<PAGE>
FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
________________________________________
(Mark One)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 29, 1995
or
(_) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________
to ______________
Commission File Number: 0-12046
MICROPOLIS CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 95-3093858
- --------------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21211 Nordhoff Street, Chatsworth, California 91311
- --------------------------------------------- ------------------------
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code (818) 709-3300
------------------------
Not Applicable
- ------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months or for such shorter period that the
Registrant was required to file such reports, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
November 3, 1995: 15,580,413 shares of Common Stock, $1.00 Par Value
---------------------------------------------------------------------
<PAGE>
MICROPOLIS CORPORATION
----------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets at 2
September 29, 1995 and December 30, 1994
Condensed Consolidated Statements of 3
Operations for the Three Months and
Nine Months ended September 29, 1995
and September 30, 1994
Condensed Consolidated Statements of 4
Cash Flows for the Nine Months Ended
September 29, 1995 and September 30, 1994
Notes to Condensed Consolidated 5
Financial Statements
Item 2 Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4 Submission of Matters to a Vote of
Security Holders 9
Item 6 Exhibit and Reports on Form 8-K 10
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
------------------------------
MICROPOLIS CORPORATION
----------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 29,
December 30,
1995 1994
----------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and equivalents and $ 37,310 $ 63,216
short-term investments
Accounts receivable, net 45,005 61,724
Inventories 53,790 56,746
Other current assets 3,004 6,405
--------- --------
Total current assets 139,109 188,091
Property, plant and equipment, at cost, less
accumulated depreciation and amortization 49,205 44,252
Other assets 1,855 1,572
--------- --------
$ 190,169 $233,915
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Notes payable $ 4,390 $ -
Current portion of long-term debt 1,800 -
Accounts payable 40,854 46,388
Other accrued liabilities 22,065 20,681
--------- --------
Total current liabilities 69,109 67,069
Loan Facility 11,888 -
6% Convertible Subordinated Debentures 75,000 75,000
Deferred income taxes 1,624 2,216
Shareholders' equity:
Preferred stock, $1.00 par value, 2,000,000
shares authorized, none issued - -
Common stock, $1.00 par value, 50,000,000
shares authorized; 15,580,413 shares issued
and outstanding (15,266,440 in 1994) 15,580 15,266
Additional paid-in capital 110,379 108,863
Accumulated deficit (93,411) (34,499)
--------- --------
Total shareholders' equity 32,548 89,630
--------- --------
$ 190,169 $233,915
========= ========
</TABLE>
See accompanying notes.
-2-
<PAGE>
MICROPOLIS CORPORATION
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- -----------------------------
September 29, September 30, September 29, September 30,
1995 1994 1995 1994
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 58,785 $ 79,285 $ 169,760 $238,704
Cost of sales 56,294 67,839 160,769 207,717
-------- -------- --------- --------
Gross profit 2,491 11,446 8,991 30,987
Operating expenses:
Research and development 9,145 11,202 32,924 32,080
Selling, general and
administrative 9,852 10,487 33,293 32,162
-------- -------- --------- --------
Total operating expenses 18,997 21,689 66,217 64,242
-------- -------- --------- --------
Loss from operations (16,506) (10,243) (57,226) (33,255)
Interest expense (1,311) (1,260) (4,133) (3,799)
Interest income 372 555 1,338 1,553
-------- -------- --------- --------
Loss before income taxes (17,445) (10,948) (60,021) (35,501)
Provision (credit) for income taxes 36 - (1,109) -
-------- -------- --------- --------
Net loss $(17,481) $(10,948) $ (58,912) $(35,501)
Loss per share $ (1.12) $ (.72) $ (3.83) $ (2.36)
======== ======== ========= ========
Weighted average common and
common equivalent shares outstanding 15,551 15,180 15,399 15,013
======== ======== ========= ========
</TABLE>
See accompanying notes.
-3-
<PAGE>
MICROPOLIS CORPORATION
----------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
September 29, September 30,
1995 1994
------------- -------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(58,912) $(35,501)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 15,870 18,229
(Gain) loss on disposal of fixed assets 21 (19)
Deferred income taxes (592) -
Increase (decrease) from changes in:
Accounts receivable 16,719 (5,510)
Inventories 2,956 8,888
Other current assets 3,401 (1,070)
Other assets (337) 1,203
Accounts payable and other
accrued liabilities (4,149) 6,534
-------- --------
Net cash used in operating activities (25,023) (7,246)
Cash flows from investing activities:
Net change in short-term investments 11,722 (1,853)
Proceeds from sale of equipment 46 109
Additions to property, plant and equipment (20,836) (14,436)
-------- --------
Net cash used in investing activities (9,068) (16,180)
Cash flows from financing activities:
Proceeds from Notes payable 4,390 -
Payment on capital lease obligation - (231)
Increase in Loan Facility 13,688 -
Proceeds from sale of common stock, net 1,829 1,592
-------- --------
Net cash provided by financing activities 19,907 1,361
Net decrease in cash and equivalents (14,184) (22,065)
Cash and equivalents at beginning of period 37,720 49,100
-------- --------
Cash and equivalents at end of period 23,536 27,035
Short-term investments 13,774 39,535
-------- --------
Total cash, cash equivalents and short-term investments $ 37,310 $ 66,570
======== ========
Supplemental cash flow information
Interest payments $ 5,175 $ 4,871
Tax payments $ (462) $ 3,187
</TABLE>
See accompanying notes.
-4-
<PAGE>
MICROPOLIS CORPORATION
----------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
SEPTEMBER 29, 1995
------------------
(Unaudited)
NOTE 1. General
- -----------------
The accompanying condensed consolidated financial statements have not been
audited by independent auditors but, in the opinion of the Company, such
unaudited statements include all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the consolidated financial
position as of September 29, 1995, and the consolidated results of operations
for the three- and nine-month periods ended September 29, 1995 and September 30,
1994 and cash flows for the nine-month periods ended September 29, 1995 and
September 30, 1994. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. Nevertheless, the
Company believes that the disclosures in these financial statements are adequate
to make the information presented not misleading. Interim results are not
necessarily indicative of the results for the full fiscal year.
These condensed consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 30, 1994 filed with the Securities and Exchange Commission.
NOTE 2. Inventories
- --------------------
Inventories are stated at the lower of standard cost, which approximates
first-in, first-out, or market:
<TABLE>
<CAPTION>
September 29, December 30,
1995 1994
------------- ------------
<S> <C> <C>
Raw materials and purchased parts $ 11,608 $ 18,634
Work in process 27,053 20,771
Finished goods 15,129 17,341
-------- --------
$ 53,790 $ 56,746
======== ========
</TABLE>
NOTE 3. Loan Facility
- ----------------------
During the third quarter of 1995, the Company refinanced its existing term
loan facility used to finance the construction of its new factory in Singapore
with a new $21.5 million loan facility. The new loan facility is payable over
six years in monthly principal installments of $298,611 beginning April 1996,
bears interest at the Singapore Interbank Offered Rate (SIBOR) plus 2%, and is
collateralized by the new factory. In contrast to the previous term loan
facility, the new loan facility does not require a standby letter of credit and
requires no pledge of the Company's short term investments.
NOTE 4. Subsequent Event--10% Convertible Subordinated Notes
- ------------------------------------------------------------
During October 1995, the Company completed the private placement to a major
institutional investor of $20,000,000 aggregate principal amount of 10%
Convertible Secured Notes (the "Notes"), due October 15, 1998. The Notes are
convertible at the option of the holder into shares of Common Stock of the
Company at a conversion price of $6.00 per share, a premium to the market price
of the Company's Common Stock at the time of issuance. The Notes are senior to
the Company's existing 6% Convertible Subordinated Debentures due 2012 and
subordinate to certain senior debt. The Company has the option to redeem the
Notes, in whole or in part, at scheduled premium-to-par redemption prices, plus
accrued and unpaid interest, at any time prior to conversion or maturity.
Interest on the Notes is payable semi-annually on April 15 and October 15.
NOTE 5. Per Share Information
- ------------------------------
Loss per share is computed by dividing net loss by the weighted average
number of shares of common stock and applicable common stock equivalents
outstanding during the period. Primary and fully diluted loss per share are the
same.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Results of Operations
- ---------------------
Three Months Ended September 29, 1995 Compared to Three Months Ended September
- ------------------------------------------------------------------------------
30, 1994
- --------
Net sales decreased 26% to $58.8 million in the third quarter of 1995 as
compared to $79.3 million in the third quarter of 1994. OEM revenues declined
by 6% in the 1995 quarter as compared to the 1994 quarter and sales made by the
Storage Systems Division decreased by approximately 29%. During the third
quarter of 1995, the Company's OEM revenue declined due to reduced shipments to
certain large customers. The Company anticipated that such revenue reduction
would be offset by new OEM customers in qualification. However, the Company
experienced delays in such OEM qualifications and unexpected difficulties in the
manufacture of 3 1/2-inch disk drives, resulting in lost sales. The Company can
provide no assurance that such qualifications will materialize in the future.
Backlog as of September 29, 1995 was $17.9 million as compared to $24.3 million
as of June 30, 1995 and $58.2 million at September 30, 1994. The decline in
backlog from the previous quarter is the result of slow bookings, particularly
early in the quarter.
Cost of sales as a percent of sales increased to 95.8% in the third quarter
of 1995 from 85.6% in the third quarter of 1994 resulting in a gross margin of
4.2% in the 1995 quarter as compared to 14.4% in the 1994 quarter. The decrease
in margin during the third quarter of 1995 was a result of price declines in the
Company's Javelin family of drives, and the manufacturing difficulties resulting
in higher manufacturing and warranty costs.
Research and development expenses increased to 15.6% of sales in the third
quarter of 1995 as compared to 14.1% in the third quarter of 1994. The
percentage increase is the result of lower sales, offset by a decrease in
expense of $2.1 million. The decrease in expense was a result of the Company's
continuing cost containment efforts initiated in March 1995, and lower costs
associated with Tulip Memory Systems.
Selling, general and administrative expenses were 16.8% of sales in the
third quarter of 1995 as compared to 13.2% in the third quarter of 1994. The
percentage increase is the result of lower sales, offset by a decrease in
expense of $635,000. The decrease in expense was the result of the Company's
cost containment efforts initiated in March 1995. The cost containment efforts
resulted in a reduction in operating expenses of approximately $3.9 million in
the third quarter of 1995 as compared to the fourth quarter of 1994.
Interest expense was $1.3 million in the third quarter of 1995 (2.2% of
sales) which is comparable to the same period a year ago. Interest income was
$372,000 as compared to $555,000 in the third quarter of 1994, as a result of
lower cash equivalent and short-term investment balances.
As a result of the above, loss before income taxes was $17.4 million in
1995 as compared to $10.9 million in 1994. The Company's income tax provision
benefits from the tax holiday afforded the Company's Singapore operation, which
will remain in effect through August 2004. The income tax exemption in
Singapore had no impact in the third quarter of 1995 and had an effect of
approximately $654,000 and $.04 on net income and earnings per share,
respectively, as compared to income taxes at the maximum statutory rates in the
third quarter of 1994. Net loss for 1995 was $17.5 million compared to $10.9
million in 1994.
-6-
<PAGE>
Nine Months Ended September 29, 1995 Compared to Nine Months Ended September 30,
- --------------------------------------------------------------------------------
1994
- ----
Net sales decreased 29% to $169.8 million in 1995 as compared to $238.7
million in 1994. OEM revenues declined by 21% in 1995 as compared to 1994 and
sales made by the Storage Systems Division decreased by approximately 31%. The
decrease in revenues was primarily attributable to sharply lower orders than
anticipated in the distribution channel during the first quarter of 1995 for the
Company's SuperCapacity 4 GB 3 1/2-inch and 9 GB 5 1/4-inch drives. In
addition, a component problem, and other technical issues, effectively shut down
production of the Company's 2 GB 3 1/2-inch drive for most of the first quarter
of 1995. During the second quarter of 1995, the Company resumed full production
of its 2 GB 3 1/2-inch drives and met the increased demand for these drives and
its SuperCapacity 4 and 9 GB drives. During the third quarter of 1995, the
Company's OEM revenue declined due to reduced shipments to certain large
customers. The Company anticipated that such revenue reduction would be offset
by new OEM customers in qualification. However, the Company experienced delays
in such OEM qualifications and unexpected difficulties in the manufacture of 3
1/2-inch disk drives resulting in lost sales. The Company can provide no
assurance that such qualifications will materialize in the future. Overall
bookings for the first nine months of 1995 decreased by 45% from those in 1994
principally due to lower orders during the first and third quarters of 1995 for
the SuperCapacity 4 and 9 GB drives.
Cost of sales as a percent of sales increased to 95% in 1995 from 87% in
1994 resulting in a gross margin of 5% as compared to 13% in 1994. The decrease
in margin was the result of price declines in the Company's Javelin family of
drives, operating inefficiencies due to low volume production of the 2 and 4 GB
drives, and a provision for materials which were to have been used in production
of the 2 GB drives during the first quarter of 1995.
Research and development expenses increased to 19% of sales in 1995 as
compared to 13% in 1994. The percentage increase is the result of lower sales
and an increase in spending of $844,000. The increase in expenses were a result
of a provision of $2.3 million, primarily representing the recognition of the
Company's guarantee obligation under its agreement with Tulip Memory Systems,
and research and development on the Company's SuperCapacity 3 1/2-inch and 5
1/4-inch drives and subsystem products. This increase in expense during the
first quarter of 1995 was offset by savings from the Company's cost containment
efforts initiated in March 1995.
Selling, general and administrative expenses were 20% of sales in 1995 as
compared to 13% in 1994. The percentage increase is the result of lower sales
and an increase in expense of $1.1 million. The increase in expense was the
result of increased expenditures for advertising and sales promotion activities
for new products, costs associated with a work force reduction in the U.S. and
Europe completed in March 1995, and the retention of outside assistance to help
the Company in formulating and implementing its recovery plan, offset by savings
from the Company's cost containment efforts initiated in March 1995. The cost
containment efforts resulted in a reduction in quarterly operating expenses of
approximately $3.9 million from the fourth quarter of 1994.
Interest expense increased to $4.1 million in 1995 (2.4% of sales) as
compared to $3.8 million (1.6% of sales) in the same period a year ago,
primarily as a result of fees associated with the Company's Loan Facility
Agreement. Interest income decreased to $1.3 million in 1995 as compared to $1.6
million in 1994 as a result of lower cash equivalent and short-term investment
balances.
As a result of the above, loss before income taxes was $60.0 million in
1995 as compared to $35.5 million in 1994. The Company enjoyed an income tax
benefit of $1.1 million in 1995, primarily representing a refund of certain
foreign income taxes paid in a prior year. The Company's income tax provision
benefits from the tax holiday afforded the Company's Singapore operation, which
will remain in effect through August 2004. The income tax exemption in Singapore
had no impact for the first nine months of 1995 and had an effect
-7-
<PAGE>
of approximately $1.6 million and $.11 on net income and earnings per share,
respectively, as compared to income taxes at the maximum statutory rates for the
first nine months of 1994. Net loss for 1995 was $58.9 million compared to a
net loss of $35.5 million in 1994.
Liquidity and Capital Resources
- -------------------------------
Cash, cash equivalents and short-term investments decreased to $37.3
million as of September 29, 1995 from $63.2 million as of December 30, 1994.
Net cash used in operations of $25.0 million is primarily due to the Company's
net loss of $58.9 million and decrease in accounts payable and other accrued
liabilities of $4.1 million, offset by a reduction in accounts receivable of
$16.7 million, due principally to decreased sales in the third quarter of 1995
compared to the fourth quarter of 1994. Accounts payable and other accrued
liabilities decreased by $4.1 million from the fourth quarter of 1994 due to
decreased inventory receipts.
The Company's capital expenditures in the first nine months of 1995 were
$20.8 million as compared to $14.4 million in 1994. Capital expenditures
related primarily to the construction of a new manufacturing facility in
Singapore to replace the current leased facility and for equipment and tooling
to support new products. The new facility is expected to be completed in 1996.
The Company obtained a loan facility to fund the expenditures associated with
the construction of the building. The Company currently anticipates that its
1996 capital spending will be comparable to that of 1995 and will be used for
completion of construction of the new manufacturing facility and for equipment
and tooling required for the Company's new products.
During the second quarter of 1995, the Company obtained a 2-year extension
of its credit facility and reset the size of the facility to $25 million, down
from $33 million. The reduction in size of the facility is not expected to have
an impact on actual availability under the line over the next twelve months.
The availability under the facility is a function of the level of eligible
accounts receivable, warranty reserves and other factors. Borrowings are
secured by substantially all of the Company's assets. The amount available
under the facility as of November 3, 1995 was $8.6 million (of which $1.6
million is reserved for an outstanding standby letter of credit).
During October 1995, the Company completed the private placement to a major
institutional investor of $20,000,000 aggregate principal amount of 10%
Convertible Secured Notes (the "Notes"), due October 15, 1998. The Notes are
convertible at the option of the holder into shares of Common Stock of the
Company at a conversion price of $6.00 per share, a premium to the market price
of the Company's Common Stock at the time of issuance. The Notes are senior to
the Company's existing 6% Convertible Subordinated Debentures due 2012 and
subordinate to certain senior debt. The Company has the option to redeem the
Notes, in whole or in part, at scheduled premium-to-par redemption prices, plus
accrued and unpaid interest, at any time prior to conversion or maturity.
Interest on the Notes is payable semi-annually on April 15 and October 15.
The Company anticipates a loss for the fourth quarter, the size of which
will depend in significant measure on the level of orders received in the latter
half of the quarter which cannot be predicted with assurance. The Company also
plans to reduce its trade accounts payable, and expects to fund that cash use
with a reduction in inventories. Based on the foregoing, the Company anticipates
a modest increase in cash in the fourth quarter as compared to September 29,
1995 due primarily to the private placement of the Notes. While the Company
believes it has sufficient liquidity to meet its near term financial needs,
should fourth quarter revenues prove to be significantly lower than currently
anticipated, the Company may require additional financing. While the Company
currently believes such financing could be obtained from its present lenders or
other sources if needed, there can be no assurance as to the terms on which it
would be available, if at all.
-8-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
MICROPOLIS CORPORATION
----------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
a) On September 29, 1995,the Board of Directors of Micropolis
Corporation circulated to the Stockholders a Notice and Proxy
Statement For Action to be Taken by Written Consent In Lieu of a
Meeting of Stockholders. This Proxy Statement was furnished for
solicitation of the written consent of Stockholders to authorize
and approve amendments to the Stock Option Plan for Executive and
Key Employees of Micropolis and the Amended and Restated Stock
Option Plan for Independent Directors of Micropolis Corporation.
b) Matters voted on by written consent and votes cast on each matter
were as follows (the number of shares for which proxy cards were
not returned are shown as "Not Voted"):
. The Stockholders approved an amendment to the Stock
Option Plan for Executive and Key Employees of Micropolis
Corporation to increase the number of shares of Common Stock
authorized for issuance thereunder from 2,400,000 to
3,150,000.
For Against Abstain Not Voted
--- ------- ------- ---------
10,625,250 3,197,251 220,631 1,537,281
. The Stockholders approved an amendment to the Amended and
Restated Stock Option Plan for Independent Directors of
Micropolis Corporation to add a provision for the automatic
granting of options to purchase 20,000 shares of Common Stock
when a Director who is not an employee or affiliate of the
Company initially is appointed to the position of Vice-
Chairman of the Board.
For Against Abstain Not Voted
--- ------- ------- ---------
12,354,282 1,475,475 213,375 1,537,281
-9-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
--------
4.3 Amendment No. 1 to Rights Agreement.
10.48* Employment Agreement between Micropolis Corporation and
J. Larry Smart.
10.49 Loan Agreement between Micropolis Limited and ST Capital
Limited, and related Guarantee Agreement between Micropolis
Corporation and Singapore Technologies Construction PTE LTD.
10.50* Consulting Agreement between Micropolis Corporation and
Chriss Street & Company
*Management contract or compensatory plan or arrangement required to be
filed as an Exhibit to the Form 10-Q Report pursuant to Item 6 (a).
b) Reports on Form 8-K
-------------------
No report on Form 8-K has been filed during the quarter for which this
report is filed.
-10-
<PAGE>
SIGNATURES
----------
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, on November 10, 1995.
MICROPOLIS CORPORATION
By /s/ J. Larry Smart
------------------------------------
J. Larry Smart
President and Chief Executive Officer
By /s/ Barbara V. Scherer
------------------------------------
Barbara V. Scherer
Vice President - Finance,
Chief Financial Officer and Treasurer
-11-
<PAGE>
Exhibit 4.3
AMENDMENT NO. 1
TO RIGHTS AGREEMENT
AMENDMENT NO. 1 (the "Amendment"), dated as of October 3. 1995, to
the Rights Agreement, dated as of May 18, 1989 (the "Rights Agreement"), between
Micropolis Corporation, a Delaware corporation (the "Company"), and First
Interstate Bank of California, as rights agent (the "Rights Agent").
WHEREAS, at a meeting of the Board of Directors of the Company (the
"Board") held on October 3, 1995, the Board considered the operation of the
Rights Agreement should the Company enter into a proposed transaction in which
the Company would issue $20 million aggregate principal amount of a newly
created series of Convertible Secured Notes (the "Convertible Notes") to an
investor pursuant to a proposed note agreement (the "Note Agreement");
WHEREAS, the investor has indicated that as a precondition to
purchasing the Convertible Notes, the investor would require that the Company
take all action necessary to ensure that no holder of such Convertible Notes or
the shares of the Company's Common Shares (as such term is defined in the Rights
Agreement) to be issued upon the conversion of any Convertible Notes will be
deemed an "Acquiring Person" under the Rights Agreement by virtue of entering
into the Note Agreement or holding or acquiring any Convertible Notes (or Common
Shares issued on conversion of such Convertible Notes) issued thereunder;
WHEREAS, the Board has determined that amendment of the Rights
Agreement to ensure that no such holder will be deemed an Acquiring Person is in
the best interests of the Company and its stockholders and has authorized such
an amendment;
<PAGE>
WHEREAS, the Company and the Rights Agent desire to amend the
Rights Agreement, as authorized by Section 26 of the Rights Agreement, by
altering, adding and deleting the provisions set forth herein in the manner set
forth below; and
WHEREAS, the parties have complied with or satisfied all conditions
necessary to the amendment of the Rights Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions.
-----------
All terms used herein as defined terms which are not defined in
this Amendment shall have the meanings ascribed to them in the Rights Agreement.
SECTION 2. Amendment to Rights Plan.
------------------------
(a) Section 1(a) of the Rights Agreement shall be deleted in its
entirety and replaced by a new Section 1(a), which shall read as follows:
(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person, shall be
the Beneficial Owner (as such term is hereinafter defined) of 20% or more
of the Common Shares of the Company then outstanding but shall not include
the Company, any Subsidiary of the Company or any employee benefit plan of
the Company or of any Subsidiary of the Company or any entity holding
shares of capital stock of the Company for or pursuant to the terms of any
such plan, in its capacity as an agent or trustee for any such plan.
Notwithstanding anything to the contrary in the foregoing, for purposes of
this Agreement and the definition of Acquiring Person, no Person shall be
deemed to be the Beneficial Owner of, or to beneficially own, securities
which such Person or any of such Person's Affiliates or Associates may
acquire, does or do acquire or may be deemed to have the right to acquire,
pursuant to (a) any Note Agreement or (b) any Convertible Notes or (c) any
Common Shares issued or issuable on conversion of any Convertible Notes.
"Note Agreement" shall mean any agreement approved by resolution of the
Board entered into after the date of Amendment No. 1 to this Agreement
between the Company and Lindner Dividend Fund, A Series of Lindner
Investments, a Massachusetts business trust, relating to the issuance of a
newly created series of Convertible Notes. "Convertible Notes" shall mean
any debt securities convertible into
<PAGE>
Common Shares which are issued by the Company after the date of Amendment
No. 1 to this Agreement pursuant to any Note Agreement.
SECTION 3. Miscellaneous. This Amendment may be executed in
-------------
one or more counterparts, each of which shall be deemed to be an original, but
all of which taken together shall constitute one and the same agreements. This
Amendment shall be governed by any interpreted in accordance with the laws of
the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Company and the Rights Agent have caused
this Amendment to be executed as of the date and year first above written.
COMPANY
-------
MICROPOLIS CORPORATION
Attest:
By: /s/ Vivien Avella By: /s/ B. V. Scherer
------------------------------ -------------------------
Name: Vivien Avella Name: B. V. Scherer
Its: Manager, Banking & Finance Its: Assistant Secretary
RIGHTS AGENT
------------
FIRST INTERSTATE BANK OF
CALIFORNIA
Attest:
By: /s/ Sharon Knepper By: /s/ Ronald Lug
------------------------------ -------------------------
Name: Sharon Knepper Name: Ronald Lug
Its: Vice President Its: Vice President
<PAGE>
Exhibit 10.48
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is made and entered into effective July 10,
1995 by and between Micropolis Corporation ("Company") and J. Larry Smart
("Executive").
RECITALS
--------
WHEREAS, the Company wishes to appoint Executive, currently a Director
of the Company, to the position of Chief Executive Officer of the Company; and
WHEREAS, Executive wishes to become the Company's Chief Executive
Officer; and
WHEREAS, the parties have entered into a Letter of Intent dated July
10, 1995 setting forth certain terms of that employment relationship; and
WHEREAS, the parties now wish to document the employment relationship
in a more formal and definitive fashion,
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Title and Duties. Executive shall hold the position of Chief
----------------
Executive Officer ("CEO"), reporting directly to the Board of Directors.
Executive shall be responsible for all of the duties and services normally
performed or provided by a CEO, in accordance with the Company's by-laws and
such directives and instructions as Executive may receive from time to time from
the Company's Board of Directors.
2. Outside Business Activities Precluded. During his employment,
-------------------------------------
Executive shall devote his full energies, interest, abilities and productive
time to the performance of his duties under this Agreement and shall not,
without the prior written consent of the Company, render to others services of
any kind for compensation or engage in any other business activity that would
materially interfere with the performance of his duties under this Agreement,
except as listed in Appendix A.
3. Compensation. Executive shall be paid a base salary of $6,731
------------
per week, in accordance with the Company's normal payroll practices and
procedures.
4. Term. The effective date of this Agreement is July 10, 1995.
----
This Agreement shall be terminated immediately upon Executive's death or
disability, or for Executive's willful breach of this Agreement, or habitual
neglect of his duties hereunder ("Cause"). Either the Company or Executive may
terminate this Agreement at any time and for any reason or no reason, upon
thirty (30) days' written notice to the other. The Company's obligation to pay
Executive compensation shall terminate upon the termination of this Agreement,
except that if Executive is terminated without Cause during the first 120 days
of this Agreement, he shall receive his base salary for the remaining portion
of that 120-day period.
<PAGE>
5. Post-Employment Consulting. In the event Executive resigns or is
--------------------------
terminated without Cause, he will, at the Company's option, continue to serve
the Company as an independent contractor consultant for a period of eight (8)
months for a fee of $1,000 per month.
6. Benefits. Executive shall be eligible to participate in all of
--------
the benefits and benefit programs generally available to employees and senior
executives of the Company pursuant to the terms of the applicable policies or
plan documents.
7. Incentive Stock Options. The Company will recommend to the
-----------------------
Compensation Committee of the Company's Board of Directors that Executive be
granted, effective July 5, 1995, incentive stock options to purchase up to
350,000 shares of the Company's common stock, at an exercise price equal to the
stock's fair market value as of the date such options are granted by the
Company's Compensation Committee, pursuant to the Stock Option Plan for
Executive and Key Employees of Micropolis Corporation, to be vested over three
(3) years in three (3) equal installments of 166,666 1/3 shares on each of the
first three (3) anniversaries of this Agreement, if Executive is either employed
by the Company at that time or performing services for the Company as an
independent contractor consultant, pursuant to paragraph 5 of this Agreement, In
the event that the common stock of the Company closes at the average trading
price of $11 5/8 or more on the NASDAQ exchange for five (5) or more consecutive
trading days while Executive is employed prior to the third anniversary of this
Agreement, the Compensation Committee shall authorize the immediate vesting of
any incentive stock options that have not yet vested pursuant to this paragraph.
If 33 1/3% or more of the voting power of the fully diluted common stock of the
Company is acquired by a "third party," all the unexpired incentive stock
options granted the Executive pursuant to this paragraph to which Executive
would otherwise be entitled will immediately vest.
8. Cash Bonus. For calendar year 1996 and thereafter, the Company's
----------
Board of Directors shall develop a long-term cash bonus program for Executive
that will be based on 70% objective evaluation and 30% subjective evaluation.
Prior to the development of a long-term cash bonus program and for the remainder
of calendar year 1995, Executive may be eligible for a cash bonus of 50% of base
salary should the Company report break-even operating results before interest
and taxes in the Company's fourth calendar quarter ending December 31, 1995.
Furthermore, prior to the development of a long-term cash bonus program and for
the remainder of calendar year 1995, Executive may be eligible for a cash bonus
of 25% of base salary if a majority of the Company's Board of Directors
determines, in its sole discretion, that the Company's operations have improved
substantially, even if the Company was unable to achieve break-even results in
the fourth calendar quarter ending December 31, 1995, based on the criteria set
forth below.
Key Objectives: . Restructure and/or reinvigorate current staff
. Substantially improve OEM base
. Bring Tomahawk to Evaluation Stage
. Grow SSD and VOD into successful business
Executive must be employed by the Company to be eligible for payment of a bonus.
9. Reimbursement of Expenses. The Company shall reimburse Executive
-------------------------
for actual and reasonable business expenses incurred in connection with
performance of his duties, subject to the Company's policies and procedures. The
Company shall provide a San Jose office set-up for
2
<PAGE>
Executive and shall pay for reasonable, business travel incurred to perform
Executive's business duties.
10. Arbitration of Disputes. The Company and Executive agree that
-----------------------
any and all disputes concerning this Agreement or his employment by the Company
shall be submitted to final and binding arbitration to be conducted according to
the Commercial Arbitration Procedures of the American Arbitration Association.
Such arbitration may be compelled and enforced according to the California
Arbitration Act, C.C.P. (S) 1280, et seq. If any party to this Agreement brings
an action to enforce or declare his/its rights hereunder, the prevailing party
shall be entitled to recover his/its costs and expenses, including reasonable
attorneys' fees, incurred in connection with such action.
11. Ancillary Agreement. Executive shall sign and comply with the
-------------------
Company's standard form Assignment of Inventions and Confidential Information
Agreement and any other agreements generally applicable to the Company's
employees.
12. Competitive Activities. During the term of this Agreement,
----------------------
Executive shall not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
or in any other individual or representative capacity, engage or participate in
any business that is in competition in any manner whatsoever with the business
of the Company, nor shall he, for himself or for any other person or entity,
call on, solicit, entice or make known to any other organization or firm the
names of customers or employees of the Company for the purposes of competing
with the Company, or otherwise interfere with the Company's operations.
13. Confidentiality and Non-Disclosure of Proprietary Information.
-------------------------------------------------------------
Executive acknowledges that the Company holds as confidential certain
information and knowledge respecting the intimate and confidential affairs of
the Company in the various phases of its business, including, but not limited
to, trade secrets, marketing plans, forecasts, and customer lists ("Proprietary
Information"). Executive agrees as follows:
a. All Proprietary Information shall be the sole property of
the Company and its assigns at all times. Both during the term of this
Agreement and after its termination, Executive agrees that he will keep all
Proprietary Information in confidence and will not use or disclose any
Proprietary Information or anything related to it without the prior written
consent of the Company, except as required in the ordinary course of
performing his duties as Executive.
b. Upon the termination of this Agreement, or at the Company's
written request at any time, Executive agrees to return all written
Proprietary Information to the Company, including all copies and
photocopies of such documents.
14. General Provisions.
------------------
14.1 Notices. Any notice, request, demand, or other
-------
communication required or permitted hereunder shall be deemed to properly given
when personally served in writing, when deposited in the United States mail,
postage pre-paid, or when communicated to a public telegraph company for
transmittal, addressed to the Company or Executive at his or its last known
address. Each party may change his or its address by written notice in
accordance with this paragraph.
3
<PAGE>
14.2 Applicable Law. This Agreement is made and is to be
--------------
governed by and construed under the laws of the State of California.
14.3 Captions and Paragraph Headings. Captions and paragraph
-------------------------------
headings as used herein are for convenience only and are not part of this
Agreement and shall not be used in construing it.
14.4 Severability. The provisions of this Agreement ace
------------
severable. If any provision of this Agreement shall be held to be invalid or
otherwise unenforceable, in whole or in part, the remainder of the provisions or
enforceable parts hereof shall not be affected thereby and shall be enforced to
the fullest extent permitted by law.
14.5 Benefit of Agreement. This Agreement shall inure to the
--------------------
benefit of and be binding upon the parties hereto and their respective
executors, administrators, successors and assigns; provided, however, that
Executive may not assign any of his rights or duties hereunder except upon the
prior written consent of the Board of Directors of the Company.
14.6 Entire Agreement. This Agreement contains the entire
----------------
agreement of the parties, and except as expressly stated herein supersedes any
and all other agreements, whether oral or in writing, between the parties
hereto with respect to the employment of the Executive by the Company. Each
party to this Agreement acknowledges that no representations, inducements,
promises, or agreements, oral or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein, and that no
other agreement, statement or promise not contained in this Agreement shall be
valid or binding. This Agreement may not be modified or amended by oral
agreement, but only by an agreement in writing signed by the Chairman of the
Board on the one hand and by Executive on the other. If Executive becomes
Chairman of Board, any modifications or amendments to this Agreement must be by
an agreement ratified by a majority of the Board of Directors or signed by the
Chairman of the Compensation Committee.
MICROPOLIS CORPORATION
/s/ J. Larry Smart By: /s/ Chriss W. Street
- --------------------------- ----------------------------------
J. Larry Smart Name
Dated: July 10, 1995 Chairman of the Compensation Committee
--------------------------------------
Title
Dated: July 10, 1995
4
<PAGE>
Exhibit A
Southwall Technologies Chairman BOD Consultant
Western Micro Tech Member BOD* Consultant
Wireless Access Member BOD* Consultant
*Invitation extended and accepted contingent upon upcoming BOD approval.
<PAGE>
EXHIBIT 10.49
DATED THE DAY OF 1995
======================================================
Between
MICROPOLIS LIMITED
("the Borrower")
And
ST CAPITAL LIMITED
("the Lender")
_____________________________________________
LOAN AGREEMENT
_____________________________________________
DREW & NAPIER
Advocates & Solicitors
20 Raffles Place #17-00
Ocean Towers
Singapore 0104
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
CLAUSE HEADING PAGE
- ------ ------- ----
<S> <C> <C>
1. INTERPRETATION..................................................... 1
2. PURPOSE AND USE OF THE FACILITY.................................... 5
3. CONDITIONS PRECEDENT............................................... 5
4. DRAWINGS........................................................... 6
5. INTEREST........................................................... 7
6. PREPAYMENT......................................................... 7
7. PREPAYMENT......................................................... 8
8. FEES............................................................... 8
9. CHANGE IN CIRCUMSTANCES............................................ 8
10. TAXES AND WITHHOLDINGS............................................. 9
11. PAYMENT PROVISIONS................................................. 10
12. SEPARATE ACCOUNT AND SET-OFF....................................... 11
13. REPRESENTATIONS AND WARRANTIES..................................... 12
14. NEGATIVE COVENANTS................................................. 15
15. POSITIVE COVENANTS................................................. 16
16. DEFAULT IN PAYMENT OF EXPENSES..................................... 19
17. EVENTS OF DEFAULT.................................................. 19
18. INDEMNITIES........................................................ 23
19. THE LENDER NOT ANSWERABLE FOR LOSS................................. 24
20. WAIVER NOT TO PREJUDICE RIGHT OF LENDER............................ 24
21. COMMUNICATIONS..................................................... 24
22. EXPENSES AND STAMP DUTY............................................ 25
23. REMEDIES, WAIVERS AND AMENDMENTS................................... 25
24. RIGHT OF CONSOLIDATION............................................. 25
25. SUCCESSORS AND ASSIGNS............................................. 26
26. COVENANT FOR FURTHER ASSURANCE..................................... 26
27. INCONSISTENCY/CONFLICT............................................. 26
28. SEVERABILITY....................................................... 27
29. GOVERNING LAW AND JURISDICTION..................................... 27
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE
- --------
<S> <C>
1. CONDITIONS PRECEDENT............................................... 28
2. NOTICE OF DRAWING.................................................. 30
</TABLE>
<PAGE>
THIS AGREEMENT is made the day of One
--------------
thousand nine hundred and ninety-five (1995) Between: -
(1) MICROPOLIS LIMITED, a company incorporated in the Cayman Islands and
------------------
having a registered office in Singapore at 5004 Ang Mo Kio Avenue 5 #01-1,
Singapore 2056 (hereinafter called "the Borrower") of the one part; and
(2) ST CAPITAL LIMITED, a company incorporated in the Republic of Singapore
------------------
and having its registered office at 79 Robinson Road #22-00, CPF Building,
Singapore 0106 (hereinafter called "the Lender") of the other part.
WHEREAS: -
--------
(1) The Lender has agreed at the request of the Borrower and the Guarantor (as
hereinafter defined), to extend and continue to extend to the Borrower on the
terms and conditions herein contained a loan facility in an amount not exceeding
in the aggregate United States Dollars Twenty-One Million Five Hundred Thousand
(US $21,500,000.00).
(2) The said loan facilities shall be secured, inter alia, by: -
(a) an assignment of all rights, title, interest and benefits of the
Borrower in the Building Agreement (as hereinafter defined) and a first
legal mortgage of the Property (as hereinafter defined); and
(b) an assignment of all rights, title, interest and benefits of the
Borrower in the Building Contract (as hereinafter defined).
NOW IT IS HEREBY AGREED as follows: -
-----------------------
1. INTERPRETATION
--------------
(1) Definitions: In this Agreement, except to the extent that the context
-----------
requires otherwise: -
"Architect" means the architect engaged or any substitute architect for the
---------
time being engaged by the Borrower as the architect for the Project;
"Assignment of Building Agreement" means the deed executed or to be
--------------------------------
executed (as the context may require) by the Borrower in favour of the
Lender assigning all the Borrower's rights title interest and benefits in
under or arising out of the Building Agreement and the said deed as
amended, supplemented or modified from time to time;
"Assignment of Building Contract" means the deed executed or to be
-------------------------------
executed (as the context may require) by the Borrower in favour of the
Lender assigning all the Borrower's rights title interest and benefits in
under or arising out of the Building Contract and the said deed as
amended, supplemented or modified from time to time;
"Availability Period" means the period commencing from the date hereof
-------------------
and ending on whichever shall be the earlier of: -
(a) 9th June 1996 or the date of issuance of TOP, whichever is the earlier;
<PAGE>
2
(b) the day on which the Facility is fully drawn and/or cancelled, or
(c) the obligations of the Lender to make the same available shall
cease pursuant to Clause 9 or Clause 17;
"Building Agreement" means the Building Agreement dated 28th February 1995
-------------------
made between JTC and the Borrower in respect of the Property, and the said
agreement as amended, supplemented or modified from time to time;
"Building Contract" means the agreement dated 20th June 1994 made between
-----------------
the Borrower and STCPL substantially on a fixed price basis in such amount
as may be approved by the Lender in writing in respect of the construction
of the Project (including the piling works) and the same as amended,
supplemented or modified from time to time;
"Business Day" means a day on which (a) dealings in US Dollar deposits may
------------
be dealt in on the Singapore interbank market, (b) commercial banks and
foreign exchange markets are open in Singapore and New York (but excludes
Saturdays and Sundays) and (c) if on that day a payment or transfer of funds
is to be made under this Agreement in US Dollars, commercial banks are open
for business in New York City and Singapore;
"Construction Contracts" means the Building Contract and all contracts from
----------------------
time to time entered into by the Borrower for the designing, construction,
equipping, fitting out and completion of the Project, including any
amendment modification and supplemental to any such contracts;
"Construction Costs" means the construction costs pertaining to the
------------------
construction of the Project including professional and administrative fees
related to the construction of the Project;
"Cost Overrun" means, at any relevant date, the amount by which the
------------
aggregate cost of work completed to such date and the cost of work required
to be done to complete the Project exceeds the amount provided in the
document delivered by the Borrower under item 17 of Schedule 1;
"Default Interest" means interest at the per month rate of 1.5% above the
----------------
Lender's cost of funds;
"Dollars" and the symbol "$" mean the legal currency of the Republic of
------- -
Singapore;
"Drawing" means the drawing made or to be made (as the context may require)
-------
by the Borrower under the Facility;
"Event of Default" means any of the events of default described in Clause
----------------
17(1);
"Facility" means the term loan facility in an amount not exceeding US
--------
Dollars Twenty-One Million Five Hundred Thousand (US $21,500,000.00)
extended or to be extended (as the context may require) by the Lender to the
Borrower on the terms and conditions of this Agreement;
<PAGE>
3
"Facility Letter" means the offer of the Facility made by the Lender to the
---------------
Borrower as set out in a letter dated 9th June 1995 from the Lender to the
Borrower;
"First Repayment Date" means the date falling twelve (12) months
--------------------
immediately following the date of first drawdown of the Facility or upon
receipt of TOP, whichever shall be the earlier;
"Guarantee" means the corporate guarantee executed or to be executed (as
---------
the context may require) by the Guarantor in favour of the Lender as
security for the Total Indebtedness and the said guarantee as amended,
supplemented or modified from time to time;
"Guarantor" means MICROPOLIS CORPORATION, a corporation duly incorporated
---------
in the State of Delaware, USA and qualified to do business in the State of
California, USA;
"JTC" means the JURONG TOWN CORPORATION, a body corporate incorporated
---
under the Jurong Town Corporation Act and its successors and assigns;
"Land" means all that land-known as Private Lot A14269 forming part of
----
Government Survey Lots 7634, 9419, 10979 and 12500 of Mukim 18, Ang Mo Kio
and situated in the Republic of Singapore as shown edged red on the plan
annexed to the Building Agreement and estimated to contain an area of 17,930
square metres more or less subject to survey;
"Lease" means the instrument of lease executed or to be executed (as the
-----
context may require) by JTC in favour of the Borrower pursuant to the
Building Agreement, and the said instrument as amended, supplemented or
modified from time to time;
"Loan" means the aggregate principal amount of the Facility drawndown and
----
for the time being outstanding;
"Margin" means two per cent. (2%);
------
"Mortgage" means the first legal mortgagee executed or to be executed (as
--------
the context may require) by the Borrower in favour of the Lender in respect
of the Property as security for the Total Indebtedness, and the said
document as amended, supplemented, varied or modified from time to time;
"Notice of Drawing" means a notice of drawing given by the Borrower
-----------------
pursuant to Clause 4 (1);
"Potential Event of Default" means any event or circumstance which, if it
--------------------------
continued after the giving of any notice, the expiry of any grace period,
and/or (as the case may be) the making of any determination by the Lender,
provided for in Clause 17(1), would become an Event of Default;
"Project" means the factory building constructed or to be constructed on
-------
the Land in accordance with (1) the planning approval issued by the Deputy
Director (Development and Building Control) Public Works Department and such
amendments thereto made from time to time by the competent authority and (2)
the Building Contract;
<PAGE>
4
"Property" means the Land together with the buildings erected or to be
--------
erected thereon;
"Proprietary Nature" means in relation to any information pertaining to
------------------
trademarks, tradenames, trade secrets and all other product processes in
connection with the Borrower's business;
"Quantity Surveyor" means the quantity surveyor appointed for the Project;
-----------------
"Security Documents" means the Assignment of Building Agreement, the
------------------
Mortgage, the Assignment of Building Contract, the STCPL Undertaking and any
and every other document from time to time executed to secure, inter alia,
the obligations of the Borrower under this Agreement and includes any of the
said documents as amended, supplemented or modified from time to time;
"SIBOR" means the rate of interest at which prime banks in Singapore are
-----
offered US Dollar deposits in an amount comparable to the Drawings or the
Loan as the case may be for a term of one (1) month in the Singapore
interbank market at or about 11:00 a.m. on the Second Business Day before
the first day of that interest period;
"STCPL" means SINGAPORE TECHNOLOGIES CONSTRUCTION PTE LTD, a company
-----
incorporated in Singapore and having its registered office at 9 Bishan Place
#08-00 Junction 8, Singapore 2057 and includes its successors and assigns;
"STCPL Security Documents" means
------------------------
(a) the second deed of assignment executed or to be executed (as the
context may require) by the Borrower in favour of STCPL assigning all the
Borrower's rights title interest and benefits in under or arising out of the
Building Agreement and the said deed as amended, supplemented or modified
from time to time;
(b) the second legal mortgage executed or to be executed (as the context
may require) by the Borrower in favour of STCPL in respect of the Property
as security for the Secured Debt as therein defined, and the said document
as amended, supplemented, varied or modified from time to time;
"STCPL Undertaking" means the deed of undertaking executed or to be
-----------------
executed (as the context may require) by STCPL and the Lender and the same
as amended, supplemented, modified or substituted from time to time;
"TOP" means the temporary occupation permit issued or to be issued by the
---
competent authority in respect of the Project;
"Total Indebtedness" means the sum total of the Borrower's liabilities to
------------------
the Lender arising out of or in connection with the Facility including
interest, commission and all charges payable in respect of the Facility and
all sums due hereunder and under the Security Documents at any given time;
<PAGE>
5
"US Dollars" and the symbol "US$" mean the lawful currency of the United
----------
States of America;
"USA" means the United States of America; and
---
"Valuation Report" means a valuation report addressed to the Lender valuing
----------------
the market value of the Property at the relevant time, in form and substance
satisfactory to the Lender, prepared by a valuer acceptable to the Lender.
(2) Miscellaneous Construction: The headings in this Agreement are inserted
--------------------------
for convenience only and shall be ignored in construing this Agreement. Unless
the context requires otherwise, words denoting the singular number only shall
include the plural and vice versa and words importing the masculine gender only
include the feminine and neuter gender.
Any reference to a "time of the day" is to Singapore time unless otherwise
---------------
stated. References to a statute shall be deemed to be references to that
statute as from time to time amended or re-enacted. References to "Schedules"
---------
and "Clauses" are to be construed as references to schedules to and clauses of
-------
this Agreement.
2. PURPOSE AND USE OF THE FACILITY
-------------------------------
(1) Availability of Facility: Subject to the terms and conditions herein
------------------------
contained and in particular those of Clause 3, the Borrower and the Guarantor
have requested the Lender and the Lender has agreed to make available and
continue to make available to the Borrower the Facility for the purposes herein
stated.
(2) Purpose: The Facility shall be utilised by the Borrower only for
-------
financing the development of the Project.
3. CONDITIONS PRECEDENT
--------------------
Subject to the terms and conditions herein contained, the Facility will
become available to the Borrower when the following conditions have been
satisfied;
(1) Receipt of Documents: The Lender has received documents appearing to it
--------------------
to comply with the requirements of Schedule 1A and has found them
satisfactory.
(2) Other Conditions: Upon the following conditions being satisfied:
-----------------
(a) that all acts, conditions and things required to be done and
performed and to have happened precedent to the execution and delivery
of this Agreement, the Security Documents and the Guarantee and to
constitute the same legal, valid and binding obligations enforceable in
accordance with their respective terms, shall have been done and
performed and have happened in due and strict compliance with all
applicable laws;
(b) that all costs and expenses (including legal fees) payable in
connection with this Agreement, the Security Documents and the Guarantee
have been paid;
<PAGE>
6
(c) that there is no material adverse change in (i) the financial
condition of the Borrower, the Guarantor and STCPL; (ii) the operating
environment and management of the Borrower, the Guarantor and STCPL; or
(iii) the Property;
(d) that no Event of Default or Potential Event of Default has occurred
and is continuing;
(e) there has been no change in the shareholding of the Borrower since
the date hereof;
(f) the Lender being satisfied that there are no legal proceedings,
suits or actions of any kind levied or commenced upon the Borrower or
the Guarantor (collectively "legal proceedings") or that if there are
legal proceedings, against the Borrower or the Guarantor, the Lender is
satisfied that such legal proceedings will not materially affect the
ability of the Borrower or the Guarantor to perform its obligations
under this Agreement, the Security Documents and the Guarantee,
respectively; and
(g) the Lender being satisfied that the Borrower is the sole beneficial
owner of the property and that title to the Property is in order.
4. DRAWINGS
--------
Subject to the terms and conditions contained in this Agreement, and in
particular to all conditions precedent under Clause 3 being complied with, the
Borrower may at any time during the Availability Period drawdown the Facility as
follows: -
(1) Notice of Drawing: The Borrower shall give the Lender not less than two
-----------------
(2) Business Days' prior notice of drawing, the date of drawing to be a
Business Day, and such notice shall be substantially in the form of Schedule
2 duly completed by the Borrower Provided Always that on both the date of
the Notice of Drawing and the date of the proposed drawdown no Event of
Default or Potential Event of Default shall have occurred which remains
unwaived.
(2) Supporting Documents: Every Notice of Drawing given pursuant to sub-
---------------------
Clause (1) above shall be supported by the following documents: -
(a) the Architect's certificate or the invoices issued by STCPL in
connection with the construction of the Project and/or all other
invoices or bills pertaining to any Construction Costs approved by the
Lender;
(b) evidence satisfactory to the Lender that there are no Cost Overruns
or that all Cost Overruns have been paid by the Borrower into an account
designated by the Lender for such purpose;
(c) all such approvals and documents as may be required by and satisfactory
to the Lender in support of the required Drawing.
(3) Limit of Each Drawing: Each Drawing shall be in an amount not exceeding
---------------------
100% of the amount due on the relevant Architect's certificate or the
invoices and bills referred to in Clause 4(2)(a) and shall be in an amount
of not less that US Dollars Five Hundred Thousand (US$500,000.00) or in such
other amounts as may be agreed to or prescribed by the Lender.
<PAGE>
7
(4) Notice Irrevocable: Every Notice of Drawing shall be effective only on
------------------
receipt by the Lender and shall be irrevocable and the Borrower shall be
bound to borrow and draw in accordance with the notice. Thereafter, in
addition to the other remedies of the Lender hereunder, the Borrower shall
have full liability and accountability for any costs incurred by the Lender
resulting from the failure of the Borrower to effect the Drawing or a
failure to satisfy the conditions for such Drawing, including but not
limited to losses from re-employment of funds obtained from the Drawing at
rates lower than the cost of such funds.
(5) Cancellation of Undrawn Amounts: Principal amounts of the Facility not
--------------------------------
drawndown by the expiry of the Availability Period shall be deemed to be
cancelled and shall not be reinstated unless an extension of time thereof
shall have been previously agreed to in writing by the Lender, which the
Lender may do at its absolute discretion and upon such terms and conditions
as the Lender may deem fit to impose.
5. INTEREST
--------
(1) Interest on Loan: The Borrower shall pay interest on the Loan at the per
-----------------
annum rate determined by the Lender to be the aggregate of the Margin and one
(1) month's SIBOR from time to time. Interest on the Loan shall be payable
monthly in arrears and be calculated and accrue daily on the number of days
elapsed over a 360-day year.
(2) Alternative Interest Rate: If the Lender shall at any time reasonably
-------------------------
determine that for any reason adequate and reasonable means do not exist for the
purpose of ascertaining or determining SIBOR for such interest period, the
Lender shall negotiate in good faith with a view to agreeing upon a mutually
acceptable alternative basis for determining such interest rate. If, within such
period as the Lender shall consider to be reasonable, such period being not less
than thirty (30) days from the date of the aforesaid notice to the Borrower, the
Borrower and the Lender are unable to agree upon such alternative basis for
determining such interest rate, then the Lender shall have the right upon giving
thirty (30) days' notice to the Borrower to require the Borrower to repay the
whole of the Loan as at the expiry of the said notice, with interest thereon at
such fair and reasonable rate as shall be certified by the Lender. Where the
Lender and the Borrower agree upon a mutually acceptable alternative basis for
determining the interest rate from time to time, all references to interest rate
and SIBOR in this Agreement shall be deemed to be a reference to the interest
rate so determined on such alternative basis.
(3) Default Interest: If the Borrower does not pay any sum payable hereunder
----------------
when due, it shall on demand pay Default Interest (both before and after
judgment) on the amount from time to time outstanding in respect of that
overdue sum for the period beginning on its due date and ending on the date of
its receipt by the Lender. Any interest which is not paid on demand shall be
added to the overdue sum and itself bear interest on monthly rest accordingly.
6. REPAYMENT
---------
The Borrower hereby covenants and undertakes with the Lender to repay the
Loan in seventy-two (72) principal instalments. The first of such repayment
instalment of US Dollars Two Hundred and Ninety-Eight Thousand Six Hundred and
Nineteen (US$298,619.00) shall be repaid together with interest thereon, on the
First Repayment Date and the subsequent seventy-one (71) repayment instalments
of US Dollars Two Hundred and Ninety-Eight Thousand Six Hundred and Eleven
(US$298,611.00) each, shall be repaid together with interest thereon at monthly
intervals thereafter.
<PAGE>
8
7. PREPAYMENT
----------
The Borrower may prepay the Loan in whole or in part by giving the Lender
not less than three (3) months' prior notice or upon payment to the Lender three
(3) months' interest in lieu of such notice, together with accrued interest
thereon calculated up to the date of prepayment and any other sum due hereunder,
subject to the following conditions: -
(1) Prepayment Premium: The Borrower shall pay a prepayment fee of 0.5%
--------------------
flat on all amounts prepaid. Such fee shall be paid on the date of the
intended prepayment.
(2) Partial Prepayment: Where only a part of the Loan is to be prepaid,
------------------
such prepayment shall be a sum of not less than US Dollars Five Hundred
Thousand (US $500,000.00) or an integral multiple thereof and shall be
applied in or towards repayment and satisfaction of the Loan in the inverse
order of maturities. No partial prepayment of the Loan shall relieve the
Borrower of its obligations under this Agreement except to the extent of the
amount prepaid (plus the amount of all previous prepayments, if any).
(3) No Re-Borrowing: Amounts repaid or prepaid may not be reborrowed or
---------------
redrawn or exchanged.
(4) Notice Irrevocable: Any notice of prepayment given by the Borrower
------------------
under this Agreement will oblige the Borrower to prepay in accordance with
that notice. Notice of prepayment once having been received shall be
irrevocable and binding on the Borrower.
8. FEES
----
(1) Cancellation Fees: The Borrower may at any time cancel all or part of the
-----------------
Facility by giving to the Lender not less than fourteen (14) days' prior written
notice and paying to the Lender a cancellation fee of 0.5% flat on the amount so
cancelled on expiry of the said notice. A cancellation fee of 0.5% flat shall
also be payable on any part of the Facility not drawn by the Borrower by the
last day of the Availability Period, and such cancellation fee shall be paid on
such last day. The aggregate amount of the Facility will, with effect from the
date of such notice or expiry of the Availability Period (as the case may be) be
reduced to the extent of the amount so cancelled and shall not thenceforth be
available to the Borrower.
(2) Commitment Fee: The Borrower shall pay to the Lender a commitment fee of
--------------
0.2% per annum on the undrawn portion of the Facility payable monthly in
arrears. The said commitment fee shall accrue from day to day and be calculated
on the basis of a year of 360 days and the number of days elapsed commencing
from 9th June 1995.
9. CHANGE IN CIRCUMSTANCES
-----------------------
(1) Illegality: If at any time it is or will become unlawful or contrary to any
----------
directive of any agency of any state for it to allow all or part of the Loan to
remain outstanding, to make, fund or allow to remain outstanding all or part of
the Loan, to carry out all or any of its other obligations under this Agreement
and the Security Documents and/or to charge or receive interest at the rate or
rates applicable, upon the Lender notifying the Borrower: -
(a) the Facility shall be cancelled and the Lender shall not be liable to
the Borrower in any way whatsoever for such cancellation; and/or
<PAGE>
9
(b) the Borrower shall prepay or repay the Loan together with interest
thereon on the next date for the payment of interest on the Loan or within
ninety (90) days of the notification (whichever is earlier) or on such
earlier date as the Lender shall certify to be necessary to comply with the
relevant law or directive, and any other sum then due to the Lender under
this Agreement.
2. Increased Costs: If any change in any applicable law, regulation or
---------------
official requirements or in the interpretation thereof by any governmental
authority charged with the administration thereof or compliance by the Lender
with any request from the Monetary Authority of Singapore or any central bank or
other fiscal, monetary or other authority (whether or not having the force of
law) shall: -
(a) Tax and Withholding: subject the Lender to any tax, deduction or
-------------------
withholding of any nature with respect to this Agreement and the Security
Documents or the Loan (other than taxation on gains profits or income of the
Lender); or
(b) Basis of Taxation: change the basis of taxation to the Lender of
-----------------
payments of principal, interest or other fees in respect of the Loan (other
than taxation on gains, profits or income of the Lender); or
(c) Modification: impose, modify or deem applicable any reserve
------------
requirements against any assets of, deposits with or for the account of, or
loans by the Lender;
and the result of any of the foregoing is to increase the cost to the Lender of
making, maintaining or funding the Loan or to reduce the amount of any payment
received or receivable by the Lender, then and in any such case: -
(i) Notification: the Lender shall promptly notify the Borrower in writing
------------
of the happening of such event;
(ii) Compensation: The Borrower shall indemnify the Lender against
------------
that increased cost, reduction, payment or foregone interest or other return
(except to the extent that the Borrower is liable to compensate it therefor
under Clause 10(2)(i) or (ii)) and accordingly pay to the Lender on demand
such amount as will compensate the Lender for such additional cost or
reduction in amount calculated from the date such additional cost was first
incurred or such reduction in amount suffered;
(iii) Prepay: the Borrower may upon giving at least thirty (30) days' prior
------
written notice to the Lender or upon payment to the Lender of thirty (30)
days' interest in lieu of such notice prepay without any prepayment fee the
Loan in full or in part in accordance with the provisions of this Clause,
together with accrued interest thereon calculated up to the date of
prepayment and any other sum due hereunder and under the Security Documents;
and
(iv) Certification: the certificate of the Lender as to any additional
-------------
amount payable to it pursuant to this Clause shall, save for manifest error,
be prima facie evidence.
10. TAXES AND WITHHOLDINGS
----------------------
(1) Payments to be free and clear: All sums payable by the Borrower under this
------------------------------
Agreement and the Security Documents shall be paid (a) free of any restriction
or condition, (b) free and clear of and (except to the extent required by law)
without any deduction or
<PAGE>
10
withholding on account of any tax and (c) without deduction or withholding
(except to the extent required by law) on account of any other amount, whether
by way of set-off or otherwise.
(2) Grossing-up of Payments: If (a) the Borrower or any other person is
------------------------
required by law to make any deduction or withholding on account of any such tax
or other amount from any sum paid or payable by the Borrower to the Lender under
this Agreement or any Security Document or (b) the Lender (or any person on its
behalf) is required by law to make any deduction or withholding from, or (except
on account of tax on the overall net income of the Lender) any payment on or
calculated by reference to the amount of, any sum received or receivable by the
Lender under this Agreement or any Security Document, the Borrower shall notify
the Lender of any such requirement or any change in any such requirement as soon
as it becomes aware of it, and: -
(i) pay any such tax or other amount before the date on which penalties
attach thereto, such payment to be made (if the liability to pay is imposed
on the Borrower) for its own account or (if that liability is imposed on the
Lender) on behalf of and in the name of the Lender;
(ii) the sum payable by the Borrower shall (except, in the case of any such
payment, to the extent that its amount is not ascertainable when that sum is
paid) be increased to the extent necessary to ensure that, after the making
of that deduction, withholding or payment, the Lender receives on the due
date and retains (free from any liability in respect of any such deduction,
withholding or payment) a net sum equal to what it would have received and
so retained had no such deduction, withholding or payment been required or
made; and
(iii) within fourteen (14) days after paying any sum from which it is
required by law to make any deduction or withholding, and within fourteen
(14) days after the due date of payment of any tax or the amount which it is
required by paragraph (ii) above to pay, the Borrower shall deliver to the
Lender evidence satisfactory to the Lender of such deduction, withholding or
payment and of the remittance thereof to the relevant taxing or other
authority.
3. Continuing Obligations: Without prejudice to the survival of any other
----------------------
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in sub-Clauses (1) through (2) above shall survive the
payment in full of the Total Indebtedness.
11. PAYMENT PROVISIONS
------------------
(1) Place of Payment: All payments to be made hereunder by the Borrower shall
----------------
(a) in Dollars, be made by the Borrower in Dollars not later than 1 p.m. on the
due date or dates to the Lender at 79 Robinson Road #22-00, CPF Building,
Singapore 0106, and (b) in US Dollars, be made by the Borrower in US Dollars not
later than 1 p.m. on the due date or dates to the Lender via THE DEVELOPMENT
BANK OF SINGAPORE LIMITED, N.Y. AGENCY, ABA 581 CHIPS UID 034675 favouring DBS
Bank Singapore for account of ST CAPITAL LIMITED Account No. 0099-314-133-581
quoting reference "MICROPOLIS LIMITED US $21.5 Million Loan Agreement dated
(__________________) 1995" Provided Always that all payments of principal and
interest in respect of the Loan, unless otherwise agreed to by the Bank, shall
be made in US Dollars.
(2) Business Day: If any sum becomes due for payment under or pursuant to
------------
this Agreement and the Security Documents on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day unless such next
succeeding Business Day
<PAGE>
11
falls in another calendar month in which event such payment shall be made on the
Business Day preceding the due date, and all calculations of interest shall be
adjusted accordingly.
(3) Debit: The Lender shall be entitled, but is not obliged to, from time to
-----
time to debit any of the accounts of the Borrower with the Lender in respect of
interest, commission, charges, fees and all other moneys due and payable
hereunder.
(4) Appropriation: If the amount received by the Lender from the Borrower on
--------------
any date is less than the total sum remaining or becoming due under this
Agreement and the Security Documents on that date, then regardless of any
appropriation of all or part of that amount by the Borrower, the Lender shall
apply that amount in payment of whichever part(s) of that sum it determines to
be most appropriate.
(5) Application of Payments: All payments made to the Lender shall be applied
-----------------------
first against fees and expenses payable hereunder and under the Security
Documents, then against interest due on amounts in default, if any, then against
interest due on principal moneys outstanding under the Facility, and thereafter
against the principal moneys outstanding under the Facility.
(6) Other Provisions: The Borrower shall not be entitled to exercise any right
----------------
of retention, set-off or counterclaim with regard to any claim against the
Borrower hereunder, any such rights being expressly waived by the Borrower.
(7) Certification: A statement or certificate by the Lender certifying the
-------------
amount due at any time in respect of any moneys owing or payable by the Borrower
to the Lender and/or any liabilities incurred by the Lender and payable by the
Borrower to the Lender under or by virtue of any terms conditions or
stipulations of this Agreement and the Security Documents shall (in the absence
of any manifest error) be final and conclusive of the matters so certified and
be binding upon the Borrower and shall also be accompanied by the basis and
calculation of such amount which shall be prima facie and binding on the
Borrower save for manifest error.
12. SEPARATE ACCOUNT AND SET-OFF
----------------------------
(1) Set-Off: The Borrower authorises the Lender to apply (without prior
-------
notice) any credit balance to which it is at any time beneficially entitled on
any account at any office of the Lender in or towards satisfaction of any sum
then due from it in respect of the Total Indebtedness and the Lender shall
thereafter notify the Borrower of such application as soon as practicable. For
that purpose the Lender is authorised to use all or any part of any such credit
balance to buy such other currencies as may be necessary to effect such
application. The Lender shall not be obliged to exercise any of its rights under
this Clause, which shall be without prejudice and in addition to any right of
set-off, combination of accounts, lien or other right to which it is at any time
otherwise entitled (whether by operation of law, contract or otherwise).
(2) Separate Accounts: In the event of the commencement of the winding-up of
-----------------
the Borrower or of the Security Documents ceasing for any reason to be binding
on the Borrower or STCPL, or if the Borrower or any person shall execute or
create any further or subsequent mortgage charge or incumbrance fixed or
floating over or otherwise deal with any of the properties rights and benefits
charged under the Security Documents, or any part or parts thereof in favour of
any other person of which the Lender receives notice either actual or
constructive, the Lender may on receiving such notice forthwith open a new or
separate account with the Borrower in the books and if the Lender does not in
fact open such new or separate account the Lender shall nevertheless be deemed
to have done so at the time when the Lender received or was deemed to have
received such notice (hereinafter called "the time
<PAGE>
12
of notice") and as from and after the time of notice all payments in account
made by the Borrower or by or on behalf of the Borrower to the Lender shall
(notwithstanding any legal or equitable rule of presumption to the contrary) be
placed or deemed to have been placed to the credit of the new or separate
account so opened or deemed to have been opened as aforesaid and shall not go in
reduction of the amount owing by the Borrower to the Lender at the time of
notice. PROVIDED ALWAYS that nothing in this paragraph contained shall prejudice
the security which the Lender otherwise would have had under the Security
Documents for the payment of the moneys costs charges and expenses herein
referred to notwithstanding that the same may become due or owing or be incurred
after the time of notice.
13. REPRESENTATIONS AND WARRANTIES
------------------------------
(1) The Borrower hereby represents and warrants to and for the benefit of the
Lender as follows: -
(a) Status of Borrower: it is a company with limited liability duly
------------------
registered and validly existing under the laws of the Cayman Islands and
registered in Singapore as a foreign company under the laws of Singapore,
and has the power and authority to own assets and to conduct the business
which it conducts and/or proposes to conduct;
(b) Status of Guarantor: the Guarantor is a corporation duly incorporated
-------------------
in the State of Delaware, USA and qualified to do business in the State of
California, USA and has the power and authority to own assets and to conduct
the business which it conducts and/or proposes to conduct;
(c) Certification: the certified copies of the Memorandum and Articles of
-------------
Association and the board resolutions of the Borrower delivered by the
Borrower to the Lender are true and accurate copies of the corporate records
of the Borrower; the certified copies of the Certificate of Incorporation
and Bylaws and the board resolutions of the Guarantor delivered by the
Guarantor to the Lender are true and accurate copies of the corporate
records of the Guarantor;
(d) Powers: the execution, delivery and performance of this Agreement, the
------
Security Documents and the Guarantee are or will when executed be within the
corporate powers of the Borrower and the Guarantor and/or have been duly
authorised by all necessary governmental approvals, and do not or will not
contravene any law or any contractual restriction binding on the Borrower or
the Guarantor or any provision of their Memorandum and Articles of
Association and the Certificate of Incorporation and Bylaws respectively;
(e) Obligations: this Agreement, the Security Documents and Guarantee when
-----------
executed will be the legal, valid and binding obligations of the Borrower
and the Guarantor respectively enforceable in accordance with their
respective terms;
(f) Authorisations and Consents: all action, conditions and things required
----------------------------
to be taken, fulfilled and done (including the obtaining of any necessary
consents) in order (i) to enable the Borrower and the Guarantor lawfully to
enter into, exercise their respective rights and perform and comply with
their respective obligations under this Agreement, the Security Documents
and the Guarantee, (ii) to ensure that those obligations are legally binding
and enforceable and (iii) to make this Agreement, the Security Documents and
the Guarantee admissible in evidence in the courts of Singapore, the Cayman
Islands and USA have been taken, fulfilled and done;
<PAGE>
13
(g) Non-Violation of Laws Etc: the Borrower's and the Guarantor's entry
-------------------------
into, exercise of their respective rights and/or performance of or
compliance with their respective obligations under this Agreement, the
Security Documents and the Guarantee do not and will not violate (i) any law
to which they are subject or (ii) any of the documents constituting the
Borrower or the Guarantor or (iii) any agreement to which they are a party
or which is binding on them or their assets, and do not and will not result
in the existence of, or oblige them to create, any security over those
assets;
(h) Breach of Other Contracts: there is no provision of any existing
-------------------------
mortgage, trust deed, contract, licence, franchise, concession or agreement
binding on the Borrower or the Guarantor which is being contravened or
breached by the acceptance by the Borrower of the Facility or the execution
of this Agreement, the Security Documents and the Guarantee by the Borrower
and the Guarantor respectively or by the Borrower's and the Guarantor's
performance or observance of any of their respective obligations under this
Agreement, the Security Documents and the Guarantee;
(i) Approvals Relating to Project: all approvals as may be necessary for
-----------------------------
the purchase of the Property and the development of the Project have been
obtained from the competent authorities, as in full force and effect and
that all the conditions specified therein have been complied with, and that
in respect of the approvals which are to be obtained hereafter, they will be
obtained and when obtained all the conditions specified therein will be duly
complied with;
(j) Litigation: no litigation, arbitration or administrative proceeding is
-----------
current or pending (i) to restrain the entry into, exercise of the
Borrower's or the Guarantor's rights under and/or performance or enforcement
of or compliance with its obligations under this Agreement, the Security
Documents and the Guarantee, or (iii) which has or could have a material
adverse effect on the ability of the Borrower or the Guarantor to perform
its obligations under this Agreement, the Security Documents and the
Guarantee respectively;
(k) Proceedings: there are no proceedings pending before any court or
-----------
threatened against or affecting the Borrower or the Guarantor and no
proceedings are before any government agency or administrative body pending
or threatened against the Borrower or the Guarantor which would materially
affect its financial condition or its operations or impair its rights to
carry on its business substantially as now conducted or the ability of the
Borrower to discharge the Total Indebtedness and the Guarantor's ability to
perform and discharge their obligations under this Agreement, the Security
Documents and the Guarantee respectively and the Borrower and the Guarantor
have complied with all applicable statutes and regulations of all government
authorities having jurisdiction over the Borrower and the Guarantor;
(1) Dissolution: the Borrower and the Guarantor are solvent and no steps
-----------
have been taken or are being taken by the Borrower or the Guarantor or by
their respective shareholders, nor have any legal proceedings been started
or threatened for the Borrower's or the Guarantor's dissolution or winding-
up or for the appointment of a receiver, receiver and manager, or
liquidator, judicial manager, trustee or such other officers in similar
capacity to take over the Borrower or the Guarantor or all or any of its
assets;
(m) Payment of Taxes and Rates: the Borrower and the Guarantor have filed
--------------------------
all tax returns which they are required by law to file and have paid or made
adequate provision for the payment of all taxes, assessments, fees and other
governmental
<PAGE>
14
charges assessed against them or upon any of their properties or assets,
income or franchises or any of them except those taxes, assessments, fees
and other governmental charges that are being contested in good faith and
when so contested may remain unpaid;
(n) Event of Default: no Event of Default or Potential Event of Default has
-----------------
occurred and/or is continuing;
(o) Cross Acceleration: the Borrower has not failed to pay any indebtedness
------------------
for borrowed money (including capital and financial leases but excluding
operating leases) at its stated maturity, nor has any such indebtedness
become due or declared to be payable prior to its stated maturity as a
result of a default by the Borrower thereunder; the Guarantor has not failed
to pay any indebtedness for borrowed money (including capital and financial
leases but excluding operating leases) at its stated maturity, nor has any
such indebtedness become due or declared to be payable prior to its stated
maturity as a result of a default by the Guarantor thereunder;
(p) Material Adverse Change: there is no material adverse change in the
-----------------------
business, assets, financial condition, operating environment, management of
the Borrower, the Guarantor or the Project or other conditions which will
materially affect the ability of the Borrower or the Guarantor to perform
its obligations under this Agreement, the Building Contract, the Security
Documents, the Guarantee or any of them;
(q) Accounts: the audited financial statements of the Borrower, and the
--------
Guarantor which have previously been submitted by the Borrower and the
Guarantor to the Lender are complete and correct and fairly represent the
financial condition of the Borrower and the Guarantor and the results of
their operations for the period stated in accordance with generally accepted
accounting principles applied on a consistent basis;
(r) Ownership of Assets: the Borrower is the sole legal and beneficial
-------------------
owner of the properties charged in the Security Documents to which it is a
party and that as at the date of drawdown of the Facility, such assets will
be free from any lien, charge or encumbrance save for the charges
constituted by the Security Documents;
(s) Breach of Security Documents: there is no breach of any of the terms
----------------------------
and conditions of any of the Security Documents, the Guarantee, the Building
Agreement or the Lease which could reasonably be expected (i) to have an
effect on the ability of the Borrower to discharge its obligations
hereunder, (ii) to impair the ability of the Lender to enforce the
obligations of the Borrower under the Security Documents or realise upon the
collateral provided pursuant to the Security Documents; or (iii) to have an
adverse effect on the value of the collateral provided pursuant to the
Security Documents or the amount which the Lender would be likely to receive
(after giving consideration to delays in payment and costs of enforcement)
in the liquidation of such collateral;
(t) Governing Law: in any legal proceedings in the Cayman Islands in
-------------
relation to this Agreement and the Security Documents or USA in relation to
the Guarantee, the choice of the laws of Singapore to govern this Agreement,
the Security Documents and the Guarantee respectively (where applicable)
under the applicable law of the Cayman Islands and USA respectively and
will, with respect to the essential elements and effects thereof, be
recognised and applied:
<PAGE>
15
(u) No Immunity: the Borrower and the Guarantor are under applicable law of
------------
Singapore, the Cayman Islands and USA, subject to civil and commercial law
with respect to their obligations under this Agreement, the Security
Documents and the Guarantee, the entering into of which constitute their
private and commercial acts; each of the Borrower and the Guarantor is
subject to legal proceedings in Singapore, the Cayman Islands, USA and
elsewhere and neither the Borrower nor the Guarantor nor any of their
respective assets is entitled to immunity from suit, execution, attachment
or other legal process.
(2) Repetition: Each of the representations and warranties contained in the
----------
preceding sub-Clause shall survive and continue to have full force and effect
after the execution of this Agreement and the Borrower hereby warrants to the
Lender that the above representations and warranties will be true and correct
and fully observed until the Total Indebtedness is fully paid and until no sums
remain to be lent under this Agreement.
14. NEGATIVE COVENANTS
------------------
The Borrower hereby covenants with the Lender as follows: -
(1) Negative Pledge: save and except for the charge in favour of The CIT
---------------
Group/Business Credit Inc. ("CITBC") under the Financing Agreement dated
18th March 1992, not to create or permit to arise or subsist any mortgage
charge (whether fixed or floating) pledge, hypothecation, lien or other
encumbrance whatsoever on any of its assets, properties and undertaking
charged under the Security Documents, without the prior written consent of
the Lender, such consent not to be unreasonably withheld;
(2) Disposals/Change of Business: not (whether by a single transaction or a
----------------------------
number of related or unrelated transactions and whether at the same time or
over a period of time) (a) sell, transfer, lease out, lend or otherwise
dispose of the whole of its assets or of any part of its assets which, when
aggregated with all other disposals by it required to be taken into account
under this sub-Clause (2), is material in relation to its assets or the
disposal of which (when so aggregated) could have a material adverse effect
on it, or (b) materially change the scope or nature of its business, whether
by disposal, acquisition or otherwise, The following disposals shall not be
taken into account under this sub-Clause (2):-
(i) disposals in the ordinary course of business; and
(ii) any disposal which the Lender shall have agreed shall not be taken
into account;
(3) Amendment to Memorandum and Articles of Association: not to amend or
---------------------------------------------------
alter any provisions of its Memorandum and Articles of Association relating
to its borrowing powers, powers to guarantee and charge its assets as
security for any third party borrowings and its principal business
activities unless with the prior consent of the Lender, such consent not to
be unreasonably withheld or delayed;
(4) Transfer of Shares: not to register any transfer of shares in the
------------------
Borrower or allot shares to a party other than the shareholders as at the
date hereof without the prior written consent of the Lender such consent not
to be unreasonably withheld or delayed;
<PAGE>
16
(5) Sale of Property: not to sell, lease, transfer, assign, alienate or
----------------
otherwise dispose of or part with in any way ownership, possession or
custody of the Property or any part thereof or grant any licence or
permission to any person to occupy use or operate the same without the
Lender's prior written consent such consent not to be unreasonably withheld
or delayed;
(6) Reconstruction or Amalgamation: not to effect any form of
------------------------------
reconstruction or amalgamation by way of a scheme of arrangement or
otherwise and shall not approve, permit or suffer any change of ownership
(whether legal or beneficial) or transfer any part of its issued capital
without the consent of the Lender such consent not to be unreasonably
withheld or delayed;
(7) Borrowings: save and except for the facilities granted by CITBC and/or
----------
any financing and/or refinancing arrangements related and/or similar
thereto, not to obtain any borrowings from other banks or financial
institutions without the prior written consent of the Lender such consent
not to be unreasonably withheld or delayed;
(8) Appointment of Judicial Manager: not to appoint a judicial manager to
-------------------------------
over the assets and undertaking of the Borrower;
(9) Variation of Project: not to vary any of the terms of the Building
---------------------
Contract or agree to or vary the amount of the Contract Sum (as therein
defined) which is to be fixed at Dollars Forty-One Million (S$41,000,000.00)
without the prior written consent of the Lender, such consent not to be
unreasonably withheld or delayed;
(10) Change in Contractor: not to effect any change in the contractor
--------------------
appointed for the Project:
(11) Actions of the Borrower: not to take or omit to take any actions
-----------------------
which act or omission could materially and adversely affect the value of the
Property. It shall, at its own expense, promptly take all action which is at
any time reasonably necessary or desirable to perfect the value of its and
the Lender's interest in, and rights to, the Property.
15. POSITIVE COVENANTS
------------------
The Borrower hereby undertakes and agrees with the Lender as follows:
(1) Unaudited Accounts: to deliver to the Lender, unaudited financial
------------------
statements within sixty (60) days of the end of each financial year;
(2) Audited Accounts: to furnish the Lender with audited financial
----------------
statements every year within six (6) months of the end of the fiscal year;
(3) Conduct of Business: to carry on and conduct its affairs and business
-------------------
in a proper and efficient manner and to keep or cause to be kept all its
properties and assets in a good state of repair and condition in accordance
with good commercial practice;
(4) Termination of Business: not without the prior written consent of the
-----------------------
Lender such consent not to be unreasonably withheld or delayed, terminate
any of its business as now conducted which will substantially and adversely
affect the financial condition of the Borrower;
<PAGE>
17
(5) Change of Directors: to notify the Lender of any change in the board of
-------------------
directors and senior management of the Borrower within fourteen (14) days of
such change;
(6) Approvals: to obtain all necessary licences and comply with all laws
---------
regulations rules and orders relating to the carrying on of its business;
(7) Financial and Other Information: to furnish and provide the Lender with
--------------------------------
and permit the Lender to obtain all such statements information explanation
and data save and except such information which may be of a proprietary
nature, as the Lender may reasonably require regarding the affairs and
operations administration financial corporate or other whatever state or
condition of the Borrower or any of the matters in this Clause mentioned
together with a list of all persons firms corporations companies or group of
companies which the Borrower is able to control or influence so as to enable
the Lender to comply with Section 29 of the Banking Act (Cap. 19) and shall
forthwith inform the Lender of any change in such list as soon as such
change occurs;
(8) Planning Approvals: to obtain all necessary planning approvals and any
------------------
other requisite approvals for the Project issued in favour of the Borrower
by the competent authorities, including the Urban Redevelopment Authority,
Building Control and the Development Control Divisions, and to notify the
Lender immediately of any amendment to any planning approval made by this
competent authority;
(9) Furnish Plans and Documents Relating to the Project: to furnish or
-----------------------------------------------------
make accessible to the Lender, detailed approved building plans,
specifications, survey plans and Construction Contracts and other
information in respect of the Project;
(10) Commencement and Completion of Construction: to obtain TOP by 30th
--------------------------------------------
September 1996 or such later date as may be allowed by the Lender at its
sole discretion;
(11) Notification of Changes: to notify the Lender of (a) any amendment to
------------------------
any planning approval made by the competent authority, (b) a breach of any
of the terms and conditions of the Building Contract or any other contract
entered into by the Borrower in respect of the Project and of any
arbitration litigation or other proceedings in respect thereof and any
consent or approval issued by any relevant authority in connection with the
Project or the Facility and (c) any anticipated amendment or breach as
aforesaid;
(12) Payment of Cost Overruns: to pay out of its own resources all Cost
------------------------
Overruns certified by the Quantity Surveyor or the Architect into an account
designated by the Lender for such purpose, and until payment thereof, the
Lender shall be entitled not to make any advance under the Facility;
(13) Payment of Construction Costs: to provide evidence to the Lender that
------------------------------
all sums due to STCPL under the Architect's certificate, the invoices and
bills pertaining to the construction of the Project, referred to in Clause
4(2)(a) have been paid, and additionally to provide the Lender with copies
of the official receipts for such payments made;
(14) Insurance Policies: to take out and maintain or cause to be taken out
------------------
and maintained all risks policies of insurance in the form of a Contractor's
All Risk Policy and/or any other policy or policies in respect of or in
connection with the Property in the joint names of the Borrower and the
Lender for their respective interests with
<PAGE>
18
or such insurance companies as the Lender may from time to time approve,
fully insuring the Property and/or the Project against, inter alia, loss or
damage by fire and all other risks commonly covered with respect to
properties and projects of a similar kind and such policies shall be in such
amounts and shall contain such terms and provisions as shall be approved by
the Lender, and shall contain non-cancellation, non-amendment and standard
mortgagee clauses and clauses naming as loss payee the Lender and the
policies shall be delivered to the Lender and retained by the Lender and
will punctually pay all premiums payable in respect of the said policies of
insurance and submit to the Lender receipts for such payments, and if the
Borrower fails to comply with the provisions of this sub-Clause the Lender
may at its discretion (but without any obligations on its part to do so)
have such insurance effected at the cost of the Borrower and all moneys paid
by the Lender in respect of such insurances shall on demand be repaid to the
Lender and until repayment shall be added to the principal moneys hereby
secured and bear interest at the rate prescribed in Clause 5(1) or 5(2) (as
the case may be) calculated from the date of payment thereof by the Lender
up to the date of repayment by the Borrower and until so repaid, shall be
added to the Total Indebtedness and all other statutory powers of insurance
for the said sum may be exercised by the Lender;
(15) Application of Insurance Monies: that all moneys received or
-------------------------------
receivable under any of the policies of insurance aforesaid by whomsoever
effected shall subject to the provisions of the Building Agreement and the
Lease, be paid to the Lender and applied towards payment of the Total
Indebtedness and at the election of the Lender towards making good the loss
or damage incurred and to the Property;
(16) Appraisal of Property: to cause a Valuation Report within 60 days
----------------------
after the receipt of TOP, at the Borrower's cost and expense;
(17) Information of Property: to give to the Lender such information
-----------------------
relating to the Property or any part thereof which the Lender may reasonably
require;
(18) Inspection: that the Lender if it has justifiable grounds for
----------
conducting such investigation, shall have the right after giving notice to
the Borrower, to enter into and upon any land and premises belonging to the
Borrower or where it carries on its business and inspect the same and to
inspect all accounts and statements of the Borrower of a non-proprietary
nature, wherever the same may be situated provided always that the Borrower
shall only be required to pay all costs, fees and other expenses whether
legal or otherwise in respect of such inspection carried out by the Lender
after the occurrence of an Event of Default;
(19) Authority for Inspection: to give to the Lender such written
------------------------
authorities or other directions and provide such facilities and access as
the Lender may reasonably require for the aforesaid inspection;
(20) Observance of Security Documents: to observe and perform the terms and
--------------------------------
conditions of this Agreement, the Security Documents, the Building Contract,
the Building Agreement, the Lease and all consents and approvals issued by
relevant authorities in connection with the Project and the Facility;
(21) Compliance with Clause 3: to deliver to the Lender upon demand any
-------------------------
documents or evidence under Clause 3 and to comply with all the terms and
conditions of Clause 3;
(22) Event of Default: to notify the Lender of the occurrence of any Event
----------------
of Default or Potential Event of Default immediately upon becoming aware of
it;
<PAGE>
18
(23) Disclosure: that the Lender is hereby authorised by the Borrower to
----------
disclose to any government or regulatory authority, STCPL, the Guarantor and
any other persons who have provided to the Lender any guarantee or security
in relation to the performance by the Borrower of its obligations herein and
the Security Documents any information relating to the Borrower and its
affairs, the Total Indebtedness or the status of any other facilities or
accommodation made available to the Borrower as the Lender shall in its
absolute discretion think fit and the Borrower hereby consents to such
disclosure made now or hereafter;
(24) Goods and Services Tax: to pay any goods and services tax, value
----------------------
added tax or such other consumption tax, by whatever name called which may
be leviable or levied or imposed upon or in respect of the Facility and all
sums payable hereunder and under the Security Documents and the Borrower
agrees to indemnify the Lender against such payment if the Lender is
required by law to collect and make payment in respect thereof;
(25) Conditions Subsequent: to comply with the conditions subsequent set
---------------------
out in Schedule 1B.
16. DEFAULT IN PAYMENT OF EXPENSES
------------------------------
In addition to and not in derogation of the other provisions of this
Agreement, if the Borrower shall fail or refuse to pay any insurance premiums,
legal fees, registration fees, stamp duty, costs, charges and expenses which the
Borrower is liable to pay hereunder and under the Security Documents, the Lender
may at its discretion pay the same (but shall not be under any obligation to do
so) and if such payment is made by the Lender it shall constitute a debt owed to
the Lender and secured hereunder and under the Security Documents and the
Borrower shall forthwith on demand repay the same to the Lender together with
interest at the rate prescribed in Clause 5(1) or 5(2) (as the case may be)
calculated from the date of payment thereof by the Lender up to the date of
repayment by the Borrower, and until so repaid, shall be added to the Total
Indebtedness.
17. EVENTS OF DEFAULT
-----------------
(1) Events of Default: If at any time and for any reason, whether within or
-----------------
beyond the control of any party to this Agreement, any of the following events
occurs, such an occurrence shall constitute an Event of Default under this
Agreement: -
(a) Non-Payment: if the Borrower shall fail to pay when due sums of money
-----------
whether principal, interest or any other sums payable under this Agreement
or any of the Security Documents seven (7) days after the due date or demand
therefor (as the case may be):
(b) Breach of Other Obligations and Warranty: if the Borrower or the
-----------------------------------------
Guarantor shall be in breach of any representation or warranty herein, the
Security Documents or the Guarantee respectively or any certificate or
statement delivered or made hereunder or thereunder shall be or become
incorrect or untrue in any material respect; or default in the due
performance of Clause 15(25) or of any material covenants, conditions or
obligations on their respective part to be performed and observed hereunder
(other than failure to pay any sum when due pursuant to sub-Clause (1)(a)
above), and under the Security Documents and the Guarantee and if that
breach is capable of remedy, it is not remedied within fourteen (14) days of
such breach;
<PAGE>
20
(c) Breach of Security Documents: if there is a breach of any term of the
----------------------------
Security Documents, the Guarantee or any of the planning approvals relating
to the Project, the Building Agreement, the Lease or the Building Contract
and such breach could reasonably be expected (i) to have an effect on the
ability of the Borrower to discharge its obligations hereunder; (ii) to
impair the ability of the Lender to enforce the obligations of the Borrower
under the Security Documents or realise upon the collateral provided
pursuant to the Security Documents; or (iii) to have adverse effect on the
value of the collateral provided pursuant to the Security Documents or the
amount which the Lender would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation of such collateral;
(d) Breach of Other Agreements: if the Borrower or the Guarantor shall
--------------------------
commit any breach or default in its obligations under any agreements made
between each the Borrower or the Guarantor and any party other than the
Lender which materially affects the financial condition of the Borrower or
the performance of their obligations hereunder under the Security Documents,
or the Guarantee and results in the payment of any moneys prior to its
stated maturity or on its due date or becomes due or is declared due and
payable prior to its stated maturity as a result of such breach or default
thereunder;
(e) Cross Default: if any indebtedness for borrowed money (including
--------------
capital and financial leases but excluding operating leases) of the Borrower
is not paid at its stated maturity or on its due date or becomes due or is
declared due and payable prior to its stated maturity as a result of a
default by the Borrower thereunder; if any indebtedness for borrowed money
(including capital and financial leases but excluding operating leases) of
the Guarantor is not paid at its stated maturity or on its due date or
becomes due or is declared due and payable prior to its stated maturity as a
result of a default by the Guarantor thereunder;
(f) Cessation of Business: if the Borrower or the Guarantor shall cease or
---------------------
threaten to cease to carry on its business;
(g) Enforcement Proceedings: if (i) an attachment or other execution is
-----------------------
levied or enforced upon or sued against any part of the properties or assets
of the Borrower or (ii) a distress is levied or sued out upon or against any
part of the assets of the Borrower and is not stayed or discharged within
fourteen (14) days;
(h) Legal Proceedings: if legal proceedings suit or action of any kind
-----------------
whatsoever (whether criminal or civil) other than those of a frivolous and
vexatious kind be instituted against the Borrower or the Guarantor which
will materially affect the ability of the Borrower or the Guarantor to
perform its obligations under this Agreement, the Building Contract, the
Building Agreement, the Lease, the Security Documents or the Guarantee
respectively;
(i) Insolvency: if the Borrower or the Guarantor becomes insolvent, is
----------
unable to pay its debts as they fall due, stops, suspends or threatens to
stop or suspend payment of all or a material part of its debts, begins
negotiations or takes any proceeding or other step with a view to
readjustment, rescheduling or deferral of all its indebtedness (or of any
part of its indebtedness which it will or might otherwise be unable to pay
when due) or proposes or makes a general assignment or an arrangement or
composition with or for the benefit of its creditors or a moratorium is
agreed or declared in respect of or affecting all or a material part of its
indebtedness;
<PAGE>
21
(j) Dissolution: if any step is taken by any person for the dissolution or
-----------
winding up of the Borrower or the Guarantor;
(k) Assignment: if the Borrower or the Guarantor shall make an assignment
-----------
for the benefit of its creditors or enter into an arrangement for
composition for the benefit of its creditors;
(l) Judicial Management: if an application is made or petition presented
-------------------
pursuant to the Companies Act (Cap. 50) for an order that the Borrower or
the Guarantor (under an analogous provision) be placed under the judicial
management of a judicial manager;
(m) Receivership: if a receiver or receiver and manager shall be
------------
appointed in respect of the Borrower's or the Guarantor's undertaking or
property or any part thereof or the Guarantor shall transfer or otherwise
dispose of all or substantially all its assets to any person, firm or
corporation;
(n) Acquisition: if a notice or proposal for compulsory acquisition of the
-----------
Property or any part thereof shall be issued or made under or by virtue of
an Act of Parliament or other statutory provision;
(o) Destruction of Property: if the Property or any substantial part
-----------------------
thereof is destroyed or damaged or if the Property is found to be
structurally unsafe or to contain or be affected by defects, structural or
otherwise and/or an investigation in respect of the Property is being
carried out by the competent authorities under the Building Control Act
(Cap. 29);
(p) Declared Borrower: if the Borrower is declared by the Minister to be a
-----------------
declared company under the provisions of Part IX of the Companies Act (Cap.
50) or the Guarantor is made a declared company under any analogous
provision;
(q) Nationalisation: if any agency of any state seizes, compulsorily
---------------
acquires, expropriates or nationalises all or a material part of the assets
properties or shares of the Borrower or the Guarantor;
(r) Cease in Application: if this Agreement, any of the Security Documents
--------------------
or the Guarantee ceases, for any reason or is claimed by the Borrower or the
Guarantor not to be the legal and valid obligations of the Borrower or the
Guarantor, binding upon it in accordance with its terms or this Agreement,
any of the Security Documents or the Guarantee or for any reason ceases to
apply (or is claimed by the Borrower or the Guarantor to apply) to the
obligations and the liabilities therein secured, or the security constituted
thereunder is in jeopardy and notice thereof has been given by the Lender to
the Borrower and/or the Guarantor (as the case may be);
(s) Authorisations and Consents: if any of the consents, authorities,
----------------------------
approvals, waivers or resolutions required for the development of the
Project shall be modified in a manner unacceptable to the Lender or shall be
wholly or partly revoked, withdrawn, suspended or terminated or shall expire
and not be renewed or shall otherwise fail to remain in full force and
effect;
(t) Change in Shareholding: if any change in the shareholding of the
----------------------
Borrower or the beneficial ownership thereof takes place without the consent
of the Lender such consent not to be unreasonably withheld or delayed;
<PAGE>
22
(u) Illegal: if it is or will become unlawful for the Borrower or the
-------
Guarantor to perform or comply with any one or more of its respective
obligations under this Agreement, the Security Documents and the Guarantee;
(v) Termination of Building Contract: if the Building Contract is
--------------------------------
terminated or otherwise ceases to remain in full force and effect or if for
any cause or reason whatsoever STCPL ceases permanently to perform any of
its essential duties or obligations under the Building Contract (unless in
any such case within a period of sixty (60) days after such termination or
cessation the Borrower shall have appointed a substitute contractor approved
by the Lender and work under the Building Contract is recommenced
immediately thereafter) or if either party to the Building Contract commits
a material breach of any of its obligations under the Building Contract and
(except where the Lender considers that such material breach is not capable
of remedy) such material breach is not remedied to the satisfaction of the
Lender within a period of sixty (60) days next following the date of service
by the Lender on the Borrower of notice requiring the material breach to be
remedied;
(w) Termination of Construction Works: if major construction work in
---------------------------------
connection with the Project is terminated for any cause for a continuous
period of more than sixty (60) days;
(x) Security in Jeopardy: if in the opinion of the Lender any security
---------------------
constituted under the Security Documents or the Guarantee is in jeopardy;
(y) Material Adverse Change: if there shall occur a material adverse
------------------------
change in the business, assets, financial position, of the Borrower or the
Guarantor which in the opinion of the Lender materially affects the ability
of the Borrower or the Guarantor to perform its obligations under this
Agreement, the Building Contract, the Security Documents or the Guarantee;
(z) Analogous Events: any event occurs which, under the laws of any
-----------------
applicable jurisdiction, has an analogous or equivalent effect to any of the
events referred to in this sub-Clause (1).
2. Notification of Default by Borrower: The Borrower shall notify the Lender
-----------------------------------
forthwith in writing of any occurrence of an Event of Default or Potential Event
of Default.
3. Declaration of Default: The Lender may at any time after the happening of an
----------------------
Event of Default (whether or not notice pursuant to sub-Clause (2) of this
Clause shall have been given by the Borrower), by notice in writing to the
Borrower declare the occurrence of an Event of Default whereupon:
(a) Repayment: the Total Indebtedness shall become immediately due and
---------
payable without any demand or notice which is hereby expressly waived;
(b) Enforcement of Security Documents and Guarantee: the Lender shall be
-----------------------------------------------
entitled to exercise forthwith all or any rights, powers, or remedies under
this Agreement, the Security Documents and the Guarantee;
(c) Credit Balance: the Lender shall be entitled to exercise its rights in
--------------
respect of any credit balance standing to any account of the Borrower with
the Lender and in whatever currency towards satisfaction of the Total
Indebtedness; and
(d) Cancellation of Facility: the Lender's commitments in relation to the
------------------------
Facility shall automatically be cancelled and forthwith cease.
<PAGE>
23
The Lender's rights hereunder are cumulative and may be exercised concurrently
or in any order as the Lender may in its absolute discretion think fit. Nothing
in this Clause 17(3) shall limit any right powers or remedies of the Lender
under this Agreement, the Security Documents and the Guarantee.
18. INDEMNITIES
-----------
(1) Miscellaneous Indemnities: The Borrower shall on demand indemnify the
-------------------------
Lender against any funding or other cost, loss, expense or liability sustained
or incurred by it as a result of: -
(a) the drawdown of any part of the facility not being made after notice
of such drawing has been given, for any reason whatsoever;
(b) the occurrence or continuance of any Event of Default;
(c) the receipt of recovery by any party (or the Lender on its behalf) of
all or any part of any amount payable by the Borrower hereunder otherwise
than on its due date;
(d) any default in the payment of the Total Indebtedness or any portion
thereof, or any other amounts payable hereunder or under the Security
Documents, or on account of the non-observance of all or any of the terms
stipulations agreements and provisions on the part of the Borrower contained
herein and under the Security Documents, and such losses, damages and
expenses shall include but not be limited to such amount as the Lender shall
certify (such certification being accompanied by the basis and calculation
of such amount and being conclusive and binding upon the Borrower save for
any manifest error).
(2) Broken Funding Costs: In the case of sub-Clause (1) above, the amount
--------------------
payable shall in any event include the amount (if any) by which: -
(a) the amount of interest which the Lender is able to obtain by placing an
amount equal to the relevant amount on deposit in the Singapore interbank
market, for the remainder of the relevant interest period, as soon as
reasonably practicable after it becomes aware that the relevant drawdown is
not being made or (as the case may be) of the relevant receipt or recovery
is less than: -
(b) the amount of interest which, in accordance with the expressed terms of
this Agreement, would otherwise be payable to the Lender in respect of the
Total Indebtedness for the relevant interest period or (as the case may be)
on the relevant amount so received or recovered for the remainder of the
relevant interest period.
(3) Currency Indemnity: Any payment or payments made to or for the account of
------------------
the Lender in a currency (the currency in which the relevant payment is made
being hereinafter referred to as "the Relevant Currency") other than the
currency in which such payment or payments are expressed to be payable under
this Agreement and the Security Documents (the currency in which the relevant
payment is expressed to be payable being hereafter referred to as "the Currency
of Account") whether as a result of, or of the enforcement of, a judgment or
order of a court of any jurisdiction, in the winding-up of the Borrower or
otherwise) shall only constitute a discharge to the Borrower to the extent of
the Currency of Account which the Lender is able, in accordance with its usual
practice, to purchase with the amount so
<PAGE>
24
received or recovered in the Relevant Currency on the date of that receipt or
recovery (or, if it is not practicable to make that purchase on that date, on
the first date on which it is practicable to do so). If the amount of the
Currency of Account is less than the amount expressed to be due to the Lender
under this Agreement and the Security Documents, the Borrower shall indemnify
the Lender against any loss sustained by it as a result. In any event, the
Borrower shall indemnify the Lender against the cost of making any such
purchase. For the purpose of this sub-Clause (3) it shall be sufficient for the
Lender to demonstrate that it would have suffered a loss had an actual exchange
or purchase been made.
(4) Indemnities Separate: Each of the above indemnities constitutes a separate
--------------------
and independent obligation from the other obligations in this Agreement, shall
give rise to a separate and independent cause of action, shall apply
irrespective of any indulgence granted by the Lender and shall continue in full
force and effect despite any judgment, order, claim or proof for a liquidated
amount in respect of any sum due under this Agreement and the Security Documents
or any judgment or other order. Any proof or evidence of any actual loss
furnished by the Lender shall be prima facie evidence thereof and is binding on
the Borrower.
19. THE LENDER NOT ANSWERABLE FOR LOSS
----------------------------------
The Lender shall not be answerable for any involuntary loss happening in or
about the exercise or execution of the powers or trusts which may be vested in
the Lender by virtue of this Agreement or the Security Documents or by law for
the time being in force.
20. WAIVER NOT TO PREJUDICE RIGHT OF LENDER
---------------------------------------
The Lender may from time to time and at any time waive either
unconditionally or on such terms and conditions as it may deem fit any breach by
the Borrower or any of the covenants undertakings stipulations terms and
conditions herein contained and any modification thereof but without prejudice
to its powers right and remedies for enforcement thereof, provided always and it
is hereby expressly agreed and declared that any waiver by or neglect or
forbearance of the Lender to require and enforce the payment of any moneys owing
hereunder and any time which may be given to the Borrower shall not in any way
prejudice or affect the right of the Lender afterwards at any time to act
strictly in accordance with the provisions hereof.
21. COMMUNICATIONS
--------------
(1) Addresses: Each communication under this Agreement shall be made in
---------
writing but, unless otherwise stated, may be made by fax or letter. Each
communication or document to be delivered to any party under this Agreement
shall be sent to that party at the fax number or address and marked for the
attention of the person (if any), from time to time designated by that party for
the purpose of this Agreement. The initial fax number, address and person (if
any) so designated by each party are set out under its name at the end of this
Agreement.
(2) Deemed Delivery: Any communication from the Borrower shall be irrevocable,
---------------
and shall not be effective until received by the Lender. Any other communication
under this Agreement shall be deemed to have been received (if sent by fax) on
the day of despatch or (in any other case) when left at the address required by
sub-Clause (1) above or three (3) Business Days after being put in the
registered post postage prepaid and addressed to that address Provided always
that in the case of communication by fax, the faxes must be received by that
person to whom it is addressed in a complete and legible form, otherwise that
person
<PAGE>
25
to whom it is addressed shall immediately inform the sender of the same.
In lieu of such communication, the fax shall be deemed to be complete and
legible and duly received.
22. EXPENSES AND STAMP DUTY
----------------------
Whether or not any part of the Facility is utilised by the Borrower pursuant
to this Agreement, the Borrower shall pay on a full indemnity basis: -
(1) Initial Expenses: on demand, all costs and expenses (including
----------------
legal fees and abortive costs) reasonably incurred by the Lender in
connection with the preparation, negotiation or entry into of this Agreement
and the Security Documents and any amendment of, supplement to or waiver in
respect of this Agreement and the Security Documents;
(2) Enforcement Expenses: on demand, all costs and expenses (including
--------------------
legal fees) incurred by the Lender in the administration of, or by the
Lender in protecting or enforcing any rights under this Agreement, the
Security Documents and the Guarantee and any such amendment, supplement or
waiver; and
(3) Stamp Duty: promptly, and in any event before any interest or penalty
----------
becomes payable, any stamp, documentary, registration or similar tax or fee
payable in connection with the entry into, registration, performance,
enforcement of admissibility in evidence of this Agreement, the Security
Documents and the Guarantee and any such amendment, supplement or waiver,
and shall indemnify the Lender against any liability with respect to or
resulting from any delay in paying or omission to pay any such tax or fee.
23. REMEDIES, WAIVERS AND AMENDMENTS
--------------------------------
(1) No failure on the part of the Lender to exercise, and no delay in
exercising, any right under this Agreement will operate as a waiver thereof, nor
will any single or partial exercise of any right under this Agreement preclude
any other or further exercise thereof or of the exercise of any other right. The
rights and remedies in this Agreement provided are cumulative and not exclusive
of any rights or remedies provided by law. Any waiver or consent given by the
Lender under this Agreement shall be in writing and may be given subject to such
conditions as the Lender may impose. Any waiver or consent shall be effective
only in the instance and for the purpose for which it is given. Any provision of
this Agreement may be amended only if the Borrower and the Lender so agree in
writing.
(2) The Lender shall not be answerable for any involuntary loss happening in or
about the exercise or execution of the powers or trusts which may be vested in
the Lender by virtue of this Agreement, any of the Security Documents, the
Guarantee or by law for the time being in force.
24. RIGHT OF CONSOLIDATION
----------------------
Section 21(1) of the Conveyancing and Law of Property Act (Chapter 61)
(restricting the right of consolidation) shall not apply to the security created
by the Security Documents, and in addition and without prejudice to any right of
consolidation none of the property of the Borrower which at the date hereof is
or which at any time hereafter shall become subject to a mortgage or a charge in
favour of or vested in the Lender shall be redeemed except on
<PAGE>
26
payment of not only all moneys thereby secured but also all moneys secured by
this Agreement and the Security Documents.
25. SUCCESSORS AND ASSIGNS
----------------------
(1) Benefit and Burden of this Agreement: This Agreement and the Security
------------------------------------
Documents shall benefit and be binding on the parties, their respective
successors and any permitted assignee or transferee of some or all of a party's
rights or obligations under this Agreement and the Security Documents. Any
reference in this Agreement and the Security Documents to any party shall be
construed accordingly.
(2) Borrower: The Borrower may not assign or transfer all or any part of its
--------
rights or obligations under this Agreement and the Security Documents.
(3) Lender:
-------
(a) The Lender may assign all or any part of its rights and/or transfer all
or part of its obligations under this Agreement and the Security Documents
without the consent of the Borrower.
(b) Any such assignee or transferee shall be and be treated as the Lender
for all purposes of this Agreement and the Security Documents and shall be
entitled to the full benefit of this Agreement and the Security Documents to
the same extent as if it were an original party in respect of the rights or
obligations assigned or transferred to it.
(4) Transfer of Obligations: Where the Lender transfers its obligations or any
-----------------------
part thereof under Clause 25(3), the Borrower shall execute such documents as
are necessary to release the Lender to the extent of the transfer and join the
transferee as a party to this Agreement and the Security Documents and any
document related hereto or in connection with this Agreement and the Security
Documents, as the case may be.
(5) Disclosure of Information: The Lender may disclose to any potential
-------------------------
assignee, transferee or sub-participant or any other person proposing to enter
into contractual arrangements with the Lender in relation to this Agreement and
the Security Documents such information about the borrower or any other person
as it may think fit.
26. COVENANT FOR FURTHER ASSURANCE
------------------------------
The Borrower shall entirely at its own expense, immediately on written
demand by the Lender, make, execute, do and perform, or cause to be made,
executed, done and performed all such further acts, agreements, assignments,
assurances, deeds, documents, mortgages and instruments of whatsoever nature as
the Lender shall require to perfect the security afforded or created or intended
to be afforded or created by this Agreement and the Security Documents.
27. INCONSISTENCY/CONFLICT
----------------------
In the event of any inconsistency or conflict between the terms of the
Facility Letter and this Agreement, the terms of this Agreement shall prevail
and in the event of inconsistency between the terms of the Security Documents
and this Agreement, the terms of this Agreement shall prevail.
<PAGE>
27
28. SEVERABILITY
------------
If any one or more of the provisions contained in this Agreement shall be
deemed invalid, unlawful or unenforceable in any respect under any applicable
law, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired.
29. GOVERNING LAW AND JURISDICTION
------------------------------
This Agreement shall be governed by and construed in accordance with the
laws of Singapore. The parties hereto submit to the non-exclusive jurisdiction
of the Singapore courts.
<PAGE>
28
SCHEDULE 1
==========
A. CONDITIONS PRECEDENT
========================
1. a duly certified copy of the resolution of the Board of Directors of the
Borrower duly authorising:-
(a) the obtaining of the Facility on the terms and conditions herein
contained;
(b) the person(s) to sign the Notices of Drawing and all notices or other
communication referred to in Clause 21 and all documents related hereto and
the transaction herein;
(c) the execution of this Agreement and the Security Documents to which it is
a party;
(d) the affixing of the Common Seal of the Borrower to this Agreement and the
Security Documents to which it is a party;
2. a duly certified copy of the resolution of the Board of Directors of the
Guarantor duly authorising the execution of the Guarantee together with all
consents and approvals required in connection with the Guarantee;
3. a duly certified copy of the resolution of the Board of Directors of STCPL
duly authorising the execution of the STCPL Undertaking;
4. a set of specimen signatures of the persons referred to in Clause 1(b) above
duly authenticated by a Director/Secretary of the Borrower;
5. a certified true copy of the Memorandum and Articles of Association of each
of the Borrower and STCPL and a certified true copy of the Certificate of
Incorporation and Bylaws of the Guarantor;
6. all title deeds pertaining to the Property;
7. all executed discharge documents in respect of the encumbrances relating to
the Property;
8. a registrable Mortgage duly executed in escrow by the Borrower;
9. the Assignment of Building Agreement duly executed by the Borrower;
10. the Assignment of Building Contract duly executed by the Borrower;
11. the STCPL Undertaking duly executed by STCPL;
12. all outstanding property tax, land premiums, rents and outgoings in respect
of the Property have been paid;
13. replies to legal requisitions sent to the relevant authorities in respect of
the Property which are satisfactory to the Lender;
14. the Guarantee duly executed by the Guarantor;
15. the Building Contract;
<PAGE>
29
16. evidence that all relevant planning and building approvals for the
development of the Project (including the approval from the Urban Redevelopment
Authority, Building Control and Development Control Divisions) have been
obtained;
17. evidence of the total cost of the construction and completion of the
Project;
18. the insurance policies referred to in Clause 15(14) with the Lender's
interest duly endorsed thereon;
19. CIT Group/Business Credit, Inc.'s ("CITBC") consent to the following:-
(a) the creation of the charges constituted by the Assignment of Building
Agreement, the Mortgage and the Assignment of Building Contract; and
(b) the Guarantor guaranteeing the obligations and liabilities of the
Borrower hereunder and under the Security Documents;
20. a deed of discharge duly executed by CITBC releasing/discharging the
properties to be charged by the Borrower under the Assignment of Building
Contract;
21. evidence that the Borrower is a wholly-owned subsidiary of the Guarantor;
22. a copy of the letter from the Guarantor appointing a process agent under the
Guarantee and the acceptance thereof by such process agent;
23. legal opinion from Messrs Maples & Calder in respect of the Borrower's
execution of this Agreement and the Security Documents and a confirmation from
them to furnish the Lender a certified extract of the Borrower's Register of
Mortgages and Charges in respect of all entries pertaining to the Property
within seven (7) days of being notified by the Lender;
24. legal opinion from Messrs Latham & Watkins in respect of the Guarantor's
execution of the Guarantee;
25. evidence that the Borrower has paid (a) the front-end fee of 0.25% flat on
the amount of the Facility provided in the Facility Letter; and (b) the
commitment fee due and payable by the Borrower to the Lender under Clause 8(2);
26. any other document which the Lender may reasonably require.
B. CONDITIONS SUBSEQUENT
=========================
1. duly executed Forms 33 and 34 and such other documents as are required to
perfect the charge created by the Assignment of Building Agreement to be
delivered to the Borrower within fourteen (14) days from the date of first
disbursement of the Facility;
2. duly executed Forms 33 and 34 and such documents as are required to perfect
the charge created by the Assignment of Building Contract to be delivered to the
Borrower within fourteen (14) days from the date of first disbursement of the
Facility;
3. within five (5) days of the date of first disbursement of the Facility, to
make an entry of the Assignment of Building Agreement in the Borrower's Register
of Mortgages and Charges and to ensure that this entry precedes any other entry
of any security interest made in respect to the Property.
<PAGE>
30
IN WITNESS whereof the parties hereto have duly executed this Agreement.
----------
The Borrower
- ------------
MICROPOLIS LIMITED
5004 Ang Mo Kio Avenue 5 #01-11
Singapore 2056
Telefax:
The Common Seal of )
MICROPOLIS LIMITED )
was hereunto affixed in the )
presence of:- )
........................... Director
........................... Director/Secretary
The Lender
- ----------
ST CAPITAL LIMITED
79 Robinson Road #22-00
CPF Building
Singapore 0106
Telefax:
The Common Seal of )
ST CAPITAL LIMITED )
was hereunto affixed in )
the presence of:- )
........................... Director and General Manager
........................... Director/Secretary
<PAGE>
DATED THE DAY OF 1995
==================================================================
MICROPOLIS CORPORATION
("the Guarantor")
To
SINGAPORE TECHNOLOGIES CONSTRUCTION PTE LTD
("ST Construction")
==================================================================
G U A R A N T E E
==================================================================
DREW & NAPIER
Advocates & Solicitors
20 Raffles Place #17-00
Ocean Towers
Singapore 0104
<PAGE>
G U A R A N T E E
=================
Date:
SINGAPORE TECHNOLOGIES CONSTRUCTION PTE LTD
9 Bishan Place #08-00
Junction 8
Singapore 2057
("ST Construction")
In consideration of ST Construction, at the request of (1) MICROPOLIS
LIMITED, a company incorporated in the Cayman Islands and having a registered
office in Singapore at 5004 Ang Mo Kio Avenue 5 #01-11, Singapore 2056
(hereinafter called "the Company"), and (2) ourselves, undertaking with ST
CAPITAL LIMITED, a company incorporated in the Republic of Singapore and having
its registered office at 79 Robinson Road #22-00, CPF Building, Singapore 0106
("the Lender"), in ST Construction's letter of undertaking dated 15th June 1995
to the Lender, to construct and complete the Project in accordance with the
Building Contract and on condition that all the Company's obligations for the
payment of money under the Building Contract and all interest, fees, costs,
expenses and all other moneys which are expressed to be payable thereunder and
the ST Construction Security Documents, and the performance and discharge of all
its obligations under the Building Contract, be secured inter-alia by the ST
Construction Security Documents including the Deed of Assignment of Building
Agreement dated ____________________________1995 executed by the Company in
favour of ST Construction (hereinafter called "the Assignment" which expression
shall include amendments, variations and supplementals made thereto from time to
time) and this Guarantee,
We, MICROPOLIS CORPORATION, a corporation duly incorporated in the State
of Delaware, qualified to do business in the State of California and with its
principle offices located at 21211 Nordhoff Street, Chatsworth, California
91311, United States of America ("USA") (hereinafter called"the Guarantor")
HEREBY lRREVOCABLY AND UNCONDlTlONALLY UNDERTAKE with ST Construction as
follows:
1. The Guarantor unconditionally and irrevocably guarantees that, if for any
reason the Company does not pay any sum payable by it under the Building
Contract and the ST Construction Security Documents by the time and on the date
specified in the Assignment and the Mortgage (whether on the normal due date, on
acceleration or otherwise), the Guarantor will on demand pay that sum; and the
Guarantor hereby waives any notice of default by the Company or waives any right
to require ST Construction to (a) proceed against the Company and/or any other
guarantors of the Company's obligations, (b) proceed against or exhaust any
security given by the Company or any other person; or (c) pursue any other
remedy in ST Construction's power whatsoever.
2. As between the Guarantor and ST Construction but without affecting the
Company's obligations, the Guarantor shall be liable under this Guarantee as if
it were the sole principal debtor and not merely a surety. Accordingly, it shall
not be discharged, nor shall its liability be affected by anything which would
not discharge it or affect its liability if it were the sole principal debtor
(including (a) any time, indulgence, waiver or consent at any time given to the
Company, the Guarantor, any other guarantors or any other person, (b) any
amendment to the Building Contract, any of the ST Construction Security
Documents or any other security or other guarantee or indemnity, (c) the making
or absence of any demand on the Company or any other person for payment, (d) the
enforcement or absence of enforcement of, the variation, exchange or abstention
from perfecting or enforcement of the Building Contract, any of the ST
Construction Security Documents or any other security or other guarantee or
indemnity and the discharge of any party to them, and to the other arrangements
with the
<PAGE>
2
Company or any person or persons liable on other securities or guarantees held
or to be held by ST Construction, (e) the release of any such other security,
guarantee or indemnity, (f) the bankruptcy, liquidation or insolvency of the
Company or any other person or (g) the illegality, invalidity or
unenforceability of or any defect in any provision of the Building Contract, any
of the ST Construction Security Documents or any of the Company's obligations
thereunder). As a separate and alternative stipulation, the Guarantor
unconditionally and irrevocably agrees that any sum expressed to be payable by
the Company under the Building Contract and the ST Construction Security
Documents but which is for any reason (whether or not now existing and whether
or not now known or becoming known to the Guarantor or any party to the Building
Contract and the ST Construction Security Documents) not recoverable from the
Guarantor on the basis of a guarantee shall nevertheless be recoverable from it
as if it were the sole principal debtor and shall be paid by it on demand.
3. The obligations of the Guarantor under this Guarantee will remain in full
force and effect by way of continuing security until the repayment and discharge
of the Secured Debt and the obligations of the Company under the Building
Contract and the ST Construction Security Documents have been performed and
discharged. Furthermore, these obligations are additional to, and not instead
of, any other security or other guarantee or indemnity at any time existing in
favour of any person, whether from the Guarantor or otherwise.
4. So long as the Secured Debt remains payable and the obligations of the
Company under Building Contract and the ST Construction Security Document are
outstanding: -
(1) any right of the Guarantor, by reason of performance of any of its
obligations under this Guarantee, (a) to be indemnified by the Company; or
(b) to take the benefit of or enforce any security or other guarantee or
indemnity shall be exercised and enforced by it only in such manner and on
such terms as ST Construction may require; and
(2) any amount received or recovered by the Guarantor as a result of any
exercise of any such right shall be held in trust for ST Construction and
immediately paid to it.
5. The Guarantor shall on demand indemnify ST Construction against any funding
or other costs, loss, expense or liability sustained or incurred by it as a
result of it being required for any reason not due to any act or omission on the
part of ST Construction to refund all or part of any amount received or
recovered by it in respect of any sum payable by the Company under the Building
Contract and the ST Construction Security Documents, and more particularly no
assurance or security or payment which may be avoided on the liquidation or
otherwise of the Company or the Guarantor and no release settlement or discharge
which may have been given or made on the faith of any such assurance security or
payment shall prejudice ST Construction's right to recover from the Guarantor
monies to the full extent hereof as if such assurance security payment release
settlement or discharge (as the case may be) had never been granted given or
made.
6. Any amount received or recovered by ST Construction (otherwise than as a
result of a payment by the Company or the Guarantor to ST Construction) in
respect of any sum payable by the Company under the Building Contract and the ST
Construction Security Documents may be placed in a suspense account and kept
there for so long as ST Construction thinks fit.
7. All monies received from or on account of the Company or from any other
person or estate or from the realisation of any security or otherwise for the
purpose of being applied in reduction of the Secured Debt and all other sums due
under the Building Contract, the ST Construction Security Documents and
hereunder shall be treated for all purposes as payments
<PAGE>
3
in gross and not as appropriated or attributable to any specific part or item of
the said monies even if appropriated thereto by the person otherwise entitled so
to appropriate.
8. This Guarantee shall not be prejudiced diminished or affected in any way nor
shall the Guarantor be released or exonerated by any of the matters following: -
(1) any variation of any terms and conditions of any of the Building
Contract or any of the ST Construction Security Documents with or without
notice to the Guarantor;
(2) any variation exchange renewal release or modification of any guarantee
indemnity or security or the refusal or neglect by ST Construction to
complete enforce or assign any judgment specialty or other security or
instrument negotiable or otherwise and whether satisfied by payment or not
all of which ST Construction is at liberty to do whether with or without the
Guarantor's consent or notice;
(3) any compromise composition or arrangement made with the Company and/or
any other person or persons all of which ST Construction is at liberty to
make whether with or without the Guarantor's consent or notice.
9. Should the Company be wound up, ST Construction may (notwithstanding payment
to ST Construction by the Guarantor or any other person of any monies hereby
guaranteed) rank as creditor and prove in the winding up of the Company for the
whole amount outstanding against the Company and ST Construction may and shall
be entitled to receive and retain the whole of the dividends to the exclusion of
all the Guarantor's rights as guarantor and no money or dividend so received by
ST Construction shall be treated as received in respect of this Guarantee or
otherwise in relation to the Guarantor but the full amount hereby guaranteed
shall be payable by the Guarantor until ST Construction shall have received from
all sources one hundred per cent of all the sums outstanding against the Company
under the Building Contract and the ST Construction Security Documents.
10. (1) No assurance, security or payment which may be avoided under any law
relating to bankruptcy or insolvency or under Section 329 or 330 of the
Companies Act (Cap. 50), and no release, settlement or discharge given or made
by ST Construction on the faith of any such assurance or security or payment,
shall prejudice or affect the right of the Lender to recover from the Guarantor
to the full extent of this Guarantee as if such assurance security payment
release settlement or discharge had never been granted given or made.
(2) It is further agreed that ST Construction shall be entitled to retain
this Guarantee as security for the Secured Debt and the performance and
discharge of the Company's obligations under the Building Contract and the ST
Construction Security Documents for a period of (7) months after the Secured
Debt shall have been paid in full and the said obligations duly performed and
discharged, notwithstanding any release, settlement, discharge or arrangement
given or made by ST Construction on, or as a consequence of, such termination of
liability, if at any time within the period of six (6) months after such
termination, a petition for bankruptcy (or equivalent) shall be presented to a
competent court against the Guarantor, ST Construction shall be entitled to
continue to retain this Guarantee for and during such further period as ST
Construction in its absolute discretion shall determine and the Guarantor agrees
that this Guarantee shall be deemed to have been and to have remained held by ST
Construction as and by way of security for the payment of the Secured Debt and
the performance and discharge of all the Company's obligations under the
Building Contract and the ST Construction Security Documents.
11. Until all monies due or owing by the Company to ST Construction shall have
been fully paid and all its liabilities and obligations to ST Construction shall
have been satisfied and
<PAGE>
4
discharged, the Guarantor will not prove in competition with ST Construction for
any monies owing by the Company to the Guarantor on any account whatsoever
and/or in respect of any monies due or owing from the Company to ST Construction
but will give to ST Construction the benefit of any proof which the Guarantor
may be able to make in the liquidation of the Company or in any arrangement or
composition with creditors.
12. (1) This Guarantee shall not be determined or in any way prejudiced or
affected by: -
(a) any change in the constitution of the Company whether by way of
amalgamation consolidation reconstruction or otherwise but shall enure and
be available for all intents and purposes as if the new or amalgamated or
resulting company or concern had been the one whose obligations were
originally guaranteed;
(b) any amalgamation reconstruction or sale of all or any part of ST
Construction's undertaking and assets to another company whether the company
with which ST Construction amalgamates or the company to which ST
Construction transfers all or any of ST Construction's assets either on a
reconstruction or sale as aforesaid shall or shall not differ in its objects
character and constitution from ST Construction, it being the Guarantor's
intent that this Guarantee shall remain valid and effectual for all purposes
and in all respects in favour of against and with reference to any such
company and that the benefit of this Guarantee and all rights conferred upon
ST Construction hereby may be and purposes as if such company or companies
person or persons had been named herein instead.
(2) No change whatsoever in the Guarantor's constitution shall affect its
liability or the liability of its successors under this Guarantee or affect the
validity of or discharge this Guarantee and this Guarantee shall be binding on
the Guarantor notwithstanding any changes that shall subsequently take place in
its constitution whether by amalgamation reconstruction or otherwise and in the
event of any such amalgamation reconstruction or change taking place as
aforesaid this Guarantee shall operate as though it had been originally given
by such new or amalgamated or reconstructed company or concern and as if the
liability hereto or hereunder had commenced at the date of this Guarantee.
13. This Guarantee shall be a continuing security binding on the Guarantor and
its successors. This Guarantee shall not be determined or affected by the
liquidation of the Guarantor but shall in all respects and for all purposes be
binding and operative.
14. Any indebtedness of the Company now or hereafter held by the Guarantor
shall be subordinated to the indebtedness or liabilities of the Company to ST
Construction as aforesaid. If the Lender so requires, after the occurrence and
during the continuance of a default by the Borrower under the Building Contract
or any of the ST Construction Security Documents, such indebtedness of the
Company to the Guarantor shall be collected enforced and received by the
Guarantor as trustee for ST Construction and shall be paid over to ST
Construction on account of the indebtedness or liabilities of the Company to ST
Construction until all monies and liabilities hereby guaranteed have been fully
paid to ST Construction. Any security now or hereafter held by or for the
Guarantor from the Company in respect of the Guarantor's liability under this
Guarantee shall be held in trust for ST Construction and as security for the
Guarantor's liability under this Guarantee.
15. As a separate and independent stipulation the Guarantor hereby irrevocably
and unconditionally undertakes to indemnify ST Construction and keep ST
Construction indemnified fully and completely against all claims and demands
actions and proceedings losses damages costs and expenses including legal costs
as between a solicitor and client and
<PAGE>
5
all other liabilities of whatsoever nature or description which may be made
taken incurred or suffered by ST Construction in connection with or in any
manner arising out of the Building Contract, the ST Construction Security
Documents and/or the Secured Debt provided that the Guarantor shall not
indemnify ST Construction against any such claims and demands, actions and
proceedings, losses, damages, costs and expenses or other liabilities which may
be made, taken, incurred or suffered by ST Construction as a result of the
breach by ST Construction of its obligations under any of the ST Construction
Security Documents.
16. (1) The Guarantor hereby represents and warrants to and for the benefit
of ST Construction as follows:
(a) it is a corporation duly incorporated and validly existing under the
laws of the State of Delaware and qualified to do business in the State of
California and has the corporate power and authority to own assets and to
conduct the business which it conducts and/or proposes to conduct;
(b) the certified copies of the Certificate of Incorporation and By Laws
and the board resolutions of the Guarantor delivered by it to ST
Construction are true and accurate copies of the corporate records of the
Guarantor;
(c) the execution, delivery and performance of this Guarantee is within
the corporate approvals, and do not or will not contravene any law or any
contractual restriction in any material agreement binding on the Guarantor
or any provision of its Certificate of Incorporation and By Laws;
(d) this Guarantee is the legal, valid and binding obligations of the
Guarantor enforceable in accordance with its terms;
(e) all acts, conditions and things required to be taken, fulfilled and
done (including the obtaining of any necessary consents) in order (i) to
enable the Guarantor lawfully to enter into, exercise its rights and perform
and comply with its obligations under this Guarantee, (ii) to ensure that
those obligations are legally binding and enforceable and (iii) to make this
Guarantee admissible in evidence in the courts of Singapore and USA have
been taken, fulfilled and done;
(f) the Guarantor's entry into, exercise of its rights and/or performance
of or compliance with its obligations under this Guarantee do not and will
not violate (i) any law to which it is subject or (ii) any agreement to
which it is a party or which is binding on it or its assets, and do not and
will not result in the existence of, or oblige it to create, any security
over those assets;
(g) there is no provision of any material existing mortgage, trust deed,
contract, licence, franchise, concession or agreement binding on the
Guarantor which is being contravened or breached by the execution of this
Guarantee by the Guarantor or by the Guarantor's performance or observance
of any of its obligations under this Guarantee;
(h) no litigation, arbitration or administrative proceeding is current or
pending (i) to restrain the entry into, exercise of the Guarantor's rights
under and/or performance or enforcement of or compliance with its
obligations under this Guarantee, or (ii) which has or could have a material
adverse effect on the ability of the Guarantor to perform its obligations
under this Guarantee;
<PAGE>
6
(i) there are no proceedings pending before any court or to the
knowledge of the Guarantor threatened against or affecting the Guarantor and
no proceedings are before any government agency or administrative body
pending or to the knowledge of the Guarantor threatened against the
Guarantor which would materially affect its financial condition or its
operations or impair its rights to carry on its business substantially as
now conducted or the ability of the Guarantor to perform and discharge its
obligations under this Guarantee and the Guarantor has complied with all
applicable statutes and regulations of all government authorities having
jurisdiction over the Guarantor;
(j) the Guarantor is solvent, and no steps have been taken or are being
taken by the Guarantor or by its shareholders, nor have any legal
proceedings been started or threatened for the Guarantor's dissolution or
winding-up or for the appointment of a receiver, receiver and manager, or
liquidator, judicial manager, trustee or such other officers in similar
capacity to take over the Guarantor or all or any of its assets;
(k) the Guarantor has filed all tax returns which it is required by law
to file and has paid or made adequate provision for the payment of all
taxes, assessments, fees and other governmental charges assessed against it
or upon any of its properties or assets, income or franchises or any of them
except for those taxes, assessments, fees and other governmental charges
that are being contested in good faith;
(l) the Guarantor is not in default in the payment or performance of any
of its material obligations for borrowed money, or in respect of other
liabilities;
(m) there is no material adverse change in the business, assets, financial
condition, operating environment, management of the Guarantor or other
conditions which will materially affect the ability of the Guarantor to
perform its obligations under this Guarantee;
(n) in any legal proceeding in USA in relation to this Guarantee, the
choice of the laws of Singapore to govern this Guarantee under the
applicable law of USA and will with respect to the essential elements and
effects thereof, be recognised and applied;
(o) the Guarantor is under applicable law of Singapore and USA, subject
to civil and commercial law with respect to its obligations under this
Guarantee, the entering into of which constitute its private and commercial
acts; the Guarantor is subject to legal proceedings in Singapore, USA and
elsewhere and neither the Guarantor nor any of its assets is entitled to
immunity from suit, execution, attachment or other legal process;
(p) the audited financial statements of the Guarantor for the fiscal year
ended 31st December 1994, which have previously been submitted by the
Guarantor to ST Construction are complete and correct and fairly represent
the financial condition of the Guarantor and the results of its operations
for the period stated in accordance with generally accepted accounting
principles applied on a consistent basis.
(2) Each of the representations and warranties contained in the preceding
sub-clauses shall survive and continue to have full force and effect after the
execution of this Guarantee and the Guarantor hereby warrants to ST Construction
that the above representations and warranties will be true and correct and fully
observed until the Secured Debt is fully paid and until all the Company's
obligations under the Building Contract and the ST Construction Security
Documents have been performed and discharged.
<PAGE>
7
17. The Guarantor hereby undertakes and agrees with ST Construction as follows:
(1) to deliver to ST Construction, its quarterly financial statements and
all such other releases relating to its finances released to the press in
USA;
(2) to furnish ST Construction with audited balance sheets, profit and
loss account and the statement of the directors every year within six (6)
months of the end of the fiscal year, such balance sheets and accounts to be
duly audited by independent certified public accountants;
(3) the Guarantor will carry on and conduct its affairs and business in a
proper and efficient manner and will keep or cause to be kept all its
properties and assets in a good state of repair and condition in accordance
with good commercial practice;
(4) the Guarantor will not without the prior written consent of ST
Construction which consent shall not be unreasonably withheld or delayed,
terminate its business as now conducted which will substantially and
adversely affect the financial condition of the Guarantor and/or the
performance of its obligations under this Guarantee;
(5) the Guarantor shall obtain all necessary material licences and
comply with all laws regulations rules and orders relating to the carrying
on of its business;
(6) the Guarantor will furnish and provide ST Construction with and
permit ST Construction to obtain all such statements information explanation
and data, as ST Construction may reasonably require regarding the affairs
operations administration financial corporate or other whatsoever state or
condition of the Guarantor or any of the matters in this clause mentioned.
(7) that ST Construction is hereby authorised by the Guarantor to
disclose to any government or regulatory authority, the Company, the Lender
and any other persons who have provided to ST Construction any guarantee,
security or other assistance in relation to the performance by the Guarantor
of its obligations herein any information relating to the Guarantor and its
affairs as ST Construction shall in its absolute discretion think fit and
the Guarantor hereby consents to such disclosure made now or hereafter;
(8) to pay any goods and services tax, value added tax or such other
consumption tax, by whatever name which may be leviable or levied or imposed
upon or in respect of this Guarantee and all sums payable hereunder and the
Guarantor agrees to indemnify ST Construction against such payment if ST
Construction is required by law to collect and make payment in respect
thereof;
(9) the Guarantor will promptly notify ST Construction of any material
event or adverse change in the condition (financial or otherwise) of the
Guarantor and of any litigation or proceedings being threatened or initiated
against the Guarantor before any court tribunal or administrative agency,
all such notification to be given to ST Construction promptly after the
Guarantor has knowledge of the said change or of the said litigation or
proceedings or threat thereof and the amount of contingent liability if such
amount is ascertainable.
18. Except with the prior written consent of ST Construction, such consent not
to be unreasonably withheld or delayed, the Guarantor shall not:
<PAGE>
8
(1) (whether by a single transaction or a number of related or unrelated
transactions and whether at the same time or over a period of time) (a)
sell, transfer, lease out, lend or otherwise dispose of the whole of its
assets or of any part of its assets which, when aggregated with all other
disposals by it required to be taken into account under this sub-Clause (1),
is material in relation to its assets or the disposal of which (when so
aggregated) could have a material adverse effect on it, or (b) materially
change the scope or nature of its business, whether by disposal, acquisition
or otherwise. The following disposals shall not be taken into account under
this sub-Clause (1):
(i) disposals in the ordinary course of business; and
(ii) any disposal which ST Construction shall have agreed shall not
be taken into account;
(2) amend or alter any provisions of its Memorandum and Articles of
Association including those relating to its borrowing powers, powers to
guarantee and charge its assets as security for any third party borrowings
and its principal business activities in so far as it will affect the
Guarantor's performance and discharge of its obligations under this
Guarantee;
(3) sell, transfer or otherwise dispose of or create or purport to
create or permit to subsist any mortgage charge lien or otherwise encumber
the Guarantor's shares in the Company or any part thereof or interest
therein or attempt or agree to do so Provided that the pledge of the
Guarantor's stake in the shares of the Company given to The CIT
Group/Business Credit Inc. shall not in any way be affected;
(4) not to appoint a judicial manager to take over the assets and
undertaking of the Guarantor.
19. (1) All sums payable by the Guarantor under this Guarantee shall be paid
(a) free of any restriction or condition, (b) free and clear of and (except to
the extent required by law) without any deduction or withholding on account of
any tax and (c) without deduction or withholding (except to the extent required
by law) on account of any other amount, whether by way of set-off or otherwise.
(2) If (a) the Guarantor or any other person is required by law to make
any deduction or withholding on account of any such tax or other amount from any
sum paid or payable by the Guarantor to ST Construction under this Guarantee or
(b) ST Construction (or any person on its behalf) is required by law to make any
deduction or withholding from, or (except on account of tax on the overall net
income of ST Construction) any payment on or calculated by reference to the
amount of, any sum received or receivable by ST Construction under this
Guarantee, the Guarantor shall notify ST Construction of any such requirement or
any change in any such requirement as soon as it becomes aware of it, and:
(i) pay any such tax or other amount before the date on which penalties
attach thereto, such payment to be made (if the liability to pay is imposed
on the Guarantor) for its own account or (if that liability is imposed on ST
Construction) on behalf of and in the name of ST Construction;
(ii) the sum payable by the Guarantor shall (except, in the case of any
such payment, to the extent that its amount is not ascertainable when that
sum is paid) be increased to the extent necessary to ensure that, after the
making of that deduction, withholding or payment, ST Construction receives
on the due date and retains (free from any liability in respect of any such
deduction, withholding or
<PAGE>
9
payment) a net sum equal to what it would have received and so retained had
no such deduction, withholding orpayment been required or made; and
(iii) within fourteen (14) days after paying any sum from which it is
required by law to make any deduction or withholding, and within fourteen
(14) days after the due date of payment of any tax or the amount which it is
required by paragraph (ii) above to pay, the Guarantor shall deliver to ST
Construction evidence satisfactory to ST Construction of such deduction,
withholding or payment and of the remittance thereof to the relevant taxing
or other authority.
(3) Without prejudice to the survival of any other agreement of the
Guarantor hereunder, the agreements and obligations of the Guarantor contained
in sub-Clauses (1) through (2) above shall survive the payment in full of all
sums and liabilities of the Guarantor under this Guarantee.
20. (1) Singapore Dollars is the sole currency of account and payment for all
sums payable by the Guarantor under or in connection with this Guarantee,
including damages. Any amount received or recovered in a currency other than
Singapore Dollars (whether as a result of, or the enforcement of, a judgment or
order of a court of any jurisdiction, in the dissolution of the Guarantor or
otherwise) by ST Construction in respect of any sum expressed to be due to it
from the Guarantor under this Guarantee shall only constitute a discharge to the
Guarantor to the extent of the Singapore Dollar amount which ST Construction is
able to purchase with the amount so received or recovered in that other currency
on the date of that receipt or recovery (or, if it is not practicable to make
that purchase on that date, on the first date on which it is practicable to do
so). If that Singapore Dollar amount is less than the Singapore Dollar amount
expressed to be due to ST Construction under this Guarantee, the Guarantor shall
indemnify ST Construction against any loss sustained by it as a result thereof.
In any event, the Guarantor shall indemnify ST Construction against the cost of
making any such purchase. For the purpose of this sub-Clause (1) it shall be
sufficient for ST Construction to demonstrate that it would have suffered a loss
had an actual exchange or purchase been made.
(2) These indemnities constitute a separate and independent obligation
from the other obligations in this Guarantee, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by ST Construction and shall continue in full force and effect despite any
judgment, order, claim or proof for a liquidated amount in respect of any sum
due under this Guarantee or any judgment or order. Any proof or evidence of any
actual loss furnished by ST Construction shall be prima facie evidence thereof
and is binding on the Guarantor.
21. (1) ST Construction may from time to time and at any time waive either
unconditionally or on such terms and conditions as it may deem fit any breach by
the Guarantor of any of the undertakings stipulations terms and conditions
herein contained and any modification thereof but without prejudice to its
powers rights and remedies for enforcement thereof, Provided Always that:
(a) neither any neglect or forbearance of ST Construction to require and
enforce payment of any moneys hereunder or the performance and observance of
any undertakings stipulations terms and conditions herein contained, nor any
time which may be given to the Company or the Guarantor shall in any way
prejudice or affect any of the rights powers or remedies of ST Construction
at any time afterwards to act strictly in accordance with the provisions
hereof;
<PAGE>
10
(b) no such waiver of any such breach as aforesaid shall prejudice the
rights of ST Construction in respect of any other or subsequent breach of
any of the undertakings stipulations terms or conditions aforesaid.
(2) No delay or omission on ST Construction's part in exercising any
right, power, privilege or remedy in respect of this Guarantee shall impair such
right, power, privilege or remedy or be construed as a waiver of it nor shall
any single or partial exercise of any such right, power, privilege or remedy
preclude any further exercise of it or the exercise of any other right, power or
privilege or remedy. The rights, powers, privileges and remedies provided in
this Guarantee are cumulative and not exclusive of any rights, powers,
privileges or remedies provided by law.
22. The liability of the Guarantor hereunder shall not be discharged by reason
of the fact that any person is or has become in any way, whether with or without
ST Construction's acceptance, liable to pay any of the moneys owing by the
Company or the Guarantor hereunder or by reason of any time or other indulgence
being granted by or with the consent of ST Construction to any such person or by
reason of any arrangement being entered into or composition accepted by ST
Construction modifying the operation of law or otherwise the rights and remedies
of ST Construction under the provisions of this Guarantee.
23. For all purposes including any legal proceedings a certificate by any of ST
Construction's officers as to the sums and liabilities due to ST Construction
shall be prima facie evidence against the Guarantor.
24. The Guarantor shall pay forthwith on demand on a full indemnity basis:
(1) all expenses including stamp duty (whether as penalty or otherwise),
legal administrative, execution fees and any other costs or charges
(including abortive costs) whether of ST Construction or otherwise and
reasonably incurred or expended by ST Construction in connection with this
Guarantee;
(2) all legal fees as between solicitors and clients and other costs and
disbursements whatsoever including but not limited to stamp or other duties
incurred in connection with demanding and enforcing payment of moneys due
hereunder or otherwise howsoever in enforcing this Guarantee or any of the
covenants, undertakings, stipulations, terms, conditions or provisions of
this Guarantee.
25. (1) The Guarantor hereby irrevocably authorises and appoints the Company (or
such other person being a firm of advocates and solicitors resident in the
Republic of Singapore as it may by written notice to ST Construction substitute)
to be its agent in the Republic of Singapore for the purpose of receiving
service of any legal proceedings, notices, demands and other correspondence in
connection herewith required to be sent or given to the Guarantor. Any demand
for payment of moneys or any other demand or notice under this Guarantee may be
made given or served by or on behalf of ST Construction by any officer for the
time being of ST Construction or by any person or firm for the time being acting
as solicitor or solicitors for ST Construction in each case by letter addressed
to the Guarantor and delivered by hand or sent by registered post to the
Company's registered office specified at the commencement of this Guarantee (or
the address of such substitute as may be appointed) and any and every demand or
notice so made given or served shall be deemed to have been duly made given or
served on the day it was so delivered or in the case of a demand or notice sent
by registered post shall be deemed to have been duly made given or served when
the registered letter would in the ordinary course be delivered notwithstanding
the fact that the letter may be returned through the post office undelivered.
Any change of the registered office of the Company will be notified to ST
Construction in writing within seven (7) days thereof.
<PAGE>
11
(2) Notices, certificates and other correspondence in connection herewith
required to be sent or given to ST Construction shall be addressed by the
Guarantor and shall be sent to ST Construction's address specified at the
commencement of this Guarantee (or to such other address as may from time to
time be given by ST Construction to the Guarantor for that purpose) and any and
every demand or notice so made given or served shall be deemed to have been
duly made given or served on the day it was so delivered or in the case of a
demand or notice sent by registered post shall be deemed to have been duly made
given or served when the registered letter would in the ordinary course be
delivered notwithstanding the fact that the letter may be returned through the
post office undelivered.
(3) All notices and demands in terms of this Guarantee shall be in writing
unless otherwise specified in this Guarantee.
26. (1) This Guarantee shall be binding upon and inure to the benefit of
the Guarantor and ST Construction and the successors in title and assigns of ST
Construction. All undertakings, agreements, representations and warranties
given, made or entered into by the Guarantor under this Guarantee shall survive
the making of any assignments hereunder.
(2) The Guarantor shall have no right to assign or transfer any of its
rights hereunder and it shall remain fully liable for all of its undertakings,
agreements, duties, liabilities and obligations hereunder, and for the due and
punctual observance and performance thereof.
27. If any one or more of the provisions contained herein shall be deemed
invalid, unlawful or unenforceable in any respect under any applicable law, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired.
28. (1) The Guarantor hereby agrees that any legal action or proceedings
arising out of or in connection with this Guarantee may be brought in the
courts of the Republic of Singapore and the Guarantor irrevocably submits to
the jurisdiction of such courts.
(2) The Guarantor agrees that any writ, judgment or other notice of legal
process arising out of or in connection with this Guarantee shall be deemed to
be duly served on the Guarantor if it is served as provided in Clause 25(1).
(3) The submission to the said jurisdiction shall not (and shall not be
construed so as to) limit the right of ST Construction to take proceedings
against the Guarantor in whatsoever jurisdictions shall to ST Construction seem
fit nor shall the taking of proceedings in any one or more jurisdictions
preclude the taking of proceedings in any other jurisdiction, whether
concurrently or not.
29. This Guarantee is in addition to and shall not merge with or otherwise
prejudice or affect any other right remedy guarantee indemnity or security of ST
Construction.
30. All capitalised terms and expressions used or referred to herein shall
unless the context requires otherwise, have the meanings ascribed to them in the
Assignment.
31. This Guarantee shall be governed by and construed in all aspects in
accordance with the Laws of the Republic of Singapore.
<PAGE>
12
IN WITNESS WHEREOF the Guarantor has hereunto affixed its Common Seal
------------------
The Common Seal of )
Micropolis Corporation )
was hereunto affixed in )
the presence of: - )
........................................... Director
[SEAL APPEARS HERE]
.......................................... Director/Secretary
<PAGE>
EXHIBIT 10.50
CONSULTING AGREEMENT
--------------------
Agreement made as of the First day of November, 1995 by and between CHRISS
STREET & COMPANY, a California corporation maintaining its principal offices at
1111 Bayside Drive, Corona del Mar, California 92625 (hereinafter referred to as
"Consultant") and MICROPOLIS CORPORATION, a Delaware corporation maintaining its
principal offices at 21211 Nordhoff Street, Chatsworth, California 91311
(hereinafter referred to as "Micropolis").
WITNESSETH:
-----------
WHEREAS, Micropolis manufactures high performance computer products and services
for sale to the open market; and
WHEREAS, Micropolis is desirous of obtaining business and financial advisory
services; and
WHEREAS, Consultant is engaged in the business of providing and rendering
business and financial advisory services, has knowledge, expertise and personnel
to render the requisite services to Micropolis.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements contained herein, it is agreed as follows:
1. Duties of Consultant. Consultant shall, at the request of Micropolis, upon
--------------------
reasonable notice provide such consulting services and advice pertaining to
Micropolis's business affairs as Micropolis may from time to time reasonably
request. Without limiting the generality of the foregoing, Consultant will
assist Micropolis in developing, studying and evaluating corporate restructuring
and repositioning proposals and assist in negotiations and discussions
pertaining thereto.
2. Compensation. For the services to be rendered and performed by Consultant
------------
during the term hereof, Micropolis shall pay to Consultant the sum of $100,000
payable on signing of this document. Micropolis shall also reimburse Consultant
for all reasonable and necessary out-of-pocket expenses incurred in the
performance of its duties for Micropolis upon presentation of statements setting
forth in reasonable detail the amount of such expenses. Consultant shall not
incur any expense for any single item in excess of $500.00 except upon the prior
approval of a representative of Micropolis.
3. Available Time. Consultant shall make available such time of its personnel
--------------
as it, in its sole discretion, shall deem appropriate for the performance of its
obligations under this Agreement.
4. Relationship. Nothing herein shall constitute Consultant as an employee or
------------
agent of Micropolis, except to such extent as might hereinafter be agreed upon
for a particular purpose. Except as might hereinafter be expressly agreed,
Consultant shall not have the authority to obligate or commit Micropolis in any
manner whatsoever.
1
<PAGE>
5. Confidentiality of Micropolis Business Information. Consultant acknowledges
--------------------------------------------------
that in the course of the performance of its duties and as a necessary incident
thereof, Micropolis may make available or impart to Consultant or Consultant's
agents or employees, certain financial and business information concerning the
business, affairs, plans and programs of Micropolis (the "Proprietary
Information"). Consultant acknowledges that the Proprietary Information would
not otherwise be made available to it but for its relationship to Micropolis and
that such Proprietary Information would not otherwise be publicly available or
obtainable. Consultant agrees that neither it nor its agents or employees or
agents will, during the term of this Agreement or at any time thereafter,
disclose or divulge or use, directly or indirectly, for its own benefit, any of
the Proprietary Information. Consultant further agrees that it will not use any
of the Proprietary Information in connection with the purchase or sale of any
securities of Micropolis. The provisions of this Paragraph 5 shall survive the
termination of this Agreement.
6. Indemnification by Micropolis as to Information Provided to Consultant.
----------------------------------------------------------------------
Micropolis acknowledges that Consultant, in the performance of its duties, will
be required to rely upon the accuracy and completeness of information supplied
to it by Micropolis's officers, directors, agents and/or employees. Micropolis
therefore agrees to indemnify, hold harmless and defend Consultant, its
officers, agents and/or employees from any proceeding or suit which arises out
of or is due to the inaccuracy or incompleteness of any material or information
supplied by Micropolis to Consultant.
7. Term and Termination. This agreement shall be for a one hundred and eighty
--------------------
day period commencing November 1, 1995 and terminating April 30, 1996.
8. Notices. Any notice to be given by either party to the other hereunder
-------
shall be sufficient if in writing and sent by registered or certified mail,
return receipt requested, addressed to such party at the address specified on
the first page of this Agreement or such other address as either party may have
given to the other in writing.
9. Entire Agreement. The within agreement contains the entire agreement and
----------------
understanding between the parties and supersedes all prior negotiations,
agreements and discussions concerning the subject matter hereof.
10. Modification and Waiver. This Agreement may not be altered or modified
-----------------------
except by writing signed by each of the respective parties hereof. No breach or
violation of this Agreement shall be waived except in writing executed by the
party granting such waiver.
11. Law To Govern. This Agreement has been negotiated and executed in the
-------------
State of California and shall be governed by the laws of the State of
California.
12. Non-Assignment. This Agreement shall not be assigned by either party
--------------
hereto except upon the prior written consent of the other.
2
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first written above.
CHRISS STREET & COMPANY
By /s/ CHRISS W. STREET
-------------------------
Chriss W. Street
President
MICROPOLIS CORPORATION
By /s/ J. LARRY SMART
--------------------------
J. Larry Smart
President
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING CONDENSED CONSOLIDATED FINANCIAL STATEMETNS OF MICROPOLIS
CORPORATION AS OF AND FOR THE THREE-MONTH PERIOD ENDED SEPTEMBER 29, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-END> SEP-29-1995
<CASH> 37,310
<SECURITIES> 0
<RECEIVABLES> 52,064
<ALLOWANCES> 7,059
<INVENTORY> 53,790
<CURRENT-ASSETS> 139,109
<PP&E> 127,637
<DEPRECIATION> 78,432
<TOTAL-ASSETS> 190,169
<CURRENT-LIABILITIES> 69,109
<BONDS> 86,888
<COMMON> 15,580
0
0
<OTHER-SE> 16,968
<TOTAL-LIABILITY-AND-EQUITY> 190,169
<SALES> 58,785
<TOTAL-REVENUES> 58,785
<CGS> 56,294
<TOTAL-COSTS> 56,294
<OTHER-EXPENSES> 18,997
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,311
<INCOME-PRETAX> (17,445)
<INCOME-TAX> 36
<INCOME-CONTINUING> (17,481)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,481)
<EPS-PRIMARY> (1.12)
<EPS-DILUTED> (1.12)
</TABLE>
