SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- -----
Exchange Act of 1934
For the period ended December 30, 1995.
Transition report pursuant to Section 13 or 15(d) of the
Securities
- --------
Exchange Act of 1934
For the transition period from to
----------- -----------
Commission File Number 0-14016
MAXTOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 770123732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
211 River Oaks Parkway, San Jose, CA 95134
(Address of principal executive offices) (Zip Code)
(408) 432-1700
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
X Yes No
----- -----
600 shares of Common Stock and no shares of Class A Common Stock were
issued and outstanding as of February 3, 1996.
This quarterly report on Form 10-Q contains 79 pages of which this is page
number 1.
MAXTOR CORPORATION
FORM 10-Q
December 30, 1995
INDEX
Part I. Financial Information Page
- --------------------------------- ----
Item 1. Consolidated Financial Statements
Consolidated Statements of Loss-
Three Months and Nine Months Ended
December 30, 1995 and December 24, 1994 3
Consolidated Balance Sheets-
December 30, 1995 and March 25, 1995 4 - 5
Consolidated Statements of Cash Flows-
Nine Months Ended December 30, 1995
and December 24, 1994 6 - 7
Notes to Consolidated Financial Statements 7 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 14
Part II. Other Information
- -----------------------------
Item 1. Legal Proceedings 15
Item 5. Other information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
PART I. FINANCIAL INFORMATION
----------------------------------
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF LOSS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
---------------------- ----------------------
Dec. 30, Dec. 24, Dec. 30, Dec. 24,
1995 1994 1995 1994
---------- ---------- ---------- ----------
Revenue $ 356,740 $ 238,174 $ 954,040 $ 630,852
Cost of revenue 326,000 216,846 893,392 602,196
---------- ---------- ---------- ----------
Gross margin 30,740 21,328 60,648 28,656
Operating expenses:
Research and development 24,778 15,791 69,416 44,416
Selling, general and
administrative 22,070 20,078 60,532 62,560
Other 4,529 - 4,529 -
---------- ---------- ---------- ----------
Total operating expenses 51,377 35,869 134,477 106,976
---------- ---------- ---------- ----------
Loss from operations (20,637) (14,541) (73,829) (78,320)
Interest expense (3,497) (2,083) (7,828) (6,499)
Interest income 177 789 836 3,278
---------- ---------- ---------- ----------
Loss before income taxes (23,957) (15,835) (80,821) (81,541)
Provision for income taxes 676 600 2,127 1,800
---------- ---------- ---------- ----------
Net loss $ (24,633) $ (16,435) $ (82,948) $ (83,341)
========== ========== ========== ==========
Net loss per share $ (0.46) $ (0.32) $ (1.57) $ (1.66)
========== ========== ========== ==========
Shares used in computing
net loss per share 53,110 50,668 52,687 50,283
========== ========== ========== ==========
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
Dec. 30, March 25,
1995 1995
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 41,366 $ 96,518
Short-term investments - 11,998
Accounts receivable, net of allowance for
doubtful accounts of $4,502 at December 30,
1995 and $3,850 at March 25, 1995 125,920 111,530
Inventories:
Raw materials 58,511 40,528
Work-in-process 31,370 28,398
Finished goods 41,258
20,754
---------- ----------
131,139 89,680
Prepaid expenses and other 13,147 8,695
---------- ----------
Total current assets 311,572 318,421
Property, plant and equipment, at cost:
Buildings 22,972 22,575
Machinery and equipment 178,042 146,020
Furniture and fixtures 13,432 12,177
Leasehold improvements 12,656 9,262
---------- ----------
227,102 190,034
Less accumulated depreciation and amortization (148,930) (133,890)
---------- ----------
Net property, plant and equipment 78,172 56,144
Other assets 7,508 7,282
---------- ----------
$ 397,252 $ 381,847
========== ==========
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
(Continued)
Dec. 30, March 25,
1995 1995
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Short-term borrowings $ 99,000 $ 30,000
Accounts payable 152,376 136,746
Income taxes payable 7,683 6,807
Accrued payroll and payroll-related expenses 16,658 14,802
Accrued warranty 25,695 25,058
Accrued expenses 25,942 19,607
Long-term debt and capital lease obligations
due within one year 2,491 2,957
---------- ----------
Total current liabilities 329,845 235,977
Long-term debt and capital lease obligations
due after one year 100,219 101,967
Commitments and contingencies
Stockholders' equity (deficit):
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:
December 30, 1995 - 33,748,988 shares;
March 25, 1995 - 32,217,287 shares 337 322
Additional paid-in capital 333,575 327,357
Accumulated deficit (366,919) (283,971)
---------- ----------
Total stockholders' equity (deficit) (32,812) 43,903
---------- ----------
$ 397,252 $ 381,847
========== ==========
See accompanying notes.
MAXTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
Dec. 30, Dec. 24,
1995 1994
---------- ----------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net loss $ (82,948) $ (83,341)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 31,936 28,177
Loss on disposal of property, plant and equipment 58 1,496
Change in assets and liabilities:
Accounts receivable (14,390) 15,555
Inventories (41,459) 9,996
Prepaid expenses and other (4,452) 805
Accounts payable 10,334 (27,504)
Income taxes payable 876 663
Accrued payroll and payroll-related expenses 1,856 1,462
Accrued warranty 637 (2,179)
Accrued expenses 6,335 (14,183)
---------- ----------
Total adjustments (8,269) 14,288
---------- ----------
Net cash used in operating activities (91,217) (69,053)
Cash flows from investing activities:
Purchases of short-term investments - (30,091)
Proceeds from maturity of short-term investments 11,998 57,986
Purchase of property, plant and equipment (50,332) (19,947)
Proceeds from disposal of property, plant and
equipment 158 2,653
Other 1,343 (255)
---------- ----------
Net cash provided by (used in) investing
activities (36,833) 10,346
Cash flows from financing activities:
Proceeds from issuance of short-term borrowings,
net of payments 69,000 -
Proceeds from issuance of debt - 194
Principal payments on debt (2,078) (3,298)
Principal payments under capital lease obligations (257) (380)
Proceeds from issuance of common stock, net of
notes receivable, stock repurchases and tax
benefits 6,233 4,941
---------- ----------
Net cash provided by financing activities 72,898 1,457
---------- ----------
Net change in cash and cash equivalents (55,152) (57,250)
Cash and cash equivalents at beginning of period 96,518 144,520
---------- ----------
Cash and cash equivalents at end of period $ 41,366 $ 87,270
========== ==========
See accompanying notes.
(In thousands)
(Unaudited) Nine Months Ended
- ---------------------------------------------------------------------------
Dec. 30, Dec. 24,
1995 1994
- ---------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 1,892 $ 3,614
Income taxes 1,214 611
Income tax refunds - (11)
Supplemental information on non-cash investing
and financing activities:
Capital lease obligations $ 121 $ 162
Purchase of property, plant & equipment
financed by accounts payable 5,296 -
- ---------------------------------------------------------------------------
MAXTOR CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. Consolidated financial statements
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The consolidated
financial statements include the accounts of Maxtor Corporation (Maxtor or
the Company) and its wholly-owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation. All
adjustments of a normal recurring nature which, in the opinion of
management, are necessary for a fair statement of the results for the
interim periods have been made. It is recommended that the interim
financial statements be read in conjunction with the Company's consolidated
financial statements and notes thereto for the fiscal year ended March 25,
1995. Interim results are not necessarily indicative of the operating
results expected for later quarters or the full fiscal year. Balance sheet
amounts at March 25, 1995 were derived from the audited financial
statements for the year ended March 25, 1995.
The Company maintains a 52/53-week fiscal year cycle. Fiscal year 1996
will be comprised of 53 weeks. The first quarter of fiscal year 1996 was
comprised of 14 weeks; remaining quarters will be comprised of 13 weeks.
Fiscal year 1995 was comprised of 52 weeks; all quarters were comprised of
13 weeks.
2. Short-term borrowings
On December 29, 1995, the Company obtained a $100 million secured bridge
loan from Hyundai Electronics America (HEA) for working capital purposes.
This credit facility allows for draw downs up to $100 million and has a
first priority secured interest in all accounts receivable. All
outstanding principal and accrued interest is due April 10, 1996. As of
December 30, 1995, there were no borrowings outstanding.
On August 31, 1995, the Company established a $100 million unsecured,
revolving line of credit through Citicorp Securities Inc. and syndicated
among ten banks, which is guaranteed by Hyundai Electronics Industries Co.,
Ltd. (HEI). This $100 million line of credit is a 364-day committed
facility, renewable annually up to three years, that will be used primarily
for general operating purposes. Under terms of the guarantee, HEI may
elect, at its sole discretion, to receive shares of the Company and its
subsidiaries in lieu of payment. As of December 30, 1995, $99 million of
borrowings and $1 million in letters of credit were outstanding.
During the quarter ended December 30, 1995, the Company also had a $20
million line of credit facility (the CIT line). As of December 29, 1995,
the Company terminated the CIT line.
3. Net loss per share
Net loss per share is based upon the weighted average number of shares of
all classes of common stock outstanding during the quarters ended December
30, 1995 and December 24, 1994.
4. 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 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. One customer accounted for 11.0% of revenues for the nine-month
period ended December 30, 1995. Additionally, this customer accounted for
11.3% of the outstanding accounts receivable balance at December 30, 1995.
If the customer fails to perform its obligations to the Company, such
failure would have adverse effects upon the Company's financial position,
results of operations, cash flows and liquidity. No customers accounted
for more than 10% of the revenues for the three-month and nine-month
periods ended December 24, 1994.
5. Contingencies
As part of the acquisition of the MiniScribe business in June 1990, the
Company was assigned a patent license agreement between MiniScribe and
Rodime plc (Rodime) covering patents related to 3.5-inch disk drives. The
Company believes that the assignment was valid; however, Rodime has taken
the position that the assignment was invalid and would not in any event
cover 3.5-inch drives manufactured and sold by the Company before the
acquisition of MiniScribe's assets. In February 1993, Maxtor commenced an
action for declaratory relief in the U.S. Bankruptcy Court in Denver,
Colorado seeking a judgment that the assignment was valid. Rodime filed a
denial and counterclaim for patent infringement. In April 1994, the
relevant claims of the Rodime patent at issue in Rodime's counterclaims
were declared invalid in litigation between Rodime and another disk drive
manufacturer. The Company's litigation with Rodime has been stayed pending
Rodime's appeal of the finding of invalidity.
Certain other claims, including other patent infringement claims, against
the Company have arisen in the course of its business. There is presently
no litigation involving such claims, and the Company believes the outcome
of these claims and the claim concerning Rodime described above will not
have a material adverse effect on the Company's financial position or
results of operations.
6. Subsequent event
Effective January 5, 1996, Hyundai Acquisition, Inc. (HAI) acquired by a
cash tender offer for $6.70 per share 32,044,065 shares of the Company's
common stock and on January 11, 1996, HAI was merged into the Company in a
short form merger (the merger) and the Company became a wholly owned
subsidiary of Hyundai Electronics America (HEA). Shares of common stock
outstanding immediately prior to the merger which were not owned by HEA or
its affiliates became the right to receive $6.70 in cash per share pursuant
to the merger.
The Agreement and Plan of Merger was filed as an exhibit to the Company's
Schedule 14D-9, as amended. See the Company's Schedule 14D-9 for further
information concerning the tender offer and merger.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
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. The
industry is subject to rapid technological change and short product life
cycles. The industry is intensely competitive and significant price
erosion is typical during a product life cycle. At times, the industry is
subject to excess production capacity and component cost pressures.
Specifically, with the overall growth experienced by the disk drive
industry in fiscal 1995 and 1996, shortages of certain key components for
the industry have increased. In addition to being impacted by these
industry factors, the Company has been less successful in the past several
years than its competitors in managing product transitions and has been
unable to bring certain products to market in a timely and cost effective
manner. Further, many of the Company's competitors have had broader
product lines than the Company with which to compete in this environment.
As a result of the factors discussed above and others, the Company has
incurred operating losses during each of the last twelve consecutive fiscal
quarters, including the fourth quarter of fiscal year 1995 for which the
Company reported net income of approximately $1.1 million as a result of a
non-recurring gain of approximately $10 million from the sale of the
Company's interest in Maxoptix Corporation. Primarily as a result of
continuing pricing pressures, serious shortages of certain key components,
product cost and time-to-market issues with regard to certain products, the
Company was not profitable during the first three quarters of fiscal year
1996 and the Company does not expect to be profitable during the remainder
of fiscal year 1996.
Industry Characteristics
Data storage manufacturers continually strive for larger storage
capacities, higher performance and lower cost. Short product life cycles
also increase the importance of the Company's ability to successfully
manage product transitions. The failure to adequately manage product
transitions could result in the loss of market opportunities, decreased
sales of existing products, cancellation of products or product lines, the
accumulation of obsolete and excess inventory and unanticipated charges
related to obsolete capital equipment. The Company's 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.
When competitors introduce products which offer greater capacity, better
performance, lower prices or any combination of these factors, and 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. 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. 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 first nine months of
fiscal year 1996, there can be no assurance that price erosion will not
increase substantially.
Manufacturing Characteristics
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 practical. However, the Company
believes that it will have to continue to utilize leading edge components
which may only be available from a single source. 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.
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. 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 continues to strive to improve
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.
Revenue and Gross Margin
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Three Months Ended Nine Months Ended
Dec. 30, Dec. 24, Dec. 30, Dec. 24,
(In millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------------
Revenue $ 356.7 $ 238.2 $ 954.0 $ 630.9
Gross margin $ 30.7 $ 21.3 $ 60.6 $ 28.7
As a percentage
of revenue 8.6% 8.9% 6.4% 4.5%
Net loss $ (24.6) $ (16.4) $ (82.9) $ (83.3)
As a percentage
of revenue (6.9%) (6.9%) (8.7%) (13.2%)
Net loss per share $ (0.46) $ (0.32) $ (1.57) $ (1.66)
- ---------------------------------------------------------------------------
Revenue for the Company's third quarter of fiscal year 1996 increased by
$118.5 million or 49.7% from the same quarter of the prior fiscal year,
primarily as a result of an increase in unit volumes and a shift to higher
capacity drives which have higher average unit selling prices, offset in
part by competitive pricing pressures. In the third quarter of fiscal year
1996, unit volumes increased by over one-third compared to the same quarter
in the prior year. Average unit selling prices, in terms of megabytes per
dollar, have dropped substantially between fiscal years 1995 and 1996,
particularly for drives with capacities of 850MB or less. During the third
quarter of fiscal 1995, the Company's revenues were adversely affected by
industry-wide pricing pressures, excess industry capacity and a shift in
product mix. Product demand had shifted to higher capacity 7000 Series
products, but at that time, due to the shortage of a key component from a
sole source vendor for the 7000 Series products, the Company's revenue was
negatively impacted.
Comparing the nine month period ended December 30, 1995 with the nine month
period ended December 24, 1994, revenue increased by $323.1 million or
51.2% primarily as a result of an increase in unit volumes and a shift to
higher capacity drives which have higher average unit selling prices,
offset in part by competitive pricing pressures. Revenue for the first
nine months of fiscal year 1996 also reflects a 40-week period as compared
to a 39-week period for the prior year. The first quarter in fiscal year
1996 was extended to realign fiscal year end periods for the 53-week fiscal
year 1996.
As noted earlier, the Company continues to be heavily dependent on the
availability of certain components and the success of certain products.
During fiscal year 1995 and throughout the first nine months of fiscal year
1996, the Company was on allocation for certain parts that delayed the
Company's production, resulting in lower than expected revenue. The
Company expects continued shortages of key components, primarily media,
which management believes will be likely to adversely impact revenues and
operating results in future periods. The Company's ability to obtain
higher allocation of key components is essential to the Company's success
in increasing its market share. There can be no assurance that the Company
will be successful in such efforts.
One customer accounted for 11.0% of revenues for the nine-month period
ended December 30, 1995. This percentage may fluctuate in future periods
and there can be no assurance that it will not decline significantly. No
customers accounted for more than 10% of the revenues for the three-month
and nine-month periods ended December 24, 1994.
Gross margin as a percentage of revenue remained relatively flat at 8.6%
for the third quarter of fiscal year 1996 as compared to 8.9% for the third
quarter of fiscal year 1995. For the first three quarters of fiscal year
1996, gross margin as a percentage of revenue increased to 6.4% from 4.5%
for the first three quarters of fiscal year 1995. The increase was
primarily attributed to an overall change in product mix from lower
capacity to higher capacity drives.
Although the shift of the Company's products sold was towards the higher
capacity products which generally have higher average selling prices per
unit, the increase in margins which resulted from this shift was offset by
the following: continued lower prices on products of 850MB and lower
capacities due to industry driven pricing pressures, pricing pressures on
1.0GB and 1.2GB products beginning in the latter part of the first quarter
and continuing through the third quarter of fiscal year 1996, and lower
than expected volumes during the quarter due to shortages of certain key
components. The gross margin for the third quarter of fiscal year 1995 was
affected by intense price competition, particularly among low capacity
products, and excess industry capacity, as well as cost and time-to-market
issues with regard to certain of the Company's products.
The Company will continue its efforts to reduce its average unit
manufacturing costs. However, there can be no assurance that average unit
selling prices will not decline at a more rapid rate or that the Company
will be successful in its efforts to improve gross margin. In addition,
given the cyclical nature of the disk drive industry and the Company's
dependence on the success of certain products, as discussed earlier, there
can be no assurance that the Company will be able to improve or maintain
its current gross margin.
Operating expenses
- ---------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Dec. 30, Dec. 24, Dec. 30, Dec. 24,
(In millions) 1995 1994 1994 1994
- --------------------------------------------------------------------------
Research and development $ 24.8 $ 15.8 $ 69.4 $ 44.4
As a percentage of revenue 7.0% 6.6% 7.3% 7.0%
Selling, general and
administrative $ 22.1 $ 20.1 $ 60.5 $ 62.6
As a percentage of revenue 6.2% 8.4% 6.3% 9.9%
Other $ 4.5 $ - $ 4.5 $ -
As a percentage of revenue 1.3% -% 0.5% -%
- ---------------------------------------------------------------------------
Research and development (R&D) expenses for the third quarter and first
nine months of fiscal year 1996 increased from the same periods of the
prior fiscal year primarily due to the Company's continued commitment 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. R&D spending in absolute dollars is expected to remain relatively
flat during the remainder of fiscal year 1996 and until the Company is able
to improve its margin and achieve profitability. 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.
The Company's efforts will continue into future quarters, however, there
can be no assurance that the Company will be successful in such efforts.
Selling, general and administrative (SG&A) expenses decreased as a
percentage of revenue for the third quarter and first nine months of fiscal
year 1996 compared to the same periods of the prior fiscal year primarily
due to the increase in the revenue base. SG&A spending in absolute dollars
increased for the third quarter compared to the same period of the prior
fiscal year primarily due to an increase in advertising costs. Nine month
comparisons indicate a decrease in spending resulting from the Company's
ongoing effort to control costs and expenditures. The Company's efforts
will continue into future quarters, however, there can be no assurance that
the Company will be successful in such efforts.
Other expenses increased during the third quarter and first nine months of
fiscal year 1996 compared to the same periods of the prior fiscal year due
to professional fees incurred related to the Hyundai Electronics America
(HEA) acquisition and merger. Effective January 11, 1996, HEA acquired by
a cash tender offer of $6.70 per share all of the outstanding shares of the
Company's common stock which were not owned by HEA or its affiliates and
the Company became a whole owned subsidiary of HEA.
The Agreement and Plan of Merger was filed as an exhibit to the Company's
Schedule 14D-9, as amended. See the Company's Schedule 14D-9 for further
information concerning the tender offer and merger.
Interest expense and interest income
- ---------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Dec. 30, Dec. 24, Dec. 30, Dec. 24,
(In millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------------
Interest expense $ 3.5 $ 2.1 $ 7.8 $ 6.5
Interest income $ 0.2 $ 0.8 $ 0.8 $ 3.3
- ---------------------------------------------------------------------------
Interest expense increased by 66.7% in the third quarter and by 20.0% in
the first nine months of fiscal year 1996 as compared to the same periods
of the prior fiscal year due to an increase in short-term borrowings under
the $100 million unsecured, revolving line of credit arranged by Citicorp
Securities Inc. The Company had $99 million of borrowings outstanding as
of December 30, 1995 and intends to keep approximately the same or higher
level of borrowings throughout the year. Therefore, the interest expense
may continue at the third quarter's level in future quarters depending upon
interest rate levels and the average amount of borrowings outstanding.
Interest income decreased in the third quarter of fiscal year 1996 due to
the lack of available cash for investing purposes. The Company is
maintaining liquidity of cash to meet daily operating requirements and
interest income is expected to remain low for the remainder of fiscal year
1996.
- ---------------------------------------------------------------------------
Three Months Ended Nine Months Ended
Dec. 30, Dec. 24, Dec. 30, Dec. 24,
(In millions) 1995 1994 1995 1994
- ---------------------------------------------------------------------------
Provision for income taxes $ 0.7 $ 0.6 $ 2.1 $ 1.5
- ---------------------------------------------------------------------------
The provision for income taxes consists primarily of foreign taxes. The
Company's effective tax rate for the third quarter of fiscal years 1996 and
1995 differs from the combined federal and state rates 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.
LIQUIDITY AND CAPITAL RESOURCES
- ---------------------------------------------------------------------------
Dec. 30,
(In millions) 1995
- ---------------------------------------------------------------------------
Cash, cash equivalents and short-term investments $ 41.4
Short-term borrowings $ 99.0
Net cash used in operating activities $ 91.2
Net cash used in investing activities $ 36.8
Net cash provided by financing activities $ 72.9
- --------------------------------------------------------------------------
As of December 30, 1995, the Company had cash, cash equivalents and short-
term investments of $41.4 million as compared to $108.5 million as of March
25, 1995, a decrease of $67.1 million. The decrease in the Company's cash
and cash equivalents was primarily the result of operating losses, as well
as an increase in purchases of inventory and property, plant and equipment.
Of the net cash used in operating activities during the first nine months
of fiscal year 1996, net loss less non-cash depreciation and amortization
accounted for approximately $51.0 million. An increase in inventory
accounted for a net use of cash of approximately $41.5 million. The
increase in inventory is related to raw materials purchased in anticipation
of industry-wide vendor shortages of certain key components and the product
mix of finished goods moving from lower capacity, lower cost products to
higher capacity, higher cost products.
Net cash used in investing activities during the first nine months of
fiscal year 1996 was primarily attributable to $50.3 million of capital
expenditures offset in part by $12.0 million in proceeds from short-term
investments. A majority of the capital expenditures activity related to
the acquisition of manufacturing and engineering equipment to develop new
products and expand production capacity. Depending on business conditions,
including the successful introduction of new products, the Company
currently expects to make capital expenditures of approximately $75 million
during fiscal year 1996. The Company expects to fund these capital
expenditures through bank, related party entities and equipment financing.
Net cash provided by financing activities during the first nine months of
fiscal year 1996 primarily reflects $69.0 million in proceeds from short-
term borrowings, drawn from the $100 million unsecured line of credit and
from the issuance of $6.2 million in common stock under the Company's stock
purchase and stock option plans, offset in part by cash used to reduce
outstanding debt.
On December 29, 1995, the Company obtained a $100 million secured bridge
loan from Hyundai Electronics America (HEA) for working capital purposes.
This credit facility allows for draw downs up to $100 million and has a
first priority secured interest in all accounts receivable. All
outstanding principal and accrued interest is due April 10, 1996. As of
December 30, 1995, there were no borrowings outstanding.
On August 31, 1995, the Company established a $100 million unsecured,
revolving line of credit through Citicorp Securities Inc. and syndicated
among ten banks, which is guaranteed by Hyundai Electronics Industries Co.,
Ltd. (HEI). This $100 million line of credit is a 364-day committed
facility, renewable annually up to three years, that will be used primarily
for general operating purposes. Under terms of the guarantee, HEI may
elect, at its sole discretion, to receive shares of the Company and its
subsidiaries in lieu of payment. As of December 30, 1995, $99 million of
borrowings and $1 million in letters of credit were outstanding.
During the quarter ended December 30, 1995, the Company also had a $20
million line of credit facility (the CIT line). As of December 29, 1995,
the Company terminated the CIT line.
Effective January 5, 1996, Hyundai Acquisition, Inc. (HAI) acquired by a
cash tender offer for $6.70 per share 32,044,065 shares of the Company's
common stock and on January 11, 1996, HAI was merged into the Company in a
short form merger (the merger) and the Company became a wholly owned
subsidiary of Hyundai Electronics America (HEA). Shares of common stock
outstanding immediately prior to the merger which were not owned by HEA or
its affiliates became the right to receive $6.70 in cash per share pursuant
to the merger.
The Agreement and Plan of Merger was filed as an exhibit to the Company's
Schedule 14D-9, as amended. See the Company's Schedule 14D-9 for further
information concerning the tender offer and merger.
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 and cash equivalents,
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 secured bridge loan, the
Company may not declare or pay any dividends without the prior consent of
its lender.
PART II. OTHER INFORMATION
---------------------------
Item 1. LEGAL PROCEEDINGS
As part of the acquisition of the MiniScribe business in June 1990, the
Company was assigned a patent license agreement between MiniScribe and
Rodime plc (Rodime) covering patents related to 3.5-inch disk drives. The
Company believes that the assignment was valid; however, Rodime has taken
the position that the assignment was invalid and would not in any event
cover 3.5-inch drives manufactured and sold by the Company before the
acquisition of MiniScribe's assets. In February 1993, Maxtor commenced an
action for declaratory relief in 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, on the Company's financial position or
results of operations.
Item 5. OTHER INFORMATION
Effective January 5, 1996, Hyundai Acquisition, Inc. (HAI) acquired by a
cash tender offer for $6.70 per share 32,044,065 shares of the Company's
common stock and on January 11, 1996, HAI was merged into the Company in a
short form merger (the merger) and the Company became a wholly owned
subsidiary of Hyundai Electronics America (HEA). Shares of common stock
outstanding immediately prior to the merger which were not owned by HEA or
its affiliates became the right to receive $6.70 in cash per share pursuant
to the merger.
The Agreement and Plan of Merger was filed as an exhibit to the Company's
Schedule 14D-9, as amended. See the Company's Schedule 14D-9 for further
information concerning the tender offer and merger.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
b) Reports on Form 8-K:
None
c) Exhibits:
See Index to Exhibits on pages 17 to 27 hereof.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAXTOR CORPORATION
Date: February 13, 1996 By: /s/ Nathan Kawaye
Nathan Kawaye
Vice President, Finance,
Chief Accounting Officer
INDEX TO EXHIBITS
Exhibit No. Description Sequentially
Numbered
Pages
- ---------------------------------------------------------------------------
2.1 (31) Agreement and Plan of Merger dated November 2,
1995 between Registrant, Hyundai Electronics
America and Hyundai Acquisition. Inc.
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
4.4 (32) Amendment No. 2 to Rights Agreement between Registrant
and the First National Bank of Boston, dated November 2,
1995.
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 (28) Confidential Resignation Agreement and General
Release of Claims between Registrant and Larry
J. Smart, dated Feburuary 7, 1995
10.135 (28) Lease Agreement by and between 345 Partnership
and Registrant, dated February 24, 1995
10.136 (28) Lease Agreement for Premises Located at 1900
Pike Road, Suite A, Longmont, CO, between
Registrant as Tenant and Pratt Land Limited
Liability Company as Landlord, dated
February 24, 1995
10.137 (28) Lease Agreement for Premises Located at 2040
Miller Drive, Suite A, B, & C between Registrant
as Tenant and Pratt Land Limited Liability
Company as Landlord, dated February 24, 1995
10.138 (28) Manufacturing and Purchase Agreement by and
Between Registrant and Hyundai Electronics
Industries Co., Ltd., dated April 27, 1995
(with certain information deleted and
indicated by blank spaces)
10.139 (28) Lease Agreement for Premises Located at 2040
Miller Drive, Suites D, E, & F, Longmont, CO,
between Registrant as Tenant and Pratt Management
Company, LLC as Landlord
10.140 (29) Memorandum of Understanding concerning Guarantee by
Hyundai Electronics Co., Ltd. of Credit Facility for
Registrant, dated July 17, 1995
10.141 (29) Waiver to Financing Agreement among Registrant and the
CIT Group/Business Credit, Inc., dated August 2, 1995
10.142 Credit Agreement among Registrant and The Initial
Lenders and the Issuing Bank and Citibank, N.A.,
dated August 31, 1995
10.143 The Guaranty and Recourse Agreement among Registrant
and Hyundai Electronics Industries Co., Ltd.,
dated August 31, 1995
10.144 Waiver to Financing Agreement among Registrant and
the CIT Group/Business Credit, Inc., and Assignment
Agreement among Registrant, the CIT Group/Business
Credit, Inc., and Finova Capital Corporation, dated
October 11, 1995
10.145 Amendment to the Financing Agreement among Registrant
and the CIT Group/Business Credit, Inc., dated
October 17, 1995
10.146 First Supplemental Indenture, dated January 11, 1996,
between Maxtor and State Street Bank and Trust
Company 28 - 33
10.147 Credit Agreement, dated December 29, 1995 between
Maxtor Corporation and Hyundai Electronics America 34 - 75
11.1 Computation of Net Loss Per Share 76 - 77
20.1 (25) Maxtor Corporation 1995 Stock Option Plan
20.2 (26) Maxtor Corporation Individual Stock Option
Agreement, dated November 8, 1994
20.3 (30) Maxtor Corporation 1992 Employee Stock Purchase Plan
and 1996 Outside Directors Stock Option Plan, dated
October 9, 1995
27 Financial Data Schedule 78 - 79
- ---------------------------------------------------------------------------
(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
(28) Incorporated by reference to exhibits to Annual Report on Form 10-K
effective June 23, 1995
(29) Incorporated by reference to exhibits of Form 10-Q filed August 14, 1995
(30) Incorporated by reference to exhibits to Registration Statement No. 33-
63295 effective October 10, 1995
(31) Incorporated by reference to exhibit III of schedule 14D-9 filed November
9, 1995
(32) Incorporated by reference to exhibit VI of schedule 14D-9 filed
November 9, 1995
MAXTOR CORPORATION
AND
STATE STREET BANK AND TRUST COMPANY
Trustee
---------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of January 11, 1996
Supplementing the Indenture Dated as of March 1, 1987
Between Maxtor Corporation
and
Security Pacific National Bank, as succeeded by
State Street Bank and Trust Company, Trustee
----------------------------------
5-3/4% Convertible Subordinated Debentures due 2012
FIRST SUPPLEMENTAL INDENTURE, dated as of January 11, 1996 (this
"Supplemental Indenture"), among MAXTOR CORPORATION, a Delaware corporation
(the "Company") and STATE STREET BANK AND TRUST COMPANY, a national
banking association organized and existing under the laws of the United
States of
America, as Trustee (the "Trustee") under the Indenture (as defined below).
W I T N E S S E T H:
WHEREAS, the Company has duly issued its 5-3/4% Convertible
Subordinated
Debentures due 2012 (the "Debentures") pursuant to an Indenture, dated as of
March 1,
1987, between the Company and the Trustee (the "Original Indenture," the
Original
Indenture as amended by this Supplemental Indenture is hereinafter referred
to as the
"Indenture");
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of November 2, 1995 by and among Hyundai Electronics
America
("Hyundai"), Hyundai Acquisition, Inc., a wholly-owned subsidiary of Hyundai
("Sub"),
and Maxtor, Sub will be merged with and into Maxtor which will be the
surviving
corporation and a wholly-owned subsidiary of Hyundai (the "Merger") effective
as of the
effective time of the Merger (the "Effective Time");
WHEREAS, pursuant to the Merger Agreement, as of the Effective Time,
each
issued and outstanding share of the Maxtor Common Stock will be converted
into the
right to receive a cash payment of $6.70 per share (the "Offer Price");
WHEREAS, Section 1310 of the Indenture provides that in the event of a
merger
of Maxtor with another corporation, then Maxtor or the successor corporation,
as the
case may be, shall execute with the Trustee a supplemental indenture
providing that the
Debentures are convertible only into the kind and amount of securities, cash
or other
property receivable upon such merger by a holder of a number of shares of
Common
Stock issuable upon conversion of such Debentures immediately prior to such
merger;
WHEREAS, Section 901 of the Indenture provides that Maxtor, when
authorized
by the resolutions of the Board of Directors, and the Trustee may enter into
a
supplemental indenture to make provision with respect to the conversion
rights of the
holders of Debentures pursuant to the requirements of Section 1310 without
the consent
of the holders of any of the Debentures at the time outstanding;
WHEREAS, on November 2, 1995, the Company's Board of Directors
approved
this Supplemental Indenture;
WHEREAS, all acts and things necessary to make this Supplemental
Indenture a
valid instrument legally binding on the Company for the purposes expressed
herein, in
accordance with its terms, have been done and performed;
NOW, THEREFORE, the Company covenants and agrees with the Trustee for
the equal and proportionate benefit of the respective holders from time to
time of the
Debentures, as follows:
ARTICLE I
Conversion of Debentures
Section 1.1. As of the Effective Time, in accordance with Section
1310 and
Article Eight of the Indenture, Section 1301 is hereby amended to read in its
entirety as
follows:
"Section 1301. Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provision of this
Article, at the
option of the Holder thereof, any Debenture or any portion of the
principal
amount thereof which is $1,000 or any integral multiple of $1,000 may
be
converted at the principal amount thereof, or of such portion thereof,
into a cash
payment equal to $6.70 times the number of shares of Common Stock of
the
Company (calculated as to each conversion to the nearest 1/100 of a
share) into
which such Debenture or any portion of the principal amount thereof is
convertible into, at the conversion price, determined as hereinafter
provided, in
effect at the time of conversion. Such conversion right shall expire
at the close of
business on March 1, 2012. In case a Debenture or portion thereof is
called for
redemption, such conversion right in respect of the Debenture or
portion so called
shall expire at the close of business on the business day prior to the
Redemption
Date, unless the Company defaults in making the payment due upon
redemption.
The price at which shares of Common Stock shall be delivered
upon
conversion (herein called the "conversion price") shall be initially
$40.00 per share
of Common Stock. The conversion price shall be adjusted in certain
instances as
provided in paragraphs (1), (2), (3), (4), (7) and (8) of Section
1304."
ARTICLE II
Notation on Debentures
Notwithstanding the changes and modifications contained in this
Supplemental
Indenture, the Company need not exchange outstanding Debentures for new
Debentures
modified as to reflect the substance of this Supplemental Indenture, but, in
accordance
with Section 906 of the Indenture, Debentures authenticated and delivered
after the
Effective Time shall bear a notation in form approved by the Trustee for the
purpose of
reflecting the provisions of this Supplemental Indenture.
ARTICLE III
Miscellaneous
Section 3.1. If for any reason any provision of this Supplemental
Indenture shall
be determined to be unenforceable or invalid, the remaining provisions of
this
Supplemental Indenture shall nevertheless be fully enforceable and valid as
if the
unenforceable or invalid provision had been originally deleted.
Section 3.2. This Supplemental Indenture shall be governed by the
laws of the
State of New York applicable to contracts made and wholly performed within
the State
of New York.
Section 3.3. Except as expressly amended by this Supplemental
Indenture, the
Indenture shall continue in full force and effect in accordance with its
terms.
Section 3.4 The recitals contained herein, except the Trustee's
certificates of
authentication, shall be taken as the statements of the Company and the
Trustee assumes
no responsibility for their correctness. The Trustees makes no
representations as to the
validity or sufficiency of this Supplemental Indenture.
Section 3.5. This Supplemental Indenture may be executed in any
number of
counterparts, each of which shall be an original, but such counterparts shall
together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly signed, and their respective corporate seals to be
hereunto affixed
and attested, as of the date first written above.
MAXTOR CORPORATION
[SEAL]
By:
Name:
Title:
Attest:
By:
Name:
Title:
STATE STREET BANK AND
TRUST COMPANY
[SEAL]
By:
Name:
Title:
Attest:
By:
Name:
Title:
30
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of
December 29, 1995 between Maxtor Corporation, a Delaware corporation (the
"Borrower"), and Hyundai Electronics America (the "Lender"), a California
corporation.
Capitalized terms used in this Agreement and not defined elsewhere
herein shall have the meanings set forth in Section 8.
W I T N E S S E T H :
WHEREAS, the Borrower, the Lender and Hyundai Acquisition, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Lender ("HAI"),
have entered into that certain Agreement and Plan of Merger dated November
2, 1995 (the "Merger Agreement") pursuant to which HAI offered to purchase
any and all outstanding shares of the common stock of the Borrower and to
merge with the Borrower upon the terms and conditions set forth therein;
WHEREAS, the Borrower has requested that the Lender loan funds to the
Borrower for working capital purposes; and
WHEREAS, the Lender is willing to advance the Borrower up to
$100,000,000 on a revolving basis for working capital purposes on the terms
set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Lender and the Borrower hereby agree as follows:
Section 1. The Loans
1.1 Revolving Loan Commitment.
a. The Commitment. From time to time prior to the Maturity Date,
the Lender, on a revolving basis, agrees to provide to the Borrower
advances in accordance with the terms and conditions of this Agreement (the
"Credit Facility"). The total principal amount of all advances outstanding
under this Agreement may not exceed at any one time One Hundred Million
Dollars ($100,000,000.00). Subject to the terms of this Agreement, the
Borrower may borrow, repay and reborrow amounts loaned under the Credit
Facility. The Borrower may, from time to time, deliver to the Lender in
the form of Exhibit A hereto a request for loan in an amount not less than
$1,000,000 or more than $30,000,000, in which shall be certified certain
information as required thereby ("Request Certificate"); provided, however,
if the principal amount remaining available for draw under the Credit
Facility is less than $1,000,000, then the Borrower may submit a Request
Certificate to the Lender only for the entire principal amount remaining
available for draw under the Credit Facility. At no time shall the
Borrower deliver a Request Certificate to the Lender more frequently than
once a week.
b. Funding of Loans. Within two (2) Business Days of oral notice
by the Borrower of a request for an advance and within one (1) Business Day
of receipt by the Lender of a Request Certificate relating to such advance,
the Lender shall determine in good faith the completeness and accuracy of
the information set forth therein (such determination to be conclusive) and
shall, if such determination is favorable, remit to the Borrower the amount
specified therein (such advances being herein referred to individually as a
"Loan" and collectively as "Loans").
c. The Note. The Borrower shall execute and deliver to Lender a
promissory note in the form of Exhibit B hereto (the "Note"). The Lender
is hereby authorized to reflect on the schedule to the Note each advance of
a Loan thereunder and the amounts indicated thereon shall be conclusive (in
the absence of manifest error) in determining interest and principal
balances from time to time outstanding, as provided in the Note.
d. Interest Rate. The outstanding principal balance of each Loan
shall bear interest at a fixed rate per annum equal to the sum of (i) the
three-month LIBOR rate quoted in The Wall Street Journal on the date of the
making of the Loan, plus (ii) sixty-five (65) basis points; provided,
however, at no time shall the rate of interest charged on any Loan exceed
the maximum amount permitted by any applicable usury law. All interest
hereunder shall be computed on the basis of a 360-day year. Any principal
or interest on any Loan which is not paid when due (whether as stated, by
acceleration or otherwise) shall bear interest at a rate equal to the sum
of the interest rate for such Loan (as determined above) plus two hundred
(200) basis points.
e. Principal and Interest Payments. The outstanding principal
balance and all accrued and unpaid interest under the Note shall become due
and payable on the earlier of (i) April 10, 1996, (ii) the date that is 90
days after the closing of the Merger (as that term is defined in the Merger
Agreement), (iii) the date (whichever comes first) that any Person (other
than the Lender or any of its Affiliates) shall (A) acquire ownership or
control, directly or indirectly, of more than 50% of the voting power of
the Borrower, (B) merge with or into the Borrower, or (C) have transferred
to it all or substantially all of the assets of the Borrower, or (iv) the
date of the termination of the Merger Agreement under Section 7.1(b)(i)
thereof (the earlier of all of such dates is herein called the "Maturity
Date"). Prior to the Maturity Date, the Borrower may pay all or part of
the outstanding principal balance of any Loan or Loans upon at least two
(2) Business Days' oral notice to the Lender (which notice shall be
immediately confirmed in writing) in an amount not less than $1,000,000,
together with payment of all accrued and unpaid interest on the principal
amount so prepaid. Said notice shall specify the Loan or Loans being paid
down and such notice, when given, shall be irrevocable and commit the
Borrower to pay down the Loan or Loans as set forth in such notice.
f. Prepayment; Taxes. All payments of principal and interest paid
or accrued in accordance with the provisions of this Agreement shall be
made under the Note as set forth therein. All payments in respect of this
Agreement shall be made by the Borrower to the Lender without defense,
setoff or counterclaim and free and clear of all present and future taxes,
levies, imposts, fees, duties and withholdings or other deductions
whatsoever, but excluding any taxes imposed on the net income of the Lender
(collectively, "Taxes"). If any such Tax becomes payable in respect of
this Agreement or any amendment, modification, extension or renewal hereof
or thereof, the Borrower agrees to pay the same, together with any interest
or penalties assessed thereon, plus an amount which, after provision for
such Tax, is necessary to yield and remit to the Lender payments at the
applicable rate set forth herein, and agrees to hold the Lender harmless
with respect thereto. The Borrower shall provide evidence that Taxes in
respect of which indemnification is provided under this Agreement shall
have been paid to the appropriate taxing authorities by delivery to the
Lender of the official tax receipts or notarized copies of such receipts
within 30 days after the payment of any such Tax. If the Borrower fails to
make any such payments when due, the Borrower shall indemnify the Lender
for any additions to Tax, interest or penalties that may become payable by
the Lender as a result of any such failure.
g. Use of Proceeds of Loans. The proceeds of the Loans shall be
used for working capital purposes for the Borrower and its Subsidiaries as
specified in any Request Certificate delivered in connection with each such
Loan. Without limiting the foregoing sentence in any way, the Borrower
agrees that none of the proceeds of any Loan shall be used to pay down any
Existing Debt (as defined in Section 2.12).
1.2 Security. The obligations of the Borrower to pay all sums due,
and to do all things and perform all obligations and agreements of any
nature (whether direct or contingent, liquidated or unliquidated, or
otherwise), hereunder and under each of the Loan Documents, as the same may
be amended, modified, extended or renewed from time to time (the
"Obligations"), shall be secured by a first priority security interest in
all of the accounts receivable of the Borrower, as evidenced by that
certain Security Agreement executed by Borrower and delivered to Lender in
the form of Exhibit C hereto (the "Security Agreement").
Section 2. Representations and Warranties
The Borrower hereby makes the following representations and warranties
to the Lender on the date of this Agreement, on the date of each Request
Certificate and on the date of the making of each Loan:
2.1 Legal Status. Each of the Borrower and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing
or to have such power, authority and governmental approvals would not have
a Materially Adverse Effect. The Borrower and each of its Subsidiaries is
duly qualified or licensed to do business and in good standing in all
jurisdictions in which such qualification or licensing is required or in
which the failure to so qualify or to be so licensed could have a
Materially Adverse Effect. A list of all Subsidiaries of the Borrower as
of the date hereof is set forth on Schedule 2.1.
2.2 Authorization and Validity. Each of the Loan Documents has been
duly authorized, and upon the execution and delivery thereof by the
Borrower in accordance with the provisions of this Agreement will
constitute legal, valid and binding agreements and obligations of the
Borrower enforceable in accordance with their respective terms.
2.3 Corporate Powers; No Violation. The execution, delivery and
performance by the Borrower of each of the Loan Documents and the
consummation of the transactions contemplated thereby are within the
Borrower's corporate powers and have been duly authorized by all necessary
corporate action, and do not (I) except as set forth in Schedule 2.3,
require the consent or approval of any Person, (ii) violate any provision
of any law or regulation, (iii) contravene any provision of its charter or
by-laws, or (iv) result in a breach of or constitute a default under any
contract, obligation, indenture or other instrument to which the Borrower
is a party or by which the Borrower is or may be bound. The Borrower has
not amended its Certificate of Incorporation or By-Laws since the date of
the Merger Agreement.
2.4 Litigation. To the best of the Borrower's knowledge, except as
set forth on Schedule 2.4, there are no pending or threatened actions,
claims, investigations, suits or proceedings before any governmental
authority, court or administrative agency, including, without limitation,
any Environmental Action, which may (i) have a Materially Adverse Effect,
or (ii) affect the legality, validity or enforceability of any of the Loan
Documents. Neither the Borrower nor any of its Subsidiaries is in default
with respect to any order, writ, injunction, decree or demand of any court
or other governmental or regulatory authority.
2.5 Correctness of Financial Statements. The audited Consolidated
financial statements of the Borrower dated for its fiscal year ended March
25, 1995, and the unaudited Consolidated financial statements of the
Borrower for the six months ended September 30, 1995, heretofore delivered
by the Borrower to the Lender, are complete and correct and present fairly
and accurately the financial condition of the Borrower and its
Subsidiaries, disclose all liabilities of the Borrower and its Subsidiaries
that are required to be reflected or reserved against under generally
accepted accounting principles ("GAAP"), whether liquidated or
unliquidated, fixed or contingent, and have been prepared in accordance
with GAAP consistently applied. Since September 30, 1995, there has been
no change likely to cause any Materially Adverse Effect except as disclosed
in Schedule 2.5 hereto.
2.6 Taxes. All federal, state and other tax returns of the Borrower
and its Subsidiaries required by law to be filed have been duly filed, and
all taxes and other governmental charges or levies upon Borrower, its
Subsidiaries or any of their respective properties, income, profits and
assets which are due and payable have been paid. The charges, accruals and
reserves on the books of Borrower and its Subsidiaries in respect of taxes
are adequate. The Borrower has paid all employment taxes required by law,
including without limitation, payroll taxes.
2.7 No Subordination. There is no agreement, indenture, contract or
instrument to which the Borrower is a party or by which the Borrower may be
bound that requires the subordination in right of payment of any Obligation
of the Borrower.
2.8 Permits, Franchises. Each of the Borrower and its Subsidiaries
possesses, and will hereafter possess, all permits, memberships,
franchises, contracts and licenses required to enable it to conduct the
business in which it is now engaged other than where failure to so obtain
the same is not likely to have a Materially Adverse Effect.
2.9 ERISA.
a. Compliance Each of the Borrower and its Subsidiaries is in
compliance in all material respects with all applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and no ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan covering the employees of the Borrower or
any of its Subsidiaries thereunder.
b. Funded Current Liabilities. As of the last annual actuarial
valuation date, the funded current liability percentage, as defined in
Section 302(d)(8) of ERISA, of each Plan exceeds 90% and there has been
no change likely to cause any Materially Adverse Effect in the funding
status of any such Plan since such date.
c. Withdrawal Liability. Neither Borrower nor any ERISA Affiliate
has incurred or is reasonably expected to incur any Withdrawal Liability
to any Multiemployer Plan that has had or is reasonably likely to have a
Materially Adverse Effect.
d. Reorganization or Termination. Neither Borrower nor any ERISA
Affiliate has been notified by the sponsor of a Multiemployer Plan that
such Multiemployer Plan is in reorganization or has been terminated,
within the meaning of Title IV of ERISA, and no such Multiemployer Plan
is reasonably expected to be in reorganization or to be terminated,
within the meaning of Title IV of ERISA.
e. SFAS 106. Except as set forth in the financial statements
referred to in Section 2.5 and in Section 4.3, each of the Borrower and
its Subsidiaries has no material liability with respect to "expected
post retirement benefit obligations" within the meaning of Statement of
Financial Accounting Standards No. 106.
2.10 Other Obligations. Neither the Borrower nor any of its
Subsidiaries is in default on any Debt or any other material lease,
commitment, contract, instrument or obligation.
2.11 Environmental Laws. Each of the Borrower and its Subsidiaries
is in compliance with all applicable Environmental Laws and Environmental
Permits, except where non-compliance would not have a Materially Adverse
Effect. The Borrower is not aware that it or any of its Subsidiaries is
under investigation by any local, state, federal or foreign agency designed
to enforce any Environmental Laws and Environmental Permits. Any past non-
compliance by Borrower or its Subsidiaries with such Environmental Laws and
Environmental Permits has been resolved without ongoing obligations or
costs, and no circumstances exist that could be reasonably likely to (I)
form the basis of an Environmental Action against the Borrower or any of
its Subsidiaries or any of their properties that could have a Materially
Adverse Effect, or (ii) cause any such property to be subject to any
restrictions on ownership, occupancy, use or transferability under any
Environmental Law that could have a Materially Adverse Effect.
2.12 Existing Debt. Set forth on Schedule 2.12 hereto is a complete
and correct list of all Debt of the Borrower and its Subsidiaries to any
Person which has a principal balance in excess of $100,000 or borrowing
availability in excess of $500,000 (the "Existing Debt").
2.13 Security Agreement Representations. Each of the representations
and warranties of Borrower set forth in the Security Agreement are true and
correct on the date hereof. Without limiting the foregoing in any way, (i)
there are no Liens on any Collateral (as that term is defined in the
Security Agreement) except for Permitted Liens and Liens set forth on
Schedule 2.13 hereto and (ii) to the Borrower's knowledge, there are no
Liens on any other property or assets of the Borrower or any of its
Subsidiaries except for Permitted Liens and Liens set forth on Schedule
2.13 hereto (collectively, "Existing Liens").
Section 3. Conditions Precedent
3.1 Initial Loan. The obligation of the Lender hereunder to make the
initial Loan shall be subject to the satisfaction by the Borrower of all of
the following conditions precedent on or prior to the date hereof:
a. Approval of the Lender's Counsel. All legal matters and
documentation incidental hereto shall be reasonably satisfactory to counsel
for the Lender.
b. The Note, Etc. The Lender shall have received the Note and all
of the other Loan Documents, duly and validly executed by the Borrower.
c. Consents, Etc. The Lender shall have received the consent of
all Persons that are required for the making of the Loans to the Borrower,
the incurrence of any of the Obligations by the Borrower or the incurrence
of any Liens in connection therewith, with each such consent to be in form
and substance reasonably satisfactory to the Lender.
d. Resolutions, Etc. The Lender shall have received an incumbency
certificate of persons authorized to execute the Loan Documents for the
Borrower and a copy of the resolutions authorizing, approving and ratifying
the Loan Documents and the transactions contemplated herein and therein,
duly adopted by the Board of Directors of the Borrower, together with a
certificate of the Secretary of the Borrower, dated the date of the initial
Loan, that such copy is a true and correct copy of resolutions duly adopted
at a meeting, or by the unanimous written consent, of the Board of
Directors of the Borrower and that such resolutions have not been modified,
amended, rescinded or revoked in any respect and are in full force and
effect as of the date hereof.
e. Special Committee Approval. The Lender shall have received a
written certification from the Borrower that the Loan Documents and the
transactions contemplated thereunder have been approved by the Special
Committee.
f. Legal Opinion. The Lender shall have received the legal
opinion of counsel to the Borrower, dated as of the date of the initial
Loan, and addressed to the Lender in form and substance satisfactory to the
Lender and its counsel.
g. Perfected Security Interest. The Security Agreement shall
create in favor of the Lender a valid, perfected security interest in the
property described therein or contemplated thereby, free of Liens except
for Permitted Liens and the Lender shall have received evidence of Lien
searches, through a date satisfactory to the Lender, showing no Liens
affecting the property or assets covered thereby other than Permitted
Liens.
h. Good Standing Certificates. The Borrower shall have delivered
to the Lender good standing certificates, as of a recent date satisfactory
to the Lender, from California, Colorado and Delaware.
i. No Action, Suit, Etc. Other than set forth on Schedule 2.4,
there shall exist no action, suit, investigation, litigation or proceeding
affecting either the Borrower or any of its Subsidiaries pending or
threatened before any court, governmental agency or arbitrator that (i)
could be reasonably likely to have a Materially Adverse Effect, or (ii)
purports to affect the legality, validity or enforceability of this
Agreement or any other Loan Document or the consummation of the
transactions contemplated hereby.
j. Other Matters. The Lender shall have received all other
documents, instruments, agreements, opinions, certificates, insurance
policies, consents and evidences of other legal matters, in form and
substance reasonably satisfactory to the Lender and its counsel, as the
Lender may reasonably request.
3.2 All Loans. The obligations of the Lender hereunder to make any
Loan (including the initial Loan) shall be subject to the further
satisfaction by the Borrower of all of the following conditions precedent
on or prior to the date hereof:
a. No Default. No Default or Event of Default shall have occurred
and be continuing, and the Borrower shall be in compliance with all of the
covenants contained in this Agreement.
b. Representations and Warranties True. Each of the
representations and warranties contained in the Loan Documents shall be
true on and as of the date of the making of such Loan as though such
representations and warranties had been made on and as of such date (unless
such representation and warranty specifically relates to an earlier date).
c. Certificate. The Lender shall have received a certificate
(which may, at the Borrower's option, be one of the Request Certificates)
of an officer of the Borrower, dated the date of each Loan, that (I) each
of the representations and warranties contained in the Loan Documents is
true and correct on and as of the date thereof with the same force and
effect as if made on and as of such date; (ii) all Obligations, covenants,
agreements and conditions contained in the Loan Documents, to be performed
or satisfied by the Borrower on or prior to the date thereof have been
performed or satisfied in all respects, (iii) except as set forth on
Schedule 2.5, there has been no Materially Adverse Effect since September
30, 1995; and (d) no Default or Event of Default shall have occurred and be
continuing or shall exist.
Section 4. Affirmative Covenants
The Borrower covenants that so long as any Obligations of the Borrower
to the Lender under any of the Loan Documents remain outstanding, and until
final payment or satisfaction in full of all indebtedness of the Borrower
to the Lender subject to this Agreement, the Borrower shall (and shall
cause its Subsidiaries to):
4.1 Payment of Obligations and Performance of Covenants. Make full
and timely payment of all Obligations as required under each of the Loan
Documents, at the time and place and in the manner specified therein,
including without limitation the Note, together with any fees or other
liabilities due under any of the other Loan Documents at the times and
place and in the manner specified therein.
4.2 Accounting Records. Maintain adequate books and records in
accordance with GAAP consistently applied, and from time to time as
requested by the Lender upon reasonable prior notice, permit a
representative of the Lender at any reasonable time to inspect, audit and
examine such books and records, to make copies of the same and to inspect
the properties of the Borrower.
4.3 Financial Statements and Other Information. Furnish to the
Lenders:
a. Monthly Financials. As soon as available and in any event
within 20 days after the end of each monthly fiscal period, Consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries as of
the end of such monthly fiscal period and Consolidated and consolidating
statements of income and cash flows of the Borrower and its Subsidiaries
for the period commencing at the end of the previous fiscal year and ending
with the end of such monthly fiscal period, duly certified (subject to year-
end audit adjustments) by the chief financial officer of the Borrower as
having been prepared in accordance with GAAP, provided that in the event of
any change in GAAP used in the preparation of such financial statements,
the Borrower shall also provide a statement of reconciliation conforming
such financial statements to GAAP;
b. Quarterly Financials. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period, Consolidated
and consolidating balance sheets of the Borrower and its Subsidiaries as of
the end of such quarterly fiscal period and Consolidated and consolidating
statements of income and cash flows of the Borrower and its Subsidiaries
for the period commencing at the end of the previous fiscal year and ending
with the end of such quarterly fiscal period, duly certified (subject to
year-end audit adjustments) by the chief financial officer of the Borrower
as having been prepared in accordance with GAAP, provided that in the event
of any change in GAAP used in the preparation of such financial statements,
the Borrower shall also provide a statement of reconciliation conforming
such financial statements to GAAP;
c. Annual Financials. As soon as available and in any event
within 90 days after the end of each fiscal year of the Borrower, a copy of
the annual audit report for such year for the Borrower and its
Subsidiaries, containing Consolidated and consolidating balance sheets of
the Borrower and its Subsidiaries as of the end of such fiscal year and
Consolidated and consolidating statements of income and cash flows of the
Borrower and its Subsidiaries for such fiscal year, in each case
accompanied by an opinion acceptable to the Lender by independent public
accountants reasonably acceptable to the Lender, provided that in the event
of any change in GAAP used in the preparation of such financial statements,
the Borrower shall also provide a statement of reconciliation conforming
such financial statements to GAAP;
d. Default. As soon as possible and in any event within five (5)
days after any officer of the Borrower has knowledge of the occurrence of a
Default continuing on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of such Default and
the action that the Borrower has taken and proposes to take with respect
thereto;
e. Filings, etc. Promptly after the sending or filing thereof,
copies of all reports and registration statements that the Borrower or any
of its Subsidiary files with the Securities and Exchange Commission or any
national securities exchange;
f. Proceedings. Promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental agency or
arbitrator affecting the Borrower or any of its Subsidiaries of the type
described in Section 2.4;
g. ERISA Event. (i) Promptly and in any event within 10 days
after the Borrower or any ERISA Affiliate knows or has reason to know that
any ERISA Event has occurred, a statement of the chief financial officer of
the Borrower describing such ERISA Event and the action, if any, that such
Borrower or such ERISA Affiliate has taken and proposes to take with
respect thereto, and (ii) on the date any records, documents or other
information must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA, a copy of such records, documents and
information;
h. PBGC Notices. Promptly and in any event within two Business
Days after receipt thereof by the Borrower or any ERISA Affiliate, copies
of each notice from the PBGC stating its intention to terminate any Plan or
to have a trustee appointed to administer any Plan;
i. Funded Current Liability Notices. Promptly and in any event
within 30 days after the receipt thereof by the Borrower or any ERISA
Affiliate, a copy of the annual actuarial report for each Plan the funded
current liability percentage (as defined in Section 302(d)(8) of ERISA) of
which is less than 90% or the unfunded current liability or which exceeds
$1,000,000;
j. Multiemployer Plan Notices. Promptly and in any event within
five Business Days after receipt thereof by the Borrower or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, copies of each notice
concerning (I) the imposition of Withdrawal Liability by any such
Multiemployer Plan, (ii) the reorganization or termination, within the
meaning of Title IV of ERISA, of any such Multiemployer Plan, or (iii) the
amount of liability incurred, or that may be incurred, by the Borrower or
any ERISA Affiliate in connection with any event described in clause (i) or
(ii);
k. Environmental Matters. Promptly after the assertion or
occurrence thereof, notice of any Environmental Action against or of any
noncompliance by the Borrower or any of its Subsidiaries with any
Environmental Law or Environmental Permit that could reasonably be expected
to have a Materially Adverse Effect; and
l. Other Information. Such other information respecting the
Borrower or any of its Subsidiaries as the Lender may from time to time
reasonably request.
4.4 Existence; Compliance with Law. Preserve and maintain its
existence and all of its licenses, permits, governmental approvals, rights,
privileges and franchises, conduct its business in an orderly and regular
manner, comply with the provisions of all documents pursuant to which the
Borrower is organized and/or which govern the Borrower's continued
existence and comply with the requirements of all applicable laws, rules,
regulations, orders of any governmental authority and requirements for the
maintenance of the Borrower's insurance, licenses, permits, governmental
approvals, rights, privileges and franchises, such compliance to include,
without limitation, compliance with ERISA, Environmental Laws and
Environmental Permits, except in each case where failure to do so is not
likely to cause a Materially Adverse Effect.
4.5 Insurance. Maintain and keep in force insurance of the types and
in amounts customarily carried in lines of business similar to the
Borrower's, including but not limited to fire, extended coverage, public
liability, property damage and workers' compensation, carried by insurers
and in amounts reasonably satisfactory to the Lender and deliver to the
Lender from time to time at the Lender's request schedules setting forth
all insurance then in effect.
4.6 Facilities. Keep all of the Borrower's properties useful or
necessary to the Borrower's business in good repair and condition, and from
time to time make necessary repairs, renewals and replacements thereto so
that the Borrower's properties shall be fully and efficiently preserved and
maintained.
4.7 Payment of Taxes and Claims. Pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or upon any properties belonging to it prior to the date
on which penalties attach thereto, and all lawful claims for labor,
materials and supplies which, if unpaid, might become a Lien upon any of
its properties and timely file all information returns required by foreign,
federal, state or local tax authorities to be filed by each of them;
provided, however, that neither the Borrower nor any of its Subsidiaries
shall be required to pay or discharge any such tax, assessment, charge or
claim that is being contested in good faith and by proper proceedings and
as to which appropriate cash reserves are being maintained, unless and
until any Lien resulting therefrom attaches to its property and becomes
enforceable against its other creditors.
4.8 Transactions With Affiliates. Conduct all transactions otherwise
permitted under the Loan Documents with any of their Affiliates on terms
that are fair and reasonable and no less favorable to the Borrower or such
Subsidiary than it would obtain in a comparable arms-length transaction
with a Person not an Affiliate.
Section 5. Negative Covenants
The Borrower further covenants that so long as any Obligations of the
Borrower to the Lender under any of the Loan Documents remain outstanding,
and until final payment in full or satisfaction of all indebtedness of the
Borrower to the Lender subject to this Agreement, the Borrower shall not
(and shall not permit its Subsidiaries to), without prior written consent
of the Lender:
5.1 Additional Debt. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries to create, incur, assume or suffer to exist,
any Debt other than:
a. Subordinated. in the case of the Borrower, Subordinated Debt;
b. Subsidiaries. in the case of any of its Subsidiaries, Debt owed
to the Borrower or to a wholly-owned Subsidiary of the Borrower; and
c. Other. in the case of the Borrower and any of its
Subsidiaries,
(i) Debt under the Loan Documents,
(ii) Capitalized Leases not to exceed in the aggregate $10,000,000
at any time outstanding,
(iii) the Existing Debt and any Debt extending the maturity of, or
refunding or refinancing, in whole or in part, any Existing Debt, provided
that the terms of any such extending, refunding or refinancing Debt, and of
any agreement entered into and of any instrument issued in connection
therewith, are otherwise permitted by the Loan Documents, and provided
further that the principal amount of such Existing Debt shall not be
increased above the principal amount thereof outstanding immediately prior
to such extension, refunding or refinancing, and the direct and contingent
obligors therefor shall not be changed, as a result of or in connection
with such extension, refunding or refinancing.
iv) endorsement of negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business, and
(v) other Debt the aggregate principal amount of which, together
with the aggregate indebtedness secured by the Liens referred to in Section
5.2(b), shall not exceed $35,000,000 in the aggregate at any time
outstanding.
5.2 Liens. Create or suffer to exist, or permit any of its
Subsidiaries to create or suffer to exist, any Lien on or with respect to
any of its properties, whether now owned or hereafter acquired, or assign,
or permit any of its Subsidiaries to assign, any right to receive income,
other than:
a. Permitted. Permitted Liens.
b. Purchase Money. Purchase money Liens upon or in any real
property or equipment acquired or held by the Borrower or any Subsidiary in
the ordinary course of business to secure the purchase price of such
property or equipment or to secure Debt incurred solely for the purpose of
financing the acquisition of such property or equipment, or Liens existing
on such property or equipment at the time of its acquisition (other than
any such Liens created in contemplation of such acquisition that were not
incurred to finance the acquisition of such property) or extensions,
renewals or replacements of any of the foregoing for the same or a lesser
amount, or Liens of a lessor under an operating lease, provided, however,
that no such Lien shall extend to or cover any properties of any character
other than the real property or equipment being extended, renewed or
replaced, provided further that the aggregate principal amount of the
indebtedness secured by the Liens referred to in this clause (b) and the
Debt incurred in connection with Section 5.1(c)(v) shall not exceed
$35,000,000 in the aggregate at any time outstanding.
c. Existing. The Existing Liens, except that the Lien of the CIT
Group, Inc. in the assets of the Borrower may remain in place until, but
shall have been released by, the date of the making of the initial Loan.
5.3 Transfer of Assets, Etc. Make any substantial change in the
nature of the Borrower's business or acquire all or substantially all of
the assets of any Person.
5.4 Loans; Advances; Investments. Make or commit to make any loans
or other advances to or investments of any kind in any Person; provided,
however, that the Borrower may make intercompany loans to any Subsidiary
that is a wholly-owned Subsidiary (i) solely for working capital purposes,
and (ii) on terms and in amounts consistent with past practice.
5.5 Distributions. Declare or pay any distribution either in cash or
any other property of the Borrower to any of its stockholders or other
security holders (except that a wholly-owned Subsidiary of the Borrower may
make such a distribution solely to the Borrower).
5.6 Regulations G, T and U. Use the proceeds of any credit
accommodation hereunder, directly or indirectly, to purchase or carry any
margin stock (within the meaning of Regulations G, T and U of the Board of
Governors of the Federal Reserve System) or extend credit to others for the
purpose of purchasing or carrying, directly or indirectly, any margin
stock.
5.7 Accounting Changes. Make or permit, or permit any of its
Subsidiaries to, make or permit any change in accounting policies or
reporting practices, except as required or permitted by GAAP.
Section 6. Events of Default.
6.1 Events of Default. The occurrence of any of the following shall
constitute an "Event of Default" under this Agreement, whether such
occurrence shall be voluntary or involuntary, or come about or be effected
by operation of law or otherwise:
a. Payment. The Borrower shall fail to pay any principal or
interest under any of the Loan Documents within two Business Days after
such payment is due and payable.
b. Representations, etc. Any representation or warranty made by
the Borrower under any of the Loan Documents shall prove to have been
materially incorrect in any respect when made.
c. Covenants. (i) The Borrower shall fail to perform or observe
any Obligation, term, covenant or agreement contained in Sections 5.1, 5.2,
5.3, 5.4 or 5.5, or (ii) the Borrower shall fail to perform or observe any
other term, covenant or agreement contained in any Loan Document on its
part to be performed or observed (other than set forth in Section 6.1(a))
if such failure shall remain unremedied for 15 days after written notice
thereof shall have been given to the Borrower by the Lender or its
designated agent or representative;
d. Cross-Default. The Borrower or any of its Subsidiaries shall
fail to pay any principal of or premium or interest on any Debt that is
outstanding in a principal or notional amount of at least $5,000,000 in the
aggregate (but excluding Debt outstanding hereunder) of the Borrower or
such Subsidiary (as the case may be), when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand
or otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such
Debt; or any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Debt and shall continue after
the applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate, or
to permit the acceleration of, the maturity of such Debt; or any such Debt
shall be declared to be due and payable, or required to be prepaid or
redeemed (other than by a regularly scheduled required prepayment or
redemption), purchased or defeased, or an offer to prepay, redeem, purchase
or defease such Debt shall be required to be made, in each case prior to
the stated maturity thereof; or
e. Insolvency, etc. The Borrower or any of its Subsidiaries shall
generally not pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding shall be
instituted by or against either Borrower or any of its Subsidiaries seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property
and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other
similar official for, it or for any substantial part of its property) shall
occur; or either Borrower or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
Section 6.1(e); or
f. Judgments. Any judgment or order for the payment of money in
excess of $5,000,000 shall be rendered against the Borrower and/or any of
its Subsidiaries and either (I) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order, or (ii) there shall
be any period of 10 consecutive days during which such judgment remains
unsatisfied and a stay of enforcement of such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect; or
g. ERISA Event. Any ERISA Event shall have occurred with respect
to a Plan and the sum (determined as of the date of occurrence of such
ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any
and all other Plans with respect to which an ERISA Event shall have
occurred and then exist (or the liability of the Borrower and the ERISA
Affiliates related to such ERISA Event) exceeds $5,000,000; or
h. Withdrawal Liability. Either Borrower or any ERISA Affiliate
shall have been notified by the sponsor of a Multiemployer Plan that it has
incurred Withdrawal Liability to such Multiemployer Plan in an amount that,
when aggregated with all other amounts required to be paid to Multiemployer
Plans by the Borrower and the ERISA Affiliates as Withdrawal Liability
(determined as of the date of such notification), exceeds $5,000,000 or
requires payments exceeding $1,250,000 per annum; or
i. Reorganization, etc. of Multiemployer Plan. Either Borrower or
any ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in reorganization or is
being terminated, within the meaning of Title IV of ERISA, and as a result
of such reorganization or termination the aggregate annual contributions of
the Borrower and the ERISA affiliates to all Multiemployer Plans that are
then in reorganization or being terminated have been or will be increased
over the amounts contributed to such Multiemployer Plans for the plan years
of such Multiemployer Plans immediately preceding the plan year in which
such reorganization or termination occurs by an amount exceeding
$1,250,000;
j. Dissolution, etc. The dissolution or liquidation of the
Borrower or any of its Subsidiaries, or the Borrower shall take action
seeking to effect the dissolution or liquidation of the Borrower or its
Subsidiaries or any of the Borrower's Subsidiaries seeks to withdraw from
the Borrower;
then, and in any such event, the Lender may (i) upon notice to the
Borrower, have no obligation to make further Loans to the Borrower
regardless of whether a Request Certificate has been submitted therefor
(except in the case of the occurrence of an Event of Default under Section
6.1(e), then the obligation of the Lender to make further Loans to the
Borrowers shall automatically be terminated), (ii) upon notice to the
Borrower, declare the Notes, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to become
immediately due and payable, whereupon the Notes, all such interest and all
such amounts shall become and be forthwith due and payable (except in the
case of the occurrence of an Event of Default under Section 6.1(e), then
the Notes, all interest thereon and all other amounts payable under this
Agreement and the other Loan Documents shall automatically become
immediately due and payable), without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower, and (iii) have all rights, powers and remedies available to
Lender under each of the Loan Documents, or accorded by law, including,
without limitation, the right to resort to any or all security subject
hereto and to exercise any or all of the rights of a beneficiary or secured
party pursuant to applicable law and the right to effect setoff against any
Obligations of the Borrower outstanding of any and all fees or payments due
and owing from time to time by the Lender or its Affiliates to the
Borrower. All rights, powers and remedies of the Lender may be exercised
at any time by the Lender and from time to time after the occurrence of any
Event of Default. All rights, powers and remedies of the Lender in
connection with each of the Loan Documents are cumulative and not exclusive
and shall be in addition to any other rights, powers or remedies provided
by law or equity.
Section 7. General
7.1 No Waiver. No delay, failure or discontinuance of the Lender, or
any holder of any promissory note or other evidence of indebtedness subject
hereto, in exercising any right, power or remedy under any of the Loan
Documents shall affect or operate as a waiver of such right, power or
remedy; nor shall any single or partial exercise of any such right, power
or remedy preclude, waive or otherwise affect any other or further exercise
thereof or the exercise of any other right, power or remedy. Any waiver,
permit, consent or approval of any kind by the Lender of any breach of or
default under any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.
7.2 Notices. All notices, requests and demands given to or made upon
any party hereto must be in writing and shall be deemed to have been given
or made when personally delivered or sent via telecopier with answer back
received or two (2) days after any of the same are deposited in the U.S.
mail, air mail and postage prepaid, addressed as follows:
Borrower: Maxtor Corporation
River Oaks Parkway
San Jose, CA 95134
Attn: Ms. Melonie Brophy
Vice President of Finance & Treasurer
with a copy to: Maxtor Corporation
2190 Miller Drive
Longmont, CO 80501
Attn: Glenn Stevens, Esq.
General Counsel
Lender: Hyundai Electronics America
510 Cottonwood Drive
Milpitas, California 95035
Attn: Mr. David P. Eichler
Senior Vice President of
Finance & Administration
or to such other address or addresses as any party may designate by written
notice to all other parties.
7.3 Successors: Assignment. This Agreement shall be binding on and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided, however,
that this Agreement may not be assigned by the Borrower without the prior
written consent of the Lender. Any purported assignment in violation of
the foregoing prohibition on assignment shall be null and void. The Lender
reserves the right, subject to the Borrower's approval (such approval not
to be unreasonably withheld, and except that no approval shall be required
for any assignment or transfer to any Affiliate of the Lender) to sell,
assign, transfer, negotiate or grant participation in all or any part of or
any interest in the Lender's rights and benefits under each of the Loan
Documents. In connection therewith, the Lender may disclose, under an
appropriate nondisclosure agreement, all documents and information which
the Lender now has or may hereafter acquire relating to credit extended by
the Lender to the Borrower or its businesses, or any collateral required
hereunder.
7.4 Entire Agreement; Amendment. This Agreement and each other of
the Loan Documents constitutes the entire agreement between the Borrower
and the Lender with respect to any extension of credit by the Lender to the
Borrower and supersede all prior negotiations, communications, discussions
and correspondence concerning the subject matter hereof and thereof, and
may be amended or modified only by a written instrument executed by each
party hereto and thereto.
7.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.6 Time. Time is of the essence of each and every provision of the
Loan Documents.
7.7 Severability of Provisions. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining
provisions of this Agreement.
7.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving
effect to conflict of laws principles.
7.9 Arbitration. Any action, claim or controversy arising out of,
related to or in connection with this Agreement, the Note or any other Loan
Document shall be submitted to arbitration in San Jose, California, before
a single arbitrator in accordance with the Commercial Rules of Arbitration
of the American Arbitration Association. The costs and expenses of such
arbitration, including, without limitation, the compensation of the
arbitrator and any stenographer employed by such arbitrator, shall be borne
by the party against whom the arbitrator renders a decision as herein
provided. In addition, the party against whom the arbitrator renders a
decision shall be liable for the attorneys' fees and expenses of the
prevailing party. The decision of the arbitrator shall be final and
binding upon the parties and may be enforced in any court of competent
jurisdiction.
7.10 Further Assurances. At any time or from time to time upon the
Lender's request, the Borrower will execute and deliver such further
documents and do such other acts and things as the Lender may reasonably
request in order to effect fully the purposes of this Agreement and the
other Loan Documents and to provide for the payment of any Loans made
hereunder and interest thereon in accordance with the terms of the Loan
Documents.
7.11 Expenses. The Borrower shall reimburse the Lender on demand for
50% of the reasonable fees and expenses of the Lender's counsel in the
negotiation, preparation and closing of the Loan Documents. If there shall
occur an Event of Default, all such reasonable out-of-pocket expenses
incurred by the Lender (including fees and disbursements of counsel) in
connection with such Event of Default and collection and other enforcement
proceedings (including bankruptcy proceedings) resulting therefrom shall be
paid by the Borrower, whether or not suit is actually commenced to obtain
any relief provided hereunder; provided, however, that in any action on
this Agreement or any other Loan Documents, the parties who are determined
to be the prevailing party thereon, whether such party or parties have
instituted the action, shall be entitled to reasonable attorneys' fees in
addition to other costs and any other relief to which such party or parties
may be entitled.
7.12 Currency. All currency expressed under this Agreement are in
U.S. Dollars.
Section 8. Definitions.
"Affiliate" means with respect to the Borrower, any other Person that
directly or indirectly controls, is controlled by or is under direct or
indirect common control with the Borrower; provided, however, that neither
the Lender nor any of its Affiliates is an Affiliate of the Borrower or
vice-versa.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks are permitted or authorized to close in
California by law.
"Capitalized Leases" means all leases that have been or should be, in
accordance with GAAP, recorded as capitalized leases.
"Consolidated" means the consolidation of accounts in accordance with
GAAP.
"Debt" of any Person means, without duplication, (a) all indebtedness
of such Person for borrowed money, (b) all obligations of such Person for
the deferred purchase price of property or services, (c) all obligations of
such Person evidenced by notes, bonds, debentures or other similar
instruments, (d) all obligations of such Person created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all obligations of
such Person as lessee under Capitalized Leases, (f) all obligations,
contingent or otherwise, of such Person in respect of acceptances, letters
of credit or similar extensions of credit, (g) all Debt of others referred
to in clauses (a) through (f) above or clause (h) below guaranteed directly
or indirectly in any manner by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (1) to pay or
purchase such Debt or to advance or supply funds for the payment or
purchase of such Debt, (2) to purchase, sell or lease (as lessee or lessor)
property, or to purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure the holder of
such Debt against loss, (3) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such services
are rendered) or (4) otherwise to assure a creditor against loss, and (h)
all Debt referred to in clauses (a) through (g) above secured by (or for
which the holder of such Debt has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including, without
limitation, accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of such Debt.
"Default" means any Event of Default or any event that would constitute
an Event of Default but for the requirement that notice be given or time
elapse or both.
"Environmental Action" means any action, suit, demand, demand letter,
claim, notice of non-compliance or violation, notice of liability or
potential liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, Environmental
Permit or Hazardous Materials or arising from alleged injury or threat of
injury to health, safety or the environment, including, without limitation,
(a) by any governmental or regulatory authority for enforcement, cleanup,
removal, response, remedial or other actions or damages and (b) by any
governmental or regulatory authority or any third party for damages,
contribution, indemnification, cost recovery, compensation or injunctive
relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment, decree or
judicial or agency interpretation, policy or guidance relating to pollution
or protection of the environment, health, safety or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of
Hazardous Materials.
"Environmental Permits" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of Borrower's controlled group, or under common control
with Borrower, within the meaning of Section 414 of the Internal Revenue
Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event within
the meaning of Section 4043 of ERISA, with respect to any Plan unless the
30-day notice requirement with respect to such event has been waived by the
PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of
ERISA (without regard to subsection (2) of such Section) are met with a
contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a
Plan, and an event described in paragraph (9), (10) (11), (12) or (13) of
Section 4043(c) of ERISA is reasonably expected to occur with respect to
such Plan within the following 30 days; (b) the application for a minimum
funding waiver with respect to a Plan; (c) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of the Borrower or any ERISA
Affiliate in the circumstances described in Section 4062(e) of ERISA; (e)
the withdrawal by the Borrower or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial employer,
as defined in Section 4001(a)(2) of ERISA; (f) the conditions for the
imposition of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring
the provision of security to such Plan pursuant to Section 307 of ERISA; or
(h) the institution by the PBGC of proceedings to terminate a Plan pursuant
to Section 4042 of ERISA, or the occurrence of any event or condition
described in Section 4042 of ERISA that constitutes ground for the
termination of, or the appointment of a trustee to administer, a Plan.
"Hazardous Materials" means (a) petroleum and petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-
containing materials, polychlorinated biphenyls and radon gas and (b) any
other chemicals, materials or substances designated, classified or
regulated as hazardous or toxic or as a pollutant or contaminant under any
Environmental Law.
"Insufficiency" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Lien" means any lien, security interest or other charge or encumbrance
of any kind, or any other type of preferential arrangement, including,
without limitation, the lien or retained security title of a conditional
vendor and any easement, right of way or other encumbrance on title to real
property.
"Loan Documents" means this Agreement and any and all documents or
agreements heretofore or hereafter entered into by or for the benefit of
the Borrower in favor of the Lender or any of its Affiliates in connection
herewith or therewith, including, without limitation, the Note, the Request
Certificates and the Security Agreement. The term "Loan Documents" shall
not include the Merger Agreement.
"Materially Adverse Effect" means materially adverse to the condition
(financial or other), results of operations, performance, properties,
obligations, liabilities, operations, business or prospects of the Borrower
and its Subsidiaries, taken as a whole.
"MultiEmployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate is making
or accruing an obligation to make contributions, or has within any of the
preceding five years made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of
Borrower or any ERISA Affiliate and at least one Person other than the
Borrower and the ERISA Affiliates or (b) was so maintained and in respect
of which Borrower or any ERISA Affiliate could have liability under Section
4064 or 4069 of ERISA in the event such plan has been or were to be
terminated.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced: (a) Lien for taxes, assessments and governmental
charges or levies to the extent not required to be paid under Section 4.7
hereof; (b) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's and repairmen's Liens and other similar Liens arising
in the ordinary course of business securing obligations that are not
overdue for a period of more than 30 days; (c) pledges or deposits to
secure obligations under workers' compensation laws or similar legislation
or to secure public or statutory obligations; (d) easements, rights of way
and other encumbrances on title to real property that do not render title
to the property encumbered thereby unmarketable or materially adversely
affect the use of such property for its present purposes; (e) Liens
consisting of judgment or judicial attachment liens, provided that the
enforcement of such Liens is effectively stayed; (f) Liens on assets of
corporations that become Subsidiaries after the date of this Agreement,
provided, however, that such Liens existed at the time the respective
corporations became Subsidiaries and were not created in anticipation
thereof or in connection with the creation of such Subsidiaries; (g) Liens
securing Capitalized Lease obligations on assets subject to such
Capitalized Leases, provided that such Capitalized Leases are permitted
under subsection 5.1(c)(ii); (h) Liens arising solely by virtue of any
statutory or common law provisions relating to banker's liens, rights of
set-off or similar rights and remedies as to deposit accounts or other
funds maintained with a creditor depository institution, provided that (i)
such deposit account is not a dedicated cash collateral account and is not
subject to restrictions against access by the Borrower in excess of those
set forth by regulations promulgated by the Federal Reserve Board, and (ii)
such deposit account is not intended by the Borrower or any of its
Subsidiaries to provide collateral to the depository institution.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government
or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any ERISA Affiliate and no Person other than Borrower and the
ERISA Affiliates, or (b) was so maintained and in respect of which Borrower
or any ERISA Affiliate could have liability under Section 4069 of ERISA in
the event such plan has been or were to be terminated.
"Subordinated Debt" means any Debt of the Borrower that is subordinated
to the Obligations of the Borrower under the Loan Documents on, and that
otherwise contains, terms and conditions satisfactory to the Lenders.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or
profits of such limited liability company, partnership or joint venture or
(c) the beneficial interest in such trust or estate is at the time directly
or indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such person's other
Subsidiaries.
"Withdrawal Liability" has the meaning specified in Part I of Subtitle
E of Title IV of ERISA.
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed and delivered as of the day and year first
written above.
MAXTOR CORPORATION
By:
--------------------------------
Name:
Title:
HYUNDAI ELECTRONICS AMERICA
By:
--------------------------------
Name:
Title:
List of Exhibits
Exhibit A - Request Certificate
Exhibit B - Note
Exhibit C - Security Agreement
List of Schedules
Schedule 2.1 - Subsidiaries
Schedule 2.3 - Required Consents
Schedule 2.4 - Litigation
Schedule 2.5 - Materially Adverse Changes
Schedule 2.12 - Existing Debt
Schedule 2.13 - Existing Liens
PROMISSORY NOTE
$100,000,000 January 5, 1996
FOR VALUE RECEIVED, the undersigned, MAXTOR CORPORATION, a Delaware
corporation (the "Company"), hereby promises to pay to the order of HYUNDAI
ELECTRONICS AMERICA, a California corporation (the "Lender"), at the office
of the Lender at 510 Cottonwood Drive, Milpitas, California 95035, or such
other address of the Lender as the Lender may from time to time direct, the
principal sum of One Hundred Million Dollars ($100,000,000) or, if less, the
aggregate unpaid principal amount of the Loans made by the Lender to the
Company pursuant to that certain Credit Agreement, dated December 29, 1995
between the Company and the Lender (as amended from time to time, the "Credit
Agreement"), in lawful money of the United States of America and in
immediately available funds, in the amounts and at the times provided by the
Credit Agreement, and to pay interest on the unpaid principal amount from
time to time outstanding on this Note, at such office, in like money and
funds, at the applicable rates and on the dates provided in the Credit
Agreement.
This Note is given under the Credit Agreement and evidences the Loans
made by the Lender thereunder. Capitalized terms used in this Note have the
respective meanings assigned to them in the Credit Agreement. Reference is
made to the Credit Agreement for provisions regarding mandatory and optional
prepayments of the principal of this Note and for the acceleration of the
maturity of this Note upon the occurrence of the Events of Default specified
therein, and regarding the rate of interest which may be charged or collected
by the Lender under the Credit Agreement. In no event shall the rate of
interest charged under this Note exceed the maximum rate permitted by
applicable law.
This Note is secured by the Security Agreement, and reference is made
thereto for a description of the Collateral securing the Obligations and the
rights of the Lender with respect thereto.
The amount and date of the Loans made by the Lender and all repayments
of the principal thereof shall be recorded by the Lender in its records
(which, absent manifest error, shall be conclusive) and, prior to any
transfer of this Note, endorsed by the Lender on the reverse of this Note or
on a schedule attached to this Note or any continuation thereof; provided
that any failure by the Lender to make any such endorsement shall not affect
the obligations of the Company under the Credit Agreement and this Note.
IN WITNESS WHEREOF, the Company has caused this Promissory Note to be
duly executed as of the date first above written.
MAXTOR CORPORATION
By:
-------------------------------------
Name:
Title:
Principal Schedule
Date
Principal Added
Principal Paid
Principal Balance
Initials
EXHIBIT C
SECURITY AGREEMENT
This Security Agreement (the "Agreement"), dated as of
,1995, is entered into between Maxtor Corporation, a Delaware corporation
("Debtor"), and Hyundai Electronics America, a California corporation
("Secured Party").
This Agreement is contemplated by Section 1.2 of that certain Credit
Agreement, dated as of , 1995 (the "Credit Agreement"), between
Debtor and Secured Party, pursuant to which Debtor has agreed to grant
Secured Party a security interest in the collateral described below.
Therefore, Debtor and Secured Party agree as follows:
1. Definitions. All capitalized terms used but not defined herein
shall have the meanings given to them in the Credit Agreement. In addition,
all terms used in Section 3 hereof but not expressly defined therein which
are defined in the California Uniform Commercial Code (the "Code") shall have
the same meaning herein as in the Code.
2. Grant of Security Interest. Debtor hereby pledges and delivers to
Secured Party, and grants to Secured Party a security interest in, the
Collateral, as defined in Section 3 hereof, to secure the payment and
performance of all of the Obligations.
3. Collateral. The collateral in which Secured Party is granted a
security interest by this Agreement (herein referred to collectively as the
"Collateral") is:
(a) All of Debtor's accounts, instruments, documents and
chattel paper due or to become due to Debtor of any kind (the "Receivables"),
whether now existing or hereafter arising, and whether now owned or hereafter
acquired, and all rights now or hereafter existing in and to all guarantees,
security agreements or other agreements or instruments securing or otherwise
relating to any such Receivables (the "Related Agreements"); and
(b) All proceeds and products of any and all of the foregoing
Collateral (including, without limitation, proceeds which constitute property
of the types described in clause (a) of this Section 3 and proceeds of any
tort claims relating to any of the foregoing Collateral) and, to the extent
not otherwise included, all payments under insurance or in connection with
any indemnity, warranty or guarantee payable by reason of loss or damage to
or otherwise with respect to any of the foregoing Collateral;
excluding, however, from all of the above all hazardous and non-hazardous
wastes, including but not limited to recyclable waste materials. The
inclusion of proceeds in this Agreement does not authorize Debtor to sell,
dispose of or otherwise use the Collateral in any manner not specifically
authorized hereby.
The term "Intangible Collateral" as used herein shall mean all
Receivables and Related Agreements.
4. Representations, Warranties and Covenants. Debtor hereby
represents, warrants and covenants as follows:
4.1 Organizational Status. Debtor is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and is in good standing as a foreign corporation in the State of
California, the State of Colorado and any other state in which the nature of
its business requires it to be so qualified or failure to be qualified would
have a Materially Adverse effect on Debtor.
4.2 Power and Authority. Debtor has full power and authority
to enter into this Agreement, grant to Secured Party a valid security
interest in the Collateral and perform all of its obligations under this
Agreement. The execution, delivery and performance by Debtor of this
Agreement do not contravene Debtor's restated certificate of incorporation or
amended and restated bylaws or violate any provision of any statute, law,
rule, regulation, judgment, order or decree applicable to Debtor and will not
conflict with, or constitute a breach or default under, any indenture, loan
agreement, contract or other agreement or instrument to which Debtor is a
party or by which Debtor or any of its property is bound.
4.3 Governmental Authorization. No authorization, consent or
approval or other action by, and no notice to or other filing with, any
Person is required for the grant by Debtor of the security interest granted
hereby, the due execution and delivery by Debtor of this Agreement or the
performance by Debtor of any of its obligations hereunder.
4.4 Title to Collateral. Except for the security interest
granted hereby and Permitted Liens, on the date of the funding of the initial
Loan Debtor is, and as to any Collateral acquired by Debtor after the date
thereof will be, the legal and beneficial owner and holder of all the
Collateral, free and clear of any Lien, and Debtor will defend all of the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein, and will take all steps to maintain the
security interest of Secured Party as a valid and fully perfected Lien.
4.5 Place of Business and Name. Debtor's chief place of
business and chief executive office is at the address set forth in Section
7.2 of the Credit Agreement and has not been moved or relocated within the
four-month period commencing on the date of this Agreement. Debtor has no
other offices or facilities of any type located in the United States of
America where documents comprising the Collateral or records regarding the
Collateral are kept except for its offices and facilities in Longmont,
Colorado. Debtor will not change its name or the location of its chief place
of business and chief executive office or open any other office or facility
in the United States of America, without giving at least 30 days' prior
written notice to Secured Party of any such proposed change. Debtor has not
utilized any trade names in the conduct of its business and, unless it shall
have first given at least 30 days' prior written notice to Secured Party,
Debtor will not utilize any such trade names or other trade names.
4.6 Financing Statements; Related Instruments.
(a) No financing statement or other document evidencing
a Lien on any of the Collateral or any proceeds thereof is on file in any
public office in any jurisdiction, other than financing statements and other
appropriate documents in favor of Secured Party and the financing statements,
if any, identified on Schedule 2.13 to the Credit Agreement. At the request
of Secured Party, Debtor will execute and deliver to Secured Party one or
more financing statements and other appropriate documents in form and
substance reasonably satisfactory to Secured Party and will pay the cost of
filing the same in all public offices where filing is deemed by Secured Party
to be necessary or desirable to perfect the Liens intended to be created
hereunder. Debtor authorizes Secured Party to prepare and file financing
statements and other appropriate documents without the signature of Debtor
where permitted by law and, if Debtor's signature shall be required, Debtor
hereby irrevocably appoints Secured Party as Debtor's agent and attorney-in-
fact for the purpose of signing and filing such financing statements, other
appropriate documents and schedules in all public offices deemed necessary or
desirable by Secured Party. If any financing statements, other appropriate
documents and/or schedules are so signed by Secured Party, Secured Party
shall send a copy thereof to Debtor. Debtor promises to pay to Secured Party
all fees and expenses incurred in filing financing statements and other
appropriate documents and any continuation statements or amendments thereto,
which fees and expenses shall become a part of the Obligations secured by
this Agreement. A carbon, photographic or other reproduction of this
Agreement or any financing statement or other appropriate document covering
the Collateral or any part thereof shall be sufficient as a financing
statement or other appropriate document, and may be filed by Secured Party in
accordance with the provisions of this Section.
(b) Debtor shall duly endorse and deliver to Secured
Party upon request all instruments or documents, the possession of which is
necessary to perfect Secured Party's interest in any of the Collateral
hereunder.
4.7 Transfers; Other Liens. Neither Debtor nor its agents,
servants or employees will sell, assign or offer to sell or assign or
otherwise transfer any part of the Collateral, without the prior written
consent of Secured Party. Debtor will not, without the prior written consent
of Secured Party, create or permit to exist any Lien on any of the
Collateral, other than the security interest in favor of Secured Party
created by this Agreement and Permitted Liens.
4.8 Schedules, Inspection of Books and Records. Debtor will
furnish to Secured Party from time to time (I) statements and schedules
further identifying and describing the Collateral, and (ii) such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail. Debtor will permit Secured Party or its
duly authorized representatives to examine its books and records during
business hours upon reasonable prior notice and shall furnish to Secured
Party such financial statements and other financial data as Secured Party may
reasonably request from time to time. Secured Party agrees to, and agrees to
cause its agents and representatives to, take reasonable precautions to
preserve the confidentiality of all such data, reports and information
obtained from or on behalf of Debtor.
4.9 Intangible Collateral. With respect to the Intangible
Collateral:
(a) Debtor's records concerning all Intangible
Collateral are and will be kept at the address indicated in the first
sentence of Section 4.5 hereof as Debtor's chief place of business and
chief executive office. Debtor will not remove any of such records from
such address without the prior written consent of Secured Party.
Without in any way excusing a breach of the foregoing sentence by
Debtor, if for any reason any of such records concerning the Intangible
Collateral shall at any time be moved to another location or locations,
Debtor will promptly notify Secured Party of any such change in the
location of such records and will execute and deliver such financing
statements and other appropriate documents and do such other acts and
things as Secured Party may reasonably request pursuant to Section 7
hereof.
(b) To the best of Debtor's knowledge, each item of the
Receivables is, or at such time as it becomes part of the Collateral
will be, a bona fide, valid and legally enforceable obligation of the
account debtor or other obligor in respect thereof, subject to no
defense, setoff or counterclaim against Debtor and in connection with
which there is no default with respect to any payment or performance on
the part of Debtor or any other party.
(c) Debtor will at all times keep accurate and complete
records of payment and performance by Debtor, the respective account
debtors and all other parties obligated on Intangible Collateral.
(d) After the occurrence and during the continuance of
any Event of Default, Debtor hereby authorizes Secured Party, upon prior
notice to Debtor, to cure any default in payment or performance by
Debtor with respect to Intangible Collateral; provided, however, that
Secured Party shall be under no obligation to do so and, provided
further, that the curing by Secured Party of any default shall not
constitute a waiver by Secured Party of any default hereunder. Debtor
agrees to reimburse Secured Party on demand with interest at the highest
rate applicable to any Loan for any payment made or any expense
reasonably incurred by Secured Party pursuant to the foregoing
authorization, and any payment made or expense reasonably incurred by
Secured Party pursuant to the foregoing authorization shall be part of
the Obligations.
(e) Notwithstanding the security interest in the
Intangible Collateral granted hereunder, Debtor shall have the right to
collect such Intangible Collateral and, so long as an Event of Default
has not occurred and is continuing, use the proceeds therefrom in the
ordinary course of its business. Upon request of Secured Party after
the occurrence and during the continuation of an Event of Default,
Debtor shall, and Secured Party may, in the name of Secured Party or
Debtor, at any time notify the account debtor or other obligor on any
item of Intangible Collateral of Secured Party's security interest.
Secured Party may, in its own name or the name of Debtor, at any time
after the occurrence and during the continuation of an Event of Default
hereunder, upon prior notice to Debtor, demand, sue for, collect or
receive any money or property payable or receivable on any Intangible
Collateral and settle, release, compromise, adjust, sue upon, foreclose,
realize upon or otherwise enforce any item of Intangible Collateral as
Secured Party may determine, and for the purpose of realizing Secured
Party's rights herein, Secured Party may receive, open and dispose of
mail addressed to Debtor and endorse notes, checks, drafts, money
orders, documents of title or other forms of payment on behalf of and in
the name of Debtor. Secured Party may at any time in its discretion,
after the occurrence and during the continuance of any Event of Default
hereunder, transfer any notes, securities or other Intangible Collateral
into its own name or that of its nominee and receive the income thereon
and hold the same as Collateral for the Obligations or apply the same to
the payment of principal or interest due on the Obligations. Debtor
agrees to reimburse Secured Party on demand with interest at the highest
rate applicable to any Loan for any payment made or any expense
reasonably incurred by Secured Party pursuant to the foregoing
authorization, and any payment made or expense reasonably incurred by
Secured Party pursuant to the foregoing authorization shall be part of
the Obligations.
5. Rights and Remedies Upon Default.
(a) Upon the occurrence and during the continuation of any
Event of Default, Secured Party shall have, in addition to all other rights
and remedies provided herein, in the Credit Agreement, or by applicable law,
all of the rights and remedies of a Secured Party under the Code, and under
the Uniform Commercial Code as enacted in any jurisdiction in which the
Collateral may be found, or in which Debtor becomes involved in proceedings
in insolvency or bankruptcy.
(b) Debtor agrees that, to the extent notice of sale shall be
required by law, at least 10 days' notice to Debtor of the time and place of
any public sale or the time after which any private sale or any other
intended disposition is to be made shall constitute reasonable notification
of such sale or disposition. Secured Party shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(c) Secured Party may, instead of exercising the powers of
sale provided for herein and under the Code, proceed by a suit or suits, at
law or in equity, to foreclose the security interest granted under this
Agreement and sell the Collateral, or any portion thereof, under a judgment
or decree of any court or courts of competent jurisdiction. Secured Party
shall also have the right to apply for and have a receiver appointed by a
court of competent jurisdiction in any action taken by Secured Party to
enforce its rights and remedies hereunder, to manage, protect and preserve
the Collateral or continue the operation of the business of Debtor, and
Secured Party shall be entitled to collect all revenues and profits thereof
and apply the same to the payment of all expenses and other charges of such
receivership, including the compensation of the receiver, and to the payment
of the Obligations until a sale or other disposition of such Collateral shall
be finally made and consummated.
(d) In the event of any disposition or collection of or any
other realization upon all or any part of the Collateral, Secured Party shall
apply the proceeds of such disposition, collection or other realization as
follows:
(I) First, to the payment of the reasonable costs and
expenses of Secured Party in exercising or enforcing its rights
hereunder, including, but not limited to, costs and expenses incurred in
retaking, holding and/or preparing the Collateral for sale, lease or
other disposition, and in collecting or attempting to collect any of the
Collateral, and to the payment of all amounts payable to Secured Party
pursuant to Section 6 hereof;
(ii) Second, to the payment of the Obligations; and
(iii) Third, after payment in full of all of the
Obligations, the surplus, if any, shall be paid to Debtor or to
whomsoever may be lawfully entitled to receive such surplus.
6. Indemnity and Expenses. Debtor agrees to indemnify Secured Party
from and against any and all claims, losses, liabilities and obligations
arising out of or resulting from this Agreement (including, without
limitation, enforcement of this Agreement or any actions taken by Secured
Party pursuant to Section 7 of this Agreement) except claims, losses,
liabilities or obligations resulting from Secured Party's own gross
negligence or willful misconduct. Debtor will on demand pay to Secured Party
the amount of any and all reasonable out of pocket costs and expenses,
including but not limited to the reasonable fees and disbursements of its
counsel and of any experts or agents, which Secured Party may incur in
connection with (I) the exercise or enforcement by Secured Party of any of
its rights or remedies hereunder, or (ii) any failure by Debtor to perform
any of the Obligations.
7. Further Assurances and Power of Attorney. Debtor will execute and
deliver to Secured Party, at Secured Party's request, at any time and from
time to time, such financing statements and other instruments and documents
(and pay the cost of filing or recording the same in all public offices
deemed necessary or desirable by Secured Party) and do such other acts and
things as Secured Party may reasonably deem necessary or desirable in order
to establish and maintain a valid Lien in the Collateral in favor of Secured
Party (free and clear of all other Liens, except for Permitted Liens) or in
order to facilitate the collection of the Collateral. To effectuate the
rights and remedies of Secured Party hereunder, Debtor hereby irrevocably
appoints Secured Party attorney-in-fact for Debtor in the name of Debtor or
Secured Party, with full power of substitution, after the occurrence and
during the continuance of any Event of Default, to sign, execute and deliver
any and all instruments, documents, licenses, sublicenses, registrations,
filings and other writings and do any and all acts and things to the same
extent as Debtor could do, to sell, assign and transfer any Collateral,
including, but not limited to, taking all action necessary or desirable to
obtain the approval of any governmental body to the transfer or issuance to
Secured Party or any other person, firm or corporation of any Collateral.
8. Debtor Remains Liable. Anything herein to the contrary
notwithstanding, (I) Debtor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by Secured Party of
any of its rights hereunder shall not release Debtor from any of its duties
or obligations under the contracts and agreements included in the Collateral,
and (iii) Secured Party shall not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this
Agreement, nor shall Secured Party be obligated to perform any of the
obligations or duties of Debtor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
9. [Intentionally Left Blank]
10. Waivers; Remedies Cumulative. Debtor waives notice of the
acceptance of this Agreement and all other notices, demands or protests to
which Debtor might otherwise be entitled by law in respect to this Agreement,
the Obligations or the Collateral, and which may be lawfully waived. Secured
Party shall have no duty as to the collection or protection of the Collateral
or any income thereon, nor as to the preservation of rights against prior
parties, nor as to the preservation of any rights pertaining to the
Collateral beyond reasonable care in the custody or preservation thereof.
Secured Party may exercise its rights and remedies with respect to the
Collateral without resorting or regard to other security or sources for
payment. All rights and remedies of Secured Party hereunder or with respect
to the Obligations or the Collateral shall be cumulative and may be exercised
singularly or concurrently.
11. Assignment. If at any time or times by sale, assignment,
negotiation, pledge or otherwise, Secured Party transfers any of the
Obligations, such transfer shall carry with it such Secured Party's rights
and remedies under this Agreement with respect to the Obligations
transferred, and the transferee shall become vested with such rights and
remedies whether or not they are specifically referred to in the transfer.
If and to the extent Secured Party retains any other Obligations, Secured
Party shall continue to have the rights and remedies herein set forth with
respect thereto.
12. Notices. Any notice or communication required or permitted to be
given or delivered under this Agreement shall be in writing and shall be
given in accordance with the procedures set forth in Section 7.2 of the
Credit Agreement. Debtor's address and Secured Party's address for notices
or communications shall be as stated in the Credit Agreement.
13. Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California applicable to contracts made and to
be performed in the State of California, except to the extent that the
validity or perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws
of a jurisdiction other than the State of California. Whenever possible,
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement shall be prohibited or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity,
without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
14. Miscellaneous. Neither this Agreement nor any provision hereof may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. This Agreement shall be
binding upon Debtor and its successors and assigns, and all persons claiming
under or through Debtor or any such successor or assign, and shall inure to
the benefit of and be enforceable by Secured Party and its successors and
assigns. Upon payment in full and performance of the Obligations, this
Agreement shall terminate and be of no further force and effect, and Secured
Party will redeliver and reassign to Debtor the remaining Collateral and take
all action necessary to terminate the security interest of the Secured Party
in the Collateral.
15. Counterparts. This Agreement and any amendments, waivers, consents
or supplements hereto and thereto may be executed in any number of
counterparts, and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same instrument.
Each such agreement shall become effective upon the execution of a
counterpart hereof or thereof by each of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Security Agreement as
of the day and year first above written.
DEBTOR:
MAXTOR CORPORATION
By:
Title:
SECURED PARTY:
HYUNDAI ELECTRONICS AMERICA
By:
Title:
MAXTOR CORPORATION
EXHIBIT 11.1
COMPUTATION OF NET LOSS PER SHARE
For the Three Months and Nine Months Ended
December 30, 1995 and December 24, 1994
(In thousands, except per share data)
Three Months Ended Nine Months Ended
- ---------------------------------------------------------------------------
Dec. 30, Dec. 24, Dec. 30, Dec. 24,
1995 1994 1995 1994
- ---------------------------------------------------------------------------
PRIMARY & FULLY DILUTED
Weighted average number
of common shares
outstanding during
the period 53,110 50,668 52,687 50,283
========= ========= ========= =========
Net loss $(24,633) $(16,435) $(82,948) $(83,341)
========= ========= ========= =========
Net loss per share $ (0.46) $ (0.32) $ (1.57) $ (1.66)
========= ========= ========= =========
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000711039
<NAME> MAXTOR CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-25-1995
<PERIOD-END> DEC-30-1995
<EXCHANGE-RATE> 1
<CASH> 41,366
<SECURITIES> 0
<RECEIVABLES> 130,422
<ALLOWANCES> 4,502
<INVENTORY> 131,139
<CURRENT-ASSETS> 311,572
<PP&E> 227,102
<DEPRECIATION> 148,930
<TOTAL-ASSETS> 397,252
<CURRENT-LIABILITIES> 329,845
<BONDS> 100,219
<COMMON> 532<F1>
0
0
<OTHER-SE> (33,344)<F2>
<TOTAL-LIABILITY-AND-EQUITY> 397,252
<SALES> 954,040
<TOTAL-REVENUES> 954,040
<CGS> 893,392
<TOTAL-COSTS> 893,392
<OTHER-EXPENSES> 134,477<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,828
<INCOME-PRETAX> (80,821)
<INCOME-TAX> 2,127
<INCOME-CONTINUING> (82,948)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,948)
<EPS-PRIMARY> (1.57)
<EPS-DILUTED> (1.57)
<FN>
<F1>COMMON INCLUDES: $195 FOR $0.01 PAR VALUE CLASS A COMMON (19,480,000
SHARES ISSUED AND OUTSTANDING); $337 FOR $0.01 PAR VALUE COMMON (33,748,988
ISSUED AND OUTSTANDING)
<F2>OTHER-SE INCLUDES ADDITIONAL PAID-IN CAPITAL OF $333,575 AND ACCUMULATED
DEFICIT OF $366,919
<F3>OTHER EXPENSES INCLUDES RESEARCH & DEVELOPMENT EXP OF $69,416, SELLING,
GENERAL AND ADMINISTRATIVE EXP OF $60,532, AND OTHER EXP OF $4,529
</FN>
</TABLE>
