any of their
property. Immediately upon receipt of Landlord's written request,
Tenant will release any property (other than the premises leased hereby)
from the lien of any judgment obtained by Tenant against Landlord
arising out of Landlord's obligations under this lease.
24. LEGAL PROCEEDINGS AGAINST TENANT BY THIRD PARTIES; TENANT TO PAY
LANDLORD'S FEES. In the event of any proceeding at law or in equity
wherein Landlord, without being in default as to its covenants under the
terms hereof, shall be made a party to any litigation by reason of
Tenant's interest in the premises, or, in the event Landlord shall be
required to commence any legal proceedings relating to the premises and
Tenant's occupancy thereof and Tenant's relation thereto, but only after
notice to and consent by Tenant, Landlord shall be allowed and Tenant
shall be liable for and shall pay all costs and expenses incurred by
Landlord, including reasonable attorneys' fees, expert witness fees and
consultant's fees.
25. INDEMNIFICATION BY TENANT AND BY LANDLORD. The Tenant shall
indemnify and save harmless Landlord of and from liability for damages
or claims against Landlord, including costs, attorneys' fees and
expenses of Landlord in defending against the same, on account of
injuries to any person or property, if the injuries are caused by the
negligence or willful misconduct of Tenant, its agents, servants or
employees, or of any other person entering upon the premises under
express or implied invitation of Tenant or if such injuries are the
result of the violation by Tenant, its agents, servants, or employees,
of laws, ordinances, other governmental regulations, or of the terms of
this lease.
The Landlord shall indemnify and save harmless Tenant of and from
liability for damages or claims against Tenant, including costs,
attorneys' fees and expenses of Tenant in defending against the same, on
account of injuries to any person or property, if the injuries are
caused by the negligence or willful misconduct of Landlord, its agents,
servants or employees, or of any other person entering upon the premises
under express or implied invitation of Landlord or where such injuries
are the result of the violation by Landlord, its agents, servants or
employees, of laws, ordinances, other governmental regulations, or of
the terms of this lease..
Landlord provides recreation facilities for the use of employees of
Tenant and other occupants within the property developed by Landlord,
which property presently includes LONG'S PEAK INDUSTRIAL PARK, FIRST,
SECOND and THIRD FILINGS, and portions of ST. VRAIN CENTRE, both in the
City of Longmont and County of Boulder, Colorado, and will include such
additional property in the immediate vicinity thereof as may be
developed by Landlord. The term "recreation facilities" includes, at
present, a fitness trail with 34 exercise stations, volleyball courts,
basketball courts, and a park, and will include such additional
facilities as Landlord may provide.
Tenant shall indemnify and save harmless Landlord of and from
Liability for damages or claims against Landlord, including costs,
attorneys' fees and expenses of Landlord in defending against the same,
on account of any injury to (or death of) an employee of Tenant arising
out of use of the recreation facilities, unless such death or injury is
caused by Landlord's gross negligence or willful misconduct
26. ASSIGNMENT OR SUBLETTING. Tenant shall not assign, mortgage, or
encumber this lease, nor sublet or permit the premises or any part
thereof to be used by others, without the prior written consent of
Landlord in each instance, which consent shall not be unreasonably
withheld.
In connection with an assignment, sublease or encumbrance Landlord
may require the submittal of detailed financial information about the
prospective subtenant or assignee, to be reviewed by Landlord, and may
require a guarantee of the obligations of the prospective subtenant or
assignee, and may require detailed financial information about the
guarantor, to be reviewed by Landlord; and there may be alterations to
this lease and alterations to the building which are necessary to
consummate the transaction. The Landlord may require Tenant or the
prospective assignee or sub-tenant to pay for the alterations to the
building, and may require that Landlord perform same. In addition,
Landlord may charge a fee of two percent of base rent for the first five
years of the lease, due in full upon Landlord's consent, as payment to
Landlord for such investigations, lease alterations and similar matters.
No two percent fee will be charged in connection with an assignment or
sublease to an assignee or subtenant who is "affiliated" with Tenant.
"Affiliated" means under common voting control, directly or indirectly.
A sale or transfer of control of a majority of the votes which may be
cast to elect Tenant's board of directors or other governing body shall
be deemed to be an assignment of this lease, requiring Landlord's
consent if the sale or transfer is essentially accomplished in a single
transaction.
If this lease is assigned, or if the premises or any part thereof is
sublet, or occupied by anyone other than Tenant, Landlord may, after
default by Tenant, collect rent from the assignee, sub-tenant, or
occupant and apply the net amount collected against all rent herein
reserved. No such assignment, subletting, occupancy, or collection
shall be deemed a waiver of this covenant, or the acceptance of the
assignee, sub-tenant, or occupant as tenant, or a release of Tenant from
further performance by Tenant of the covenants in this lease. The
consent by Landlord to an assignment or subletting shall not be
construed to relieve Tenant (or any subsequent tenant) from obtaining
the consent in writing of Landlord to any further assignment or
subletting. This provision shall not apply to a sale or transfer of
control to Hyundai Electronic Industries Co. Ltd. and /or any of it's
affiliates.
27. LANDLORD'S WARRANTY OF TITLE; QUIET ENJOYMENT. Landlord
covenants it has good right to lease the premises in the manner
described herein and that Tenant shall peaceably and quietly have, hold,
occupy, and enjoy the premises during the term of the lease; except as
provided in Paragraph 31 concerning subordination to mortgage lenders.
28. ADDITIONAL DEVELOPMENT OF PROPERTY - RIGHTS OF LANDLORD.
Landlord does reserve, during the term of this lease, the right to go
upon and deal with the premises or part thereof for the purpose of
implementing a common development plan for the project of which the
premises are a part, and to install non-exclusive sidewalks, paths,
roadways and other street improvements for use by vehicles, pedestrians,
and for parking; to undertake such drainage programs to handle
underground and surface drainage water and to make any other changes
and/or improvements as Landlord shall deem advisable in the exercise of
its sole discretion; provided, however, any such action by Landlord
shall not unreasonably interfere with the rights of Tenant hereunder.
29. GOVERNMENTAL ACQUISITION OF THE PREMISES. The parties agree
that Landlord shall have sole and exclusive authority to negotiate and
settle all matters pertaining to the acquisition of all or part of the
premises by a governmental agency by eminent domain or threat thereof
(condemnation), and to convey all or any part of the premises under
threat of condemnation, and the lease shall terminate as to any area so
conveyed. It is agreed that any compensation for land and/or buildings
to be taken whether resulting from negotiation and agreement or
condemnation proceedings, shall be the exclusive property of Landlord,
and that there shall be no sharing whatsoever between Landlord and
Tenant of any such sum. Such taking of property shall not be
considered as a breach of this lease by Landlord, nor give rise to any
claims in Tenant for damages or compensation from Landlord. Tenant may
separately claim and recover from the condemning authority the value of
any personal property owned by Tenant which is taken, and any relocation
expenses owed to Tenant by the condemning authority. If the taken
portion of the premises consists only of areas where no building is
constructed, and the land area of the premises is reduced by less than
ten percent, and the parking area available for use by Tenant is reduced
by less than five percent, and there is no material change in Tenant's
access to the premises, then there shall be no change in the terms of
the lease. If no building area is taken but the foregoing limits on
parking area reductions are exceeded, then Tenant may terminate the
lease unless Landlord provides sufficient reasonably adjacent parking
area so that the total available parking area is reduced by less than
five percent. If any portion of the building on the premises is taken,
then Landlord, at its election, may replace the square footage taken
with space in the same building, or may provide land and building area
essentially the same as the premises in a reasonably adjacent location,
within 10 days after the conveyance or taking, under the same terms and
conditions as contained in this lease, and this lease shall be in full
force and effect as to the new premises. If Landlord does not so
provide reasonable space, then Tenant shall have two options. First,
Tenant may terminate the lease by written notice delivered to Landlord
within 60 days after the conveyance or taking. Second, Tenant may
retain the remaining portion of the premises, under all the terms and
conditions hereof, but the base rental shall be reduced in proportion to
the number of square feet of building floor space taken compared to the
number of square feet of building floor space on the premises prior to
the taking.
30. SUBORDINATION OF THE LEASEHOLD TO MORTGAGES. This lease shall
be subject and subordinate in priority at all times to the lien of any
existing and/or hereafter executed mortgages and trust deeds encumbering
the premises. Although no instrument or act on the part of Tenant shall
be necessary to effectuate such subordination, Tenant will execute and
deliver such further instruments subordinating this lease to the lien of
any such mortgages or trust deeds as may be desired by the mortgagee or
holder of such trust deeds. Tenant hereby appoints Landlord as his
attorney in fact, irrevocably, to execute and deliver any such
instrument for Tenant. Tenant further agrees at any time and from time
to time upon not less than ten (10) days prior written request by
Landlord, to execute, acknowledge, and deliver to Landlord an estoppel
affidavit in form acceptable to Landlord and the holder of any existing
or contemplated mortgage or deed of trust encumbering the premises.
Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (1) that this lease is in full force and effect,
without modification except as may be represented by Landlord; (2) that
there are no uncured defaults in Landlord's performance; and (3) that
not more than one (1) month's rent has been paid in advance. Further,
upon request, Tenant shall supply to Landlord a corporate resolution
certifying that the party signing this statement on behalf of Tenant is
properly authorized to do so, if Tenant is a corporation. Tenant agrees
to provide Landlord within ten business days of Landlord's request,
Tenant's most recently completed financial statements and such other
financial information as reasonably requested by Landlord in order to
verify Tenant's financial condition to satisfy requirements of
Landlord's existing or contemplated lender or mortgagee.
Tenant agrees with lender and Landlord that if there is a foreclosure
of any such mortgage or deed of trust and pursuant to such foreclosure,
the Public Trustee or other appropriate officer executes and delivers a
deed conveying the premises to the lender or its designee, or in the
event Landlord conveys the premises to the lender or its designee in
lieu of foreclosure, Tenant will attorn to such grantee of the premises,
rather than to Landlord, to perform all of Tenant's obligations under
the lease, and Tenant shall have no right to terminate the lease by
reason of the foreclosure or deed given in lieu thereof.
Landlord will include in the terms of any mortgage or deed of trust
on the premises a provision that if Tenant is not in default under the
terms of this lease and Tenant is then in possession of the premises,
Tenant's rights of quiet enjoyment arising out of the lease shall not be
affected or disturbed by lender in the event of a default by Landlord
and any sale of the premises through foreclosure of any deed of trust or
otherwise.
31. MEMORANDUM OF LEASE - RECORDING. This lease shall not be
recorded in the office of the County Clerk and Recorder of Boulder
County, except by Landlord as a financing statement. In order to effect
public recordation, the parties hereto may, at the time this lease is
executed, agree to execute a Memorandum of lease incorporating therein
by reference the terms of this lease, but deleting therefrom any
expressed statement or mention of the amount of rent herein reserved,
which instrument may be recorded by either party in the office of the
Clerk and Recorder of Boulder County.
32. NO WAIVER OF BREACH; ACCEPTANCE OF PARTIAL PAYMENTS OF RENT. No
assent, or waiver expressed or implied, or failure to enforce, as to any
breach of any one or more of the covenants or agreements herein shall be
deemed or taken to be a waiver of any succeeding or additional breach.
Payment by Tenant or receipt by Landlord of an amount less than the
rent or other payment provided for herein shall not be deemed to be
other than a payment on account of the earliest rent then due, nor shall
any endorsement or statement on any check or any letter accompanying any
check or payment of rent be deemed an accord and satisfaction, and
Landlord may accept such check or other payment without prejudice to
Landlord's right to recover the balance of all rent then due, and/or to
pursue any or all other remedies provided for in this lease, in law,
and/or in equity including, but not limited to, eviction of Tenant.
Specifically, but not as a limitation, acceptance of a partial payment
of rent shall not be a wavier of any default by Tenant.
33. CONTROLLING LAW. The lease, and all terms hereunder shall be
governed by the laws of the State of Colorado, exclusive of its
conflicts of laws rules.
34. INUREMENTS. The covenants and agreements herein contained shall
bind and inure to the benefit of Landlord and Tenant and their
respective successors. This lease shall be signed by the parties in
duplicate, each of which shall be a complete and effective original
lease.
35. TIME. Time is of the essence in this lease in each and all of
its provisions in which performance is a factor.
36. ADDRESSES; EMPLOYER IDENTIFICATION NUMBERS; METHOD OF GIVING
NOTICE. The street address of Landlord is 1960 Industrial Circle,
Longmont, CO 80501. The mailing address of Landlord is P. O. Box 1937,
Longmont, CO 80502-1937. All payments, notices and communications which
are sent to Landlord via United States mail shall be addressed to the
mailing address. Only payments, notices and communications which are
hand delivered or delivered by private courier service shall be
addressed to the street address.
Tenant's street address is 2040 Miller Drive, Longmont, Colorado 80501.
Tenant's mailing address is 2190 Miller Drive, Longmont, Colorado 80501.
Any notice to Tenant may be delivered to the above addresses or to the
premises. A copy of any notice should be sent to Vice President and
General Consul, 211 River Oaks Parkway, San Jose, California 95136.
Landlord's current fax number is (303)776-4946. Tenant's current fax
number is 303-a678-2165. Any written notice required hereby may be
delivered by fax, U.S. mail, private courier service, or hand delivery.
Notice shall be effective at time of delivery to the address or fax
number shown.
Either party may change its street or mailing address, or fax number,
for purposes hereof, by written notice delivered to the other. The
federal employer identification number of Landlord is 84 0954 078. The
federal identification number of Tenant is 77-0123732.
38. PARAGRAPH HEADINGS; GRAMMAR. All paragraph headings are made
for the purposes of ease of location of terms and shall not affect or
vary the terms hereof. Throughout this lease, wherever the words,
"Landlord" and "Tenant" are used they shall include and imply to the
singular, plural, persons both male and female, and all sorts of
entities and in reading said lease, the necessary grammatical changes
required to make the provisions hereof mean and apply as aforesaid shall
be made in the same manner as though originally included in said lease.
39. ADDITIONAL PROVISIONS:
FLEXIBILITY CLAUSE: In the event Tenant's requirement for
space increases or decreases during the term of this lease, including
any extended term thereof, Tenant may notify Landlord of its adjusted
space requirement, in which event Landlord shall, within 120 days after
such notice, increase or decrease the square footage available to Tenant
so as to reasonably meet the Tenants new needs (as is reasonably
devisable by Landlord), either using the premises or other comparable
space of Landlord reasonably acceptable by Tenant. Tenant may not
decrease space in existing premises leased from the Landlord and lease
space in Boulder County owned by a third party, unless the Landlord
cannot accommodate the Tenant's overall space requirements. In such
event, Landlord and Tenant shall amend this lease accordingly, or enter
into a new lease upon rental rates and other terms which are similar to
those of this Lease and reasonably acceptable to both parties and
terminate this lease. Tenant may exercise the right described in this
paragraph multiple times, but not more than once in any twelve month
period. Not withstanding language to the contrary that might be found
elsewhere in this lease, the Tenant will be allowed to exercise the
right described in this paragraph without incurring of cost or other
penalties sometimes associated with early terminations, Tenant will be
expected to return the premises to Landlord pursuant to the terms and
conditions of Paragraph 14 of this Lease Agreement. This provision
shall not apply to 345 S. Francis, Longmont, Colorado.
IN WITNESS WHEREOF, the Parties have executed this lease as of the
date hereof.
LANDLORD: PRATT LAND LIMITED LIABILITY COMPANY
By: /s/ Susan M. Pratt
-----------------------
Susan M. Pratt, Manager
TENANT: MAXTOR CORPORATION
By: /s/ Walter D. Amaral
-------------------------
Title: Sr. V.P. Finance & CFO
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
The foregoing instrument was acknowledged before me this 20th day of
March, 1995 by Susan Pratt, Manager, Pratt Land Limited Liability
Company.
Witness my hand and official seal.
My commission expires: May 3, 1997
------------
/s/ Elizabeth H. Oram
-----------------------
Notary Public
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
The foregoing instrument was acknowledged before me this day of
February, 1995 by , Maxtor Corporation.
Witness my hand and official seal.
My commission expires:
------------------------------
Notary Public
TEXT DELETED PURSUANT TO REQUEST FOR CONFIDENTIAL TREATMENT DATED JUNE 21,
1995.
MANUFACTURING AND PURCHASE AGREEMENT
BY AND BETWEEN
MAXTOR CORPORATION
AND
HYUNDAI ELECTRONICS INDUSTRIES CO., LTD.
DATED APRIL 27, 1995
TABLE OF CONTENTS
RECITALS 1
1.0 DEFINITIONS 1
2.0 SCOPE; ROLE OF THE PARTIES 2
3.0 OBLIGATIONS OF THE PARTIES DURING TRANSITION PERIOD; 3
PAYMENT OF EXPENSES; ON-GOING SUPPORT
4.0 GRANT OF LICENSE; TRANSFER OF TECHNOLOGY 4
5.0 OBLIGATIONS DURING PRE-PRODUCTION PERIOD 6
6.0 OBLIGATIONS DURING PRODUCTION PERIOD 7
7.0 FORECAST 8
8.0 PURCHASE ORDERS 8
9.0 PURCHASE ORDER CANCELLATIONS AND 9
RESCHEDULING AND CHANGES
10.0 PURCHASE PRICE 9
11.0 TERMS OF PAYMENT AND TAXES 10
12.0 PACKAGING AND SHIPMENT 10
13.0 ENGINEERING CHANGES 11
14.0 INSPECTION AND ACCEPTANCE 11
15.0 WARRANTY 12
16.0 EPIDEMIC FAILURE 13
17.0 ON-SITE INSPECTION/VISITATION, VENDOR INFORMATION 13
AND AUDITS
18.0 INDEMNIFICATION 14
19.0 INVENTIONS 15
20.0 CONFIDENTIAL INFORMATION 16
21.0 ADMINISTRATIVE AND TECHNICAL COORDINATORS 16
22.0 TERM AND TERMINATION 17
23.0 LIMITATION OF LIABILITY 18
24.0 DISPUTE RESOLUTIONS 18
25.0 GENERAL 18
MANUFACTURING AND PURCHASE AGREEMENT
This Manufacturing and Purchase Agreement (the "Agreement") dated
this 27th day of April, 1995 (the "Effective Date") is entered into by
Maxtor Corporation ("Maxtor"), a Delaware corporation having its
principal place of business at 211 River Oaks Parkway, San Jose,
California 95134, U.S.A., and Hyundai Electronics Industries Co., Ltd.
("Hyundai"), a Korean corporation having its principal place of business
at San 136-1, Ami-ri, Bubal-eub, Ichon-kun, Kyoungki-do, 467-860 Korea.
RECITALS
A. Maxtor is in the business of designing, manufacturing and
selling hard disk drives and other storage products.
B. Hyundai is in the business of designing, manufacturing and
selling, among other items, certain high technology computer products.
C. Maxtor wishes to contract with Hyundai to manufacture and sell
to Maxtor the Products (as hereinafter defined), and Hyundai wishes to
manufacture and sell to Maxtor the Products.
D. Hyundai and Maxtor are entering into this Agreement for the
purpose of establishing a long-term mutually beneficial business
relationship, and understand that the full cooperation of both parties
is necessary to fully develop this business and maximize the potential
opportunities. If problems should be encountered with respect to any
aspect of this Agreement or if the parties should encounter any problems
not covered by this Agreement, Maxtor and Hyundai shall discuss them in
a cooperative and sincere spirit and attempt to arrive at a mutually
acceptable solution.
NOW, THEREFORE, in consideration of these premises and of the mutual
covenants herein contained, the parties agree as follows:
1.0 DEFINITIONS.
1.1 Day shall mean calendar day unless otherwise specified.
1.2 Hyundai Technology shall mean all information, in whatever form
or medium, whether communicated orally or in tangible form, including,
but not limited to, trade secrets, inventions, patent rights, designs,
drawings, specifications, test information, methods, procedures,
engineering and associated design data and manufacturing information,
relating to the use, manufacture, service and/or sale of the Products
and components thereof to which Hyundai now or hereafter owns or is
authorized to sublicense without payment to third parties.
1.3 Maxtor's Other Manufacturing Sources shall mean Maxtor's
existing manufacturing Subsidiaries listed on Schedule A hereto and
other Subsidiaries established or acquired by Maxtor from time to time
for the purpose of manufacturing the Products or Other Products.
1.4 Maxtor Technology shall mean all information, in whatever form
or medium, whether communicated orally or in tangible form, including,
but not limited to, trade secrets, inventions, patent rights, designs,
drawings, Specifications, Process, test information, methods,
procedures, Quality and Reliability Systems, engineering and associated
design data and manufacturing information, relating to the use,
manufacture, service and/or sale of the Products and components thereof
to which Maxtor now or hereafter owns or is authorized to sublicense
without payment to third parties.
1.5 "Products" shall mean any and all data storage products
(including, but not limited to, hard disk drives (rigid or removable)
and flash memory products) which will be manufactured by Hyundai for
Maxtor hereunder in accordance with the terms of this Agreement.
1.6 "Other Products" shall mean any and all data storage products
(including, but not limited to, hard disk drives (rigid or removable)
and flash memory products) manufactured by Maxtor, or jointly by Maxtor
with a third person, or for Maxtor by a third person, that do not fall
under the definition of Products.
1.7 "Process" shall mean assembly and test methods and procedures
established by Maxtor relating to the manufacture of the Products.
1.8 "Specifications" shall mean the engineering specifications
relating to the Products provided or developed by Maxtor from time to
time.
1.9 "Quality and Reliability Systems" shall mean those methods and
practices provided or developed by Maxtor which (i) prevent shipment
of material which does not meet Specifications, (ii) provide
corrective action to prevent manufacture of additional non-conforming
material, (iii) provide notification and control of all changes to the
Process or Products which may impact the end customers' use of the
Product, (iv) provide resolution for customer perceived quality or
reliability problems with the Products and (v) provide regular reports
of manufacturing data to give assurance that the Process and Products
are within acceptable statistical limits.
1.10 "Subsidiary" shall mean any other corporation, company or other
entity more than fifty percent (50%) of whose outstanding shares of
securities are now or hereafter owned or controlled directly or
indirectly by either party, but only so long as such ownership or
control exists.
2.0 SCOPE; ROLES OF THE PARTIES.
2.1 Maxtor shall have the principal responsibility for designing
the Products and providing to Hyundai working prototypes ready for
volume production. Maxtor shall purchase the Products from Hyundai in
accordance with the terms and conditions of this Agreement and shall
have the responsibility for the worldwide marketing and sale of the
Products. Without making any , Maxtor
acknowledges that it is Maxtor's to have Hyundai
manufacture for Maxtor the
defined in Schedule F hereto.
2.2 Hyundai shall have the principal responsibility for the
manufacture of the Products and shall manufacture and assemble the
Products for Maxtor solely in accordance with the
Process and Specifications provided by Maxtor from time to time.
2.3 Maxtor and Hyundai understand that full cooperation is
necessary to fully develop the business relationship contemplated herein
and to achieve the potential opportunities thereof. The parties,
therefore, intend to fully cooperate with each other to continue and
maintain a long-term and mutually beneficial business relationship.
2.4 (a) Neither party shall be prevented from entering into
similar agreements with third parties for
products or services or for performing such manufacturing
services, provided that the confidential information or Technology of
the other party is not used without obtaining prior written consent from
the other party. At the request of either party,
.
(b) Notwithstanding anything to the contrary contained
herein, it is understood that
. In analyzing such overall
costs and other terms, shall be considered.
. In analyzing such overall costs and other
terms,
shall be considered. For this analysis, Maxtor will take into
consideration .
2.5 It is the parties' intention to manufacturing
levels at each of Hyundai and Maxtor's Other Manufacturing Sources'
factories. Accordingly, the parties agree to meet and confer at least
once quarterly to review and determine the most efficient and cost
effective utilization of their . Notwithstanding
anything to the contrary, it is agreed and understood that in order to
achieve the intent of this Section,
.
2.6 It is also the parties' intention to conduct Hyundai's
manufacturing operations in the and mutually
beneficial manner, . Accordingly, the parties also
agree to meet and confer at least once per quarter to assess whether the
current Hyundai manufacturing operation is , and
if it is agreed that it is not, to
to make such manufacturing operations ,
.
2.7 The parties understand that the assurance of continued
production of quality and low-cost Products is critical to Maxtor's
business and that Maxtor is relying on Hyundai as the of
certain Products. The parties recognize that the laws existing in
certain countries may require the manufacture of products in the country
in order for the products to be sold in such country and that unforeseen
events, including political conditions within the United States, or
other circumstances, may arise which would either limit or prevent
Hyundai from manufacturing Products or Other Products in Korea or other
countries, or from satisfying Maxtor's purchase requirements for
Products necessary to meet the demands of the market. In addition, the
economics associated with the manufacture of the Products, or some
portion thereof, may be such that it is clearly appropriate to have such
Product, or component or portion thereof, manufactured outside of Korea.
In the event that legal, political or governmentally imposed economic
restrictions or other conditions, or if any event described in Section
25.4, or if a material breach of this Agreement by Hyundai shall occur,
or the parties are unable to resolve a material dispute in accordance
with Section 24, which prevent or limit, or make more unfavorable, the
delivery of Products from Hyundai to Maxtor or its customers, Maxtor and
Hyundai will in good faith and sincere spirit
to to allow Hyundai to the Products to Maxtor.
Nothing set forth in this Section shall affect the understandings and
obligations set forth in Section 2.4(b), above.
3.0 OBLIGATIONS OF THE PARTIES DURING TRANSITION; PAYMENT OF
EXPENSES; ON-GOING SUPPORT.
3.1 Hyundai's Obligations. Hyundai shall be responsible to
purchase, own, lease or otherwise acquire and continually make
available, the facilities and capital equipment needed to manufacture
the Products and shall provide all parts, labor, materials and other
items necessary to perform Hyundai's obligations hereunder.
3.2 Maxtor's Obligations.
(a) To enable Hyundai to manufacture the Products, Maxtor shall (i)
provide Hyundai (through Maxtor or a Maxtor subcontractor) with the
necessary in accordance with the Transition Plan
described in Schedule B attached hereto, as will be modified from time
to time by the parties, (ii) assist Hyundai in procuring the necessary
to allow Hyundai to perform
its obligations hereunder, and (iii) with respect to the Products,
produce and compile for Hyundai and deliver to Hyundai, on a schedule
mutually agreed to by the parties, the Product design, Process,
technical specifications, and test information relating to the Products,
and the Product manufacturability, fabrication, operation, performance,
interfaces, and reliability of the Products in sufficient detail so as
to enable Hyundai to thoroughly understand the Products to be
manufactured by Hyundai.
(b) Subsequent to the initial transition period for each Product as
described in the Transition Plan for each such Products, upon Hyundai's
reasonable request, Maxtor shall promptly provide additional
to Hyundai at facilities designated by
Hyundai relating to the services performed or Products delivered
hereunder. The period of time is required shall
be mutually agreed upon by the parties. The parties agree to
periodically assess the continued provision of such Maxtor support in
terms of reasonableness relating to, among other items, expense, time,
manpower required, and
.
3.3 Allocation of Expenses. All expenses incurred by the parties
during the initial transition period shall be allocated as specified in
the Transition Plan in accordance with the terms of this Agreement. It
is anticipated that the parties will continue to incur expenses as part
of the ongoing technology exchange under Section 4.3 and continual
refinement of their business relationship. Unless otherwise agreed to
by mutual agreement, the parties agree to incurred
pursuant to this Agreement in accordance with the following guidelines:
(a) agrees .
(b) During and subsequent to the initial transition period,
issued by Maxtor and shipping Products to Maxtor.
(c) agrees to assume incurred in
the of the Products.
(d) agrees to assume associated with
the after the initial transition period.
(e) agrees to assume ,
including or other technical information
developed or provided by Maxtor, and assisting Hyundai in establishing
and operating Hyundai's manufacturing facility.
(f) Except as otherwise provided, will be
borne by .
4.0 GRANT OF LICENSE; TRANSFER OF TECHNOLOGY.
To enable the parties to fulfill their respective obligations under
this Agreement, Maxtor and Hyundai shall grant to the other
license pursuant to the terms described below.
4.1 Grant of License by Maxtor.
(a) Subject to the provisions of Section 22, Maxtor hereby grants
to Hyundai:
(i) license,
, to use the Maxtor Technology solely in
connection with of the
Products in accordance with the terms of this
Agreement; and
(ii) the right to
, in accordance with certain minimum terms and conditions
established by Maxtor and subject to Maxtor's prior written approval,
the right to use the Maxtor Technology for the purpose of
having the Products. .
(b) Maxtor will deliver to Hyundai in a timely manner the Maxtor
Technology as determined necessary by Maxtor in order to permit Hyundai
to meet its obligations hereunder. The schedule and manner of delivery
of information shall be mutually agreed to by Maxtor and Hyundai with
respect to each Product.
(c) The rights granted to Hyundai pursuant to Section 4.1(a)
(including all sublicenses granted by Hyundai under Section 4.1(a)(ii))
shall terminate upon termination or expiration of this Agreement,
whenever and for whatever reasons, and Hyundai agrees to immediately
cease using the Maxtor Technology or any other information supplied by
Maxtor or obtained by Hyundai under this Agreement in any manner upon
such termination or expiration.
4.2 Grant of License by Hyundai.
(a) Subject to the provisions of Section 22, Hyundai hereby grants
to Maxtor and its Subsidiaries:
(i) a license, , to
use the Hyundai Technology solely in connection with of
the Products and hard disk drive Other Products developed by or for
Maxtor provided that the license to Hyundai technology as aforesaid for
such hard disk drive Other Products is
; and
(ii) the right to ,
in accordance with certain minimum terms and conditions established by
Hyundai and subject to Hyundai's prior written approval, the right to
use the Hyundai Technology for the purpose
of the Products.
(b) The rights granted to Maxtor pursuant to Section 4.2(a)
(including all sublicenses granted by Maxtor under Section 4.2(a)(ii))
shall terminate upon termination or expiration of this Agreement,
whenever and for whatever reasons, and Maxtor agrees to immediately
cease using the Hyundai Technology or any other information supplied by
Hyundai or obtained by Maxtor under this Agreement in any manner upon
such termination or expiration.
4.3 Technology Transfer and Technical Information Exchange. It is
agreed that technical information exchange will be an ongoing process
during the term of the Agreement. Each party shall have ,
subject to the provisions of Section 20, to the other's facilities and
production processes for the Products and shall provide of
technical information. To the extent feasible, the parties agree
to each other information relating to a Product
design or manufacturing, as it is developed or becomes available.
5.0 OBLIGATIONS DURING PRE-PRODUCTION PERIOD.
5.1 Maxtor's Obligations.
(a) For each Product proposed by Maxtor, Maxtor shall be
responsible for and shall related to the following:
(i) the development of the Product
;
(ii) the selection and qualification of
and ;
(iii) the development of the by
Hyundai;
(iv) the performance of ;
(v) the of the Quality and Reliability
Systems; and
(vi) the of technology, technical information and
documentation relating to the foregoing to Hyundai in an
manner.
(b) Maxtor shall Hyundai's manufacturing
facilities and each of the Products to be manufactured by Hyundai
hereunder.
(c) Maxtor shall assist and cooperate with Hyundai in resolving any
pre-production issues.
5.2 Hyundai's Obligations.
(a) Hyundai agrees that it will complete, as provided in the
Transition Plan, the establishment of a manufacturing facility fully
equipped to manufacture the Products in volume for Maxtor pursuant to
Section 8.
(b) Hyundai shall relating
to required to perform its obligations
under this Agreement.
(c) Hyundai shall comply with the qualification plan developed by
Maxtor for the qualification of Hyundai's manufacturing facility and the
Products to be produced by Hyundai. It is understood that the
qualification plan may be modified from time to time as new Products are
being introduced.
(d) Hyundai shall perform all Quality and Reliability testing in
accordance with the Quality and Reliability Systems that are developed
and provided by Maxtor and attached hereto as Schedule D.
(e) Hyundai may not move any portion of the manufacturing process
or Product to any new facility or move from the original manufacturing
facility qualified by Maxtor, except with the prior written consent of
Maxtor.
(f) At Maxtor's request, Hyundai will assist Maxtor in qualifying
used in the Products. It is understood, however, that
Maxtor will select and qualify , including
components manufactured by Hyundai. Hyundai agrees that it will
purchase components and parts for the manufacture or assembly of the
Products from provided to Hyundai
from time to time by Maxtor. The parties, however, agree to cooperate
and use reasonable efforts to in order to reduce material or
manufacturing costs.
6.0 OBLIGATIONS DURING PRODUCTION PERIOD.
6.1 Maxtor's Obligations.
(a) Maxtor shall use its best efforts to use of
Hyundai's factory as contemplated under Section 2.5.
(b) Maxtor shall promptly assist and cooperate with Hyundai in
resolving any production problems to allow Hyundai to resume production
.
(c) Maxtor shall work with Hyundai on an ongoing basis to address
issues and to improve yield.
(d) Maxtor shall keep in place, at , a mutually
agreed upon dedicated to assist Hyundai with the
ongoing technology exchange and shall promptly
.
(e) Maxtor shall promptly qualify, at in order to
reduce the materials and manufacturing cost of the Product.
(f) Maxtor will develop and to ensure
effective and efficient continuity of supply for all components used in
the Products. Hyundai shall assist Maxtor in the development and
.
(g) Maxtor shall inspect Products within from
the date of receipt and use the data obtained to independently determine
whether the have been maintained. Maxtor shall
promptly make such to assist Hyundai in meeting
its reliability and quality goals.
(h) Maxtor shall promote the sale of the
Products.
6.2 Hyundai's Obligations.
(a) Hyundai will be responsible for processing sufficient Product
starts and procuring sufficient inventory to provide Maxtor with the
required number of Products.
(b) Hyundai acknowledges that due to the of certain
Products manufactured by Hyundai for Maxtor, it is critical that Hyundai
maintain the its manufacturing capacity upon Maxtor's
request. Hyundai and Maxtor therefore agree to develop
Hyundai's manufacturing capacity to meet customer demand.
(c) Hyundai shall assist Maxtor in the development of
plans to ensure effective and efficient continuity of supply for all
components used in the Products.
(d) Hyundai shall maintain and supply on Products
pursuant to the Quality and Reliability Systems.
(e) Hyundai shall comply with the Change Control Policy set forth
in Schedule C and the Quality and Reliability Systems Procedure set
forth in Schedule D.
(f) Hyundai may not move to any new
facility or move from the original manufacturing facility qualified by
Maxtor, except with the prior written consent of Maxtor.
(g) Hyundai will comply with the provisions set forth in Section
5.2(f) above.
7.0 FORECAST.
7.1 At least Maxtor will provide to
Hyundai a of Maxtor's requirement for the
Products in accordance with Maxtor's Product Requirement Forecast (PRF)
process. This forecast is provided solely for Hyundai's ;
the forecast shall not be construed as an authorization by Maxtor to
order any materials for, or to allocate any labor or equipment for the
manufacture of the Products. Maxtor will not be responsible for any of
for materials, supplies, labor, or other commitments
or expenses, other than as authorized by a written Maxtor Purchase Order
in Hyundai's possession as provided in Section 8 below.
7.2 Hyundai will submit to Maxtor, on a basis,
a rolling plan for
in accordance with Maxtor's Response to Forecast (RTF) process. This
will consist of the current quantity ordered by Maxtor
for each of the forthcoming and any additional capacity in
excess of what Maxtor has ordered for each of the forthcoming
. Maxtor may place orders for the quantity, or any portion thereof,
specified in the excess capacity part of the , up to and
including Hyundai's entire output for the , with a
minimum of lead time. In the event Maxtor's
requirements exceed Hyundai' plant capacity, the parties agree to meet
and attempt to a resolution that will meet Maxtor's
customer's needs.
8.0 PURCHASE ORDERS
8.1 This Agreement, together with all Schedules and other documents
referred to herein, will apply to all purchases, notwithstanding any
acknowledgment or other business forms transmitted by either party. All
purchase orders, acknowledgments and transmittals must reference this
Agreement. The terms and conditions of this Agreement, together with
all Schedules and other documents referred to herein, shall prevail
notwithstanding any variance with the terms and conditions of any other
document submitted by either party.
8.2 This Agreement does not constitute a purchase order.
Procurements made under this Agreement shall be made in accordance with
written purchase order issued by Maxtor (in the form attached hereto as
Schedule E). Hyundai may not perform any services or expend any monies
for which Maxtor is responsible hereunder without prior receipt of a
Maxtor purchase order therefor.
8.3 The purchase order shall show the quantity, description, unit
price, required ship date, method of shipment, destination, and any
negotiated special charges. All purchase orders shall provide a lead
time of days. Maxtor may, from time to
time, request Hyundai to make shipments in less than the standard lead
time. Such requests will be negotiated by the parties to arrive at
mutually agreeable dates of delivery.
8.4 Hyundai agrees to accept purchase orders issued by Maxtor or
its Subsidiaries in accordance with the terms and conditions of this
Agreement. Within working days of its receipt of each purchase
order, Hyundai will provide written order acknowledgment. If Hyundai's
order acknowledgment is not received by Maxtor with said period,
the purchase order will be deemed to have been accepted by Hyundai.
8.5 (a) Hyundai shall timely deliver all Products according to
schedule. If Hyundai's performance falls below , Hyundai
shall immediately implement a mutually agreed upon corrective action
plan which brings compliance. The parties agree to
cooperate in the development and implementation of such corrective
action plan.
(b) The parties agree to further cooperate in identifying the cause
of any delay in scheduled Product delivery, and to
. In the event that
either party is damaged or suffers a loss as a result of the delay, the
parties shall work together to such loss or damage.
8.6 Should Maxtor request Hyundai to stop shipment of Products for
quality reasons, Hyundai's obligations to meet delivery commitments
shall thereafter be suspended until such time as Maxtor thereafter
requests Hyundai to recommence shipment of Products. Maxtor and Hyundai
shall work together to allow Hyundai to resume production ,
and to attributable to the stop shipment. All requests
pursuant to this Section shall be in writing.
8.7 Hyundai shall always use its best efforts to maintain the
ability to supply all Products that Maxtor orders from Hyundai. Hyundai
shall immediately notify Maxtor of any event or circumstance that might
affect Hyundai's ability to fully perform its obligations under this
Agreement.
9.0 PURCHASE ORDER CANCELLATIONS, RESCHEDULING AND CHANGES.
9.1 Cancellation. Maxtor may cancel purchase order(s) or any
portions thereof for any reason by notifying Hyundai in writing at least
date on the purchase orders. Cancellation will be
effective upon Hyundai's receipt of the written cancellation notice from
Maxtor, or such later date as specified in the cancellation notice.
Hyundai will cease work on affected purchase order(s) in accordance with
the cancellation notice. Maxtor will (i) purchase and pay for any units
of Products that have been completed as of the effective date of the
cancellation, (ii) will pay Hyundai the incurred by
Hyundai in connection with the assembly of any goods that are
as of the effective date of cancellation under
the canceled order(s), (iii) pay the costs of components and other
materials procured by Hyundai specifically on account of the canceled
order(s) specified in Section 8.3, (iv) pay
the costs of components and other materials that Hyundai has ordered and
is with longer than lead time, and
(v) pay any cancellation or restocking charges imposed by vendors on
account of any canceled orders pursuant to clauses (iii) and (iv) above.
Hyundai will use its best efforts to return components and other
materials to its vendors and/or use them in other activities at Hyundai.
Hyundai will in any event use its best efforts to mitigate the
cancellation charges hereunder. In the event any such cancellation
causes underutilization of Hyundai's manufacturing capacity, Maxtor and
Hyundai will expeditiously meet to discuss mutually acceptable solutions
for optimizing such capacity in a manner consistent with Section 2.5.
9.2 Rescheduling.
(a) Maxtor may upon prior written notice to Hyundai reschedule
delivery of the following quantities of the Products for
which purchase orders have been submitted:
Percentage of the units
If Rescheduling occurs of the Products which
(days prior to delivery) may be rescheduled
- ------------------------- -------------------------
- %
- %
- %
or more %
It is agreed that the new ship date(s) must not be more than
beyond the original ship date(s) shown on the affected purchase order.
(b) If Maxtor's reschedule request represents an acceleration or
increase, Hyundai will use its best efforts to meet the requested
delivery dates.
9.3 Product Mix Changes. It is understood that market conditions
or requirements by Maxtor's customers may require changes in the Product
mix within an HDA family and it is anticipated that such changes may
. Hyundai, therefore, grants to Maxtor the right to
to the Product mix that do not change the of the
Products ordered . Maxtor and Hyundai agree to work
together to respond to such changes in a timely manner.
10.0 PURCHASE PRICE.
10.1 The initial unit price to be paid by Maxtor for Products
hereunder shall be calculated as set forth in Schedule F.
10.2 All prices are expressed and all payments will be made in
.
10.3 Pricing. If at any time the purchase price
charged by Hyundai for the Products
, Maxtor and Hyundai shall meet to
discuss
.
10.4 Benefits. If Maxtor purchases components
manufactured by Hyundai from Hyundai, Hyundai shall use its best efforts
to ensure Maxtor that the
; and that if, during the term of
this Agreement (or any extension thereof), Hyundai shall sell such
products for to any other customers,
thereupon and thereafter Maxtor shall be
.
11.0 TERMS OF PAYMENT AND TAXES.
11.1 Hyundai will invoice Maxtor upon delivery of the Product in
accordance with Section 12. Maxtor shall pay within after
the relevant invoice date or delivery of the Products, whichever is
later. Payment shall be made by wire transfer, check or other
instrument approved by Hyundai. At Maxtor's request, Hyundai will grant
to Maxtor an extension of time beyond , at which time
the parties agree to meet to reach an agreement regarding the interest
to be paid for extending such payment term. from the
Effective Date of this Agreement , or as otherwise requested by a party.
11.2 shall bear all applicable
federal, state, municipal, and foreign jurisdiction taxes (such as
sales, use or similar taxes), all customs duties, imposts, and similar
charges, and all personal property taxes assessable on the Products
which are imposed after delivery to .
11.3 Maxtor shall invoice Hyundai for all expenses incurred by
Maxtor and charged to Hyundai in accordance with the Transition Plan.
All invoices will be paid within from the date thereof,
except as otherwise set forth in the Transition Plan, or as otherwise
agreed by the parties. The parties agree to specifically address payment
by Hyundai of made or to be made by Maxtor for
Hyundai at Hyundai's request. The contemplated
are set forth in the Transition Plan
11.4 All payments hereunder shall be expressed and made in
.
12.0 PACKAGING AND SHIPMENT.
12.1 All Products are to be packed in accordance with Maxtor
specifications, unless otherwise provided by Maxtor.
.
12.2 Hyundai shall deliver the Products to Maxtor
(as defined by the International Chamber of Commerce).
shall pay all duties, taxes, shipping, customs, insurance, and handling
charges to the , which is the point at which title
shall pass from Hyundai to Maxtor. shall pay all duties,
taxes, shipping, customs, insurance and handling charges after the goods
are aboard the exporting vessel. Delivery shall not occur until
Hyundai has obtained any export license or other official authorization
necessary for export of Products. Korean export licensing is the sole
responsibility and at the sole expense of Hyundai.
13.0 ENGINEERING CHANGES.
13.1 Definition. The term Engineering Change(s) shall mean those
mechanical, electrical, firmware or software design changes or
specification changes, piece part or subassembly design or
specification changes, made to the Products or Process, or, which, if
made, could affect the schedule, performance, reliability, availability,
serviceability, appearance, dimensions, tolerances, safety or costs,
such determination to be made .
13.2 Hyundai Change(s). Hyundai will notify Maxtor of any
Engineering Change proposed to be made by Hyundai to the Products or
Process, and will supply a written description of the expected effect of
the Engineering Change on the Products, including its effect on price,
performance, reliability and serviceability. Maxtor may elect to
evaluate the prototype, parts and/or designs specified as part of the
proposed change and Hyundai shall provide the prototype, parts and/or
design to Maxtor at no charge for such evaluation. Maxtor agrees to
make to approve or disapprove Hyundai's
proposed changes within after receipt of Hyundai
request for changes, and within
for changes. Hyundai will not change or modify the
Products or Process by implementation of such Engineering Change
without Maxtor's prior written approval.
13.3 Maxtor Change(s). Maxtor may request, in writing and in a
manner similar to Hyundai's request as set forth in Article 13.2, that
Hyundai incorporate any Engineering Change into the Products, and
Hyundai will provide to Maxtor its written response
after receipt of Maxtor's request. For Engineering
Changes, as determined by Maxtor, Hyundai will respond within
of Maxtor's written request. Hyundai's response will state the cost
savings or increase, if any, expected to be created by the Engineering
Change, and the effect on the schedule, performance, reliability,
availability, safety, serviceability, appearance, dimensions,
tolerances, composition of bills of material, and of the Products. If
Maxtor requests Hyundai to incorporate an Engineering Change into the
Products, the applicable Specifications will be amended as required.
Hyundai will not unreasonably refuse to incorporate Maxtor's Engineering
Changes into the Products.
13.4 Unforeseen Changes. In the event of a serious and unforeseen
safety or technical problem with the Products provided hereunder, an
emergency Engineering Change may be required. Such problem may or may
not result in the Products failing to meet the applicable
Specifications. Maxtor and Hyundai shall mutually expend all necessary
resources in order to correct such problems immediately upon their
discovery by either party.
13.5 In the event such Maxtor required Engineering Change
directly causes a negative financial impact to Hyundai due to
incorporation of such change into a Product, the parties agree to
promptly meet to discuss of such financial impact.
Hyundai agrees to use its best efforts to notify Maxtor of such
financial impact prior to incorporation of such Engineering Change, and
in any event, notify Maxtor as soon as Hyundai becomes aware of such
impact.
14.0 INSPECTION AND ACCEPTANCE.
14.1 Hyundai will ensure all Products are tested in accordance with
the requirements set forth in Schedule D. Maxtor may, subject to mutual
agreement, update or modify Schedule D during the term of this
Agreement, or any extension thereof. Hyundai will provide only those
Products conforming to the Specifications described in this Agreement,
unless Hyundai has obtained prior written approval from the Maxtor
technical coordinator for any deviation from such Specifications.
14.2 Maxtor may inspect and test all Products. If nonconformance
to the Specifications occurs, Maxtor and Hyundai will to
identify and find a way to correct the causes of the problem(s). Maxtor
may refuse to accept Products which do not conform to the
Specifications. Maxtor may reject if lot acceptance
criteria established in the Specifications are not fulfilled. Maxtor
may of Products until the cause(s) for
non-conformity, as mutually determined by parties, has been corrected.
Maxtor will use its best efforts to in identifying the
cause(s) for rejection through a . If the cause(s)
identified by the relate to Maxtor's design of the
Products or Process, Maxtor will promptly take to allow
Hyundai to resume production as soon as possible.
14.3 Subject to the Section 14.2, if Maxtor rejects any defective
Products, from the date of
receipt of such rejected units at Hyundai's facility. If the failure
is unrelated to Maxtor's design or Process as provided in Section 14.2,
and Hyundai is unable to correct such failure within a reasonable time,
Maxtor may cancel the affected order(s) and all pending orders for those
Products at no cost or obligation to Maxtor. agrees to pay
for incurred by Maxtor or its customers arising out of
or relating to the return to Hyundai of all the units that did not meet
the Specifications of this Agreement as a result of manufacturing errors
by Hyundai.
14.4 If, after from the date of receipt by Maxtor, Maxtor
has not rejected a Product, it will be deemed to have been accepted by
Maxtor. The act of inspection or payment by Maxtor for the Products
will not be construed as Maxtor's acceptance of such Products.
15.0 WARRANTY.
15.1 Hyundai warrants that the Products delivered by Hyundai to
Maxtor shall meet the
. The parties agree to establish warranty terms
which are so as to permit the Products to
remain .
15.2 At the defective Products.
The parties agree to establish warranty terms for Products repaired or
replaced under this Section which are so as to
permit the Products to remain .
15.3 All Products repaired by Hyundai will exhibit an identifying
mark to indicate that the Products have been reworked or repaired and
the latest date of delivery. shall pay for
relating to the return of the defective Products to Hyundai
and shall pay for relating to the
subsequent return of the repaired or replaced Products to Maxtor.
15.4 Hyundai agrees to collect and send to Maxtor
on
basis in a mutually agreed format.
15.5 (a) Hyundai agrees to provide out-of-warranty repair service
to Maxtor until the end of after the last purchase
of each Product. The prices charged by Hyundai will be Hyundai's
which Hyundai will try, in good faith, not to have .
The foregoing notwithstanding, Maxtor will
have to have any Product repaired by Hyundai. In
the event Maxtor chooses not to have a Product repaired by Hyundai,
Maxtor shall notify Hyundai in writing. In such situation, Maxtor and
Hyundai agree to meet
.
(b) Regarding out-of-warranty repair services, the parties
agree:
(i)that Maxtor and Hyundai will work together to support customer
requirements for out-of-warranty repair;
(ii)where possible, Maxtor and Hyundai will work together to
alleviate the need for extended out-of-warranty repair by helping
customers find other options; and
(iii)that Maxtor and Hyundai will work together to
requirements and minimize exposure on obsolete material.
15.6 EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH ABOVE, HYUNDAI
GRANTS NO OTHER WARRANTIES, EITHER EXPRESS OR IMPLIED, FOR THE PRODUCTS,
AND DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE. THE ABOVE EXPRESS WARRANTIES SHALL BE THE SOLE
AND EXCLUSIVE REMEDY FOR DEFECTIVE PRODUCTS, UNLESS OTHERWISE SET FORTH
IN THIS AGREEMENT.
16.0 EPIDEMIC FAILURE.
16.1 In the event of an epidemic failure of the Product, whether
occurring inside or outside of the warranty period, the parties shall
work together to identify the nature of the failure and to
determine whether the failure results from the design or manufacture of
the Products.
16.2 Maxtor and Hyundai shall agree on an of the cost
of resolving the problem which shall depend on whether the primary
source of the problem is Maxtor's design of the Products or Hyundai's
manufacture of the Products.
16.3 Maxtor and Hyundai shall cooperate in to
identify the cost-effective solution to the problem.
16.4 For purposes of this Section 16, "epidemic failure" shall mean
.
17.0 ON-SITE INSPECTION/VISITATION, VENDOR INFORMATION AND AUDITS.
17.1 Maxtor's representatives, including Maxtor customers as
designated by Maxtor, shall be allowed a reasonable number of visits to
Hyundai's manufacturing and test facilities (including access to the
manufacturing areas) for purposes of qualification and monitoring
production processes. Maxtor or Maxtor's customers for
travel and living during their visit.
17.2 Maxtor shall be entitled to conduct , periodic
audits of Hyundai's quality, reliability, vendor control and process
control procedures as they affect the Products produced by Hyundai for
Maxtor. Such audits may be conducted as often as reasonably necessary
to ensure compliance with this Agreement. Such audits may be conducted
by Maxtor personnel or by contractors hired on behalf of Maxtor. In the
event contractors are hired, Maxtor will ensure that they are bound by a
nondisclosure provision equivalent to the provisions of Section 20.
Hyundai agrees to provide reasonable access to its facilities, including
manufacturing areas, and reasonable assistance in understanding such
procedures to such auditors.
17.3 Hyundai shall keep throughout the term of this Agreement all
. Hyundai will advise Maxtor when these
records are about to be destroyed and will allow Maxtor the opportunity
to reproduce the information.
17.4 A reasonable number of duly authorized and technically
qualified employees of Hyundai shall be given access from time to time
during the term of this Agreement to those offices of Maxtor or its
Subsidiaries. Hyundai shall be responsible for travel and living
expenses for its employees during their visit.
17.5 Visits made by either party pursuant to this Section shall be
subject to reasonable conditions and regulations which may be necessary
in order to not interfere with normal operations and administration of
the other party. Prior to any visit, the visiting party shall notify
the other of such intended visit and state the number of visiting
employees (or customers, in Maxtor's case) and the purpose of the visit.
The representatives of the parties shall obey all pertinent rules and
regulations of the other party while of the premises of the other party,
including but not limited to those relating to safeguarding of
confidential information.
17.6 Each party agrees that it will not disclose to any third
parties any identified confidential information of the other party which
becomes known as a result of such on-site inspections or visitations and
any such confidential information shall be handled in accordance with
Section 20.
18.0 INDEMNIFICATION.
18.1 Hyundai Infringement Indemnification. If an infringement
arises
from a process or Technology that is proprietary
to Hyundai and used in the manufacture of Products or provision of
services for Maxtor, Hyundai shall defend Maxtor, its customers, and all
persons claiming under Maxtor, at Hyundai's expense against any claim or
suit for the infringement of any patent, trade secret, copyright,
trademark or any other intellectual property or proprietary right of a
third person; and Hyundai shall pay all costs, claims and other
liabilities incurred and settlements and damages finally awarded as a
result of such claim or suit against the aforesaid parties provided: (a)
Hyundai shall have the right to control the defense and settlement of
all such actions or claims; (b) Maxtor agrees to take all lawful actions
that may be reasonably requested by Hyundai in connection with such
settlement or defense at the expense of Hyundai; and (c) Maxtor promptly
notifies Hyundai in writing of such claim. If a preliminary or final
judgment shall be obtained against any of the aforesaid parties use of
the Product, materials or services to be provided by Hyundai hereunder,
or if, in Hyundai's reasonable opinion, such Product, process,
Technology, materials or services are likely to become the subject of a
claim for infringement, Hyundai shall, at its expense and option,
either: (a) substitute fully equivalent non-infringing items; (b) modify
the infringing item so that it no longer infringes but remains
functionally equivalent; or (c) obtain for Maxtor or its customers, at
Hyundai's expense, the right to continue use of such item. If none of
the foregoing is feasible, .
18.2 Maxtor Infringement Indemnification. If an infringement
arises
from a design, Process, Technology or Specifications
that are proprietary to Maxtor and provided by Maxtor to Hyundai and
used in the manufacture of the Products or provision of services for
Maxtor, Maxtor shall defend Hyundai at Maxtor's expense against any
claim or suit brought against Hyundai for the infringement of any
patent, trade secret, copyright, trademark or any other intellectual
property or proprietary right of a third person, and Maxtor shall pay
all costs, claims and other liabilities incurred and settlements and
damages finally awarded as a result of such claim or suit against
Hyundai provided: (a) Maxtor shall have the right to control the defense
and settlement of all such actions or claims; (b) Hyundai agrees to take
all lawful actions that may be reasonably requested by Maxtor in
connection with such settlement or defense at the expense of Maxtor; and
(c) Hyundai promptly notifies Maxtor in writing of such claim. If a
preliminary or final judgment shall be obtained against Hyundai's use of
the Maxtor Technology, design, Process or Specifications, which were
provided by Maxtor hereunder, Maxtor, at its expense and option, will
either : (a) substitute fully equivalent non-infringing items; (b)
modify the infringing item so that it no longer infringes but remains
functionally equivalent; or (c) obtain for Hyundai, at Maxtor's expense,
the right to continue to use such item. If none of the above is
feasible, .
18.3 Cross Indemnification. As between the parties hereto, the
above are the sole and exclusive remedies for intellectual property
infringement by a party of a third persons' intellectual property
rights. Each party will indemnify the other against and hold it
harmless from any loss, cost, liability or expense (including court
costs and reasonable fees of attorneys and other professionals) to the
extent it arises out of or in connection with, in whole or in part, any
negligence or willful act or omission of it or its employees or agents
including but not limited to any such act or omission that contributes
to: (a) any bodily injury, sickness, disease or death; (b) any injury or
destruction to tangible or intangible property of the other or any loss
of use resulting therefrom; or (c) any violation of any statute,
ordinance or regulation.
19.0 INVENTIONS.
19.1 As used herein, "Invention" shall mean any idea, design,
concept, technique, discovery, enhancement, modification, or
improvement, whether or not patentable, conceived, or reduced to
practice during the term of this Agreement by one or more employees of
Hyundai or Maxtor independently of the other (such party making such
independent Invention is herein referred to as the "Inventing Party"),
or jointly by one or more employees of Maxtor and Hyundai, or
subcontractors thereof, (such Invention is herein referred to as "Joint
Invention") in conjunction with or as a result of work done hereunder.
19.2
19.3 Inventions made by shall be
the of such Inventing Party, shall be
deemed confidential information of such Inventing Party and treated in
accordance with the terms of this Agreement, and is hereby granted
by the such party is granted
hereunder to of such Inventing Party.
19.4 Joint Inventions made by the parties to other than the
Technology of a particular party, shall be
. The parties agree that for such Joint
Inventions, may exercise of
such Joint Invention, for any lawful purpose
. The parties further agree that all expenses associated
with protecting each such Joint Invention, e.g., patent protection or
the like, shall be ; however, if one party elects
not to in such expenses, the shall
have the right to seek or maintain such protection and
shall have over the prosecution and maintenance thereof,
even though of any patent or copyright and any rights granted
or allowed thereunder shall, in all cases, .
19.5 Neither party shall be liable for any payments to employees of
the other whose services may have contributed, in any manner, to the
conception or reduction to practice of any Invention, including a Joint
Invention.
19.6 Nothing contained in this Agreement shall be deemed to grant,
either directly or by implication, estoppel or otherwise, any license on
the patents, patent applications, copyrights or proprietary information
arising out of any other inventions of either party provided, that
notwithstanding the foregoing, the parties confirm the grant of rights
made to the other party hereunder to use such party's Technology as
allowed hereunder.
19.7 For purposes of Sections 19.2 and 19.3, Technology belonging
to Hyundai and Maxtor shall have the meanings set forth in Sections 1.2
and 1.4, respectively.
20.0 CONFIDENTIAL INFORMATION.
20.1 All confidential information disclosed by either party to the
other in connection with this Agreement shall be subject to the
provisions of the Confidentiality Agreement dated effective May 1, 1993
between Maxtor and Hyundai, which is attached hereto as Schedule G.
20.2 Any and all information provided by either party to the other,
including, respectively, Maxtor Technology or Hyundai Technology, shall
be considered to be confidential information of the providing party for
purposes of this Agreement and will be subject to the confidentiality
obligations set forth in Schedule G.
21.0 ADMINISTRATIVE AND TECHNICAL COORDINATORS.
21.1 Each party will appoint an individual to serve as its
administrative coordinator. Either party may appoint a new
administrative coordinator at any time upon prior written notice to the
other party. The administrative coordinators will be responsible for
maintaining liaison between parties and monitoring production schedules.
The administrative coordinators for the parties as of the Effective Date
will be as follows:
For Maxtor:
For Hyundai:
21.2 In addition, each party will appoint a qualified individual to
serve as its technical coordinator. Either party may appoint a new
technical coordinator at any time upon prior written notice to the other
party. The technical coordinators will be authorized to:
(a) Maintain technical liaison between the parties;
(b) Submit and receive proposals of Engineering Changes, and give
responses and/or approvals thereto as specified in Section 13.0;
(c) Coordinate the warranty processes set forth in Section 15.0;
and
(d) Approve deviations from the Specifications. Any deviation
approval must be in writing between the parties and will include the
specific deviation and the length of time such deviation is valid.
The technical coordinators for the parties as of the Effective Date will
be as follows:
For Maxtor:
For Hyundai:
21.3 The administrative coordinators must be included on copy of
all correspondence between the technical coordinators.
22.0 TERM AND TERMINATION.
22.1 Term. The initial term of this Agreement shall commence on
the date of this Agreement and continue for years from the
Effective Date. Thereafter, this Agreement shall be automatically
renewed for successive periods, unless either party
gives the other party at least prior written notice of its
intent not to renew the Agreement.
22.2 Termination by Either Party for Cause.
(a) Subject to the other terms and procedures stated herein, the
Agreement may be terminated by either party if the other party (i)
breaches any material provision and does not remedy such breach as
provided below or (ii) files a petition in bankruptcy or such a petition
is filed for the party. Except for late delivery pursuant to Section
8.5, for which there is no cure, in the event of breach of a material
provision of this Agreement by a party, the non-breaching party shall
notify the other party in writing of such breach and provide a detailed
description of the breach as well as any available information
reasonably useful or necessary to enable a cure of the claimed breach.
If the breach is not corrected by the breaching party within thirty (30)
days of the date such notice is given, this Agreement may be immediately
terminated by the non-breaching party, by giving written notice of such
termination; provided, however, that such 30-day period shall be
reasonably extended if such breach requires more than thirty (30) days
to correct and the breaching party begins to cure promptly within such
period and thereafter diligently completes the correction.
(b) The obligations of the breaching party for such termination are
as follows:
(i) In the event Maxtor terminates, Hyundai shall
. Hyundai's obligations shall
also be as stated in .
(ii) In the event Hyundai terminates, Maxtor's obligations are
as .
(iii) In addition to the obligations set forth in (b)(i) and (ii)
above, the parties agree that the breaching party shall also responsible
for any damages and losses incurred by the non-breaching party.
. The parties
further agree that
shall survive termination of this Agreement. In the event
that the parties are unable to revolve such damages issues, such dispute
shall be by means of arbitration in accordance with the arbitration
provision set forth in Section 24 herein.
(iv) Notwithstanding anything to the contrary herein, the
parties agree that the total liability of a party and its affiliates to
the other party, for any causes of action, whether or not the Agreement
has been breached and/or terminated, shall not in the aggregate
(collectively for all causes of action) exceed, for Hyundai, the
, and shall not exceed for Maxtor,
the . This limitation of liability shall
not apply to damages incurred due to breach of the provisions of
Sections 4.1 (a) and (c), 4.2(a) and (b), and Section 20.
22.3 Limitation of Liability for Termination. All of the above
charges shall be invoiced within following
the termination date of this Agreement. Charges not invoiced within
shall be waived. The charges provided in this Section 22
are the complete statement of costs related to termination. EXCEPT AS
OTHERWISE SET FORTH ABOVE, ALL OTHER DIRECT, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, OR OTHER DAMAGES (INCLUDING LOSS OF PROFITS) FOR TERMINATION
ARE HEREBY WAIVED, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
23.0 LIMITATION OF LIABILITY.
EXCEPT AS OTHERWISE SET FORTH ABOVE, IN NO EVENT SHALL EITHER PARTY
BE LIABLE TO THE OTHER FOR INCIDENTAL, CONSEQUENTIAL, EXEMPLARY,
PUNITIVE OR SPECIAL DAMAGES ARISING UNDER OR IN ANY WAY RELATING TO THIS
AGREEMENT, INCLUDING ANY LOSS OF USE, LOSS OF PROFITS OR REVENUES. THE
PROVISIONS OF THIS SECTION SHALL NOT APPLY TO BREACH OF THE OBLIGATIONS
SET FORTH IN SECTIONS OR TO THE OBLIGATIONS
DESCRIBED IN SECTIONS AS SPECIFIED THEREIN.
24.0 DISPUTE RESOLUTIONS.
The parties agree that any material dispute between the parties relating
to this Agreement will be submitted to a panel of two senior executives
of Maxtor and Hyundai. Either party may initiate this proceeding by
notifying the other party pursuant to the notice provision under Section
25.15. Within five (5) days from the date of receipt of the notice, the
parties' executives shall confer (via telephone or in person) in an
effort to resolve such dispute. The decision of the executives will be
final and binding on the parties. In the event the executives are
unable to resolve such dispute within twenty (20) days after submission
to them, such dispute shall be settled by means of arbitration in
accordance with the Rules of Arbitration of the International Chamber of
Commerce. If Maxtor demands arbitration, such arbitration shall be
conducted in Seoul, Korea and if Hyundai demands arbitration, it shall
be conducted in Denver, Colorado, U.S.A.. The decision rendered by
arbitration shall be final and binding upon the parties. Nothing in
this Section shall prevent either party from providing the appropriate
notice of breach allowed under Section 22.5 prior to initiating the
proceeding set forth above. The cure period set forth in Section 22.5
shall continue to run pending resolution by the parties' executives,
unless otherwise agreed to by the parties. Each party's executives
shall be identified by notice to the other party, and may be changed at
any time thereafter also by notice to the other.
25.0 GENERAL.
25.1 Management Review. The senior management of the parties shall
meet to discuss performance under this Agreement and to
resolve any problem issues. The discussion shall include, at a minimum,
product quality, delivery of Products, production levels, ,
field performance of the Products, pricing, cost reduction and payment.
25.2 Independent Contractors. Persons furnished by each party
shall be solely the employees or agent of such party and shall be under
the sole and exclusive direction and control of such party. They shall
not be considered employees of the other party for any purpose. Each
party shall remain an independent contractor and shall be responsible
for compliance with all laws, rules and regulations involving, but not
limited to, employment of labor, hours of labor, health and safety,
working conditions and payment of wages. Each party shall also be
solely responsible for payment of taxes, including federal, state and
municipal taxes, chargeable or assessed with respect to its employees,
such as social security, unemployment, worker's compensation, liability
insurance and federal and state withholding. Each party shall indemnify
the other for any loss, damage, liability, claim, demand or penalty
including costs, expenses, and reasonable attorneys' fees assessed
against one party that may be sustained by reasons of the other party's
failure to comply with the provisions of this Section.
25.3 Trademarks. Nothing contained in this Agreement shall be
construed as conferring any license, right to use or other right with
respect to any trademark or trade name of either Party.
25.4 Force Majeure. Neither party shall be liable to the other for
any alleged loss or damages resulting from non-performance or delays of
performance hereunder caused by acts of God, natural disasters, acts of
civil or military authority, government priorities, fire, floods,
epidemics, quarantine, energy crises, labor strikes, war, riots, or any
other act or condition beyond the reasonable control of the parties.
The affected party shall notify the other party within two (2) business
days of discovery of any such event, or when such party knows or has
reasonable anticipation that such event will occur, whichever is
earlier. The parties agree to immediately meet to agree upon a mutually
acceptable plan of action to address the effects of such situation.
25.5 Compliance with Laws. Each party shall comply with all
applicable federal, state and local laws and regulations governing the
manufacture or sale of the Products or the performance of services
covered by this Agreement.
25.6 Export Controls. The export of commodities or technical data
from the United States of America and/or the re-export from foreign
countries of commodities or technical data or direct products of
technical data of United States of America origin, may be conditioned
upon the issuance of an export license by the government of the United
States of America. Each party represents that it will not export or re-
export any commodities or technical data or direct products of technical
data in furtherance of this Agreement unless and until it has complied,
in all respects with the United States of America Export Control
Regulations. Neither party makes any warranty that an export license
will be granted for such export or re-export, and neither party shall
have any liability for its inability to obtain such a license.
25.7 Publicity. Neither party shall disclose, advertise or publish
the existence or terms and conditions of this Agreement, without prior
written consent of the other party, except as may be required by law
(including SEC regulations).
25.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the ,
without reference to its conflict of laws rules.
25.9 Severability. In the event any provision of this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, provided that a provision of similar
economic effect shall be substituted for the illegal, invalid or
unenforceable provision.
25.10 Waiver or Delay. A waiver of any default hereunder or of any
terms and conditions of this Agreement shall not be deemed to be a
continuing waiver or a waiver of any other default or any other term or
condition, but shall apply solely to the instance to which such waiver
is directed.
25.11 Assignment. Except as otherwise provided herein, assignment
of this Agreement shall be prohibited without the express written
consent of the other party and any attempted assignment prohibited
hereunder shall be null and void, provided, however, that either party
may assign this Agreement to any without having to
obtain prior consent of the other party as long as such assignee agrees,
in writing, to comply with all of the terms and conditions of this
Agreement.
25.12 Paragraph Headings. The paragraph headings and captions of
this Agreement are intended for reference and for convenience only and
shall not be construed as limiting or affecting any of the contents of
this Agreement.
25.13 Additional Property. Title to all property not otherwise
specifically addressed herein owned by one party (the "Furnishing
Party") and furnished to the other party (the "Receiving Party"), shall
remain with the Furnishing Party. Any such property owned by one party
and in the Receiving Party's possession or control shall be used only in
the performance of this Agreement unless otherwise authorized in writing
by the Furnishing Party. The Receiving Party shall adequately protect
such property and shall return it to the Furnishing Party after use or
upon termination of this Agreement or upon this request.
25.14 Attorneys' Fees. In the event any action is brought with
respect to the interpretation or enforcement of this Agreement, the
prevailing party in such action shall be entitled to receive from the
losing party(s) a reasonable sum as attorneys' fees and costs of such
action.
25.15 Notice. All legal notices required or permitted hereunder
shall be in writing, and shall be addressed to the parties hereto at
their respective addresses, set forth below and shall be considered
given when (a) delivered personally, (b) sent by confirmed telex, (c)
two days after having been sent by commercial overnight courier with
written verification receipt, (d) five (5) days after having been sent,
postage prepaid, by first class or registered mail, or (e) transmitted
by confirmed telephone facsimile.
To Maxtor: With a copy to:
Maxtor Corporation Maxtor Corporation
2190 Miller Drive 2190 Miller Drive
Longmont, Colorado 80501 Longmont, Colorado 80501
Attn: Glenn H. Stevens Attn:
Vice President, General Counsel
To Hyundai: With a copy to:
Hyundai Storage Division Hyundai Storage Division
San 136-1 Ami-ri, Boobal-eub San 136-1 Ami-ri, Boobal-eub
I-chon, Kyungki-do, Korea I-chon, Kyungki-do, Korea
Attn: Attn:
25.16 Limitation of Action. No action, regardless of form, arising
out of this Agreement, may be brought by either party more than
after the cause of action has arisen, or in the case of nonpayment,
from the date the .
25.17 Order of Precedence. In the event of any inconsistency
between the terms and conditions of this Agreement, and the terms and
conditions of purchase order(s) issued pursuant to this Agreement, the
terms and conditions of this Agreement shall prevail. In the event of
any inconsistency between the Schedules to this Agreement and the terms
and conditions of this Agreement, the provisions of the Schedules will
prevail.
25.18 Joint Work Product. This Agreement is the joint work product
of representatives of Maxtor and Hyundai. For convenience it has been
drafted in final form by one of the parties. Accordingly, in the event
of ambiguities, no inferences will be drawn against either party solely
on the basis of authorship of this Agreement.
25.19 English Language. The official language of this Agreement is
English. All correspondence, communications, agreements and requests
shall be in English.
25.20 Survival of Obligations. The provisions contained in Sections
4.1(c), 4.2(b), 15, 16, 17.6, 18, 19, 20, 22.3, 22.6, 23, 25.7, 25.16
shall survive expiration or termination of this Agreement.
25.21 Entire Agreement. This Agreement with Schedules, Attachments,
other documents referred to herein, are intended as the complete, final
and exclusive statement of the terms of the agreement between the
parties and supersede any and all other agreements between them relating
to the subject matter hereof (including the Memorandum of Understanding
dated January 24, 1995 between the parties). This Agreement may not be
modified except in writing signed by both parties. This Agreement as
set forth in this writing shall not be modified or altered by any
subsequent course of performance by and between the parties. It is
agreed that the parties may from time to time make changes to certain
Schedules without executing a formal amendment to this Agreement so long
as both parties mutually agree to such changes in writing.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement on the date first above
written.
HYUNDAI ELECTRONICS
MAXTOR CORPORATION INDUSTRIES CO., LTD.
By /s/ Katherine Curtin Young By /s/ Byoung Doo, Choi
- ------------------------------ ----------------------------
Name Katherine Curtin Young Name Byoung Doo, Choi
Sr. Vice President, General Manager & Vice President
Title: Worldwide Operations Title: Storage Business Division
------------------------- --------------------------
-30-
LEASE AGREEMENT
FOR PREMISES LOCATED AT
2040 Miller Drive
Suites D, E, & F
Longmont, CO
BETWEEN
MAXTOR CORPORATION
AS TENANT
AND
PRATT MANAGEMENT COMPANY, LLC
AS LANDLORD
TABLE OF CONTENTS
LEASE
1. PREMISES LEASED; DESCRIPTION
2. PRESENT CONDITION OF PROPERTY
3. TERM
3.1 Initial Term
3.2 Option to Extend
3.3 Delivery of Possession
4. RENT
4.1 Base Rental
4.2 Escalation of Base Rental
4.3 Maintenance Expense for Grounds, Snow Removal, Exterior and HVAC
4.4 Private Security Service
4.5 Late Charges
4.6 Security Deposit
4.7 Proration of Rent for Partial Months
5. TAXES - REAL PROPERTY - PAID BY TENANT - PROTEST
6. TAXES - TENANT'S PERSONAL PROPERTY - PAID BY TENANT
7. UTILITIES - TENANT TO OBTAIN AND PAY FOR
8. HOLDING OVER
9. MODIFICATIONS OR EXTENSIONS
10. ALTERATION - CHANGES AND ADDITIONS - RESPONSIBILITY - NO HOLES IN
ROOF - NO NEW EQUIPMENT ON ROOF
11. MECHANIC'S LIENS
12. UNIFORM SIGNS; NO "FOR RENT" SIGNS
13. MAINTENANCE AND REPAIRS OF THE BUILDING; LANDLORD NOT LIABLE FOR
DAMAGE TO CONTENTS
14. CONDITION UPON SURRENDER - RETURN OF KEYS
15. CARE OF GROUNDS; STORAGE OUTSIDE THE BUILDING; NO WASTE, NO
NUISANCE; COMPLIANCE WITH LAWS; FUTURE RULES AND REGULATIONS
16. LIABILITY FOR OVERLOAD
17. NO USE OF PREMISES IN VIOLATION OF INSURANCE POLICIES
18. INSURANCE
18.1 All Risk Insurance
18.2 General Liability Insurance
18.3 Tenant Improvements
18.4 Other Insurance
18.5 Waiver of Subrogation
18.6 Other Provisions Regarding Tenant's Insurance
18.7 Changes in Standard Policies
19. FIRE REGULATIONS - TENANT RESPONSIBILITY
20. REPLACEMENT OF BUILDING - CASUALTY DAMAGE
21. ENVIRONMENTAL MATTERS
21.1 Definitions
21.1.1 Hazardous Material
21.1.2 Environmental Requirements
21.1.3 Environmental Damages
21.2 Tenant's Obligation to Indemnify, Defend and Hold Harmless
21.3 Tenant's Obligation to Remediate
21.4 Notification
21.5 Negative Covenants
21.5.1 No Hazardous Material on Premises
21.5.2 No Violations of Environmental Requirements
21.5.3 No Environmental or Other Liens
21.6 Landlord's Right to Inspect and to Audit Tenant's Records
21.7 Landlord's Right to Remediate
21.8 Landlord's Obligation to Remediate
21.9 Landlord's Obligation to Indemnify, Defend and Hold Harmless
Concerning Environmental Matters
21.10 Survival of Environmental Obligations
22. ENTRY BY LANDLORD
23. DEFAULT - REMEDIES BY LANDLORD
23.1 Default Defined
23.2 Landlord's Remedies in the Event of Default
23.3 Tenant to Surrender Peaceably
23.4 No Termination by Re-Entry
23.5 Injunction
23.6 Remedies Listed are Cumulative and Non-Exclusive
23.7 Interest on Sums Past Due
23.8 Attorneys' Fees
23.9 Time to Cure Certain Non-Monetary Defaults
23.10 Landlord Default
24. LEGAL PROCEEDINGS AGAINST TENANT BY THIRD PARTIES; TENANT TO PAY
LANDLORD'S FEES
25. INDEMNIFICATION BY TENANT AND BY LANDLORD
26. ASSIGNMENT OR SUBLETTING
27. LANDLORD'S WARRANTY OF TITLE; QUIET ENJOYMENT
28. ADDITIONAL DEVELOPMENT OF PROPERTY - RIGHTS OF LANDLORD
29. GOVERNMENTAL ACQUISITION OF THE PREMISES
30. SUBORDINATION OF THE LEASEHOLD TO MORTGAGES
31. TENANT'S GUARANTEE AND FINANCIAL STATEMENTS
32. MEMORANDUM OF LEASE - RECORDING
33. NO WAIVER OF BREACH; ACCEPTANCE OF PARTIAL PAYMENTS OF RENT
34. CONTROLLING LAW
35. INUREMENTS
36. TIME
37. ADDRESSES; EMPLOYER IDENTIFICATION NUMBERS; METHOD OF GIVING NOTICE
38. PARAGRAPH HEADINGS; GRAMMAR
39. ADDITIONAL PROVISIONS
EXHIBIT A: SITE PLAN
EXHIBIT B: TENANT FINISH
LEASE
THIS LEASE, made and entered into this 26th day of May, 1995 by and
between PRATT MANAGEMENT COMPANY, LLC, a Colorado limited liability
company, hereinafter referred to as "Landlord," and MAXTOR CORPORATION,
hereinafter referred to as "Tenant,"
W I T N E S S E T H:
In consideration of the covenants, terms, conditions, agreements, and
payments as hereinafter set forth, the parties hereto covenant and agree
as follows:
1. PREMISES LEASED; DESCRIPTION. Landlord hereby leases unto Tenant
the following described premises containing approximately 31,123 square
feet of building floor space measured to the outside of the walls,
including overhangs, canopies and loading docks, and to approximately
1/2 the thickness of common walls; commonly known as 2040 Miller Drive,
in the City of Longmont, County of Boulder, State of Colorado, a more
detailed description of which is part of Lot 7, Longs Peak Industrial
Park, Second Filing, County of Boulder, State of Colorado, a diagram of
which is attached as Exhibit B (hereinafter referred to as the
"Premises"); the leasing of which is made according to the terms of this
Agreement; together with all appurtenances thereto, and all fixtures
attached thereto, in present condition, and together with nonexclusive
reasonable access across any other land owned by Landlord as may be
required for use of the premises by Tenant, with such access to be on
such roadways, sidewalks, and other common areas of which the premises
are a part, or of any such adjacent lands owned by Landlord, as Landlord
may from time to time designate.
2. PRESENT CONDITION OF PROPERTY. Tenant has examined, and accepts
the building, improvements, and any fixtures on the premises, in present
condition, subject to the construction of Tenant Improvements as
detailed on the plans and specifications labeled Exhibit "B," attached
hereto and made a part hereof by reference. No representation,
statement, or warranty, express or implied, has been made by or on
behalf of Landlord as to the condition of the premises, or as to the use
that may be made of same. In no event shall Landlord be liable for any
defect in the premises which are discernible by Tenant's examination
thereof or for any limitation on the use of the premises. Tenant shall
not be deemed to have accepted the Tenant improvements to be constructed
by Landlord until it shall have had a reasonable opportunity to inspect
the same.
3. TERM.
3.1 Initial Term. The term of this lease shall commence at
12:00 noon on July 1st, 1995 (the "Commencement Date"), and unless
terminated as herein provided for, shall end at 12:00 noon on the 29th
day of February, 2000. The Commencement Date as set forth in this
Paragraph 3.1 shall be subject to those adjustments of the Commencement
Date, if any, set forth in Paragraph 3.3 which relate to the performance
of construction on the premises.
3.2 Option to Extend. Upon full and complete performance of all
the terms, covenants, and conditions herein contained by Tenant and
payment of all rental due under the terms hereof, Tenant shall be given
the option to renew this lease for three (3) additional terms of sixty
(60) months each. Each such option shall be exercisable only by
delivery of Tenant's signed written notice of extension to Landlord not
less than 180 days prior to the expiration of the then-existing lease
term. In the event of such exercise, this lease shall be deemed to be
extended for the additional period pursuant to all the terms and
conditions set forth herein, including (but not as a limitation) those
provisions for increase of the base rental set forth in Paragraph 4.2.2.
In the event of exercise of said Option, any funds held by Landlord
pursuant hereto shall continue to be so held subject to the terms and
conditions relating to same.
3.3 Delivery of Possession. Tenant shall be entitled to
possession of the premises at noon on the Commencement Date, as defined
in Paragraph 3.1. Tenant may, with approval by Landlord in its sole
discretion, have access to the premises during tenant improvement
construction for the purpose of moving in Tenant-owned furniture,
fixtures, equipment and inventory. This access and the items so moved
in shall not in any way impede the construction of the tenant
improvements, nor shall Landlord, its agent, employees, sub-contractors,
or any other person on the premises whether invited or not invited, be
liable for the protection, care or security of Tenant owned items. This
paragraph shall not be construed so as to permit Tenant to occupy the
premises prior to the satisfaction of all requirements for Tenant's
insurance set forth below.
4. RENT. Tenant shall pay to Landlord, at the address of Landlord
as herein set forth, the following as rental for the premises:
4.1 Base Rental.
The base rental for the full term hereof shall be One million
eighty-nine thousand three hundred five and 28/100THS U.S. Dollars
($1,089,305.28), payable in monthly installments of Nineteen thousand
four hundred fifty-one and 88/100THS U.S. Dollars ($19,451.88) in
advance on the first day of each month during the term hereof.
4.2 Escalation of Base Rental.
4.2.1 On the first anniversary of the commencement date of this
lease, and annually thereafter, the base rental payable by Tenant shall
be increased to an amount determined by multiplying the basic monthly
rental by a fraction, the denominator of which shall be the most recent
Consumer Price Index figure, as hereinafter defined, published prior to
the Commencement Date, and the numerator of which shall be the most
recent Consumer Price Index figure published prior to the particular
anniversary date; provided, however, that in no event shall the rent for
any month after such anniversary be less than the rent for the month
immediately preceding such anniversary. As used herein, the term
"Consumer Price Index" shall mean the Consumer Price Index, All Urban
Consumers, All Items, Denver, Colorado (1982-84 = 100), or the successor
of that Index, as published by the Bureau of Labor Statistics, U.S.
Department of Labor. Should Landlord lack sufficient data to make the
proper determination on the date of any adjustment, Tenant shall
continue to pay the monthly rent payable immediately prior to the
adjustment date. As soon as Landlord obtains the necessary data,
Landlord shall determine the rent payable from and after such adjustment
date and shall notify Tenant of the adjustment in writing. Should the
monthly rent for the period following the adjustment date exceed the
amount previously paid by Tenant for that period, Tenant shall forthwith
pay the difference to Landlord. Should the Consumer Price Index as
above described cease to be published, a reasonably comparable successor
index shall be selected by Landlord. If Tenant objects to the successor
index, the dispute will be resolved and a successor index designated by
arbitration pursuant to the rules and procedures of the American
Arbitration Association.
4.2.2 Notwithstanding the foregoing, the parties agree that the
increase in base rental for each year shall be not less than two and one-
half percent (2.5%) nor more than seven percent (7%) of the base rental
for the previous year, each year for such purposes to commence on the
anniversary of the Commencement Date.
4.2.3 Landlord may in its sole discretion, waive the escalation
provided for in Paragraph 4.2.1 or Paragraph 4.2.2 for any particular
year, years, or part of a year. No such waiver shall preclude Landlord
from applying the escalation to any subsequent year or part of a year,
and from making the subsequent application as if all subsequent
escalations had been duly made to the maximum permissible extent.
4.3 Maintenance Expense for Grounds, Snow Removal, Exterior and
HVAC. Tenant shall pay the cost of having Landlord maintain the HVAC
systems and the exterior of the premises including parking lots, green
areas, sidewalks, entrances, and corridors (but not the exterior
surfaces of the building, other than glass). Cost of maintaining such
areas shall include, but shall not be limited to, repairs, preventative
maintenance, HVAC filters and compressors, sealing, striping, lawn
mowing, snow removal (Tenant is responsible for snow removal of less
than 2"), gardening, shrub care and replacements, lawn watering, parking
area maintenance, electricity for lighting, sign maintenance,
depreciation of equipment used for the foregoing purposes and other
costs related to the premises or common areas. Landlord shall perform
such maintenance and charge the cost thereof to Tenant, which shall be
paid as additional rent within 10 days after delivery of Landlord's
invoice. Landlord shall keep reasonable records of such cost, which
shall be available for Tenant's inspection during normal business hours.
Certain items of such maintenance (such as landscape maintenance and
snow removal) are performed by Landlord on numerous areas owned and/or
maintained by Landlord, in addition to the premises, and the cost
thereof cannot be precisely ascribed to the premises. As to such
services which are performed on areas in addition to the premises, the
cost for all areas so serviced shall be allocated to the premises in
proportion to the square feet of building floor space in the premises
compared to the square feet of building floor space in the entire area
to which such services are provided.
For the first year of the lease, Landlord agrees that the total of
the maintenance fees referred to in this paragraph will not exceed $.80
per square foot annually.
4.4 Private Security Service. Landlord may engage a private
security service, as an independent contractor, to patrol an area which
includes the premises. Tenant shall be included in the selection
process. If Landlord does so employ a private security service, which
the tenant has approved, the cost thereof shall be treated in the same
manner as Maintenance Expense and paid by Tenant as Additional Rent
under the same provisions as are applicable to Maintenance Expense.
Tenant shall have no obligation to participate under this Section 4.4,
if Tenant's portion of the cost of such services is more than the amount
that Tenant has been paying for such service.
Landlord shall have absolutely no obligation to engage a private
security service and shall not be liable for any damages or loss which
might have been averted had a private security service been engaged. If
Landlord does engage a private security service, Landlord shall not be
liable for any damages or loss which may result from actions, inactions,
non-performance or quality of performance by the security service. If
the Tenant desires a higher level of security services than Landlord
provides, or wishes to obtain an agreement that there will be liability
for actions, inactions, non-performance or quality of performance by a
security service, Tenant may itself engage such security service as
Tenant chooses, at Tenant's sole expense.
Nothing herein shall limit any action by Tenant against any person or
entity providing private security service, provided that Landlord shall
not be party to, or liable for any judgment entered in such an action,
as a defendant, cross defendant, third-party .defendant, or otherwise.
4.5 Late Charges. Tenant will pay a late charge equal to five
percent of any monthly rental payment or other payment not paid when
due, which payment shall be in addition to any interest elsewhere
provided for.
4.6 Security Deposit. Landlord acknowledges receipt of the sum
of Nineteen thousand four hundred fifty-one and 88/100THS U.S. Dollars
($19,451.88) paid by Tenant upon the execution hereof or a letter of
credit for the same amount, to be retained by Landlord as security for
the performance of all of the terms and conditions of this lease
Agreement to be performed by Tenant, including payment of all rental due
under the terms hereof. Landlord shall not owe Tenant any interest on
the deposit. At Landlord's election, deductions may be made by Landlord
from the amount so retained for the reasonable cost of repairs to the
premises which should have been performed by Tenant, for any rental
payment or other sum delinquent under the terms hereof, and for any sum
used by Landlord in any manner to cure any default in the performance of
Tenant under the terms of this lease. In the event deductions are so
made during the rental term, upon notice by Landlord, Tenant shall
redeposit such amounts so expended so as to maintain the security
deposit in the amount as herein provided for, within 10 days after
receipt of such written demand from Landlord. Nothing herein contained
shall limit the liability of Tenant as to any repairs or maintenance of
the premises; and nothing herein shall limit the obligation of Tenant
promptly to pay all sums otherwise due under this lease and to comply
with all the terms and conditions hereof. The security deposit, less
any sums withheld by Landlord pursuant to the terms hereof, shall be
repaid to Tenant within sixty days after the date of termination of the
lease.
4.7 Proration of Rent for Partial Months. If the lease term
begins on other than the first day of a month, base rent and additional
rent from such date until the first day of the next succeeding calendar
month shall be prorated on the basis of the actual number of days in
such calendar month and shall be payable in advance. If the lease term
terminates on other than the last day of the calendar month, rent from
the first day of such calendar month until such termination date shall
be prorated on the basis of the actual number of days in such month, and
shall be payable in advance.
5. TAXES - REAL PROPERTY - PAID BY TENANT - PROTEST. Tenant shall
pay as additional rent, all real estate taxes and assessments, as
shall, from and after the date hereof, be assessed upon the premises and
any appurtenances or improvements thereto. Tenant shall pay one-twelfth
(1/12) of such estimated additional rent, in advance, with each monthly
rental payment. Landlord shall reasonably estimate such taxes and
advise Tenant in writing of the amount to be paid each month. Such
payments shall be separately accounted for by Landlord, (and may be
deposited with any holder of a mortgage or deed of trust on the
premises) and shall be used to make prompt payment of such taxes as they
come due. If the estimated payments made by Tenant are not sufficient
to fully pay such taxes as they come due, Tenant shall pay to Landlord
any amount necessary to make up the deficiency within ten (10) days of
notice from Landlord. Landlord shall have no obligation to pay any
interest to Tenant on such additional rent, but Landlord shall give
Tenant an annual accounting showing credit for such payments made by
Tenant, and debits for payments made by Landlord or Landlord's lender.
If Tenant fails to make any required payment to Landlord, Landlord may,
but shall not be required to, pay any such tax and shall become entitled
to repayment from Tenant without demand, together with interest thereon
as elsewhere provided. The real estate taxes and assessments for the
year in which the term of this lease shall begin, as well as for the
year in which the lease shall end, shall be apportioned so that Tenant
shall pay only the portions that correspond with the portions of such
years as are within such lease term. In the event that the premises are
assessed for tax purposes as a part of a larger parcel, the tax on the
entire parcel shall be prorated in proportion to the number of square
feet of building floor space on each portion of the entire parcel.
Upon written request from Tenant, Landlord shall protest the tax
assessment on the premises, to the extent that Landlord, in good faith,
believes that such protest is justifiable and likely to be successful.
In the event of any such protest Tenant shall nevertheless pay to
Landlord the taxes as assessed, and Tenant shall be entitled to the
appropriate share of any refund. Tenant shall not protest any real
property tax assessment on the premises.
6. TAXES - TENANT'S PERSONAL PROPERTY - PAID BY TENANT. Tenant
shall be responsible for and timely pay any and all personal property
taxes assessed against any furniture, fixtures, equipment and items of a
similar nature installed and/or located in or about the premises by
Tenant.
7. UTILITIES - TENANT TO OBTAIN AND PAY FOR. Landlord shall not be
required to furnish to Tenant any utility services of any kind, such as
but not limited to, water, hot water, heat, gas, electricity, light,
telephone, cable TV and power. Tenant shall obtain and pay all charges
for gas, electricity, light, heat, power, water (and lawn watering), and
telephone, cable TV or other communication services or other utilities
used, rendered, or supplied, upon or in connection with the premises.
Tenant irrevocably appoints Landlord as Tenant's attorney-in-fact solely
for the purpose of terminating Tenant's account with any provider of
such utilities, if the premises are abandoned by Tenant or if the lease
is terminated.
8. HOLDING OVER. If, after expiration of the term of this lease,
Tenant shall remain in possession of the premises and continue to pay
rent without a written agreement as to such possession, then Tenant
shall be deemed a month-to-month Tenant and the rental rate during such
holdover tenancy shall be equivalent to one hundred fifteen percent
(115%) the monthly rental paid for the last month of tenancy under this
lease. Such month-to-month tenancy may be terminated by the Landlord at
noon on any day which is more than twenty-nine (29) days after date of
delivery of Landlord's written notice of termination to Tenant.
9. MODIFICATIONS OR EXTENSIONS. No holding over by Tenant shall
operate to renew or extend this lease without the written consent of
Landlord. No modification of this lease shall be binding unless
endorsed hereon or otherwise written and signed by the respective
parties.
10. ALTERATION - CHANGES AND ADDITIONS - RESPONSIBILITY - NO HOLES
IN ROOF - NO NEW EQUIPMENT ON ROOF. Tenant may, during the term of this
lease, at Tenant's expense, erect inside partitions, add to existing
electric power service, add telephone outlets or other communication
services, add light fixtures, install additional heating and/or air
conditioning or make such other changes or alterations as Tenant may
desire, provided that prior to commencement of any such work, Tenant
shall submit to Landlord a set of fully detailed working drawings and
specifications for the proposed alteration, prepared by a licensed
architect or engineer. If Tenant so requests, Landlord will have the
drawings and specifications prepared for Tenant, at Tenant's expense,
utilizing Landlord's in-house staff. Tenant will pay Landlord's
customary hourly charges for such services, as additional rent, to be
paid within 10 days after delivery of invoice. In particular, but not
as a limitation, the working drawings must fully detail changes to
mechanical, wiring and electrical, lighting, plumbing and HVAC systems
to Landlord's satisfaction. Landlord may refuse to consent to the
alterations because of the inadequacy of the drawings and
specifications. Tenant may not commence the alterations until
Landlord's written consent has been given. At the termination of this
lease, Tenant shall be responsible for all expenses necessary to return
the telecommunication and data transmission equipment, facilities, lines
and outlets on the premises to their condition before such additions or
alterations were made. If the drawings and specifications are adequate,
to Landlord's sole satisfaction, then Landlord will not unreasonably
withhold its consent to the alterations, except that Landlord may
withhold its consent to new or altered openings (holes) in the roof, or
placement of additional equipment on the roof, as follows. Landlord may
withhold its consent to new openings in the roof or placement of
additional equipment on the roof unless Landlord, in its sole
discretion, is satisfied that the risk of increased leakage or risk of
more frequent repairs or maintenance of the roof is acceptable to
Landlord. Any new or altered opening in the roof, or placement of
additional equipment thereon, shall be considered an alteration which
requires the prior written consent of Landlord. If within thirty (30)
days after such plans and specifications are submitted by Tenant to
Landlord for such approval, Landlord shall have not given Tenant notice
of disapproval, stating the reason for such disapproval, such plans and
specifications shall be considered approved by Landlord. As a condition
of approval for such alternations, Landlord shall have the right to
require Tenant to furnish adequate bond or other security acceptable to
Landlord for performance of and payment for the work to be performed.
At the end of this lease, all such fixtures, equipment, additions and/or
alterations (except trade fixtures installed by Tenant) shall be and
remain the property of Landlord, provided, however, Landlord shall have
the option to require Tenant to remove any or all such fixtures,
equipment, additions, and/or alterations and restore the premises to the
condition existing immediately prior to such change and/or installation,
normal wear and tear excepted, all at Tenant's cost and expense. All
work done by Tenant shall conform to appropriate city, county and state
building codes and health standards and OSHA standards and Tenant shall
be responsible for obtaining and paying for building permits.
If any such work done by Tenant causes damage to the structural
portion, exterior finish or roof of the premises, then the costs of
repair of such damage, and of all further maintenance and repairs to
such structural portion, exterior finish or roof during the term of the
lease shall thereafter be the responsibility of Tenant.
Neither Landlord's right of entry, nor any actual inspection by
Landlord, nor Landlord's actual knowledge of any alteration accomplished
or in progress shall constitute a waiver of Landlord's rights concerning
alterations by Tenant.
11. MECHANIC'S LIENS. Tenant shall pay all costs for construction
done by it or caused to be done by it on the premises as permitted by
this lease. Tenant shall keep the building, other improvements and land
of which the premises are a part free and clear of all mechanic's liens
resulting from construction by or for Tenant. Tenant shall have the
right to contest the correctness or validity of any such lien if,
immediately on demand by Landlord, Tenant deposits with Landlord and/or
any appropriate court or title insurance company a bond or sum of money
sufficient to allow issuance of title insurance against the lien and/or
to comply with the statutory requirements for discharge of the lien
found in 38-22-130 and 131, Colorado Revised Statutes, or any
successor statutory provision. Landlord shall have the right to require
Tenant's contractor(s), subcontractors and materialmen to furnish to
both Tenant and Landlord adequate lien waivers on work or materials paid
for, in connection with all periodic or final payments, by endorsement
on checks, making of joint checks, or otherwise, and Landlord shall have
the right to review invoices prior to payment. Landlord reserves the
right to post notices on the premises that Landlord is not responsible
for payment of work performed and that Landlord's interest is not
subject to any lien.
12. UNIFORM SIGNS; NO "FOR RENT" SIGNS. It is Landlord's intent to
maintain uniformity of signs throughout the area where signs may be
controlled by Landlord. Tenant shall place no signs on the premises
(except inside Tenant's portion of the building on the premises) without
prior written consent of Landlord, which consent shall not be
unreasonably withheld.
Tenant may not put any signs on the premises indicating that the same
are for rent, or available for assignment or sublease, and may put no
signs of real estate brokers on the premises.
13. MAINTENANCE AND REPAIRS OF THE BUILDING; LANDLORD NOT LIABLE FOR
DAMAGE TO CONTENTS. Landlord shall be responsible for maintenance and
repairs of the structural portions, the roof and the exterior finish of
the building (other than glass) on the premises at the sole cost and
expense of Landlord; provided, however, that if any such maintenance or
repairs are necessitated by the acts of Tenant or its employees, agents,
contractors, sub-contractors, licensees, invitees or guests, Tenant
shall reimburse Landlord for the cost of same, as additional rent, to be
paid within 10 days after delivery of invoice. All other maintenance,
repairs and replacements shall be performed by Tenant, at its own
expense, including all necessary maintenance, repairs and replacements
to pipes, plumbing systems, electrical systems, window or other glass,
doors, fixtures, interior decorations, and all other appliances and
appurtenances. Such repairs and replacements, interior and exterior,
ordinary as well as extraordinary, shall be made promptly, as and when
necessary, so that the premises are maintained in first class condition.
All such maintenance, repairs and replacements shall be in quality and
class at least equal to the original work. On default of Tenant in
making such maintenance, repairs or replacements, Landlord may, but
shall not be required to, make such repairs and replacements for
Tenant's account, and the expense shall constitute and be collectable as
additional rent, together with interest thereon as hereinafter provided.
Notwithstanding the Landlord's obligations elsewhere set forth in
this lease, under no circumstances shall Landlord be liable for damage
to the contents of the building or consequential damages to Tenant
resulting from roof or window leaks or failure, or leakage of any water
pipe or gas pipe, failure of any communications system or alarm, failure
or leakage or discharge by any sprinkler system or other fire
suppression system, power surges, power shortages or outage, sewer
failure or sewage backup, or failure or malfunction of any heating or
cooling system. The term "contents" shall include, but shall not be
limited to, improvements made by Tenant, and data bases and other
information stored or contained in computers, hard or floppy disks,
tapes, computer chips and other memory or storage devices. The term
"consequential damages" shall include, but not be limited to, Tenant's
inability to perform any contract on which Tenant is bound, loss of
sales, loss of profit, or loss of business reputation or goodwill.
14. CONDITION UPON SURRENDER - RETURN OF KEYS. Tenant shall vacate
the premises in the same condition as when received on the date hereof,
ordinary wear and tear excepted, and shall remove all of Tenant's
property, so that Landlord can repossess the premises not later than
noon on the day upon which this lease or any extension hereof ends,
whether upon notice, holdover or otherwise. The Landlord shall have the
same rights to enforce this covenant by ejectment and for damages or
otherwise as for the breach of any other conditions or covenant of this
lease. Upon termination of the lease, Tenant shall deliver to Landlord
keys which operate all locks on the exterior or interior of the
premises, including, without limitation, keys to locks on cupboards and
closets. Tenant shall retrieve all keys to the premises which Tenant
has delivered to employees or others, and include same with the keys
delivered to Landlord.
15. CARE OF GROUNDS; STORAGE OUTSIDE THE BUILDING; NO WASTE; NO
NUISANCE; COMPLIANCE WITH LAWS; FUTURE RULES AND REGULATIONS. Tenant
shall use the premises for office, research and development, light
manufacturing and other uses appurtenant thereto, and occupancy is
limited to 175 employees. Except as otherwise provided herein, Tenant
will maintain the grounds which are part of the premises, keeping them
free from accumulation of trash or debris and will be responsible for
snow removal up to two inches of snow. Tenant shall conform to all
present and future laws and ordinances of any governmental authority
having jurisdiction over the premises, and will make no use in violation
of same. No outside storage shall be allowed unless first approved by
Landlord in writing and then only in such areas as are designated as
storage areas by Landlord. Tenant shall not commit or suffer any waste
on the premises. Tenant shall not permit any nuisance to be maintained
on the premises nor permit any disorderly conduct, noise or other
activity having a tendency to annoy or to disturb occupants of any other
part of the property of which the premises are a part and/or of any
adjoining property.
As part of a common scheme for orderly development, use and
protection, of its various properties and those properties adjacent to
the premises, Landlord may impose upon Tenant reasonable rules and
regulations concerning parking and vehicle traffic; locations at which
deliveries are to be made and access thereto; trash disposal; use of
common areas such as recreation areas, corridors, and sidewalks; signs
and directories; use of communication wires or cables which are used in
common but which may be inadequate fully to serve all the demands placed
upon them; provided that such rules and regulations shall be uniform in
their application and shall not violate the express terms of this lease
elsewhere set forth.
16. LIABILITY FOR OVERLOAD. Tenant shall be liable for the cost of
any damage to the premises or the building or the sidewalks and
pavements adjoining the same which results from the movement of heavy
articles or heavy vehicles or utility cuts made by or on behalf of
Tenant. Tenant shall not overload the floors or any other part of the
premises.
17. NO USE OF PREMISES IN VIOLATION OF INSURANCE POLICIES. Tenant
shall make no use of the premises which would void or make voidable any
insurance upon the premises.
18. INSURANCE.
18.1 All Risk Insurance. Tenant shall keep the building and
improvements insured throughout the term of this lease against losses
covered by an "All Risk" policy, as defined in the insurance industry,
which shall also cover 1) loss of rental and 2) deposit of Hazardous
Materials on the premises by those acts of third parties which
constitute vandalism. The deductible amount shall not exceed $50,000.
18.2 General Liability Insurance. Tenant agrees to carry
comprehensive general liability insurance in the minimum total amount of
ONE MILLION Dollars ($1,000,000.00 ) for each occurrence of bodily
injury and ONE MILLION Dollars ($1,000,000.00) for each occurrence of
property damage. Tenant shall supply to Landlord certificates of
insurance as provided in Paragraph 18.6. In the event Tenant fails to
secure such insurance or to give evidence to Landlord of such insurance
by depositing with Landlord certificates as provided below, Landlord may
purchase such insurance in Tenant's name and charge Tenant the premiums
therefor. Bills for the premiums therefor shall be deemed and paid as
additional rent due within 10 days after delivery of invoice. The
Landlord shall be an additional named insured on the policy.
18.3 Tenant Improvements. Tenant agrees to carry insurance
covering all of Tenant's leasehold improvements, alterations, additions
or improvements, trade fixtures, merchandise and personal property from
time to time in, on or upon the premises, in an amount not less than one
hundred percent (100%) of the full replacement cost of such items from
time to time during the term of this lease, providing protection against
any peril included within an "All-Risk" policy, with a deductible amount
not to exceed $10,000. Any policy proceeds shall be used for the repair
or replacement of the property damaged or destroyed unless this lease
shall cease and terminate due to destruction of the premises as provided
below.
18.4 Other Insurance. Tenant agrees to carry insurance against
such other hazards and in such amounts as the holder of any mortgage or
deed of trust to which the lease is subordinate may require from time to
time.
18.5 Waiver of Subrogation. Landlord and Tenant grant to each
other on behalf of any insurer providing fire and extended insurance
coverage to either of them covering the premises, improvements thereon,
and contents thereof, a waiver of any right of subrogation or recovery
of any payments of loss under such insurance, such waiver to be
effective so long as each is empowered to grant such waiver under the
terms of its insurance policy, and to give all necessary notice of such
waiver to its insurance carriers.
18.6 Other Provisions Regarding Tenant's Insurance. All
insurance required of Tenant in this lease shall be effected under
enforceable policies issued by insurers of recognized good financial
condition licensed to do business in this State. At least fifteen (15)
days prior to the expiration date of any such policy, a certificate
evidencing a new or renewal policy shall be delivered by Tenant to
Landlord. Within fifteen (15) days after the premium on any policy
shall become due and payable, Landlord shall be furnished with
satisfactory evidence of its payment. To the extent obtainable, all
policies shall contain an agreement that notwithstanding any act or
negligence of Tenant which might otherwise result in forfeiture of such
insurance, such policies shall not be canceled except upon ten (10) days
prior written notice to Landlord, and that the coverage afforded thereby
shall not be affected by the performance of any work in or about the
premises.
If Tenant provides any insurance required of Tenant by this lease in
the form of a blanket policy, Tenant shall furnish satisfactory proof
that such blanket policy complies in all respects with the provisions of
this lease, and that the coverage thereunder is at least equal to the
coverage which would be provided under a separate policy covering only
the premises.
18.7 Changes in Standard Policies. If the definition of
insurance industry policy language relating to "All-Risk" insurance or
other term changes, the insurance requirements hereunder shall be
modified to conform to the existing insurance industry language;
however, the dollar amount of the coverages required under this lease
shall not be less than those existing at the time of the effective
beginning date of this lease.
19. FIRE REGULATIONS - TENANT RESPONSIBILITY. It shall be Tenant's
sole and exclusive responsibility to meet all fire regulations of any
governmental unit having jurisdiction over the premises to the extent
such regulations affect Tenant's operations, at Tenant's sole expense.
20. REPLACEMENT OF BUILDING - CASUALTY DAMAGE. If the premises are
damaged or destroyed by fire or other cause at any time after the date
of commencement of this lease, Landlord shall proceed with due diligence
to repair or restore the same to the same condition as existed before
such damage or destruction, and as soon as possible thereafter but in no
event more than 180 days from the date of damage or destruction will
give possession to the Tenant of the premises without diminution or
change of location. If Landlord does not complete all repairs and
restoration within 180 days, Tenant may at its reasonable discretion
terminate the lease. Provided, however, that in case of total
destruction of the premises by fire, or in case the premises are so
badly damaged that, in the opinion of the Landlord, it is not feasible
to repair or rebuild the same, then, either Tenant or Landlord shall
have the right to terminate this lease instead of rebuilding the
improvements; provided, however, that the terminating party shall give
the other party written notice of its intention to terminate, said
notice to be served not later than thirty (30) days after the occurrence
of the damage to the property. In the event the premises are rendered
temporarily untenantable because of fire or other casualty, base monthly
rent shall abate on the untenantable area until the premises are
restored to their former condition, abatement to be based on the square
feet of building floor space in the untenantable area compared to the
total square feet of building floor space on the premises. Provided,
however, that to the extent the damage or destruction results from the
negligence or other action of Tenant or its employees, agents,
contractors, subcontractors, invitees, guests or licensees, Tenant shall
pay for the restoration or repair, to the extent the cost of same is not
covered by insurance.
21. ENVIRONMENTAL MATTERS.
21.1 Definitions.
21.1.1 Hazardous Material. Hazardous Material means any
substance:
(a) the presence of which requires investigation, notice or
remediation under any federal, state or local statute, regulation,
ordinance, order, action, policy or common law; or
(b) which is or becomes defined as a "hazardous material,"
"hazardous waste," "hazardous substance," "regulated substance,"
"pollutant" or "contaminant" under any federal, state or local statute,
regulation, rule or ordinance or amendments thereto including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. 9601 et seq.), Toxic Substances Control Act
(15 U.S.C. _ 2601 et seq.), the Colorado Underground Storage Tank Act
(Colo. Rev. Stat. 25-18-101 et seq.), and/or the Resource Conservation
and Recovery Act (42 U.S.C. _ 6901 et seq.); or
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic, or otherwise hazardous
and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, the State of Colorado or any political subdivision thereof; or
(d) the presence of which on the premises causes or threatens
to cause a nuisance upon the premises or to adjacent properties or poses
or threatens to pose a hazard to the health or safety of persons on or
about the premises; or
(e) which contains gasoline, diesel fuel or other petroleum
hydrocarbons; or
(f) which contains polychlorinated biphenyls (PCBs), asbestos
or urea formaldehyde foam insulation; or
(g) radon gas.
21.1.2 Environmental Requirements. Environmental
Requirements means all applicable present and future statutes,
regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises, and similar
items, of all governmental agencies, departments, commissions, boards,
bureaus, or instrumentalities of the United States, states and political
subdivisions thereof and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to the protection of
human health or the environment, including, without limitation:
(a) All requirements, including but not limited to those
pertaining to reporting, licensing, permitting, investigation, and
remediation of emissions, discharges, releases, or threatened releases
of Hazardous Materials, chemical substances, pollutants, contaminants,
or hazardous or toxic substances, materials or wastes whether solid,
liquid, or gaseous in nature, into the air, surface water, groundwater,
or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of chemical
substances, pollutants, contaminants, or hazardous or toxic substances,
materials, or wastes, whether solid, liquid, or gaseous in nature; and
(b) All requirements pertaining to the protection of the
health and safety of employees or the public.
21.1.3 Environmental Damages. Environmental Damages means
all claims, judgments, damages, losses, penalties, fines, liabilities
(including strict liability), encumbrances, liens, costs, and expenses
of investigation and defense of any claim, whether or not such claim is
ultimately defeated, and of any good faith settlement or judgment, of
whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation reasonable
attorneys' fees and disbursements and consultants' and witnesses' fees,
any of which are incurred at any time as a result of the existence of
Hazardous Material upon, about, beneath the premises or migrating or
threatening to migrate to or from the premises, or the existence of a
violation of Environmental Requirements pertaining to the premises,
including without limitation:
(a) Damages for personal injury, or injury to property or
natural resources occurring upon or off of the premises, foreseeable or
unforeseeable, including, without limitation, lost profits,
consequential damages, the cost of demolition and rebuilding of any
improvements on real property, interest and penalties including but not
limited to claims brought by or on behalf of employees of Tenant;
(b) Fees incurred for the services of attorneys, consultants,
contractors, experts, laboratories and all other costs incurred in
connection with the investigation or remediation of such Hazardous
Materials or violation of Environmental Requirements including, but
not limited to, the preparation of any feasibility studies or reports or
the performance of any cleanup, remediation, removal, response,
abatement, containment, closure, restoration or monitoring work required
by any federal, state or local governmental agency or political
subdivision or court, or reasonably necessary to make full economic use
of the premises and any other property in a manner consistent with its
current use or otherwise expended in connection with such conditions,
and including without limitation any attorneys' fees, costs and expenses
incurred in enforcing this agreement or collecting any sums due
hereunder;
(c) Liability to any third person or governmental agency to
indemnify such person or agency for costs expended in connection with
the items referenced herein; and
(d) Diminution in the value of the premises and adjoining
property, and damages for the loss of business and restriction on the
use of or adverse impact on the marketing of rentable or usable space or
of any amenity of the premises and adjoining property.
21.2 Tenant's Obligation to Indemnify, Defend and Hold Harmless.
Tenant, its successors, assigns and guarantors, agree to indemnify,
defend, reimburse and hold harmless the following persons from and
against any and all Environmental Damages arising from activities of
Tenant or its employees, agents, contractors, subcontractors, or guests,
licensees, or invitees which (1) result in the presence of Hazardous
Materials upon, about or beneath the premises or migrating to or from
the premises, or (2) result in the violation of any Environmental
Requirements pertaining to the premises and the activities thereon:
21.2.1 Landlord;
21.2.2 any other person who acquires an interest in the
premises in any manner, including but not limited to purchase at a
foreclosure sale or otherwise; and
21.2.3 the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees,
affiliates, lessees, mortgagees, trustees, heirs, devisees, successors,
assigns, guests and invitees of such persons.
This obligation shall include, but not be limited to, the burden and
expense of the indemnified parties in defending all claims, suits and
administrative proceedings, including attorneys' fees and expert witness
and consulting fees, even if such claims, suits or proceedings are
groundless, false or fraudulent, and conducting all negotiations of any
description, and paying and discharging, when and as the same become
due, any and all judgments, penalties or other sums due against such
indemnified persons, and all such expenses incurred in enforcing the
obligation to indemnify. Tenant, at its sole expense, may employ
additional counsel of its choice to associate with counsel representing
the indemnified parties.
21.3 Tenant's Obligation to Remediate. Notwithstanding the
obligation of Tenant to indemnify Landlord pursuant to this agreement,
Tenant shall, upon demand of Landlord, and at its sole cost and expense,
promptly take all actions to remediate the premises which are reasonably
necessary to mitigate Environmental Damages or to allow full economic
use of the premises, or are required by Environmental Requirements,
which remediation is necessitated by the 1) introduction of a Hazardous
Material upon, about or beneath the premises or 2) a violation of
Environmental Requirements, either of which is caused by the actions of
Tenant, its employees, agents, contractors, subcontractors, guests,
invitees or licensees. Such actions shall include, but not be limited
to, the investigation of the environmental condition of the premises,
the preparation of any feasibility studies, reports or remedial plans,
and the performance of any cleanup, remediation, containment, operation,
maintenance, monitoring or restoration work, whether on or off of the
premises. Tenant shall take all actions necessary to restore the
premises to the condition existing prior to the introduction of
Hazardous Material upon, about or beneath the premises, notwithstanding
any lesser standard of remediation allowable under applicable law or
governmental policies. All such work shall be performed by one or more
contractors, selected by Tenant and approved in advance and in writing
by Landlord. Tenant shall proceed continuously and diligently with such
investigatory and remedial actions, provided that in all cases such
actions shall be in accordance with all applicable requirements of
governmental entities. Any such actions shall be performed in a good,
safe and workmanlike manner and shall minimize any impact on the
business conducted at the premises. Tenant shall pay all costs in
connection with such investigatory and remedial activities, including
but not limited to all power and utility costs, and any and all taxes or
fees that may be applicable to such activities. Tenant shall promptly
provide to Landlord copies of testing results and reports that are
generated in connection with the above activities, and copies of any
correspondence with any governmental entity related to such activities.
Promptly upon completion of such investigation and remediation, Tenant
shall permanently seal or cap all monitoring wells and test holes to
industrial standards in compliance with applicable federal, state and
local laws and regulations, remove all associated equipment, and restore
the premises to the maximum extent possible, which shall include,
without limitation, the repair of any surface damage, including paving,
caused by such investigation or remediation hereunder. Provided,
however, that Tenant shall not be obligated to remediate environmental
damages which result from seepage of Hazardous Materials onto the
premises from adjacent property unless the presence on the adjacent
property was caused by Tenant or its employees, agents, contractors,
subcontractors, guests, invitees or licensees.
21.4 Notification. If Tenant shall become aware of or receive
notice or other communication concerning any actual, alleged, suspected
or threatened violation of Environmental Requirements, or liability of
Tenant for Environmental Damages in connection with the premises or past
or present activities of any person thereon, or that any representation
set forth in this agreement is not or is no longer accurate, including
but not limited to notice or other communication concerning any actual
or threatened investigation, inquiry, lawsuit, claim, citation,
directive, summons, proceeding, complaint, notice, order, writ, or
injunction, relating to same, then Tenant shall deliver to Landlord,
within ten days of the receipt of such notice or communication by
Landlord, a written description of said violation, liability, correcting
information, or actual or threatened event or condition, together with
copies of any such notice or communication. Receipt of such notice
shall not be deemed to create any obligation on the part of Landlord to
defend or otherwise respond to any such notification or communication.
21.5 Negative Covenants.
21.5.1 No Hazardous Material on Premises. Except in strict
compliance with all Environmental Requirements, Tenant shall not cause,
permit or suffer any Hazardous Material to be brought upon, treated,
kept, stored, disposed of, discharged, released, produced, manufactured,
generated, refined or used upon, about or beneath the premises by
Tenant, its agents, employees, contractors, subcontractors, guests,
licensees or invitees, or any other person. Tenant shall deliver to
Landlord copies of all documents which Tenant provides to any
governmental body in connection with compliance with Environmental
Requirements with respect to the premises, such delivery to be
contemporaneous with provision of the documents to the governmental
agency.
21.5.2 No Violations of Environmental Requirements. Tenant
shall not cause, permit or suffer the existence or the commission by
Tenant, its agents, employees, contractors, subcontractors or guests,
licensees or invitees, or by any other person of a violation of any
Environmental Requirements upon, about or beneath the premises or any
portion thereof.
21.5.3 No Environmental or Other Liens. Tenant shall not
create or suffer or permit to exist with respect to the premises, any
lien, security interest or other charge or encumbrance of any kind,
including without limitation, any lien imposed pursuant to section
107(f) of the Superfund Amendments and Reauthorization Act of 1986 (42
U.S.C. section 9607(1) or any similar state statute to the extent that
such lien arises out of the actions of Tenant, its agents, employees,
contractors, subcontractors or guests, licensees or invitees.
21.6 Landlord's Right to Inspect and to Audit Tenant's Records.
Landlord shall have the right in its sole and absolute discretion, but
not the duty, to enter and conduct an inspection of the premises and to
inspect and audit Tenant's records concerning Hazardous Materials at any
reasonable time to determine whether Tenant is complying with the terms
of the lease, including but not limited to the compliance of the
premises and the activities thereon with Environmental Requirements and
the existence of Environmental Damages as a result of the condition of
the premises or surrounding properties and activities thereon. If
Landlord has reasonable cause to believe Tenant is in default with
respect to any of the provisions of this lease related to Hazardous
Materials, Environmental Requirements or Environmental Damages, then
Landlord shall have the right, but not the duty, to retain at the sole
expense of Tenant an independent professional consultant to enter the
premises to conduct such an inspection and to inspect and audit any
records or reports prepared by or for Tenant concerning such compliance.
Tenant hereby grants to Landlord the right to enter the premises and to
perform such tests on the premises as are reasonably necessary in the
opinion of Landlord to assist in such audits and investigations.
Landlord shall use reasonable efforts to minimize interference with the
business of Tenant by such tests inspections and audits, but Landlord
shall not be liable for any interference caused thereby.
21.7 Landlord's Right to Remediate. Should Tenant fail to
perform or observe any of its obligations or agreements pertaining to
Hazardous Materials or Environmental Requirements, then Landlord shall
have the right, but not the duty, without limitation upon any of the
rights of Landlord pursuant to this agreement, to enter the premises
personally or through its agents, consultants or contractors and perform
the same. Tenant agrees to indemnify Landlord for the costs thereof and
liabilities therefrom as set forth in Paragraph 21.2.
21.8 Landlord's Obligation to Remediate. Landlord agrees to
remediate all Environmental Damages 1) caused by Landlord, its agents,
employees, contractors, subcontractors, guests, licensees or invitees,
or 2) not so caused but arising prior to Commencement Date hereof and
not caused by Tenant, its agents, employees, contractors,
subcontractors, guests, licensees or invitees.
21.9 Landlord's Obligation to Indemnify, Defend and Hold
Harmless Concerning Environmental Matters. Landlord, its successors,
assigns and guarantors, agree to indemnify, defend, reimburse and hold
harmless the following persons from and against any and all
Environmental Damages arising from activities of Landlord or its
employees, agents, contractors, subcontractors or guests, licensees,
invitees; or which occurred prior to the Commencement Date (and were not
caused by Tenant, its agents, employees, contractors, subcontractors,
guests, licensees or invitees) which (1) result in the presence of
Hazardous Materials upon, about or beneath the premises or migrating to
or from the premises, or (2) result in the violation of any
Environmental Requirements pertaining to the premises and the activities
thereon:
21.9.1 Tenant;
21.9.2 the directors, officers, shareholders, employees,
partners, agents, contractors, subcontractors, experts, licensees,
affiliates, lessees, mortgagees, trustees, heirs, devisees, successors,
assigns and invitees of Tenant.
This obligation shall include, but not be limited to, the burden and
expense of the indemnified parties in defending all claims, suits and
administrative proceedings, including attorneys' fees and expert witness
and consulting fees, even if such claims, suits or proceedings are
groundless, false or fraudulent, and conducting all negotiations of any
description, and paying and discharging, when and as the same become
due, any and all judgments, penalties or other sums due against such
indemnified persons, and all such expenses incurred in enforcing the
obligation to indemnify. Landlord, at its sole expense, may employ
additional counsel of its choice to associate with counsel representing
Tenant.
21.10 Survival of Environmental Obligations. The obligations of
Landlord and Tenant as set forth in Paragraph 21 and all of its
subparagraphs shall survive termination of this lease.
22. ENTRY BY LANDLORD. Landlord, or its authorized representative,
and/or any lender or prospective lender, shall have the right to enter
the premises during the lease term at all reasonable times during usual
business hours for purposes of inspection, and/or the performance of any
maintenance, repairs or replacement therein. Landlord shall give Tenant
such advance notice of entry as is reasonable in light of the purpose
for the entry. Landlord shall have the right to enter the premises and
show the same to a prospective tenant during the last 180 days of this
lease or any extended term, unless the term shall have been extended by
mutual written agreement or delivery of notice of exercise of any option
to extend. In all circumstances, Landlord shall use its best efforts to
conduct its business while in Tenant premises as not to interfere with
Tenant's operations or use of the premises.
23. DEFAULT - REMEDIES OF LANDLORD.
23.1 Default Defined. Any one or more of the following events
(each of which is herein sometimes called "event of default") shall
constitute a default:
23.1.1 Tenant defaults in the due and punctual payment of any
rent, taxes, tax deposits, insurance premiums, maintenance fees or other
sums required to be paid by Tenant under this lease when and as the same
shall become due and payable;
23.1.2 Tenant abandons the premises;
23.1.3 Tenant defaults in the performance of or compliance with
any of the covenants, agreements, terms and conditions contained in this
lease other than those referred to in the foregoing Paragraph 23.1.1,
and such default shall continue for a period of 30 days after written
notice thereof from Landlord to Tenant, and shall not be cured as
permitted by Paragraph 23.9;
23.1.4 Tenant files a voluntary petition in bankruptcy or is
adjudicated a bankrupt or insolvent, or takes the benefit of any
relevant legislation that may be in force for bankrupt or insolvent
debtors or files any petition or answer seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
similar relief for itself under any present or future federal, state or
other statute, law or regulation, or proceedings are taken by Tenant
under any relevant Bankruptcy Act in force in any jurisdiction available
to Tenant, or Tenant seeks or consents to or acquiesces in the
appointment of any trustee, receiver or liquidator of Tenant or of all
or any substantial part of its properties or of the premises, or makes
any general assignment for the benefit of creditors;
23.1.5 A petition is filed against Tenant seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal, state
or other statute, law or regulation, and shall remain undismissed for an
aggregate of 120 days, or if any trustee, receiver or liquidator of
Tenant or of all or any substantial part of its properties or of the
premises is appointed without the consent or acquiescence of Tenant and
such appointment remains unvacated for an aggregate of 120 days.
23.2 Landlord's Remedies in the Event of Default. In the event
of any event of default, Landlord shall have the option, without further
notice to Tenant or further demand for performance exercise any one or
more of the following remedies (and any other remedy available at law or
in equity):
23.2.1 If Tenant has been late in payment of rent or other
sums due on four or more occasions during any period of one year,
Landlord, without terminating this lease, may 1) require that all future
payments be made by bank cashier's check, and/or 2) require an
additional security deposit in the amount of the then-current base rent
for two months, and/or 3) require that rent for each month be paid on or
before the 15th day of the preceding month. Such requirement shall be
imposed by Landlord's written notice delivered to Tenant. The
additional security deposit shall be paid within 10 days after delivery
of the notice. The Landlord may or may not exercise the remedies
provided in this Paragraph 23.2.1, in its sole discretion. The exercise
of the remedies provided in this Paragraph 23.2.1 shall not be required
prior to the exercise of any other available remedy.
23.2.2 To institute suit against Tenant to collect each
installment of rent or other sum as it becomes due or to enforce any
other obligation under this lease even though the premises be left
vacant subject to Landlord's obligation to mitigate damages.
23.2.3 As a matter of right, to procure the appointment of a
receiver for the premises by any court of competent jurisdiction upon ex
parte application. All rents, issues and profits, income and revenue
from the premises shall be applied by such receiver to the payment of
the rent, together with any other obligations of the Tenant under this
lease.
23.2.4 To re-enter and take possession of the premises and
all personal property therein and to remove Tenant and Tenant's agents
and employees therefrom, and either:
1) terminate this lease and sue Tenant for damages for
breach of the obligations of Tenant to Landlord under this lease; or
2) without terminating this lease, relet, assign or sublet
the premises and personal property, as the agent and for the account of
Tenant in the name of Landlord or otherwise, upon the terms and
conditions Landlord deems fit with the new Tenant for such period (which
may be greater or less than the period which would otherwise have
constituted the balance of the term of this lease) as Landlord may deem
best, and collect any rent due upon any such reletting providing that if
the new lease term shall be greater than Tenant's original term, Tenant
shall be released from any and all further obligation upon the
expiration of Tenant's original term save for amounts accrued upon the
expiration of Tenant's original term. In this event, the rents received
on any such reletting shall be applied first to the expenses of
reletting and collecting, including, without limitation, all
repossession costs, reasonable attorneys' fees, and real estate brokers'
commissions, alteration costs and expenses of preparing said premises
for reletting, and thereafter toward payment of the rental and of any
other amounts payable by Tenant to Landlord. If the sum realized shall
not be sufficient to pay the rent and other charges due from Tenant,
then within five days after demand, Tenant will pay to Landlord any
deficiency as it accrues. Landlord may sue therefor as each deficiency
shall arise if Tenant shall fail to pay such deficiency within the time
limited.
23.3 Tenant to Surrender Peaceably. In the event Landlord
elects to re-enter or take possession of the premises, Tenant shall quit
and peaceably surrender the premises to Landlord, and Landlord may enter
upon and re-enter the premises and possess and repossess itself thereof,
by force, summary proceedings, ejectment or otherwise, and may
dispossess and remove Tenant and may have, hold and enjoy the premises
and the right to receive all rental income of and from the same.
23.4 No Termination by Re-Entry. No re-entry or taking of
possession by Landlord shall be construed as an election on Landlord's
part to terminate or accept surrender of this lease unless Landlord's
written notice of such intention is delivered to Tenant.
23.5 Injunction. In the event of any breach by Tenant of any of
the agreements, terms, conditions or covenants contained in this lease,
Landlord, in addition to any and all other rights, shall be entitled to
enjoin such breach and shall have the right to invoke any right and
remedy allowed at law or in equity or by statute or otherwise for such
breach as though re-entry, summary proceedings, and other remedies were
not provided for in this lease.
23.6 Remedies Listed are Cumulative and Non-Exclusive. The
enumeration of the foregoing remedies does not exclude any other
remedy, but all remedies are cumulative and shall be in addition to
every other remedy now or hereafter existing at law or in equity,
including, but not limited to, the remedies provided in Paragraph 24
concerning Landlord's security interest in Tenant's personalty and
Landlord's right to remove same.
23.7 Interest on Sums Past Due. All rent and all other amounts
due from Tenant hereunder shall bear interest at the rate of twelve
(12%) percent per annum compounded quarter-annually from their
respective due dates until paid, provided that this shall in no way
limit, lessen or affect any claim for damages by Landlord for any breach
or default by Tenant.
23.8 Attorneys' Fees. Reasonable attorneys' fees, expert
witness fees, consulting fees and other expenses incurred by either
party by reason of the breach by either party in complying with any of
the agreements, terms, conditions or covenants of this lease shall
constitute additional sums to be paid to the prevailing party on
demand.
23.9 Time to Cure Certain Non-Monetary Defaults. In the event
of any default other than failure to pay a sum of money, for which
notice has been given as provided herein, which because of its nature
can be cured but not within the period of grace heretofore allowed, then
such default shall be deemed remedied, if the correction thereof shall
have been commenced within said grace period or periods and shall, when
commenced, be diligently prosecuted to completion.
23.10 Landlord Default. If Landlord is in default under any of
its obligations and the default continues for thirty (30) days after
written notice from Tenant (subject to extension pursuant to 23.9),
Tenant may pursue all remedies at law or in equity. Tenant may, but
shall not be required to, correct such default for the Landlord's
account , and the expense shall be promptly paid within ten (10) days
by Landlord; however, in no event shall Tenant have the right to rental
abatement, offset of expenses against rental, or the right to terminate
this lease, subject to Tenant's legal or equitable remedies.
Tenant may not offset any sum due or assertedly due from Landlord to
Tenant against any sum due from Tenant to Landlord.
Tenant agrees that if Tenant obtains a judgment against Landlord
arising out of Landlord's obligations under this lease, such judgment
may be satisfied only by execution and sale of Landlord's interest in
the premises leased hereby. Tenant may not seek execution against other
property of Landlord, nor pursue any judgment, execution or other remedy
against the partners or other owners of Landlord or any of their
property. Immediately upon receipt of Landlord's written request,
Tenant will release any property (other than the premises leased hereby)
from the lien of any judgment obtained by Tenant against Landlord
arising out of Landlord's obligations under this lease.
24. LEGAL PROCEEDINGS AGAINST TENANT BY THIRD PARTIES; TENANT TO PAY
LANDLORD'S FEES. In the event of any proceeding at law or in equity
wherein Landlord, without being in default as to its covenants under the
terms hereof, shall be made a party to any litigation by reason of
Tenant's interest in the premises, or, in the event Landlord shall be
required to commence any legal proceedings relating to the premises and
Tenant's occupancy thereof and Tenant's relation thereto, but only after
notice to and consent by Tenant, Landlord shall be allowed and Tenant
shall be liable for and shall pay all costs and expenses incurred by
Landlord, including reasonable attorneys' fees, expert witness fees and
consultant's fees.
25. INDEMNIFICATION BY TENANT AND BY LANDLORD. The Tenant shall
indemnify and save harmless Landlord of and from liability for damages
or claims against Landlord, including costs, attorneys' fees and
expenses of Landlord in defending against the same, on account of
injuries to any person or property, if the injuries are caused by the
negligence or willful misconduct of Tenant, its agents, servants or
employees, or of any other person entering upon the premises under
express or implied invitation of Tenant or if such injuries are the
result of the violation by Tenant, its agents, servants, or employees,
of laws, ordinances, other governmental regulations, or of the terms of
this lease.
The Landlord shall indemnify and save harmless Tenant of and from
liability for damages or claims against Tenant, including costs,
attorneys' fees and expenses of Tenant in defending against the same, on
account of injuries to any person or property, if the injuries are
caused by the negligence or willful misconduct of Landlord, its agents,
servants or employees, or of any other person entering upon the premises
under express or implied invitation of Landlord or where such injuries
are the result of the violation by Landlord, its agents, servants or
employees, of laws, ordinances, other governmental regulations, or of
the terms of this lease..
Landlord provides recreation facilities for the use of employees of
Tenant and other occupants within the property developed by Landlord,
which property presently includes LONG'S PEAK INDUSTRIAL PARK, FIRST,
SECOND and THIRD FILINGS, and portions of ST. VRAIN CENTRE, both in the
City of Longmont and County of Boulder, Colorado, and will include such
additional property in the immediate vicinity thereof as may be
developed by Landlord. The term "recreation facilities" includes, at
present, a fitness trail with 34 exercise stations, volleyball courts,
basketball courts, and a park, and will include such additional
facilities as Landlord may provide.
Tenant shall indemnify and save harmless Landlord of and from
Liability for damages or claims against Landlord, including costs,
attorneys' fees and expenses of Landlord in defending against the same,
on account of any injury to (or death of) an employee of Tenant arising
out of use of the recreation facilities, unless such death or injury is
caused by Landlord's gross negligence or willful misconduct
26. ASSIGNMENT OR SUBLETTING. Tenant shall not assign, mortgage, or
encumber this lease, nor sublet or permit the premises or any part
thereof to be used by others, without the prior written consent of
Landlord in each instance, which consent shall not be unreasonably
withheld.
In connection with an assignment, sublease or encumbrance Landlord
may require the submittal of detailed financial information about the
prospective subtenant or assignee, to be reviewed by Landlord, and may
require a guarantee of the obligations of the prospective subtenant or
assignee, and may require detailed financial information about the
guarantor, to be reviewed by Landlord; and there may be alterations to
this lease and alterations to the building which are necessary to
consummate the transaction. The Landlord may require Tenant or the
prospective assignee or sub-tenant to pay for the alterations to the
building, and may require that Landlord perform same. In addition,
Landlord may charge a fee of two percent of base rent for the first five
years of the lease, due in full upon Landlord's consent, as payment to
Landlord for such investigations, lease alterations and similar matters.
No two percent fee will be charged in connection with an assignment or
sublease to an assignee or subtenant who is "affiliated" with Tenant.
"Affiliated" means under common voting control, directly or indirectly.
A sale or transfer of control of a majority of the votes which may be
cast to elect Tenant's board of directors or other governing body shall
be deemed to be an assignment of this lease, requiring Landlord's
consent if the sale or transfer is essentially accomplished in a single
transaction.
If this lease is assigned, or if the premises or any part thereof is
sublet, or occupied by anyone other than Tenant, Landlord may, after
default by Tenant, collect rent from the assignee, sub-tenant, or
occupant and apply the net amount collected against all rent herein
reserved. No such assignment, subletting, occupancy, or collection
shall be deemed a waiver of this covenant, or the acceptance of the
assignee, sub-tenant, or occupant as tenant, or a release of Tenant from
further performance by Tenant of the covenants in this lease. The
consent by Landlord to an assignment or subletting shall not be
construed to relieve Tenant (or any subsequent tenant) from obtaining
the consent in writing of Landlord to any further assignment or
subletting. This provision shall not apply to a sale or transfer of
control to Hyundai Electronic Industries Co. Ltd. and /or any of it's
affiliates.
27. LANDLORD'S WARRANTY OF TITLE; QUIET ENJOYMENT. Landlord
covenants it has good right to lease the premises in the manner
described herein and that Tenant shall peaceably and quietly have, hold,
occupy, and enjoy the premises during the term of the lease; except as
provided in Paragraph 31 concerning subordination to mortgage lenders.
28. ADDITIONAL DEVELOPMENT OF PROPERTY - RIGHTS OF LANDLORD.
Landlord does reserve, during the term of this lease, the right to go
upon and deal with the premises or part thereof for the purpose of
implementing a common development plan for the project of which the
premises are a part, and to install non-exclusive sidewalks, paths,
roadways and other street improvements for use by vehicles, pedestrians,
and for parking; to undertake such drainage programs to handle
underground and surface drainage water and to make any other changes
and/or improvements as Landlord shall deem advisable in the exercise of
its sole discretion; provided, however, any such action by Landlord
shall not unreasonably interfere with the rights of Tenant hereunder.
29. GOVERNMENTAL ACQUISITION OF THE PREMISES. The parties agree
that Landlord shall have sole and exclusive authority to negotiate and
settle all matters pertaining to the acquisition of all or part of the
premises by a governmental agency by eminent domain or threat thereof
(condemnation), and to convey all or any part of the premises under
threat of condemnation, and the lease shall terminate as to any area so
conveyed. It is agreed that any compensation for land and/or buildings
to be taken whether resulting from negotiation and agreement or
condemnation proceedings, shall be the exclusive property of Landlord,
and that there shall be no sharing whatsoever between Landlord and
Tenant of any such sum. Such taking of property shall not be
considered as a breach of this lease by Landlord, nor give rise to any
claims in Tenant for damages or compensation from Landlord. Tenant may
separately claim and recover from the condemning authority the value of
any personal property owned by Tenant which is taken, and any relocation
expenses owed to Tenant by the condemning authority. If the taken
portion of the premises consists only of areas where no building is
constructed, and the land area of the premises is reduced by less than
ten percent, and the parking area available for use by Tenant is reduced
by less than five percent, and there is no material change in Tenant's
access to the premises, then there shall be no change in the terms of
the lease. If no building area is taken but the foregoing limits on
parking area reductions are exceeded, then Tenant may terminate the
lease unless Landlord provides sufficient reasonably adjacent parking
area so that the total available parking area is reduced by less than
five percent. If any portion of the building on the premises is taken,
then Landlord, at its election, may replace the square footage taken
with space in the same building, or may provide land and building area
essentially the same as the premises in a reasonably adjacent location,
within 10 days after the conveyance or taking, under the same terms and
conditions as contained in this lease, and this lease shall be in full
force and effect as to the new premises. If Landlord does not so
provide reasonable space, then Tenant shall have two options. First,
Tenant may terminate the lease by written notice delivered to Landlord
within 60 days after the conveyance or taking. Second, Tenant may
retain the remaining portion of the premises, under all the terms and
conditions hereof, but the base rental shall be reduced in proportion to
the number of square feet of building floor space taken compared to the
number of square feet of building floor space on the premises prior to
the taking.
30. SUBORDINATION OF THE LEASEHOLD TO MORTGAGES. This lease shall
be subject and subordinate in priority at all times to the lien of any
existing and/or hereafter executed mortgages and trust deeds encumbering
the premises. Although no instrument or act on the part of Tenant shall
be necessary to effectuate such subordination, Tenant will execute and
deliver such further instruments subordinating this lease to the lien of
any such mortgages or trust deeds as may be desired by the mortgagee or
holder of such trust deeds. Tenant hereby appoints Landlord as his
attorney in fact, irrevocably, to execute and deliver any such
instrument for Tenant. Tenant further agrees at any time and from time
to time upon not less than ten (10) days prior written request by
Landlord, to execute, acknowledge, and deliver to Landlord an estoppel
affidavit in form acceptable to Landlord and the holder of any existing
or contemplated mortgage or deed of trust encumbering the premises.
Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant (1) that this lease is in full force and effect,
without modification except as may be represented by Landlord; (2) that
there are no uncured defaults in Landlord's performance; and (3) that
not more than one (1) month's rent has been paid in advance. Further,
upon request, Tenant shall supply to Landlord a corporate resolution
certifying that the party signing this statement on behalf of Tenant is
properly authorized to do so, if Tenant is a corporation. Tenant agrees
to provide Landlord within ten business days of Landlord's request,
Tenant's most recently completed financial statements and such other
financial information as reasonably requested by Landlord in order to
verify Tenant's financial condition to satisfy requirements of
Landlord's existing or contemplated lender or mortgagee.
Tenant agrees with lender and Landlord that if there is a foreclosure
of any such mortgage or deed of trust and pursuant to such foreclosure,
the Public Trustee or other appropriate officer executes and delivers a
deed conveying the premises to the lender or its designee, or in the
event Landlord conveys the premises to the lender or its designee in
lieu of foreclosure, Tenant will attorn to such grantee of the premises,
rather than to Landlord, to perform all of Tenant's obligations under
the lease, and Tenant shall have no right to terminate the lease by
reason of the foreclosure or deed given in lieu thereof.
Landlord will include in the terms of any mortgage or deed of trust
on the premises a provision that if Tenant is not in default under the
terms of this lease and Tenant is then in possession of the premises,
Tenant's rights of quiet enjoyment arising out of the lease shall not be
affected or disturbed by lender in the event of a default by Landlord
and any sale of the premises through foreclosure of any deed of trust or
otherwise.
31. MEMORANDUM OF LEASE - RECORDING. This lease shall not be
recorded in the office of the County Clerk and Recorder of Boulder
County, except by Landlord as a financing statement. In order to effect
public recordation, the parties hereto may, at the time this lease is
executed, agree to execute a Memorandum of lease incorporating therein
by reference the terms of this lease, but deleting therefrom any
expressed statement or mention of the amount of rent herein reserved,
which instrument may be recorded by either party in the office of the
Clerk and Recorder of Boulder County.
32. NO WAIVER OF BREACH; ACCEPTANCE OF PARTIAL PAYMENTS OF RENT. No
assent, or waiver expressed or implied, or failure to enforce, as to any
breach of any one or more of the covenants or agreements herein shall be
deemed or taken to be a waiver of any succeeding or additional breach.
Payment by Tenant or receipt by Landlord of an amount less than the
rent or other payment provided for herein shall not be deemed to be
other than a payment on account of the earliest rent then due, nor shall
any endorsement or statement on any check or any letter accompanying any
check or payment of rent be deemed an accord and satisfaction, and
Landlord may accept such check or other payment without prejudice to
Landlord's right to recover the balance of all rent then due, and/or to
pursue any or all other remedies provided for in this lease, in law,
and/or in equity including, but not limited to, eviction of Tenant.
Specifically, but not as a limitation, acceptance of a partial payment
of rent shall not be a wavier of any default by Tenant.
33. CONTROLLING LAW. The lease, and all terms hereunder shall be
governed by the laws of the State of Colorado, exclusive of its
conflicts of laws rules.
34. INUREMENTS. The covenants and agreements herein contained shall
bind and inure to the benefit of Landlord and Tenant and their
respective successors. This lease shall be signed by the parties in
duplicate, each of which shall be a complete and effective original
lease.
35. TIME. Time is of the essence in this lease in each and all of
its provisions in which performance is a factor.
36. ADDRESSES; EMPLOYER IDENTIFICATION NUMBERS; METHOD OF GIVING
NOTICE. The street address of Landlord is 1960 Industrial Circle,
Longmont, CO 80501. The mailing address of Landlord is P. O. Box 1937,
Longmont, CO 80502-1937. All payments, notices and communications which
are sent to Landlord via United States mail shall be addressed to the
mailing address. Only payments, notices and communications which are
hand delivered or delivered by private courier service shall be
addressed to the street address.
Tenant's street address is 2040 Miller Drive, Suites D, E, and F,
Longmont, Colorado, 80501. Tenant's mailing address is 2190 Miller
Drive, Longmont, Colorado, 80501. Any notice to Tenant may be delivered
to the above addresses or to the premises. A copy of any notice should
be sent to Vice President and General Consul, 211 River Oaks Parkway,
San Jose, California, 95136.
Landlord's current fax number is (303)776-4946. Tenant's current fax
number is 303-678-2165. Any written notice required hereby may be
delivered by fax, U.S. mail, private courier service, or hand delivery.
Notice shall be effective at time of delivery to the address or fax
number shown.
Either party may change its street or mailing address, or fax number,
for purposes hereof, by written notice delivered to the other. The
federal employer identification number of Landlord is 84 0954 078. The
federal identification number of Tenant is 77-0123732.
38. PARAGRAPH HEADINGS; GRAMMAR. All paragraph headings are made
for the purposes of ease of location of terms and shall not affect or
vary the terms hereof. Throughout this lease, wherever the words,
"Landlord" and "Tenant" are used they shall include and imply to the
singular, plural, persons both male and female, and all sorts of
entities and in reading said lease, the necessary grammatical changes
required to make the provisions hereof mean and apply as aforesaid shall
be made in the same manner as though originally included in said lease.
39. ADDITIONAL PROVISIONS:
FLEXIBILITY CLAUSE: In the event Tenant's requirement for
space increases or decreases during the term of this lease, including
any extended term thereof, Tenant may notify Landlord of its adjusted
space requirement, in which event Landlord shall, within 120 days after
such notice, increase or decrease the square footage available to Tenant
so as to reasonably meet the Tenants new needs (as is reasonably
devisable by Landlord), either using the premises or other comparable
space of Landlord reasonably acceptable by Tenant. Tenant may not
decrease space in existing premises leased from the Landlord and lease
space in Boulder County owned by a third party, unless the Landlord
cannot accommodate the Tenant's overall space requirements. In such
event, Landlord and Tenant shall amend this lease accordingly, or enter
into a new lease upon rental rates and other terms which are similar to
those of this Lease and reasonably acceptable to both parties and
terminate this lease. Tenant may exercise the right described in this
paragraph multiple times, but not more than once in any twelve month
period. Not withstanding language to the contrary that might be found
elsewhere in this lease, the Tenant will be allowed to exercise the
right described in this paragraph without incurring of cost or other
penalties sometimes associated with early terminations, Tenant will be
expected to return the premises to Landlord pursuant to the terms and
conditions of Paragraph 14 of this Lease Agreement. This provision
shall not apply to 345 S. Francis, Longmont, Colorado.
REIMBURSEMENT OF RELOCATION COSTS. Tenant shall reimburse the
Landlord, an amount not to exceed $20,000.00, for the cost of relocating
the current tenant, Technistar Corporation, to alternative premises.
The actual cost of relocating the tenant shall be invoiced by Landlord
to Tenant and shall be paid within thirty (30) days from invoice date.
TENANT IMPROVEMENT AMORTIZATION. In the event the Tenant
elects to have the Landlord amortize the cost of the Tenant Improvements
to the Premises, the total cost of the Tenant Improvements shall not
exceed $162,500.00 which shall be fully amortized over the term of this
Lease at an annual interest rate of 14%. In the event the Tenant
elects to terminate the Lease as provided in Paragraph 39- ADDITIONAL
PROVISIONS: "Flexibility Clause" the Tenant shall pay to Landlord on
the date of termination the unamortized balance of the tenant
improvements as provided in this paragraph.
QUALITY TEST SITE The Tenant shall have the right to
construct a quality test site in the courtyard of 2040 Miller, at the
Tenant's sole cost and expense. Tenant shall submit to the Landlord
plans and specifications for review and approval prior to the
commencement of construction.
IN WITNESS WHEREOF, the Parties have executed this lease as of the
date hereof.
LANDLORD: PRATT MANAGEMENT COMPANY, LLC
By: /s/ Susan M. Pratt
-------------------------
Susan M. Pratt, Manager
TENANT: MAXTOR CORPORATION
By: /s/ Nate Kawaye
------------------------------------
Nate Kawaye, Sr. VP and CFO, Finance
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
The foregoing instrument was acknowledged before me this day of
May, 1995 by Susan Pratt,Manager, Pratt Management Company LLC.
Witness my hand and official seal.
My commission expires:
---------------------------
------------------
Notary Public
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
The foregoing instrument was acknowledged before me this day of May,
1995 by Nate Kawaye, Sr. Vice President & CFO, Finance, Maxtor
Corporation.
Witness my hand and official seal.
My commission expires:
-------------------------
------------------------
Notary Public
MAXTOR CORPORATION
EXHIBIT 11.1
COMPUTATION OF NET INCOME (LOSS) PER SHARE
For the Three Years Ended March 25, 1995
(In thousands, except per share data)
Year Ended
- -------------------------------------------------------------------------
March 25, March 26, March 27,
1995 1994 1993
- -------------------------------------------------------------------------
PRIMARY
Weighted average number of common
shares outstanding during the year 50,583 32,203 27,283
Incremental common shares attributable
to exercise of outstanding options
(assuming proceeds would be used to
purchase treasury stock) - - 4,252
--------- ---------- --------
Total shares 50,583 32,203 31,534
========= ========== ========
Net income (loss) $(82,222) $(257,589) $ 46,112
========= ========== ========
Net income (loss) per share $ (1.63) $ (8.00) $ 1.46
========= ========== ========
FULLY DILUTED
Weighted average number of common
shares outstanding during the year 50,583 32,203 27,283
Incremental common shares attributable
to exercise of outstanding options
(assuming proceeds would be used to
purchase treasury stock) - - 4,316
--------- ---------- --------
Total shares 50,583 32,203 31,599
========= ========== ========
Net income (loss) $(82,222) $(257,589) $ 46,112
========= ========== ========
Net income (loss) per share $ (1.63) $ (8.00) $ 1.46
========= ========== ========
Note: The subordinated convertible debentures have an anti-dilutive
effect on earnings per share, therefore the calculation of fully diluted
earnings per share excludes both the share equivalents and the interest
income adjustment elements.
MAXTOR CORPORATION
EXHIBIT 21.1
SUBSIDIARIES OF MAXTOR CORPORATION, INCORPORATED IN DELAWARE ("MAXTOR")
Fiscal year ended March 25, 1995:
1) Maxtor Peripherals (S) Pte Ltd. ("MPS"), incorporated in
Singapore, is a wholly-owned subsidiary of Maxtor.
2) Maxtor Ireland Limited, incorporated in Ireland, is a wholly-owned
subsidiary of MPS.
3) Maxtor (Hong Kong) Limited, incorporated in Hong Kong, is a wholly-
owned subsidiary of Maxtor.
4) Maxtor Europe Ltd., incorporated in the United Kingdom, is a
wholly-owned subsidiary of Maxtor.
5) Maxtor Europe GmbH, incorporated in Germany, is a wholly-owned
subsidiary of Maxtor.
6) Maxtor Europe Sarl, incorporated in France, is a wholly-owned
subsidiary of Maxtor.
7) Maxtor (Japan) Ltd., incorporated in Japan, is a wholly-owned
subsidiary of Maxtor.
8) Maxtor Disc Drives Pty Ltd., incorporated in Australia, is a
wholly-owned subsidiary of Maxtor.
9) Maxtor Asia Pacific Ltd., incorporated in Hong Kong, is a wholly
owned subsidiary of Maxtor and maintains a branch operation in
Taiwan.
10) Maxtor Korea Ltd., incorporated in Korea, is a wholly-owned
subsidiary of Maxtor.
11) Maxtor (Thailand) Limited, incorporated in Thailand, is a wholly-
owned subsidiary of Maxtor.
12) IMS International Manufacturing Services, Ltd. ("IMS"),
incorporated in Cayman Islands as a holding company, is a wholly-
owned subsidiary of Maxtor.
13) IMS (Thailand) Ltd., incorporated in Thailand, is a wholly-owned
subsidiary of IMS.
14) International Manufacturing Services, Inc., incorporated in
Delaware, is a wholly-owned subsidiary of Maxtor.
15) Storage Dimensions, Inc., incorporated in Delaware. Maxtor holds
a 32.8% interest in this company.
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Form S-8 Nos. 33-2206, 33-21514, 33-32190, 33-18323, 33-
18324, 33-38168, 33-38388, 33-43172, 33-44708, 33-56274, 33-56216, 33-
56206, 33-56212, 33-60462, 33-52233, 33-52237, 33-56405 and 33-56407)
pertaining to the Maxtor Corporation Fiscal 1985 Stock Option Plan and
Employee Stock Purchase Plan, the Maxtor Corporation Fiscal 1985 Stock
Option Plan, the Maxtor Corporation Employee Stock Purchase Plan, the
Maxtor Corporation Fiscal 1988 Stock Option Plan, the Maxtor
Corporation Fiscal 1986 Outside Directors Stock Option Plan, the
Maxtor Corporation Employee Stock Purchase Plan, the Maxtor
Corporation Fiscal 1988 Stock Option Plan, the Maxtor Corporation
Fiscal 1992 Stock Option Plan, the Maxtor Corporation 1991 Employee
Stock Purchase Plan, the Maxtor Corporation Fiscal 1992 Stock Option
Plan, the Maxtor Corporation 1986 Outside Directors Stock Option Plan,
the Maxtor Corporation Employee Stock Purchase Plan, the Maxtor
Corporation Immediately Exercisable Non Qualified Stock Option
Agreement, the Maxoptix Corporation 1989 Stock Option Plan, the Maxtor
Corporation 1992 Employee Stock Purchase Plan, the Maxtor Corporation
Fiscal 1992 Stock Option Plan, the Maxtor Corporation 1995 Stock
Option Plan and the Maxtor Corporation Individual Stock Option
Agreement, respectively, of our report dated April 19, 1995, with
respect to the consolidated financial statements and schedule of
Maxtor Corporation included in the Annual Report (Form 10-K) for the
year ended March 25, 1995.
/s/ Ernst & Young LLP
San Jose, California
June 21, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000711039
<NAME> MAXTOR CORPORATION
<MULTIPLIER> 1000
<CURRENCY> U. S. DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-25-1995
<PERIOD-START> MAR-27-1994
<PERIOD-END> MAR-25-1995
<EXCHANGE-RATE> 1
<CASH> 108,516 <F1>
<SECURITIES> 0
<RECEIVABLES> 115,380
<ALLOWANCES> 3,850
<INVENTORY> 89,680
<CURRENT-ASSETS> 318,421
<PP&E> 190,034
<DEPRECIATION> 133,890
<TOTAL-ASSETS> 381,847
<CURRENT-LIABILITIES> 235,977
<BONDS> 101,967
<COMMON> 517 <F2>
0
0
<OTHER-SE> 43,386 <F3>
<TOTAL-LIABILITY-AND-EQUITY> 381,847
<SALES> 906,799
<TOTAL-REVENUES> 906,799
<CGS> 850,669
<TOTAL-COSTS> 850,669
<OTHER-EXPENSES> 132,156 <F4>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,379
<INCOME-PRETAX> (80,189)
<INCOME-TAX> 2,033
<INCOME-CONTINUING> (82,222)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,222)
<EPS-PRIMARY> (1.63)
<EPS-DILUTED> (1.63)
<FN>
<F1> CASH INCLUDES CASH AND CASH EQUIVALENTS OF $96,518 AND SHORT-TERM
INVESTMENTS OF $11,998.
<F2> COMMON INCLUDES: $195 FOR $0.01 PAR VALUE CLASS A COMMON (19,480,000
SHARES ISSUED AND OUTSTANDING); $322 FOR $0.01 PAR VALUE COMMON
(32,217,287 SHARES ISSUED AND OUTSTANDING)
<F3> OTHER-SE INCLUDES ADDITIONAL PAID-IN CAPITAL OF $327,357 AND
ACCUMULATED DEFICIT OF $283,971.
<F4> OTHER-EXPENSES INCLUDE RESEARCH & DEVELOPMENT EXP OF $60,769;
SELLING, GENERAL AND ADMINISTRATIVE EXP OF $81,600 AND RETRUCTURING
AND OTHER INCOME OF $10,213.
</FN>
</TABLE>
