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SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1995
[ ] Transitional _____ pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) For the transition period from ______ to
______.
Commission File Number 0-13381
MYLEX CORPORATION
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2291597
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
34551 Ardenwood Boulevard
Fremont, California 94555
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Address of principal executive office (Zip code)
Registrant's telephone number, including area code: 510-796-6100
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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
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The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the mean of the closing bid and asked price of the
Common Stock on March 1, 1996, as reported on Nasdaq was $434,348,044. Shares
of Common Stock held by each officer and director and by each person who owns
5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [ ]
As of March 1, 1996, registrant had outstanding 19,631,550 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Parts II and IV incorporate information by reference from the Annual Report to
Shareholders for the year ended December 31, 1995. Part III incorporates
information by reference from the definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 30, 1996.
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TABLE OF CONTENTS
PART I
Page
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Item 1. Business 5
Item 2. Properties 15
Item 3. Legal Proceedings 15
Item 4. Submission of Matters to a
Vote of Security Holders 16
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 17
Item 6. Selected Financial Data 17
Item 7. Management's Discussion and Analysis of
Financial Condition and Results
of Operations 17
Item 8. Consolidated Financial Statements and
Supplementary Data 17
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 17
PART III
Item 10. Directors and Executive Officers
of the Registrant 18
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain
Beneficial Owners and Management 18
Item 13. Certain Relationships and Related
Transactions 18
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PART IV
Item 14. Exhibits, Consolidated Financial Statements,
Financial Statement Schedules, and
Reports on Form 8-K 19
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PART I
ITEM 1. BUSINESS
GENERAL
Mylex designs, manufactures and markets RAID controllers that provide high
performance, capacity enhancing fault tolerant storage and input/output
solutions for client/server computer networks. Mylex controllers integrate the
Company's proprietary ASICs, firmware and software with standard industry
components. More than twenty leading network file server and storage subsystem
OEMs, including IBM, Hewlett-Packard Company, Digital Equipment Corporation, and
NEC, have designed Mylex RAID controllers into their server and storage
subsystem products. The Company was incorporated under the laws of the State of
Florida in May 1983.
During the late 1980s and early 1990s, the Company's principal business
involved the production and sale of system boards (so-called "mother boards")
for personal computers. In the early 1990s, Mylex responded to changes in the
computer industry by undertaking a series of product development initiatives
designed to reposition the Company to address the storage and input/output, or
"I/O," challenges facing the emerging client/server computing environment. In
1992, the Company introduced its first RAID controller product into the personal
computer network market. Sales of RAID controller products have grown rapidly
since 1992, and represented 95% of the Company's net sales during 1995. The
higher gross margins from this new product line are reflected in the increase in
the Company's overall gross margins from 13.6% in 1992 to 19.4% in 1993 to 35.5%
in 1994 to 37.5% in 1995.
The trend toward client/server computing that began in the mid-1980s has
placed particular demands on network storage systems and related I/O functions.
The development of faster microprocessors and more robust computer bus
architectures in network systems has often outstripped the capabilities of data
storage and I/O technologies, leading to systems "bottlenecks." To alleviate or
avoid such bottlenecks, networks require continual improvements in stored data
retrieval speed. In addition, the development of more complex applications and
operating systems has created the need for increased network storage capacity.
Meanwhile, the mission critical, enterprise-wide nature of networked computing
often requires a high level of "fault tolerance," or the ability to preserve
data from loss and to provide uninterrupted system service even if an individual
data storage device fails. The emergence of data-intensive applications such as
multimedia and video-on-demand are further driving the demands for speed,
capacity and reliability in network storage devices.
Mylex RAID controllers enable increased speed, greater capacity, and a high
degree of fault tolerance in network storage and I/O functions. RAID, which
stands for redundant array of independent disks, is a method for distributing
data across several
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disk drives and allowing the server microprocessor to access those drives
simultaneously, thus increasing system storage I/O performance. In addition,
lost data on any drive can be recreated using special RAID algorithms, thus
ensuring the immediate availability of RAID protected data even in the event of
a disk drive failure. Mylex controllers support all major operating systems and
bus types, and the Company endeavors to rapidly develop products for new bus,
operating system, and platform standards as they are defined. RAID controller
products based on the recently introduced PCI bus standard represented a
majority of its disk array product sales in 1995. The Company believes that its
proprietary software and firmware as well as its large installed base
of RAID units are key competitive advantages in the RAID controller market.
In December 1995, Mylex announced the signing of an agreement to acquire
BusLogic Inc., a Santa Clara, California-based supplier of high-performance
SCSI (Small Computer Systems Interface) I/O solutions used in network file
servers, personal computers and workstations. That acquisition was
consummated in February 1996. BusLogic's SCSI host adapter product family
represents one of the broadest host adapter product offerings available. Each
of these products provides a common interface to all of today's PC bus
architectures, including PCI, VESA, EISA, ISA and Micro Channel. The
acquisition of BusLogic should strengthen Mylex by adding significant SCSI
technology and ASIC (Application Specific Integrated Circuit) development
capabilities to the Company's capabilities. BusLogic will continue to operate
under its own name as a wholly owned subsidiary.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
Sales of the Company's RAID controller products accounted for 81% of the
Company's net sales in 1994 and 95% of net sales in 1995. RAID controller
products are used principally in personal computer network applications. The
use of RAID technology in the personal computer network market is relatively
recent, and there can be no assurance that another technology will not
replace RAID in the disk array controller marketplace or that there will be
widespread acceptance or continuing growth of the use of RAID products in
general, or the Company's RAID controllers in particular, in that market.
Furthermore, even if the market continues to grow, there can be no assurance
that the Company will be able to continue to market and sell its RAID
controller products at the same rates, and with the same gross margins, it
has experienced to date. In addition, in order to be able to compete
successfully in the RAID controller market, the Company will have to develop
and market new RAID controller products. There can be no assurance that the
Company will be able to develop and introduce new RAID controller products in
a timely manner or that any such products will gain or sustain market
acceptance.
The Company's revenue depends on a customer base that is highly
concentrated. The Company's three largest customers, International Business
Machines ("IBM"), Digital Equipment Corporation ("DEC"), and Hewlett-Packard
Company ("HP"), collectively accounted for 53% of the Company's net sales in
1994. In 1995, sales to IBM, DEC and HP collectively accounted for 59% of the
Company's net sales. Sales to IBM alone represented 26% of the Company's net
sales during 1995. A limited number of customers and customer orders have
accounted for, and are likely to continue to account for, a substantial portion
of the Company's revenue in any period. The Company has no long-term purchase
commitments from its customers, and customers generally may
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cancel their orders on 30-days notice. Accordingly, there can be no assurance
that orders from existing customers, including the Company's principal
customers, will continue at their historical levels, or that the Company will be
able to obtain orders from new customers. Loss of one or more of the Company's
current customers, particularly a principal customer, or cancellation or
rescheduling of orders already placed, could materially and adversely affect the
Company's business and operating results.
The Company's OEM customers have integrated the Company's RAID controller
products into their servers and storage subsystems. Any of these OEM customers
may choose to develop their own RAID controller products which could be
substituted for, and thus reduce or eliminate their purchases of, the Company's
RAID controller products. Most of the Company's OEM customers, and particularly
its principal customers, have extensive product development experience and
expertise, substantial financial resources and ongoing, substantial product
development activities. As a result, it is likely that those customers have been
and will be involved in RAID development programs on a continuing basis. Any
material reduction in purchases of RAID controller products by any OEM
customers as a result of such customer developing its own competing product will
materially and adversely affect the Company's business and operating results.
PRODUCTS
During the last half of 1993, the Company shifted its principal activity
from the supply of system board products to the manufacture of I/O devices
and storage management enhancing computer peripheral products. Mylex designs
its products to provide solutions for all popular operating systems,
including Novell Netware, Windows NT, SCO UNIX, Solaris, Unixware and Banyan.
Mylex products also work with all popular platforms. These include personal
computer platforms that use PCI, EISA, and Micro Channel bus architectures
and workstation platforms, including Sun Microsystems, Silicon Graphics and
IBM RS-6000 workstations that use the Company's SCSI to SCSI products.
Raid Controllers
Each bus-based Mylex RAID controller includes a proprietary application
specific integrated circuit, or "ASIC," that serves as an interface with the
host computer, an Intel i960 RISC processor, up to five SCSI channels to manage
the transfer of data to and from the disk drives in the array and a dynamic
cache memory ranging in size from 2 to 64 MB, depending on the product, to
buffer the transfer of information to and from the disks. The controller also
includes Mylex firmware residing on an EEPROM that implements the RAID
algorithms and the algorithms necessary for the cache and supporting
software, including I/O drivers, configuration utilities and system
monitoring programs.
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Mylex disk array controllers DAC960E, DAC960 Micro Channel, DAC960P and
DAC960PD provide high performance, fault tolerant data storage solutions for
EISA, Micro Channel and PCI bus platforms. The Mylex SCSI-to-SCSI disk array
controllers (DAC960S/SI) bring the performance of RAID technology to
virtually any hardware platform without requiring special host software. The
Mylex disk array products are designed for both internal and external storage
options and are compatible with most commonly used operating systems.
Products currently under development include new SCSI to SCSI
controllers, a controller optimized for multimedia and video imaging,
controllers that will provide for high speed serial interfaces to disk
drives, a low-cost RAID solution and a RAID implementation for the system
board. There can be no assurance that the Company will introduce its products
under development. If these products are introduced, there can be no
assurance that they will gain market acceptance or that their sales will
produce adequate gross margins.
Network Enhancement Products
In addition to RAID controllers, Mylex produces the PNA960, an internal
peer to peer Ethernet Switch designed for the PCI bus, under a license
agreement that the Company entered with XPoint Technologies in early 1995.
The PNA960 incorporates an on board microprocessor which relieves the server
processor of additional task management and substantially increases the speed
of data transfer over the network. Mylex also provides high performance
Ethernet Network Cards. All network enhancement products are compatible with
major operating systems and platforms.
System Boards
Historically, the industry has recognized Mylex as a supplier of high
quality, high performance system boards. While off-shore manufacturers now
dominate the low end of this business, a market remains in the high end
server and multi-processor applications. The Company continues to provide
small quantities of system boards and enclosures to system integrators and
through its distributor channel. With the implementation of system boards
incorporating RAID design references, the Company will be in a position to
provide RAID-capable system boards.
The markets for the Company's products are characterized by rapidly
changing technology, evolving industry standards and relatively short product
life cycles. The Company's ability to compete successfully will depend on its
ability, on a timely and cost-effective basis, to enhance its existing products
and to introduce new products, such as its new PCI and SCSI to SCSI disk array
product families, with features that meet changing customer requirements and
with competitive prices. There can be no assurance that the Company will be
successful in doing so. Delays in product enhancement and development or the
failure of the Company's new products or enhancements to gain market acceptance
could have an adverse effect on the Company's business and operating results.
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Despite testing, new products may be affected by quality, reliability or
interoperability problems, which could result in returns, delays in collecting
accounts receivable, unexpected service or warranty expenses, reduced orders and
a decline in the Company's competitive position. In addition, there can be no
assurance that new products or technologies developed by others, or the
emergence of new industry standards, will not render the Company's products or
technologies noncompetitive or obsolete. For example, efforts by the Company's
OEM customers and other manufacturers to integrate additional functions into
system boards, to use chip sets that incorporate additional functionality, or to
design their own controllers and other devices rather than purchase the
Company's products could have a material adverse effect on the Company's
business and operating results.
All of the Company's RAID controller products are based on the Intel i960
processor. If another company develops a processor for RAID applications which
renders the i960 processor noncompetitive, whether as a result of cost,
specifications or other advantages of the new processor, or if Intel ceases to
produce the i960 processor or support the Company's efforts to develop products
based on the i960 processor, the Company will be forced to develop new products
based on another processor. Such development efforts will be costly, and there
can be no assurance that the Company will be able to timely complete such
development efforts or that such products, if developed, will have the same
degree of market acceptance or the same gross margin as the Company's present
RAID products.
PRODUCT MANUFACTURE AND SUPPLIERS
Mylex organizes its manufacturing as a continuous flow process.
Manufacturing entails placing semiconductors and other electronic components on
printed circuit boards and soldering them in place through an automated process.
The Company accomplishes almost all manufacturing using Fuji Surface Mount
Technology equipment. This equipment automatically positions and attaches chips
and other components to circuit boards, increasing the speed and accuracy of the
manufacturing process.
The Company's manufacturing facility is located at its Fremont, California
headquarters. The Company manufactures approximately 40% of its products
in-house. For the remainder, the Company relies on selected local ISO 9000
certified subcontract manufacturers. Currently, the Company uses its outside
subcontractors for high-volume production activities, giving the Company the
flexibility to use its internal production capacity for new product
introductions to allow Mylex to bring those products to market at a rapid pace
and to meet unexpected short-term production demands. Despite its arrangements
with local subcontractors, however, there can be no assurance that the Company's
manufacturing resources always will be adequate to meet product demand.
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Mylex performs quality control and inspection procedures throughout the
production process to ensure that products meet industry standards. Mylex
subjects all products, including those manufactured by subcontractors, to 100%
in circuit and functional testing at Mylex's facility. To continue this
process, the Company will be required to expand its in-house testing facilities
and personnel.
The Company's most critical components are the i960 RISC processor, the
Company's applications specific integrated circuits or "ASICs," the SCSI chip
and the DRAM SIMM memory module. The Company procures the i960 processor from
Intel and its ASICs, SCSI chip and DRAM SIMM modules from Toshiba, Symbios Logic
and FirstTech Corporation, respectively. One of the Company's OEM customers
also provides an ASIC for inclusion on its custom product, a proprietary chip
that frequently is in short supply. Other components are available from several
sources at competitive prices.
The Company has no long-term supply contracts. There can be no assurance
that the Company will be able to obtain, on a timely basis, all the components
it requires. If the Company cannot obtain essential components as required, it
could be unable to meet demand for its products, thereby adversely affecting its
operating results. In addition, scarcity of such components could result in
cost increases and adversely affect the Company's gross margins.
The Company's need to manufacture products before receiving firm purchase
orders, combined with risks of technological obsolescence and rapid shifts in
market demand, could result in inventory devaluation or obsolescence, either of
which could have a material adverse effect on its operating results.
SALES AND MARKETING
As of December 31, 1995, the Company employed 31 sales and sales support
personnel who devoted substantially all their time to marketing, sales, and
technical and customer support. The Company plans to increase the number of
sales and marketing employees during 1996 to support its expanding customer base
and product lines.
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The Company sales and marketing plan is based on a two-tier strategy: sales
to OEMs of servers and storage subsystems, and sales into alternate channels
that include distributors, system integrators and value added resellers.
OEM Sales
Sales to OEMs represented 69% of net sales during 1994 and 76% of net
sales in 1995. Sales to IBM accounted for 22% of net sales in 1994 and 26% of
net sales during 1995. Sales to the next two largest customers, DEC and HP,
accounted for an additional 17% and 14%, respectively, of net sales in 1994
and 15% and 18%, respectively, in 1995. The Company expects a limited number
of customers and customer orders to continue to account for a substantial
portion of the Company's revenue in any period. Although there are OEM
agreements in place that define the terms of sale and support services with
some of the Company's largest customers, these agreements do not include
specific quantity commitments and generally allow customers to cancel any
orders on 30 days notice. The Company generally sells products on a purchase
order basis. As a result, historical sales are not necessarily an accurate
indicator of future sales.
Most of the Company's OEM customers, and particularly its principal
customers, have extensive product development experience and expertise,
substantial financial resources and ongoing, substantial product development
activities. Any of these OEM customers may choose to develop their own products
which could be substituted for, and thus reduce or eliminate their purchases of,
the Company's products. Any material reduction in purchases of a controller
product by any significant OEM customer will materially and adversely affect
the Company's business and operating results.
The OEM sales process is complex, requiring interaction with several layers
of the OEM customer's organization and extensive technical exchanges, product
demonstrations and commercial negotiations. As a result, the Company's typical
sales cycle is usually 4 to 6 months. OEM relationship commitments are
generally made at a high level within the customer's organization, and the sales
process involves broad participation across the Mylex organization, from the
Chief Executive Officer to the engineers who designed the product.
Alternate Channel Sales
Alternate channel sales represented 31% of net sales during 1994 and 24%
of net sales in 1995. The Company's alternate channel sales involve the
marketing and distribution of the Company's products to system integrators,
value added resellers and commercial and industrial distributors (who also
service major OEM customers in some international markets) throughout the
world. Mylex also uses the services of manufacturer representatives in the
United States and Canada in this sales channel.
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The Company has distribution agreements with both commercial distributors,
including companies such as Tech Data, Merisel and Ingram Micro, and industrial
distributors, such as Avnet Corporation and Wyle Electronics. Mylex also has
agreements with various regional and specialty distributors, both domestic and
international. The Company also conducts extensive advertising in trade
publications, conducts various joint marketing activities with its distributors,
and sponsors exhibits at approximately 25 trade shows annually.
International Sales
Sales to customers outside the United States accounted for approximately
39% of the Company's revenue in 1995. The Company expects that international
sales will continue to represent a significant portion of the Company's
revenue in 1996 and thereafter. International sales pose certain risks not
faced by companies that limit themselves to domestic sales. Fluctuations in
the value of foreign currencies relative to the U.S. dollar, for example,
could make the Company's products less price competitive and, if the Company
in the future denominates any of its sales in foreign currencies could result
in losses from foreign currency transactions. International sales also could
be adversely affected by factors beyond the Company's control, including the
imposition of government controls, export license requirements, restrictions
on technology exports, changes in tariffs and taxes and general economic and
political conditions. In some countries, the law does not protect the
Company's intellectual property rights to the same extent as the laws in the
United States.
BACKLOG
The Company's backlog as of December 31, 1995, totaled $36.7 million as
compared to $5.8 million as of December 31, 1994. The increase in the
backlog was attributable to both the wider incorporation of RAID technology
into our OEM customer base's product lines and the industry wide higher level
of file server shipments which incorporated RAID. Because almost all of the
orders for the Company's products may be cancelled prior to shipment and
customers may similarly change delivery schedules, the Company believes that
backlog as of any particular date may not be indicative of actual net
revenues for any succeeding period. Furthermore, the Company's manufacturing
capabilities may not be sufficient, from time to time, to permit it to ship
all products subject to a substantial backlog by the shipment dates requested
by the respective customer. Accordingly, there can be no assurance that
increases in the Company's backlog will produce future increases in the
Company's revenue or profitability. Of the total $36.7 million backlog at
December 31, 1995, all but $2.4 million of the orders would have been
scheduled for delivery within the three months ended March 31, 1996, unless
the orders were-cancelled or rescheduled by the respective customers.
COMPETITION
The markets for the Company's RAID controller products have been
competitive and are likely to become more competitive. Furthermore, there are
numerous companies with established reputations in the controller and personal
computer related markets, many of which have greater financial, manufacturing
and marketing resources than those of the Company. The Company believes that
its competitors include Adaptec, which recently introduced a PCI bus based
disk array controller and which has significantly greater financial,
manufacturing and marketing resources than the Company.
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Some OEMs (such as Compaq and Dell) have developed their own RAID
controllers. As noted, the customers historically accounting for the most
significant volumes of the Company's sales are major OEMs, any of which could
develop their own controllers at any time rather than purchase such products
from the Company.
The Company's ability to compete successfully in either the personal
computer networking market or the RAID controller market depends upon its
ability to continue to develop products that obtain market acceptance, which can
be sold at competitive prices, while maintaining adequate gross margin levels,
and which are proven to be reliable. Although the Company believes that its
RAID controller products have certain competitive advantages, there can be no
assurance that the Company will be able to compete successfully in the future in
the market for such products or that other companies may not develop products
with greater performance or more favorable prices and thus reduce the demand for
the Company's products. Furthermore, as more companies enter the RAID
controller market, the Company expects to encounter price competition for such
products which could materially and adversely affect its gross margins.
RESEARCH AND DEVELOPMENT
The Company conducts an active and ongoing research, development and
engineering program that focuses on the development of new products and new
features for the Company's existing products. The Company continues to expand
its development activities and added 20 engineering and development employees in
fiscal 1995.
As part of its product development strategy, the Company actively seeks
available, cooperative and codevelopment activities with industry leaders in the
hardware, software, silicon and system business. For example, the Company
worked on a cooperative basis with Intel to include a RAID design reference in
the i960*RP I/O processor, which Intel has announced for delivery in sample
quantities in the 3rd quarter of 1996. The project, which was the culmination
of several months of cooperative work, makes it possible to implement RAID using
a processor residing on the computer system board. Mylex has announced that
it will offer a suite of RAID software and firmware for use with the new
i960*RP I/O processors, starting delivery with Intel's initial shipments of
the processors.
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The Company's ability to compete successfully will depend in large part on
its ability, on a timely and cost-effective basis, to enhance its existing
products and introduce new products with features that meet changing customer
requirements and with competitive prices. Despite testing, new products may be
affected by quality, reliability and interoperability problems, which could
result in returns, delays in collecting accounts receivable, unexpected service
or warranty expenses, reduced orders and a decline in the Company's competitive
position.
EMPLOYEES
As of December 31, 1995, the Company employed 193 people. Those
employees included 48 engineering and product development employees, 23
finance and administration employees, 31 employees in the sales, marketing
and technical and customer support areas, and 91 manufacturing employees.
Recruitment of personnel in the computer industry is highly competitive.
The Company believes that its future success will depend in part on its
ability to attract and retain highly skilled management, sales, marketing,
finance and technical personnel. There can be no assurance of the Company's
ability to recruit and retain the employees that it may need.
INTELLECTUAL PROPERTY
The Company does not hold any patents applicable to its RAID controllers
and relies on a combination of trade secret, copyright and trademark laws and
employee and third party non-disclosure agreements to protect its intellectual
property. There can be no assurance that the steps taken by the Company to
protect its rights will be adequate to prevent misappropriation of the Company's
technology or to preclude competitors from developing products with features
similar to the Company's products.
Certain patents and copyrights owned by others are of critical importance
to the high technology electronic product industry segment in which the Company
operates. The Company has obtained licenses to certain technology protected by
patents and copyrights which the Company believes are adequate for the operation
of its business as presently conducted. It is likely that such licenses to
produce, use and market new
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technologies will continue to be important to the Company. In the future, the
Company may be required to obtain licenses from others, and there are no
assurances that such licenses would be available on terms satisfactory to the
Company.
There can be no assurance that third parties will not assert infringement
or related indemnity claims against the Company. Asserting the Company's rights
or defending against third party claims could involve substantial expense, thus
materially and adversely affecting the Company's results of operations.
ITEM 2. PROPERTIES
The Company's headquarters and manufacturing facility is located in a
73,887 square foot facility in Fremont, California. The Company's lease on
this facility extends through April 14, 2001. The Company on December 9,
1995 entered into a lease for an additional 59,295 square feet. This lease
is to be executed in two phases. The first phase, executed in January, 96,
placed 20,325 square feet under the Company's control, while the remaining
38,970 square feet to be available to the Company August , 96. The lease on
this 59,295 square feet shall expire 7 years after delivery of the phase II
portion of the lease.
ITEM 3. LEGAL PROCEEDINGS
In October 1994, the former Chief Executive Officer of the Company, Dr.
M.A. Chowdry, filed a complaint against the Company and its outside directors,
claiming breach of an employment agreement that he entered into with the Company
approximately three months prior to his termination as the Company's Chief
Executive Officer. The complaint alleges compensatory and consequential damages
of over $6 million (which would vary based on the price of the Company's Common
Stock) and unspecified punitive damages. The Company believes it has meritorious
defenses and will vigorously defend this lawsuit. Nonetheless, given the
unpredictable nature of legal proceedings, there can be no assurance that the
Company will prevail.
The Company has incurred and expects to continue to incur substantial
legal expenses in defending against Dr. Chowdry's suit. Those expenses may
fluctuate from quarter to quarter and are likely to increase.
Although there can be no assurance given with respect to the results of
legal proceedings, based on information currently available to the Company, it
believes that it
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does not have potential liability with respect to these proceedings that would
have a material adverse effect on the Company.
In addition to matters discussed above, the Company is a party to routine
suits and claims arising in the ordinary course of its business which the
Company does not believe will have a material adverse effect on its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
This information is incorporated by reference from the information under
the caption "Market for Registrant's Common Equity and Related Stockholder
Matters" on page 22 of the Annual Report to Shareholders for the year ended
December 31, 1995.
ITEM 6. SELECTED FINANCIAL DATA
This information is incorporated by reference from the information under
the caption "Selected Five Year Consolidated Financial Data" on page 17 of
the Annual Report to Shareholders for the year ended December 31, 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All other information regarding management's discussion and analysis of
financial condition and results of operations are incorporated by reference from
the information under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 18 through 21 of the
Annual Report to Shareholders for the year ended December 31, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated financial statements of Mylex Corporation at December 31,
1995 and 1994 and for each of the three years in the three-year period ended
December 31, 1995 and the independent public accountants' report thereon are
incorporated by reference from pages 23 through 34 of the Annual Report to
Shareholders for the year ended December 31, 1995.
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is incorporated by reference from the information under
the caption "Election of Directors" and "Executive Officer Compensation" in the
Registrant's definitive Proxy Statement for its 1996 Annual Meeting of
Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the information under
the caption "Executive Officer Compensation" of the Registrant's definitive
Proxy Statement for its 1996 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference from the information under
the caption "Securities Ownership of Management and Principal Stockholders" in
the Registrant's definitive Proxy Statement for its 1996 Annual Meeting of
Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the information under
the caption "Certain Relationships and Related Transactions" in the
Registrant's definitive Proxy Statement for its 1996 Annual Meeting of
Shareholders.
18
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
The following Consolidated Financial Statements of Mylex Corporation and the
Independent Auditors' Report, as listed under (a) (1) below, are
incorporated herein by reference to the Registrant's Annual Report to
Shareholders for the year ended December 31, 1995.
(a) (1) Financial Statements
Page in
Annual
Report
------
Consolidated Statements of Operations - Years ended December 31,
1995, 1994 and 1993 24
Consolidated Balance Sheets at December 31, 1995 and 1994 23
Consolidated Statements of Cash Flows - Years ended December 31,
1995, 1994 and 1993 26
Consolidated Statements of Shareholder' Equity - Years ended
December 31, 1995, 1994 and 1993 25
Notes to Consolidated Financial Statements 27-33
Report of Independent Public Accountants 34
(2) The following financial statement schedule and report on schedule are
submitted herewith:
Page
in this
Report
-------
Schedule II - Valuation and Qualifying Accounts S-1
Independent Auditors' Report and Consent S-2
19
<PAGE>
(3) Exhibits included herein (numbered in accordance with Item 601 of
Regulation S-K):
Exhibit No. Exhibit
3.1 (c) Articles of Incorporation, as amended
3.2 (c) By-laws, as amended
10.10 (b) 1983 Incentive Stock Option Plan, as amended and restated.
10.11 (e) 1993 Stock Option Plan.
10.12 (h) Bus Logic 1990 Equity Incentive Plan.
10.13 (j) 1995 Employee Stock Purchase Plan.
10.20 (b) Lease Agreement of premises at 34551 Ardenwood Boulevard,
dated March 6, 1991.
10.20.1 (a) Amendment to Lease Agreement of premises at 34551 Ardenwood
Boulevard dated, February 26, 1996.
10.21 (i) Security and Loan Agreement, dated May 15, 1995, with
Imperial Bank
10.22 (a) Lease Agreement of premises at 6607 Kaiser Drive dated,
December 9, 1995.
10.25 (d) Digital Equipment Corporation Basic Order Agreement.
10.28 (b) License Agreement with IBM, effective December 1, 1990.
10.40 (g) 401(k) plan; Target Investment Advisory Agreement and
Standardized Adoption Agreement.
10.41 (f) Employment Agreement, dated as of January 1, 1995, with Al
Montross.
11.0 (a) Statement regarding computation of per share earnings.
13.1 (a) Annual Report to Shareholders for the fiscal year ended
December 31, 1995.
24.1 (a) Consent of the Independent Auditors. (see Schedule S-2.)
20
<PAGE>
(b) Reports on Form 8-K, none.
- -----------------------------------------------------------------------------
(a) Filed herewith
(b) Filed as an exhibit to the Registrant's Annual Report on Form 10-K, for the
year ended December 31, 1992, Commission File No. 0-13381 and incorporated
herein by reference.
(c) Filed as an exhibit to the Registration Statement on Form S-8, on July 24,
1989, No. 33-30104, and incorporated herein by reference.
(d) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q, for
the period ended September 30, 1993, and incorporated herein by reference.
(e) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1993, and incorporated herein by reference.
(f) Filed as an exhibit to the Registrant's Registration Statement on Form S-3,
No. 33-61877 on August 17, 1995, and incorporate herein by reference.
(g) Filed as an exhibit to the Registrant's Annual Report on Form 10-K, for the
year ended December, 1994, and incorporated herein by reference.
(h) Filed as an exhibit to the Registrant's Statement on Form S-8,
No. 333-1283 on February 28, 1996, and incorporated herein by reference.
(i) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q, for
period ended June 30, 1995, and incorporated herein by reference.
(j) Filed as an exhibit to the Registrant's Definitive Proxy Statement for its
1996 Annual Meeting of Shareholders.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MYLEX CORPORATION
Date: March 26, 1996 By: /s/ Al Montross
Al Montross
President and Chief
Executive Officer
Pursuant to the Requirements of the Securities Exchange Act of 1934, this Report
has been signed below on March 26, 1996 by the following persons in the
capacities indicated.
Signature Title
--------- -----
/s/ Ismael Dudhia Chairman of the Board of Directors
- -----------------------------
Mr. Ismael Dudhia
/s/ Richard Love Treasurer and Director
- -----------------------------
Mr. Richard Love
/s/ M. Yaqub Mirza Secretary and Director
- -----------------------------
Dr. M. Yaqub Mirza
/s/ Inder Singh Director
- -----------------------------
Dr. Inder Singh
/s/ Stephen McKenzie Director
- -----------------------------
Mr. Stephen McKenzie
/s/ Al Montross President and Chief Executive Officer
- ----------------------------- and Director
Mr. Al Montross (Principal Executive Officer)
/s/ Colleen Gray Vice President Finance and Chief
- ----------------------------- Financial Officer
Ms. Colleen Gray (Principal Accounting Officer)
22
<PAGE>
MYLEX CORPORATION AND SUBSIDIARY
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994, 1993
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COST AND TO OTHER AT
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS CHARGES (a) YEAR-END
-------------- ------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
Amounts deducted from assets to which
they apply:
Year ended December 31, 1995:
Allowance for doubtful
accounts - accounts receivable $532,000 - - (62,000) 470,000
Year ended December 31, 1994:
Allowance for doubtful
accounts - accounts receivable 5,403,000 - - (4,871,000) 532,000
Year ended December 31, 1993:
Allowance for doubtful
accounts - accounts receivable 852,000 4,676,000 - (125,000) 5,403,000
</TABLE>
(a) Doubtful accounts written off, less recoveries.
23
<PAGE>
INDEPENDENT AUDITORS' REPORT AND CONSENT
The Board of Directors and Stockholders
Mylex Corporation:
Under date of January 30, 1996, except as to Note 13, which is as of
February 9, 1996, we reported on the consolidated balance sheets of Mylex
Corporation and subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 1995, as
contained the 1995 annual report to stockholders. These consolidated
financial statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 1995. In connection with our
audits of the aforementioned consolidated financial statements, we also
audited the related financial statement schedule as listed in Item 14(a)2 of
this Form 10-K. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits. In our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
We consent to incorporation by reference in the registration statement (No.
33-61877) on Form S-3 and in the registration statement (No. 333-1283) on
Form S-8 of Mylex Corporation of our report dated January 30, 1996, except as
to Note 13, which is as of February 9, 1996, relating to the consolidated
balance sheets of Mylex Corporation and subsidiary as of December 31, 1995
and 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1995, and our report on the related schedule, which
reports appear or are incorporated by reference in the December 31, 1995,
annual report on Form 10-K of Mylex Corporation.
San Jose, California
March 28, 1996
24
<PAGE>
EXHIBIT 10.20.1
AMENDMENT NO. 2 TO LEASE
(Building D, 6607 Kaiser Drive, Fremont)
This Amendment No. 2 to Lease (the "Amendment"), dated March 12, 1996 for
reference, is entered into by and between THE MARTIN GROUP OF COMPANIES, INC., a
California corporation ("Martin Group"), and MYLEX CORPORATION, a Florida
corporation ("Tenant"), with reference to the following facts and
understandings:
RECITALS
A. Logitech, Inc., a California corporation ("Logitech") and Tenant have
entered into that certain Lease Agreement, dated December 8, 1995, whereby
Logitech leased to Tenant the premises described therein and located at Building
D, Ardenwood Corporate Park, 6607 Kaiser Drive, Fremont, California (the
"Premises"). Such Lease Agreement has been amended by that certain Amendment
No. 1 to Lease, dated January 23, 1996, between Logitech and Tenant, and, as so
amended, is referred to herein as the "Lease".
B. Logitech has entered into an agreement to sell the real property of
which the Premises is a part to the Martin Group or its assignee.
C. The Martin Group has requested that, in the event the Martin Group or
its assignee purchases such real property and assumes the obligations of
Logitech, as Landlord, under the Lease, certain modifications be made to the
Lease, Tenant is willing to agree to such modifications, on the terms set forth
in this Amendment.
AGREEMENT
Now, therefore, in consideration of the mutual covenants herein set forth,
and other valuable consideration, the receipt of which is acknowledged, Landlord
and Tenant agree as follows:
1. DEFINITIONS. All capitalized terms used in this Amendment without
definition shall have the same meanings as are ascribed to such terms by the
Lease.
2. PHASE II COMMENCEMENT DATE. Section 6.2 of the Lease is amended to
read in its entirety as follows. The term "Facilities and Office Services
portion of the Building D Premises" used below shall mean that portion of the
Premises depicted as such on EXHIBIT A attached to and incorporated into this
Amendment by this reference.
"6.2 PHASE II COMMENCEMENT DATE. Subject to the provisions of section
6.4 below, the Term of this Lease shall commence with respect to the entire
Building D Premises on the first to occur of the following two (2) dates:
(a) the date on which the Landlord Work (defined in section 13
below) is 'substantially completed' (as set forth in section 2.3 of the
Work Letter, attached as EXHIBIT B to this Lease); or
<PAGE>
(b) August 1, 1996, whether or not the Landlord Work is
substantially completed; PROVIDED THAT (i) actual, physical construction of
the Phase II Improvements within the Facilities and Office Services portion
of the Building D Premises shall have commenced on or before June 1, 1996,
and actual, physical construction of the Phase II Improvements within the
balance of the Building D Premises shall have commenced on or before July
16, 1996 (subject to extension for any 'tenant delays', as defined in the
Work Letter); (ii) Landlord shall have been, and shall continue to be,
diligently pursuing the Phase II Improvements to completion; and (iii)
possession of the entire Building D Premises is made available to Tenant,
on or before July 16, 1996, for the conduct of its business.
The date on which this Lease commences with respect to the balance of the
Building D Premises (other than the Phase I Premises) Is referred to as the
'Phase II Commencement Date'. It is understood and agreed that Tenant
shall occupy the Premises in phases and that occupancy of the Phase I
Premises shall not subject Tenant to any liability or obligation hereunder
with respect to the balance of the Building D Premises prior to the Phase
II Commencement Date, In addition, in the event that the Phase II
Commencement Date is determined under clause (b) above, Tenant's occupancy
of the entire Building D Premises prior to August 1, 1996 shall not advance
the Phase II Commencement Date, or otherwise render Tenant liable for
payment of any rent or other expense with respect to the balance of the
Building D Premises, prior to August 1, 1996."
3. DELAY IN DELIVERY. The Martin Group and Tenant acknowledge that
Landlord has tendered to Tenant, and Tenant is in possession of, the Phase I
Premises, on and subject to the terms of the Lease, including the construction
of the Phase II Improvements. Therefore, section 6.4 of the Lease is amended to
read in full as follows:
"6.4 DELAY IN DELIVERY. BAL section 2.3 is deleted and replaced, for
purposes of this Lease, with the following provision:
(a) If Landlord fails to deliver possession of the balance of
the Building D Premises on or before August 1, 1996, in the condition
required by section 7.1 of this Lease, and if such failure is due to either
(1) a previous occupant of the Premises who is holding over or (2) any
other cause or reason beyond the reasonable control of Landlord (including,
but not limited to, "tenant delays"), then the following provisions shall
apply:
(i) the Term shall not commence on August 1, 1996, but
shall, instead, commence on a revised Phase II Commencement Date fixed by
Landlord in a notice to Tenant, which notice shall state the new Phase II
Commencement Date and that the balance of the Building D Premises will be
ready for occupancy by Tenant on a date which is 14 days prior to the Phase
II Commencement Date fixed in such notice; PROVIDED, HOWEVER, that Landlord
may from time to time, by notice to Tenant, change the Phase II
Commencement Date fixed in a prior notice (but not sooner than
2
<PAGE>
14 days after possession of the balance of the Building D Premises is
tendered to Tenant in the condition required by this Lease);
(ii) neither the validity of this Lease nor the obligations
of Tenant under this Lease shall be affected by such failure to deliver
possession, except that the Term shall begin as provided in clause (i)
above;
(iii) Tenant shall have no claim against Landlord because of
Landlord's failure to deliver possession of the balance of the Building D
Premises on the date originally fixed therefor, except Tenant shall
commence payment of Rent, with respect to the balance of the Building D
Premises on the revised Phase II Commencement Date; and
(iv) the Expiration Date shall remain the date which is
eighty-four (84) months following the Phase II Commencement Date, as such
date may be extended in accordance with this section.
(b) Notwithstanding subsection (a) above, the Phase II Commencement
Date shall occur on August 1, 1996 so long as (i) the conditions for the
occurrence of the Phase II Commencement Date on August 1, 1996, as set
forth in section 6.2(b) of the Lease (as amended by Amendment No. 2 to the
Lease) have been satisfied, and (ii) the sole reason that the physical
condition of the Building D Premises does not comply with the requirements
of section 7.1 of the Lease is because of the continuing efforts to
complete the Phase II Improvements.
(c) Notwithstanding any provision in this Lease to the contrary, if
the Phase II Commencement Date has not occurred on or before September 30,
1996 (which date shall be subject to extension for the period of any
"tenant delays"), then Tenant shall have the option to terminate this Lease
by written notice to Landlord given within ten (10) days thereafter unless,
within such ten (10) day period possession of the Premises is delivered to
Tenant in the condition required by this Lease.
4. STRUCTURAL REPAIRS. The Martin Group acknowledges that it has been
notified that structural repairs and reinforcements are required to be made to
the Premises. The Martin Group agrees that such repairs and reinforcement work
shall be made, in due course, by Landlord at Landlord's sole cost and expense,
without reimbursement by Tenant.
5. CONDITION TO AMENDMENT. This Amendment is subject to and shall be
effective only upon the acquisition of the Premises, and the assumption of the
Landlord's obligations under the Lease, by the Martin Group or its assignee on
or before April 1, 1996, In the event that the Martin Group or its assignee does
not acquire fee title to the Premises and assume the Landlord's obligations
under the Lease on or before April 1, 1996, then this Amendment shall be null,
void and of no effect, and the Lease shall continue in accordance with its terms
without regard to this Amendment.
3
<PAGE>
6. GENERAL PROVISIONS.
(a) Subject to satisfaction of the condition precedent set forth in
section 5 above, the terms and conditions of the Lease, as amended by this
Amendment, shall remain in full force and effect.
(b) The headings and captions used in this Amendment are provided for
convenience of reference only and shall not affect the meaning or interpretation
of the terms of this Amendment.
(c) This Amendment shall be binding on, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assignees under the Lease.
(d) This Amendment may be executed in two or more counterparts, each
of which shall constitute an original as against the party whose signature
appears thereon and together which shall constitute but one and the same
instrument. A facsimile transmission, by one party to the other, of a
counterpart of this Amendment bearing the signature of the transmitting party
shall constitute delivery of an executed counterpart of this Amendment to the
other party, provided that the original executed counterpart is delivered to
such other party on the next business day following the date of transmission.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
and delivered by their respective duly authorized officers on the dates set
forth beneath their respective signatures hereto:
THE MARTIN GROUP MYLEX CORPORATION
OF COMPANIES, INC. a Florida corporation
a California corporation
By: /s/ By: /s/ Colleen Gray
------------------------------ ----------------------
Its: Vice President Its: VP Finance & CFO
----------------------------- ---------------------
Date: March 14, 1996 Date: March 14, 1996
---------------------------- --------------------
4
<PAGE>
EXHIBIT A
[FLOOR PLAN]
<PAGE>
AMENDMENT TO INDUSTRIAL LEASE
THIS AMENDMENT TO INDUSTRIAL LEASE (this "AMENDMENT") is entered into this
26th day of February, 1996, by and between LOGITECH, INC., A California
corporation ("LANDLORD") and MYLEX CORPORATION, a Florida corporation
("TENANT").
RECITALS:
A. Landlord and Tenant are the "Landlord" and "Tenant", respectively,
under that certain Industrial Lease (the "ORIGINAL LEASE"), dated April 15,
1991, between Metropolitan Life Insurance Company, a New York corporation
("METLIFE"), and Tenant. Landlord succeeded to the interests of MetLife in and
to the Original Lease pursuant to that certain Assignment and Assumption of
Leases and Security Deposits, dated December 26, 1991, and recorded in the
Official Records of Alameda County on December 26, 1991, as Documents No. 91-
343590. The Original Lease sets forth the terms and conditions pursuant to
which Tenant leases from Landlord the premises commonly known as Building A of
Ardenwood Corporate Park, 34551 Ardenwood Boulevard, Fremont, California (the
"PREMISES"), as more particularly described in the Original Lease.
B. Certain provisions of the Original Lease were amended by the Lease
Agreement-Building D, Ardenwood Corporate Park (the "BUILDING D LEASE"), between
Landlord and Tenant, dated December 8, 1995. The Original Lease and the terms
of the Building D Lease applicable to Building A shall be referred to herein as
the "LEASE."
C. Landlord and Tenant now desire to amend the Lease upon the terms and
conditions of this Amendment.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants set forth in this
Amendment and other valuable considerations, the receipt and adequacy of which
is hereby acknowledged, Landlord and Tenant hereby agree as follows:
1. DEFINED TERMS. All terms used in this Amendment, except those terms
which are expressly defined in this Amendment, shall have the meanings ascribed
to such terms in the Original Lease.
2. AMENDMENT OF LEASE. Landlord and Tenant hereby amend the Lease as
follows:
(a) EXTENDED TERM. The Term of the Lease is hereby extended to
include the period commencing April 15, 1996 and expiring April 14, 2001 (the
"EXTENDED TERM"), unless sooner terminated pursuant to the provisions of the
Lease,
1
<PAGE>
as modified by this Amendment. From and after the date of this Amendment, the
Extended Term shall be included as a part of the "TERM" as defined in the Lease.
(b) OPTION TO EXTEND TERM. Tenant shall have the right and option to
extend the Term of this Lease on and subject to the following terms. This
Paragraph 2(b) supersedes in its entirety Rider No. 1 to the Original Lease.
(i) GRANT OF OPTION. Subject to the provisions of this
Paragraph 2(b), Landlord grants to Tenant the right and option (the "OPTION") to
extend the Term of the Lease for one (1) additional period of sixty (60) months
(the "OPTION PERIOD"), on all the provisions contained in the Lease, except that
Tenant shall have no further option to extend the Term, Landlord shall have no
obligation to improve the Premises in any respect (or provide any allowance for
Tenant to improve the Premises), and the monthly Rent shall be fixed at the
"Market Rental", as determined below, but in no event less than the monthly Rent
in effect immediately prior to the expiration of the Extended Term. The Option
shall be exercised by Tenant, if at all, by written notice to Landlord at least
one hundred eighty (180) days and not more than three hundred sixty (360) days
prior to the expiration of the Extended Term.
(ii) MARKET RENTAL. As used herein, "MARKET RENTAL" for the
Premises shall mean the rental and all other monetary payments and escalations,
including without limitation, consumer price indexing, that could be obtained
from a third party desiring to lease the Premises for the Option Period, taking
into account the age of the Building, the size, location and floor levels of the
Premises, the lack of an obligation of Landlord to provide tenant improvements,
the quality of construction of the Building and the Premises, the services
provided under the terms of this Lease, the rental then being obtained for new
leases of space in the Park and all other factors that would be relevant to a
third party desiring to lease the Premises for the Option Period.
(iii) DETERMINATION OF OPTION PERIOD RENT. Within thirty (30)
days after its receipt of Tenant's timely notice of exercise of the Option, or
as soon thereafter as is reasonably possible, Landlord shall notify Tenant in
writing of Landlord's determination, in good faith, of the Market Rental for the
Premises for the Option Period. If, within ten (10) days after receipt of such
notice from Landlord, Tenant in good faith disagrees with Landlord's
determination of Market Rental, Tenant may elect, in writing, to revoke and
rescind Tenant's exercise of the Option; and the Option shall thereupon be
terminated and the Term shall expire on the expiration of the Extended Term as
if Tenant had not exercised the Option. If Tenant does not revoke and rescind
its exercise of the Option, nor dispute Landlord's determination of Market
Rental, in writing during such ten (10) day period, the Market Rental for the
Option Period shall be the Market Rental set forth in Landlord's notice. If
Tenant fails to so revoke and rescind its exercise of the Option, but
nevertheless disputes Landlord's determination of Market Rental, Tenant shall so
notify Landlord in writing within such ten (10) day period and the Market Rental
shall be determined as follows:
2
<PAGE>
(A) For a period of thirty (30) days following the date on
which Tenant gives written notice to Landlord disputing Landlord's determination
of Market Rental, Landlord and Tenant shall meet, from time to time, and attempt
to agree on the Market Rental.
(B) If Landlord and Tenant fail to agree on the Market
Rental within such thirty (30) day period, then each party shall, within ten
(10) days following the expiration of such thirty (30) day period, appoint a
"qualified appraiser" and such qualified appraisers shall meet during the
ensuing thirty (30) day period to determine the Market Rental. A "qualified
appraiser" shall be a California licensed real estate broker having at least 10
years current experience leasing industrial and research and development
buildings in Santa Clara County and southern Alameda County, California. If
either party fails to appoint a qualified appraiser within such ten (10) day
period, then the sole appointed appraiser shall determine the Market Rental. If
two qualified appraisers are appointed and they are unable to agree on the
Market Rental within thirty (30) days after they are appointed, then the two
appraisers shall, within ten (10) days after the expiration of such thirty (30)
day period, select a third qualified appraiser having no prior relationship with
either Landlord or Tenant. The third appraiser shall submit his or her
determination of the Market Rental within fifteen (15) days after being
appointed. The two closest determinations of Market Rental among the three
determinations submitted by the appraisers shall be averaged and the resulting
quotient shall become the Market Rental; provided, if the middle determination
of Market Rental of the three appraisals is equally close to both of the other
determinations of Market Rental, the middle determination shall become the
Market Rental. Each party shall pay the costs of the appraiser appointed by it
and one-half (1/2) the cost of any third appraiser who may be appointed.
(C) Upon final determination of the Market Rental, the
parties shall execute and attach to this Lease an addendum, prepared by
Landlord, setting forth the new Expiration Date and the amount of the monthly
Rent for the Option Period.
(iv) LIMITATIONS. Notwithstanding the provisions of Paragraph 2(b)(i)
hereof, Tenant shall have no right to exercise the Option if (A) on the date
that Tenant exercises the Option or the date of the commencement of the Option
Period Tenant is in default of any of its obligations under this Lease, (B)
Tenant has subleased or assigned all or any portion of the Premises, except to a
Permitted Transferee or (C) Tenant or a Permitted Transferee is not in occupancy
of all of the Premises (unless it has vacated the Premises or a portion thereof
for a limited period of time as necessary for remodeling of the Premises). The
Option is personal to Tenant and cannot be exercised by any other person or
entity, and shall not be transferable or assignable (voluntarily or
involuntarily) to any assignee of this Lease or a sublessee of all or any part
of the Premises, except to a Permitted Transferee. Any purported assignment of
the Option, other than to a Permitted Transferee, shall be void.
3
<PAGE>
(c) MONTHLY RENT. Tenant shall pay to Landlord, as monthly Rent
(which amount shall not include any Additional Rent payable by Tenant under
Article 4 of the Original Lease) for the Premises, commencing on the
commencement of the Extended Term and continuing thereafter on the first (1st)
day of each month of the Term of the Lease, monthly payments in advance in the
following amounts:
Months 01 to 24: $52,607.54;
Months 25 to 36: $53,272.53;
Months 37 to 48: $54,898.04; and
Months 49 to 60: $56,523.56.
(d) INSURANCE. Section 32.2 of the Original Lease is amended to
provide that Landlord is obligated to obtain and maintain, during the Term the
casualty insurance policy, described generally in Section 32.2 of the Original
Lease. In addition, Section 12 of Rider No. 2 to the Original Lease is amended
to provide that the bidding process described therein shall not apply to annual
renewals of Landlord's existing policies.
(e) ALTERATIONS.
(i) SECTION 7.2 AMENDMENT. Notwithstanding the provisions of
Section 7.2 of the Original Lease to the contrary, Tenant's trade fixtures
installed in the Premises shall not become the property of Landlord, but shall
constitute "Tenant's Property", provided that such trade fixtures may be removed
without material damage to the Premises.
(ii) EXHIBIT C, SECTION 10 AMENDMENTS. Section 10 of Exhibit C
to the Original Lease is amended, as follows:
(A) SUBSECTION 10(g) AMENDMENT. The first sentence of
Subsection 10(g) of such Exhibit C is amended by deleting from the end thereof
the following clause: "together with twenty percent (20%) for Landlord's
supervision and overhead." The last sentence of Subsection 10(g) of such Exhibit
C is deleted.
(B) SUBSECTION 10(j) AMENDMENT. Subsection 10(j) of such
Exhibit C is deleted and replaced with the following sentence: "In rendering its
consent to any Alterations, Landlord may impose such conditions as may be
reasonably required to minimize any disturbance that the performance of the Work
may cause to other tenants or occupants of the Park."
(f) ENVIRONMENTAL MATTERS. Section 2 of Rider No. 2 to the Original
Lease is amended as follows:
(i) DEFINITIONS. Subsection 2.1 of Rider No. 2 to the Original
Lease is amended as follows:
(A) "Hazardous Substance(s)" as used herein shall
4
<PAGE>
include any substance, chemical, compound or mixture which is (or which contains
any substance, chemical, compound, or mixture which is):
(1) A "Hazardous Substance", "Hazardous Material",
"Hazardous Waste", or "Toxic Substance" under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq. or the Solid Waste Disposal Act, 42 U.S.C. Section 6901, et seq., including
any regulations promulgated thereunder, as any of the foregoing may be amended;
(2) a "Hazardous Material", "Hazardous Substance" or
"Hazardous Waste" under Section 25117, 25218, 25316, 25501, or 25501.1 of the
California Health and Safety Code, as any of the foregoing may be amended;
(3) "Oil" or a "Hazardous Substance" under Section 311
of the Federal Water Pollution control Act, 33 U.S.C. Section 1321, as may be
amended, as well as any other hydrocarbonic substance, fraction, distillate or
byproduct;
(4) defined, identified or listed as an "Acutely
Hazardous Waste," "Extremely Hazardous Material", "Extremely Hazardous Waste",
"Hazardous Constituent", "Hazardous Material", "Hazardous Waste", "Hazardous
Waste Constituent", or "Toxic Waste" pursuant to Division 4.5, Chapters 10 or 11
or Title 22 of the California Code of Regulations, as may be amended;
(5) listed by the State of California as chemical
known by the State to cause cancer or reproductive toxicity pursuant to Section
25249.8 of the California Health and Safety Code, as may be amended;
(6) environmentally harmful, hazardous, toxic,
ignitable, radioactive, corrosive or reactive and which is regulated by any
public entity or under any law; or
(7) a material which, due to its characteristics or
interaction with one or more other substances, wastes, chemicals, compounds or
mixtures, damages or threatens to damage health, safety or the environment or is
required by any law or public entity to be remediated, including remediation
which such law or public entity requires in order for the property to be put to
any lawful purpose.
(B) RELEASE. The definition of "Release" is amended to add
the following language at the end thereof: "As used herein, the term 'threatened
release' shall mean a threatened release which triggers an obligation of
remediation or other liability under applicable law."
5
<PAGE>
(ii) SECTION 2.3 AMENDMENT. Section 2.3 of Rider No. 2 to the
Original Lease is amended as follows: (a) the caption of such section is
changed to "Release"; (b) the first sentence of the section is deleted; (c) the
second sentence of the section is amended to replace the words "such default"
with "a Release resulting in contamination of the Premises"; and (d) the last
sentence of the section is amended to replace the words "not be excessive" with
"be reasonable" and to replace the words "cure the default" with "remediate any
contamination".
(iii) SECTION 2.4 AMENDMENT. Section 2.4 of Rider No. 2 to the
Original lease is amended as follows:
(A) The fourth sentence of the section (which begins at
line 8 of page 3 of such Rider No. 2) is deleted and replaced with the following
sentence: "All Remedial Work shall be performed by one or more contractors
selected by tenant, subject to Landlord's reasonable approval."
(B) The fifth sentence of the section (which begins at
line 10 of page 3 of such Rider No. 2) is deleted and replaced with the
following sentence: "All costs and expenses of such Remedial Work, including,
without limitation, the charges of such contractor(s) and Landlord's reasonable
attorneys' fees and costs incurred, shall be paid by Tenant."
(C) The last sentence of the section is amended by
replacing the words "not be excessive" with "reasonable."
(iv) SECTION 2.5 AMENDMENT. The last Sentence of Section 2.5 of
Rider No. 2 to the Original lease is deleted and replaced with the following
sentence: "If Landlord so requires, Tenant shall comply, at it sole cost and
expense, with all reasonable recommendations contained in any Environmental
Assessment, including any recommendation with respect to the precautions which
should be taken with respect to activities on the Premises or any
recommendations for additional testing and studies to detect the presence of
Hazardous Substances."
(v) SECTION 2.10 AMENDMENT. Section 2.10 of Rider No. 2 of the
Original Lease is amended as follows:
(A) The last sentence of Subsection 2.10(a) is amended to
delete the word "strictly" (appearing in the sixth line from the bottom of
Subsection 2.10(a)).
(B) The third to last sentence of Subsection 2.10(b) is
deleted and replaced with the following sentence: "Tenant shall also comply at
its expense with any reasonable recommendations of Landlord or Landlord's
consultant with respect to the amended HMMP."
3. CONFIRMATION OF CREDIT OR PAYMENT. Landlord confirms that it has
previously agreed to pay Tenant or credit against Tenant's payments due under
this
6
<PAGE>
Lease the sum of Sixty Thousand Nine Hundred Eighty-One Dollars and 57/100
Dollars ($60,981.57).
4. BROKER'S COMMISSION. No broker's commission shall be paid by Landlord
for the Extended Term.
5. RATIFICATION. The Lease, as amended by this Amendment, is hereby
ratified and affirmed by Landlord and Tenant and remains in full force and
effect.
6. COUNTERPARTS. This Amendment may be executed in two or more
counterparts each of which shall be deemed an original of this Amendment and all
of which shall be deemed one and the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to
be executed by their duly authorized representatives as of the day and year
first above written.
"LANDLORD" "TENANT"
LOGITECH, INC., MYLEX CORPORATION,
a California corporation a Florida corporation
By: /s/ Jon Sacchetti By: /s/ Colleen Gray
--------------------------------- ---------------------------
Name: Jon Sacchetti Name: Colleen Gray
------------------------------- --------------------------
Title: Corporate Real Estate Mgr. Title: VP Finance & CFO
------------------------------ -------------------------
7
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LEASE AGREEMENT
Building D, Ardenwood Corporate Park
This Lease Agreement ("Lease"), dated December 8, 1995 for reference, is
entered into by and between LOGITECH, INC., a California corporation
("Landlord"), and MYLEX CORPORATION, a Florida corporation, ("Tenant"), with
reference to the following facts and understandings:
RECITALS
A. Landlord and Tenant are the "Landlord" and "Tenant", respectively,
under that certain Industrial Lease, dated April 15, 1991, between Metropolitan
Life Insurance Company, a New York corporation ("MetLife"), and Tenant (the
"Building A Lease"). Landlord succeeded to the interests of MetLife in and to
the Building A Lease pursuant to that certain Assignment and Assumption of
Leases and Security Deposits, dated December 26, 1991, and recorded in the
Official Records of Alameda County on December 26, 1991, as Document No,
91-343590. The Building A Lease sets forth the terms and conditions pursuant to
which Tenant leases from Landlord the premises commonly known as Building A of
Ardenwood Corporate Park, 34551 Ardenwood Boulevard, Fremont, California (the
"Building A Premises").
B. Landlord desires to lease to Tenant, and Tenant desires to lease from
Landlord, additional premises commonly referred to as Building D of the
Ardenwood Corporate Park, 6607 Kaiser Drive, Fremont, California, as more
particularly described below (the "Building D Premises"), on and subject to the
terms of the Building A Lease, as amended and supplemented by the terms and
conditions of this Lease.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
1. LEASE. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Building D Premises on and subject to the terms, covenants and
conditions set forth in this Lease. All terms, covenants and conditions of the
Building A Lease are incorporated into and form a part of this Lease, as such
terms, covenants and conditions are amended, deleted or supplemented by this
Lease.
2. DEFINED TERMS. Capitalized terms used in this Lease without
definition shall have the same meanings as are ascribed to such terms in the
Building A Lease. References to the "Lease" which appear in provisions of the
Building A Lease incorporated herein shall mean this Lease. References herein
to a specific section of the Building A Lease shall be
<PAGE>
identified by reference to "BAL section" number. References herein to a
specific section of this Lease shall be identified by reference to "section"
number. During the period from the Phase I Commencement Date (defined in
section 6.1 below) through the Phase II Commencement Date (defined in section
6.2 below), references in the Building A Lease to the "Premises" shall mean and
refer to the Phase I Premises (defined in section 5 below); and from and after
the Phase II Commencement Date, references in the Building A Lease to the
"Premises" shall mean and refer to the Building D Premises. References in the
Building A Lease to the "Building" shall mean and refer to Building D of
Ardenwood Corporate Park.
3. SCOPE OF LEASE. The Building A Lease, as amended and supplemented by
this agreement, sets forth the terms and conditions on which Landlord leases to
Tenant, and Tenant leases from Landlord, the Building D Premises. Except as
expressly set forth in this Lease, the terms, covenants and conditions of the
Building A Lease, without regard to this Lease, shall continue to govern the
rights, duties, obligations and liabilities of Landlord and Tenant with regard
to the Building A Premises.
4. BASIC LEASE INFORMATION.
Address for Notices:
Landlord: Logitech, Inc.
6505 Kaiser Drive
Fremont, CA 94555
Attn: Mr. Jon Sacchetti
Telephone: (510) 713-4742
Fax: (510) 792-8901
Tenant: Mylex Corporation, a Florida corporation
Address of Premises: 6607 Kaiser Drive, Fremont, CA 94555
Address for Notices: 34551 Ardenwood Boulevard, Fremont, CA 94555
Contact: Colleen M. Gray
Chief Financial Officer Phone: (510) 796-6100
BAL Section 1.1 Premises: 6607 Kaiser Drive, Fremont, CA 94555
See section 5
Building: Building D
Park: Ardenwood Corporate Park
2
<PAGE>
BAL Section 1.3 Parking Spaces: (4 per 1,000 r.s.f.)
Phase I: 84 unassigned
Phase II: 237 unassigned (total, including
the 84 spaces allocated under
Phase I)
BAL Section 2.1 Term: See section 6
Commencement Date: See section 6.1
Expiration Date: See section 6.3
BAL Section 3.1 Rent: See section 8
Monthly Installments: See section 8
Rent Commencement Date: See section 8
BAL Section 3.2 N/A
BAL Section 4.1 Gross Area of Premises:
Phase I: 21,061 rentable square feet,
subject to section 9.1
Phase II: 59,295 rentable square feet
Gross Area of Park: 295,560 rentable square feet
Tenant's Share: See section 9.2
BAL Section 6.1 Use: Office, sales, marketing, engineering,
manufacturing, assembly, warehousing and
distribution of electronic products and related
legal uses.
BAL Section 25.1 Security Deposit:
Phase I: $15,795.75
Phase II: $53,069.02 (combined total)
See section 11
BAL Section 27.1 Broker:
Cornish & Carey Commercial Wayne Mascia Associates
400 Hamilton Avenue 3945 Freedom Circle
Palo Alto, CA 94301 Suite 350
Santa Clara, CA 95054
3
<PAGE>
5. PREMISES. The Premises shall consist, initially, of that portion of
Building D depicted on EXHIBIT A to this Lease as the "Phase I Premises". From
and after the Phase II Commencement Date, the Building D Premises shall consist
of the entirety of Building D, as depicted on EXHIBIT A to this Lease.
6. TERM.
6.1. COMMENCEMENT DATE. The Term of this Lease shall commence with
respect to the Phase I Premises on the date that Landlord tenders possession of
the Phase I Premises to Tenant in the condition required by section 7.1 below,
which date shall be no earlier than December 15, 1995 and no later than January
2, 1996. Landlord shall provide Tenant with at least five (5) business days
notice prior to delivering possession of the Phase I Premises. The date on
which the Term of this Lease commences is referred to as the "Phase I
Commencement Date".
6.2. PHASE II COMMENCEMENT DATE. Subject to the provisions of section
6.4 below, the Term of this Lease shall commence with respect to the entire
Building D Premises on the first to occur of the following three (3) dates:
(a) the date on which the Landlord Work (defined in section 13
below) is "substantially completed" (as set forth in section 2.3 of the Work
Letter, attached as EXHIBIT B to this Lease); or
(b) August 1, 1996, whether or not the Landlord Work is
substantially completed; PROVIDED THAT (i) actual, physical construction of the
Phase II Improvements shall have commenced on or before June 1, 1996 (subject to
extension for any "tenant delays", as defined in the Work Letter); (ii) Landlord
shall have been, and shall continue to be, diligently pursuing the Phase II
Improvements to completion; and (iii) possession of the balance of the Building
D Premises is made available to Tenant on or before August 1, 1996; or
(c) the date on which Tenant actually occupies and commences to
do business in the balance of the Building D Premises (excluding the Phase I
Premises).
The date on which this Lease commences with respect to the balance of the
Building D Premises is referred to as the "Phase II Commencement Date". It is
understood and agreed that Tenant shall occupy the Premises in phases and that
occupancy of the Phase I Premises shall not subject Tenant to any liability or
obligation hereunder with respect to the balance of the Building D Premises
prior to the Phase II Commencement Date.
6.3. EXPIRATION DATE. The Term of this Lease shall expire, with
respect to the Building D Premises, on the date (the "Expiration Date") which is
eighty-four (84) calendar months following the Phase II Commencement Date.
4
<PAGE>
6.4. DELAY IN DELIVERY. BAL section 2.3 is deleted and replaced, for
purposes of this Lease, with the following provision:
If Landlord fails to deliver possession of the Phase I Premises
on or before January 2, 1996, or if Landlord fails to deliver possession of the
balance of the Building D Premises on or before August 1, 1996, in either case
in the condition required by section 7.1 below either (a) because a previous
occupant is holding over or (b) because of any other cause or reason beyond the
reasonable control of Landlord (including, but not limited to, "tenant delays"),
then the following provisions shall apply:
(i) the Term shall not commence on the Phase I Commencement
Date or the Phase II Commencement Date, as the case may be, but shall, instead,
commence on a revised Commencement Date fixed by Landlord in a notice to Tenant,
which notice shall state that the Phase I Premises or the balance of the
Building D Premises, as the case may be, are, or prior to the Commencement Date
fixed in such notice, will be ready for occupancy by Tenant; PROVIDED, HOWEVER,
that Landlord may from time to time, by notice to Tenant, change the applicable
Commencement Date fixed in a prior notice;
(ii) neither the validity of this Lease nor the obligations of
Tenant under this Lease shall be affected by such failure to deliver possession,
except that the Term shall begin as provided in clause (i) above;
(iii) Tenant shall have no claim against Landlord because of
Landlord's failure to deliver possession of the Phase I Premises or the balance
of the Building D Premises, as the case may be, on the date originally fixed
therefor, except Tenant shall commence payment of Rent, with respect to the
Phase I Premises or the balance of the Phase II Premises, as the case may be,
upon the revised Commencement Date pertaining to such Premises;
(iv) the Expiration Date shall remain the date which is eighty-
four (84) months following the Phase II Commencement Date, as such date may be
extended in accordance with this section; and
(v) in the event that the Phase I Commencement Date has not
occurred on or before January 31, 1996, or in the event that the Phase II
Commencement Date has not occurred on or before August 31, 1996 (which date
shall be subject to extension for the period of any "tenant delays"), Tenant
shall have the option to terminate the Lease by written notice to Landlord given
within ten (10) days thereafter unless, within such ten (10) day period
possession of the applicable Premises is delivered to Tenant in the condition
required by this Lease.
6.5. EARLY ENTRY. BAL section 2.5 is deleted and replaced, for
purposes of this Lease, in its entirety with the following provision:
5
<PAGE>
Tenant shall be permitted to enter the balance of the Building D
Premises prior to completion of the Landlord Work for purposes of installing
Tenant's equipment, furnishings, trade fixtures, cabling and related items not
within the scope of Landlord's Work; PROVIDED THAT, such entry (i) shall be
subject to the terms and conditions of this Lease except for the payment of
Rent or Additional Rent, which shall not commence prior to the Phase II
Commencement Date, and (ii) shall be coordinated with Landlord or Landlord's
contractor so as not to interfere unreasonably with the completion of Landlord's
Work.
6.6. ACCEPTANCE OF PREMISES. BAL section 2.6 is amended, for purposes
of this Lease, to add at the beginning thereof the phrase: "Subject to section
7.1,".
7. CONDITION OF PREMISES. Section 1 of Rider No. 2 to the Building A
Lease is deleted and replaced, for purposes of this Lease, in its entirety with
the following provisions:
7.1. CONDITION OF PREMISES; WARRANTY. Landlord shall deliver
possession of the Phase I Premises and the balance of the Building D Premises,
as and when required under this Lease, vacant of all occupants and personal
property, clean and free of debris, with all carpets cleaned and with all
existing Building systems (e.g., mechanical, electrical, plumbing, heating,
ventilation, air-conditioning, roof, roof membrane, man doors, roll-up doors and
dock revelers) in good operating condition and repair. Notwithstanding the
foregoing, Landlord shall not be required to complete any Landlord Work
pertaining to the Phase I Premises prior to the Phase I Commencement Date.
Landlord warrants that such Building systems shall remain in good operating
condition and repair for a period of six (6) months after the Phase II
Commencement Date; excluding repairs necessitated by Tenant's failure to perform
its maintenance obligations under this Lease or by the misuse or abuse of such
Building systems by Tenant or its agents, employees, contractors or invitees. In
the event that the foregoing warranty is violated, Tenant shall give written
notice to Landlord setting forth with reasonable specificity the nature of the
violation and Landlord shall promptly, at Landlord's sole expense, rectify such
violation. Except for the completion of warranty work of which Landlord is
given written notice within such six (6) month period, after the expiration of
such six (6) month period, Landlord shall have no further warranty obligations
regarding the items warranted by Landlord under this section 7.1
7.2. COMPLIANCE WITH LAWS. Landlord warrants to Tenant that, to the
best of Landlord's knowledge, the Building complies with all laws, rules,
regulations and codes, including without limitation, building codes and the
Americans with Disabilities Act of 1990, as amended, applicable to the Building
at the date of this Lease. Landlord further warrants that Landlord has received
no notice from any government authority requiring any work to be done on or
about the Building. In the event that the Building is found, prior to the later
of (a) the Phase II Commencement Date or (b) the date on which the Landlord Work
is completed (such period being referred to herein as the "warranty period"),
not to be in compliance with such laws, rules, regulations or codes, Tenant
shall give written notice to Landlord setting forth with reasonable specificity
the nature of the violation and Landlord
6
<PAGE>
shall promptly, at Landlord's sole expense, rectify the violation; provided,
however, that Tenant shall not be required to give such notice to Landlord if
Landlord is notified of the violation in connection with the Landlord Work.
Except for the completion of warranty work of which Landlord has notice within
the warranty period, after the expiration of the warranty period, Landlord
shall have no further obligation to rectify violations of the warranties set
forth above in this section 7.2. For purposes of this section 7.2, "Landlord's
knowledge" shall mean the actual knowledge of Jon Sacchetti or Walt Grunberg,
without any duty of investigation other than a review of documents in Landlord's
possession. Landlord warrants to Tenant that Jon Sacchetti and Walt Grunberg
are the persons under Landlord's employ with managerial responsibility for, and
who can reasonably be expected to have knowledge of, the matters within the
scope of the foregoing warranties.
7.3. DISCLAIMER. Except as expressly provided in this Lease, Tenant
acknowledges that, by accepting possession of the Premises, Tenant shall be
deemed (a) to have accepted the Premises, and all improvements, fixtures and
equipment therein, in its existing "AS IS" condition; (b) to have acknowledged
that neither Landlord nor its representatives have made any other warranties or
representations regarding the condition of the Premises or its suitability for
Tenant's intended purposes; and (c) to have agreed that Landlord has no
obligation to make any repairs, alterations or improvements to the Premises or
to remediate any condition therein.
8. RENT. Section 19 of Rider No. 2 to the Building A Lease is deleted
and replaced, for purposes of this Lease, in its entirety with the following
provisions:
8.1. PHASE I RENT. During the period commencing on the Phase I
Commencement Date and continuing to the Phase II Commencement Date, Tenant shall
pay Monthly Installments of Rent in the sum of $15,795.75 ($.75/psf) and monthly
installments of Additional Rent due with respect to the Phase I Premises,
pursuant to section 9 below and BAL section 4. The Monthly Installment of Rent
and the first installment of such Additional Rent due for the first month of the
Term shall be paid to Landlord promptly upon the mutual execution and delivery
of this Lease.
8.2. PHASE II RENT. Commencing on the Phase II Commencement Date
(being the first day of "Month 01" below) and continuing through the end of
the Term, Tenant shall pay Monthly Installments of Rent as follows:
Month Monthly Rent
----- ------------
01 through 24 $44,471.25 [$.75/psf]
25 through 48 $47,139.53 [$.795/psf]
49 through 72 $50,044.98 [$.844/psf]
73 through 84 $53,069.02 [$.895/psf]
7
<PAGE>
9. ADDITIONAL RENT; TENANT'S SHARE.
9.1. PHASE I PREMISES RENTABLE AREA. Tenant shall have fifteen (15)
days from the date this Lease is mutually executed to have the Rentable Area of
the Phase I Premises measured by an architect approved by both parties. If such
Rentable Area as so measured differs from the Rentable Area shown in section 4.1
of the Basic Lease Information, then the parties shall execute a memorandum
amending the Phase I Rentable Area, and all amounts in the Lease that are
determined by such Rentable Area shall be adjusted accordingly. The architect's
expenses may be paid either directly by Tenant or as a deduction from the
Allowance in the Work Letter, at Tenant's option.
9.2. TENANT'S SHARE. With respect to the Phase I Premises, during the
period commencing on the Phase I Commencement Date and ending on the Phase II
Commencement Date, "Tenant's Share" shall be seven and 13/100 percent (7.13%),
which is the percentage obtained by dividing the Rentable Area of the Phase I
Premises (21,061) by the total rentable area of the Park (295,560). From and
after the Phase II Commencement Date, "Tenant's Share" shall be twenty and
06/100 percent (20.06%), which is the percentage obtained by dividing the
Rentable Area of the Building D Premises (59,295) by the total rentable area of
the Park (295,560). As modified by the foregoing two sentences, BAL section
4.1(c) shall apply to this Lease.
9.3. ADDITIONAL RENT. Tenant's Share of Taxes, Common Expenses and
other items of Additional Rent or Additional Charges payable under this Lease
with respect to the Phase I Premises and Building D Premises shall be computed
and billed separately from Tenant's Share of Taxes, Common Expenses and other
items of Additional Rent or Additional Charges payable under the Building A
Lease.
9.4. EXCLUDED EXPENSES. Notwithstanding anything to the contrary in
the Lease, "Common Expenses" under this Lease and under the Building A Lease
shall not include the following expense items:
(a) The costs of original construction, the purchase price or
any depreciation of the Premises, Building or Park, any additions or
improvements thereto or any Premises, Building or Park service or utility
systems therein, except for the cost of capital improvements to the extent
permitted under BAL section 4.1(e)(xi);
(b) Costs incurred for the repair, maintenance or replacement
of the Premises, Building or Park, or any portion thereof, to the extent: (i) of
the proceeds of insurance received by Landlord under policies actually
maintained or which Landlord would have received under policies which Landlord
is required to maintain under this Lease (whichever is greater), (ii) of any
reimbursement which Landlord receives under any warranties or from any third
party (other than on account of a tenant's pro rata share of Common Expenses, or
(iii) caused by the gross negligence or willful misconduct of Landlord or
Landlord's agents;
8
<PAGE>
(c) Leasing commissions, attorneys' fees, tenant improvement
costs and other costs and expenses incurred in connection with the leasing, or
the improvement for leasing, of any premises;
(d) Advertising, marketing, media and promotional expenditures
regarding the Premises, Building or Park, and costs of signs in or on the
Premises, Building or Park identifying the owner, lender or any contractor;
(e) Costs incurred in connection with the presence,
investigation, monitoring, release, removal or remediation of any Hazardous
Materials on, under, in or about the Premises, Building or Park; or
(f) Any cost items that are not subject to apportionment among
all tenants of the Park in proportion to the ratio of the total rentable area of
the premises ]eased by such tenants (with Landlord being considered the tenant
of any unleased premises) to the total rentable area of the Park.
The aggregate sum of all Common Expenses allocated to tenants of the Park for
any year upon which an allocation is made shall not exceed the aggregate sum of
such expenses which are actually incurred by Landlord for the year in question.
No expense item shall be included more than once or allocated under more than
one expense category. No expense item shall be submitted for payment by Tenant
before it is incurred by Landlord. As amended by this section 9.4, BAL section
4.1(e) shall apply to this Lease.
10. BUILDING D UTILITY EXPENSES. During the period commencing on the
Phase I Commencement Date and continuing to the date on which Landlord delivers
possession of the balance of the Building D Premises to Tenant (during which
period occupancy of the Building D Premises may be shared by Landlord and
Tenant), all water, electricity, natural gas and other utilities provided to the
Building D Premises and not separately metered to the Phase I Premises (herein,
the "Building D Utility Expenses") shall be prorated between Landlord and
Tenant. Tenant shall reimburse Landlord, within fifteen (15) days after
presentation of an invoice therefor from the utility provider, Tenant's Share of
the Building D Utility Expenses incurred by Landlord and Tenant. Tenant's
Share, for purposes of this section 10, shall be thirty-five and 52/100 percent
(35.52%), which is the percentage obtained by dividing the Rentable Area of the
Phase I Premises (21,061) by the total Rentable Area of the Building D Premises
(59,295). During such period, Landlord shall pay all utility bills for the
Building D Premises prior to delinquency and not take any action to terminate or
suspend the provision of such utilities without Tenant's prior written consent.
From and after the date on which Landlord delivers possession of the balance of
the Building D Premises to Tenant, Tenant shall be responsible for payment of
all Building D Utility Expenses, PROVIDED, HOWEVER, that Landlord shall
reimburse Tenant, within fifteen (15) days after presentation of an invoice from
the utility provider, for Landlord's portion of any Building D Utility Expenses
incurred prior to the date on which possession of the balance of the Building D
9
<PAGE>
Premises was delivered to Tenant. As amended by the foregoing provisions, BAL
section 16.1 shall apply to this Lease.
11. SECURITY DEPOSIT. Upon execution of this Lease, Tenant shall deposit
with Landlord a Security Deposit in the amount of $15,795.75. On or before the
Phase II Commencement Date, Tenant shall deposit with Landlord an additional sum
which, when combined with the initial Security Deposit, shall equal a total
Security Deposit of $53,069.02. The Security Deposit deposited with Landlord
under this section 11 shall be held by Landlord subject to the provisions of BAL
section 25.1.
12. INSURANCE. BAL section 32.2 is amended to provide that Landlord is
obligated to obtain and maintain, during the term of this Lease the casualty
insurance policy, described generally in BAL subsection 32.2(a), on Building D.
In addition, section 12 of Rider No. 2 to the Building A Lease is amended to
provide that the bidding process described therein shall not apply to annual
renewals of Landlord's existing insurance policies.
13. LANDLORD WORK. Landlord shall cause the Building D Premises to be
improved in accordance with the Work Letter attached as EXHIBIT B to this Lease.
Such work is referred to herein as the "Landlord Work". In addition, Landlord
shall, at its sole expense, construct or install any partitions necessary or
appropriate to demise the Phase I Premises from the balance of the Building D
Premises during the period that Landlord and Tenant share occupancy of the
Building D Premises. Such expenses shall not be deducted from the Allowance
provided by Landlord under the Work Letter.
14. ALTERATIONS.
14.1. BAL SECTION 7.2 AMENDMENT. Notwithstanding the provisions
of BAL section 7.2 to the contrary, Tenant's trade fixtures installed in the
Premises shall not become the property of Landlord, but shall constitute
"Tenant's Property", provided that such trade fixtures may be removed without
material damage to the Premises.
14.2. EXHIBIT C, SECTION 10 AMENDMENTS. Section 10 of Exhibit C
to the Building A Lease is amended, for purposes of this Lease, as follows:
(a) SUBSECTION 10(g) AMENDMENT. The first sentence of
subsection 10(g) of such Exhibit C is amended by deleting from the end thereof
the following clause: "together with twenty percent (20%) for Landlord's
supervision and overhead." The last sentence of subsection 10(g) of such Exhibit
C is deleted.
(b) SUBSECTION 10(j) AMENDMENT. Subsection 10(j) of such
Exhibit C is deleted and replaced with the following sentence: "In rendering its
consent to any Alterations, Landlord may impose such conditions as may be
reasonably required to minimize any disturbance that the performance of the Work
may cause to other tenants or occupants of the Park."
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15. ACCESS TO ROOF. Section 18 of Rider No. 2 to the Building A Lease is
amended, for purposes of this Lease, as follows: The first sentence is deleted.
The reference in the second sentence to "such equipment" is deleted. Any work
performed by Tenant on the roof shall be done in compliance with section 10 of
Exhibit C to the Building A Lease. As modified by the foregoing provisions,
section 18 of Rider No. 2 to the Building A Lease shall apply to this Lease.
16. ENVIRONMENTAL MATTERS. Section 2 of Rider No. 2 to the Building A
Lease is amended as follows:
16.1. DEFINITIONS. Subsection 2.1 of Rider No. 2 to the Building A
Lease is amended as follows:
(a) HAZARDOUS SUBSTANCES. "Hazardous Substance(s)" as used
herein shall include any substance, chemical, compound or mixture which is (or
which contains any substance, chemical, compound, or mixture which is):
(i) A "Hazardous Substance", "Hazardous Material",
"Hazardous Waste", or "Toxic Substance" under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq. or the Solid Waste Disposal Act, 42 U.S.C. Section 6901, et seq.,
including any regulations promulgated thereunder, as any of the foregoing may
be amended;
(ii) a "Hazardous Material", "Hazardous Substance" or
"Hazardous Waste" under Section 25117, 25281, 25316, 25501, or 25501.1 of the
California Health and Safety Code, as any of the foregoing may be amended;
(iii) "Oil" or a "Hazardous Substance" under Section
311 of the Federal Water Pollution Control Act, 33 U.S.C. Section 1321, as may
be amended, as well as any other hydrocarbonic substance, fraction, distillate
or by-product;
(iv) defined, identified or listed as an "Acutely
Hazardous Waste," "Extremely Hazardous Material", "Extremely Hazardous Waste",
"Hazardous Constituent", "Hazardous Material", "Hazardous Waste", "Hazardous
Waste Constituent", or "Toxic Waste" pursuant to Division 4.5, Chapters 10 or 11
of Title 22 of the California Code of Regulations, as may be amended;
(v) listed by the State of California as a chemical
known by the State to cause cancer or reproductive toxicity pursuant to Section
25249.8 of the California Health and Safety Code, as may be amended;
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(vi) environmentally harmful, hazardous, toxic,
ignitable, radioactive, corrosive or reactive and which is regulated by any
public entity or under any law; or
(vii) a material which, due to its characteristics or
interaction with one or more other substances, wastes, chemicals, compounds or
mixtures, damages or threatens to damage health, safety or the environment or is
required by any law or public entity to be remediated, including remediation
which such law or public entity requires in order for the property to be put to
any lawful purpose.
(b) RELEASE. The definition of "Release" is amended to add
the following language at the end thereof: "As used herein, the term
'threatened release' shall mean a threatened release which triggers an
obligation of remediation or other liability under applicable law."
16.2. SECTION 2.3 AMENDMENT. Section 2.3 of Rider No. 2 to the
Building A Lease is amended as follows: (a) the caption of such section is
changed to "Release"; (b) The first sentence of the section is deleted; (c) the
second sentence of the section is amended to replace the words "such default"
with "a Release resulting in contamination of the Premises"; and (d) the last
sentence of the section is amended to replace the words "not be excessive" with
"be reasonable" and to replace the words "cure the default" with "remediate any
contamination".
16.3. SECTION 2.4 AMENDMENT. Section 2.4 of Rider No. 2 to the
Building A Lease is amended as follows:
(a) The fourth sentence of the section (which begins at
line 8 of page 3 of such Rider No. 2) is deleted and replaced with the following
sentence: "All Remedial Work shall be performed by one or more contractors
selected by Tenant, subject to Landlord's reasonable approval."
(b) The fifth sentence of the section (which begins at line
10 of page 3 of such Rider No. 2) is deleted and replaced with the following
sentence: "All costs and expenses of such Remedial Work, including, without
limitation, the charges of such contractor(s) and Landlord's reasonable
attorneys' fees and costs incurred, shall be paid by Tenant."
(c) The last sentence of the section is amended by
replacing the words "not be excessive" with "be reasonable".
16.4. SECTION 2.5 AMENDMENT. The last sentence of section 2.5 of
Rider No. 2 to the Building A Lease is deleted and replaced with the following
sentence: "If Landlord so requires, Tenant shall comply, at its sole cost and
expense, with all reasonable recommendations contained in any Environmental
Assessment, including any recommendation
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with respect to the precautions which should be taken with respect to activities
on the Premises or any recommendations for additional testing and studies to
detect the presence of Hazardous Substances."
16.5. SECTION 2.10 AMENDMENTS. Section 2.10 of Rider No. 2 to the
Building A Lease is amended as follows:
(a) The last sentence of subsection 2.10(a) is amended to delete
the word "strictly" (appearing in the sixth line from the bottom of that
subsection).
(b) The penultimate sentence of subsection 2.10(b) is deleted
and replaced with the following sentence: "Tenant shall also comply at its
expense with any reasonable recommendations of Landlord or Landlord's consultant
with respect to the amended HMMP."
17. OPTION TO EXTEND TERM. Tenant shall have the right and option to
extend the Term of this Lease on and subject to the following terms. References
in the Building A Lease to the Option to Extend the Term shall, for purposes of
this Lease, mean the OPTION to Extend the Term set forth below. The Option to
Extend Term set forth in this Lease applies solely and exclusively to this Lease
of the Building D Premises. Any exercise of this Option to Extend Term shall
not operate to extend the term of the Building A Lease.
17.1. GRANT OF OPTION. Subject to the provisions of this section
17, Landlord grants to Tenant the right and option (the "Option") to extend the
Term of the Lease for one (1) additional period of sixty (60) months (the
"Option Period"), on all the provisions contained in this Lease, except that
Tenant shall have no further option to extend the Term, Landlord shall have no
obligation to improve the Premises in any respect, and the Monthly Installment
of Rent shall be fixed at the "Market Rental", as determined below, but in no
event less that the Monthly Installment of Rent in effect immediately prior to
the Expiration Date. The Option shall be exercised by Tenant, if at all, by
written notice to Landlord on or before the date that is one hundred eighty
(180) days prior to the Expiration Date of the Term.
17.2. MARKET RENTAL. As used herein, "Market Rental for the
Premises shall mean the rental and all other monetary payments and escalations,
including without limitation, consumer price indexing, that could be obtained
from a third party desiring to lease the Premises for the Option Period, taking
into account the age of the Building, the size, location and floor levels of the
Premises, the lack of an obligation of Landlord to provide tenant improvements,
the quality of construction of the Building and the Premises, the services
provided under the terms of this Lease, the rental then being obtained for new
leases of space in the Park and all other factors that would be relevant to a
third party desiring to lease the Premises for the Option Period.
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17.3. DETERMINATION OF OPTION PERIOD RENT. Within thirty (30) days
after its receipt of Tenant's timely notice of exercise of the Option, or as
soon thereafter as is reasonably possible, Landlord shall notify Tenant in
writing of Landlord's determination, in good faith, of the Market Rental for the
Premises for the Option Period. If, within ten (10) days after receipt of such
notice from Landlord, Tenant in good faith disagrees with Landlord's
determination of Market Rental, Tenant may elect, in writing, to revoke and
rescind Tenant's exercise of the Option; and the Option shall thereupon be
terminated and the Term shall expire on the Expiration Date as if Tenant had not
exercised the Option. If Tenant fails to so revoke and rescind its exercise of
the Option, but nevertheless disputes Landlord's determination of Market Rental,
Tenant shall so notify Landlord in writing within such ten (10) day period and
the Market Rental shall be determined as follows:
(a) For a period of thirty (30) days following the date on which
Tenant gives written notice to Landlord disputing Landlord's determination of
Market Rental, Landlord and Tenant shall meet, from time to time, and attempt to
agree on the Market Rental.
(b) If Landlord and Tenant fail to agree on the Market Rental
within such thirty (30) day period, then each party shall, within ten (10) days
following the expiration of such thirty (30) day period, appoint a "qualified
appraiser" and such qualified appraisers shall meet during the ensuing thirty
(30) day period to determine the Market Rental. A "qualified appraiser" shall
be a California licensed real estate broker having at least 10 years current
experience leasing industrial and r&d buildings in Santa Clara County and
southern Alameda County, California. If either party fails to appoint a
qualified appraiser within such ten (10) day period, then the sole appointed
appraiser shall determine the Market Rental. If two qualified appraisers are
appointed and they are unable to agree on the Market Rental within thirty (30)
days after they are appointed, then the two appraisers shall, within ten (10)
days after the expiration of such thirty (30) day period, select a third
qualified appraiser having no prior relationship with either Landlord or Tenant.
The third appraiser shall submit his or her determination of the Market Rental
within fifteen (15) days after being appointed. The two closest determinations
of Market Rental among the three determinations submitted by the appraisers
shall be averaged and the resulting quotient shall become the Market Rental.
Each party shall pay the costs of the appraiser appointed by it and one-half the
cost of any third appraiser who may be appointed.
(c) Upon final determination of the Market Rental, the parties
shall execute and attach to this Lease an addendum, prepared by Landlord,
setting forth the new Expiration Date and the amount of the Monthly Installment
of Rent for the Option Period.
17.4. LIMITATIONS. Notwithstanding the provisions of section
17.1, Tenant shall have no right to exercise the Option if (a) on the date that
Tenant exercises the Option or the date of the commencement of the Option Period
Tenant is in default of any of its obligations under this Lease, (b) Tenant has
subleased or assigned all or any portion of the Premises, except to a Permitted
Transferee (as defined in section 8 of Rider No. 2 to the
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Building A Lease) or (c) Tenant or a Permitted Transferee is not in occupancy of
all of the Premises (unless it has vacated the Premises or a portion thereof for
a limited period of time as necessary for remodeling of the Premises). The
Option is personal to Tenant and cannot be exercised by any other person or
entity, and shall not be transferable or assignable (voluntarily or
involuntarily) to any assignee of this Lease or a sublessee of all or any part
of the Premises, except to a Permitted Transferee. Any purported assignment of
the Option, other than to a Permitted Transferee, shall be void.
18. SUBORDINATION. The form of Subordination, Non-Disturbance and
Attornment Agreement, attached as Exhibit E to the Building A Lease, shall be
subject to modification, as and when required by Landlord under the terms of
this Lease and/or the Building A Lease, to reflect the correct identities of
Landlord, Tenant and Beneficiary, respectively.
19. DELETED LEASE PROVISIONS. The following provisions of the Building A
Lease are deleted from and inapplicable to this Lease: Basic Lease Information,
sections 2.1, 2.2, 2.3 and 2.5, section 5.1; Exhibit B1 and Exhibit B2 [Floor
Plan]; sections 1 through 9 of Exhibit C [Work Letter Agreement]; Rider No. 1
[Option to Extend Term]; and sections 1 [Condition of Premises], 14 [Right of
First Refusal], 15 [Purchase of FFE] and 19 [Rent] of Rider No. 2 [Additional
Provisions]. In the event of any conflict between the terms of this Lease and
the terms of the Building A Lease, the terms of this Lease shall prevail.
20. GENERAL PROVISIONS.
20.1. ENTIRE AGREEMENT; EXHIBITS. The Building A Lease, as
amended, deleted and supplemented by the terms of this agreement and including
all exhibits and addenda attached hereto and referenced herein, constitutes the
entire agreement between Landlord and Tenant and supersedes all prior or
contemporaneous oral or prior written instruments, negotiations or
understandings between the parties concerning the lease of the Building D
Premises. The exhibits attached hereto and initialed by the parties are deemed
to constitute part of this Lease and are incorporated herein.
20.2. AMENDMENTS. No amendment of this Lease shall be effective
unless set forth in a writing which specifies such amendment and is signed by
Landlord and Tenant. Without limiting the generality of the preceding sentence,
no amendment to the Building A Lease shall constitute an amendment to this Lease
unless such amendment expressly provides that it amends this Lease, sets forth
the terms of the amendment, and is signed by Landlord and Tenant.
20.3. CAPTIONS AND HEADINGS. The captions and headings used in
this Lease to reference sections, paragraphs and terms appearing herein are
provided solely for convenience of reference and shall not be deemed to be
relevant in resolving any question of interpretation of any provision of this
Lease,
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20.4. COUNTERPARTS. This Lease may be executed in two or more
counterparts, each of which shall constitute an original as against the party
whose signature appears thereon and together which shall constitute but one and
the same instrument. A facsimile transmission, by one party to the other, of a
counterpart of this Lease bearing the signature of the transmitting party shall
constitute delivery of an executed counterpart of this Lease to the other party,
provided that the original executed counterpart is delivered to such other party
on the next business day following the date of transmission.
20.5. MODIFICATIONS FOR LENDER AND BUYER. If a prospective
purchaser or mortgagee of the Building D Premises shall request reasonable
modifications to this Lease as a condition to the purchase or financing of the
Building D Premises, Tenant shall not unreasonably withhold, delay or defer its
consent thereto, provided that such modifications do not adversely affect
Tenant's rights or increase Tenant's obligations under this Lease. This
section 20.5 shall expire and become of no further effect on December 31, 1995.
IN WITNESS WHEREOF, the parties have caused this Lease to be executed and
delivered by their respective duly authorized officers on the dates set forth
beneath their respective signatures hereto:
Landlord: Tenant:
LOGITECH, INC. MYLEX CORPORATION
a California corporation a Florida corporation
By: /s/ Jon Sacchetti By: /s/ Colleen M. Gray
---------------------------------- ----------------------------
Name: Jon Sacchetti Name: Colleen M. Gray
-------------------------------- --------------------------
Title: Corporate Real Estate Manager Title: VP Finance & CFO
------------------------------- -------------------------
Date: Dec. 9, 1995 Date: Dec 9, 1995
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EXHIBIT A
[FLOOR PLAN]
<PAGE>
EXHIBIT B
WORK LETTER
This Work Letter is part of the Lease Agreement, dated December 8, 1995,
between Logitech, Inc,, as Landlord, and Mylex Corporation, as Tenant, for the
Premises commonly known as Building D of the Ardenwood Corporate Park, 6607
Kaiser Drive, Fremont, California, as more particularly described in the Lease.
Capitalized terms used, but not otherwise defined, in this Work Letter have the
meanings ascribed to such terms in the Lease.
Landlord and Tenant agree as follows with respect to the construction of
tenant improvements to be installed in the Building D Premises:
I. PLANS AND SPECIFICATIONS.
1.1. LANDLORD WORK. Subject to the terms and conditions of this Work
Letter, Landlord agrees to construct certain tenant improvements in the Building
D Premises. Landlord's obligations under this Work Letter are referred to the
"Landlord Work".
1.2. PHASED CONSTRUCTION. Pursuant to the terms of the Lease, Tenant
is to obtain possession of the Building D Premises in two phases. The Phase I
Premises is to be delivered to Tenant prior to the completion of any Landlord
Work pertaining to the Phase I Premises. Accordingly, Landlord shall have no
obligation to complete any Landlord Work pertaining to the Phase I Premises
prior to the Phase I Commencement Date. The balance of the Building D Premises,
excluding the Phase I Premises (herein, the "Phase II Premises") is to be
delivered to Tenant upon substantial completion of the Landlord Work, subject to
earlier commencement as provided in the Lease.
1.3. PHASE I IMPROVEMENTS.
(a) PLANS AND SPECIFICATIONS. Within thirty (30) days after
this Lease is mutually executed and delivered, Tenant shall provide Landlord
with a schedule of improvements to be made to the Phase I Premises (the "Phase I
Improvements") in sufficient detail to permit the development of preliminary
plans and specifications therefor. If the nature of the Phase I Improvements
requires working drawings and specifications, then, Landlord shall, promptly
after being furnished with Tenant's schedule and information concerning the
Phase I Improvements, commence to have working drawings and specifications
therefor prepared by Landlord's architect (herein, the "Architect"). Tenant
shall promptly furnish any additional information requested by the Architect for
the preparation of the preliminary plans, working drawings and specifications.
The working drawings and specifications shall be subject to Tenant's reasonable
approval, disapproval and modification, which Tenant shall render within five
(5) business days after submission thereof to Tenant.
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(b) COST ESTIMATES. Promptly after the preliminary plans and
specifications for the Phase I Improvements have been prepared and approved,
Landlord shall obtain a line item cost estimate from its contractor or Architect
based on the approved preliminary plans and specifications. Tenant shall have
the right to approve or disapprove the cost estimates and to make modifications
to the plans and specifications based on such cost estimates, within five (5)
business days after submission to Tenant. If the anticipated cost of the Phase
I Improvements (as estimated by the Architect) is expected to exceed $30,000.00,
then the Phase I Improvements work shall be competitively bid, and the
contractor therefor selected, in accordance with the procedure set forth in
subsection 1.4.(c) below.
(c) CONSTRUCTION. Promptly after the plans, specifications and
cost estimates for the Phase I Improvements have been finalized and approved
(such plans and specifications being referred to as the "Final Plans" for the
Phase I Improvements), Landlord shall cause its contractor or Architect to
prepare and deliver to Tenant a schedule for the completion of the Phase I
Improvements (the "Construction Schedule") and shall cause the Phase I
Improvements to be constructed and installed diligently and expeditiously, in
accordance with section 2 below. All costs incurred in the construction of the
Phase I Improvements shall be paid subject to and in accordance with the
provisions of section 3 below. After the Phase I Commencement Date, Landlord
and its contractor shall have reasonable access to the Phase I Premises for
purposes of designing, constructing and/or installing the Phase I Improvements
and any Phase II Improvements thereafter to be made within the Phase I Premises;
PROVIDED, HOWEVER, that Landlord shall cause such work to be done in a manner
that will minimize any interruption of or disturbance to the conduct of Tenant's
business therein.
1.4. PHASE II IMPROVEMENTS.
(a) PRELIMINARY PLANS. On or before March 15, 1996, Tenant shall
provide to Landlord a schedule of improvements to be made to the Building D
Premises (the "Phase II Improvements") in sufficient detail to permit Architect
to prepare preliminary plans and specifications. The Phase II Improvements may
include improvements to and alterations of the entire Building D Premises.
(b) PLANS, SPECIFICATIONS AND WORKING DRAWINGS. Within fifteen (15)
days after receipt of Tenant's schedule of Phase II Improvements, Landlord shall
cause its Architect to prepare and deliver to Tenant preliminary plans and
specifications for the Phase II Improvements. Tenant shall cooperate diligently
with the Architect and shall furnish, within five (5) business days after
request, all information required by the Architect for completion of the
preliminary plans and specifications. Within fifteen (15) days after the
preliminary plans and specifications are approved by both parties, Landlord
shall cause its Architect to prepare and deliver to Tenant working drawings and
specifications consistent with the approved preliminary plans and specification.
Concurrent with or prior to delivery of the proposed final working drawings and
specifications to Tenant for Tenant's approval, Landlord shall deliver to Tenant
a line item cost estimate showing the estimated costs of constructing and
installing the improvements shown on such drawings. Within five (5) business
days after
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submission of such drawings and cost estimates to Tenant, Tenant shall have the
right to approve, disapprove or request reasonable modifications to the working
drawings and specifications. All modifications shall be subject to Landlord's
reasonable approval. If Tenant fails to respond to Landlord's request for
approval within such five (5) business day period, then the working drawings and
specifications shall be deemed to have been approved by Tenant. If Tenant
timely disapproves the working drawings and specifications, Tenant shall specify
the modifications thereto required by Tenant, and Landlord shall cause revised
drawings and specifications to be prepared and delivered to Tenant within five
(5) business days after receipt of Tenant's proposed modifications.
(c) PLAN BIDS. When the working drawings and specifications are
approved or deemed approved by Tenant, Landlord will obtain competitive
contractor bids from at least three contractors, selected by Landlord and
subject to Tenant's reasonable approval, for completion of the work specified
therein. Devcon Construction is hereby designated as a contractor approved by
Tenant. Landlord shall submit to Tenant the bids obtained (not less than three)
and the bid and contractor selected by Landlord from among the contractors who
submitted conforming bids; provided that the contractor selected by Landlord
must have submitted a conforming bid that is within five (5) percent of the
lowest conforming bid received and, provided further, that Tenant shall have the
right reasonably to approve Landlord's selected contractor within five (5) days
after notification. Notwithstanding the foregoing, if Devcon Construction bids
on the Landlord Work and submits a conforming bid that is within five (5)
percent of the lowest conforming bid received, then Tenant consents to using
Devcon Construction as the Contractor. Based on the contractor bid obtained by
Landlord and accepted by Tenant, Landlord will prepare a schedule of the Phase
II Improvement Costs (the "Final Pricing Schedule").
(d) FINAL PLANS. In the event the Contractor bid would cause the
estimated total Improvement Costs for the Phase II Improvements to exceed the
Allowance (defined below) remaining after all deductions therefrom are made for
the Improvement Costs of the Phase I Improvements, Tenant shall, within five (5)
days after request by Landlord, have the right to specify one final set of
modifications to the proposed final working drawings and specifications to
reduce the estimated total Improvement Cost below the Allowance (plus any
additional amount as Tenant, in its sole discretion, may elect to contribute),
and the working drawings and specifications shall be revised accordingly. Such
revised drawings shall be resubmitted for bidding by the Contractor, and a
revised Final Pricing Schedule shall be prepared and submitted for approval by
Landlord and Tenant. The final working drawings and specifications, prepared
and approved in accordance with the foregoing procedures, shall constitute the
"Final Plans" for the Phase II Improvements.
(e) CONSTRUCTION SCHEDULE. Upon approval of the Final Plans, the
Contractor or Architect shall prepare and deliver to Landlord and Tenant a
schedule (the "Construction Schedule") setting forth the estimated timetable for
the construction of the Phase II Improvements. Upon approval of the
Construction Schedule by Landlord and Tenant, the Construction Schedule shall
become the basis for completing the Phase II Improvements.
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2. CONSTRUCTION OF TENANT IMPROVEMENTS.
2.1. PERMITS. Promptly after the Final Plans are approved, Landlord
shall submit the Final Plans to the appropriate governmental body for plan
checking and issuance of all necessary governmental permits and approvals. The
Final Plans shall be subject to such minor modifications and adjustments as may
be required by applicable governmental bodies or for on-site conditions
determined during the course of construction.
2.2 CONTRACT. Once all conditions precedent herein have been
satisfied and all governmental permits and approvals have been obtained,
Landlord shall enter into a construction contract with its Contractor for the
construction of the Landlord Work in accordance with the Final Plans and the
Final Pricing Schedule. Landlord shall use its best efforts to cause the
Landlord Work to be substantially completed in accordance with the Construction
Schedule and the Final Pricing Schedule. Landlord shall cause Landlord's Work
to be completed in a safe, good and workmanlike using new materials of
commercial or better grade, unless otherwise specified by Tenant and approved by
Landlord. All work shall be performed in accordance with applicable codes, laws,
rules and regulations. Landlord shall provide at least 48 hours advance notice
to Tenant of any interruption of utility service to the Phase I Premises that
may be required.
2.3. SUBSTANTIAL COMPLETION.
(a) The Landlord Work shall be deemed to be "substantially
completed" when the Landlord Work shall have been completed in accordance with
the Final Plans therefor and applicable law, except for minor punchlist items
the completion of which will not interfere substantially with the conduct of
Tenant's business in the Premises, and when all governmental approvals to the
Landlord Work have been obtained to permit immediate occupancy of the Building D
Premises.
(b) Following substantial completion of the Landlord Work and,
with respect to the Phase II Improvements, within ten (10) days after Tenant
takes possession of the Phase II Premises, Landlord and Tenant shall inspect the
Building D Premises and jointly prepare a "punch list" of construction items to
be completed or repaired. Landlord shall complete the items set forth on the
punch list as soon as reasonably possible and shall use its best efforts to have
such items completed within thirty (30) days after preparation of the punch
list.
(c) If Tenant takes occupancy of the Phase II Premises prior to
substantial completion of the Phase II Improvements, Tenant shall conduct its
activities in the Building D Premises so as to minimize any interference with
the completion of the Phase II Improvements; and Landlord shall use reasonable
efforts to minimize any interference with the conduct of Tenant's business.
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3. IMPROVEMENT COSTS AND ALLOWANCE.
3.1. ALLOWANCE. Landlord shall provide Tenant with a construction
allowance of $3.00 per rentable square foot of the Premises up to a total of One
Hundred Seventy Seven Thousand, Eight Hundred Eighty-five Dollars ($177,885.00)
(the "Allowance").
3.2. IMPROVEMENTS COST.
(a) "Improvement Costs" shall include the following costs and
expenses incurred in connection with the design, construction and installation
of the Phase I Improvements and the Phase II Improvements:
(i) All costs of preliminary and final architectural and
engineering plans, drawings and specifications, and engineering costs associated
with completion of the State of California energy utilization calculations under
Title 24 legislation;
(ii) All costs of obtaining building permits and other
necessary authorizations from the applicable governmental authority;
(iv) All costs of interior design and finish schedule
plans, drawings and specifications;
(iv) All labor and materials costs, the contractor's fee
for overhead and profit, the cost of equipment rentals, and temporary utility
services;
(v) All costs of affecting change orders requested or
approved by Tenant in writing; and
(vi) a reasonable charge for services rendered by
Landlord's in-house personnel for space planning, preliminary plans, and
construction supervision and administration, in an amount not to exceed Five
Thousand Dollars ($5,000.00) total.
(b) Improvement Costs shall not include:
(i) any costs of procuring, constructing or installing any
of Tenant's personal property or trade fixtures, except to the extent
performed by Contractor at Tenant's express request;
(ii) any costs to correct errors in design or construction;
(iii) any costs incurred in connection with any change
orders not requested or approved by Tenant in writing;
(iv) any costs in excess of the Final Pricing Schedule,
unless approved by Tenant in writing;
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(v) Landlord's indirect costs of administering the Lease
or this Work Letter, except as specifically set forth in subparagraph
3.2.(a)(vi); or
(vi) any costs which are to be paid solely by Landlord
under the terms of the Lease.
3.3 DEVIATIONS OF IMPROVEMENT COSTS FROM ALLOWANCE. Landlord shall pay
all Improvement Costs.
(a) If the total Improvements Costs exceeds the Allowance, then
the excess of the Improvements Cost over the Allowance shall be reimbursed by
Tenant to Landlord within fifteen (15) days after Tenant's receipt of a
statement from Landlord accompanied by paid invoices to the Contractor.
Notwithstanding the foregoing sentence and subject to the following, Tenant
shall have no obligation to reimburse Landlord for any Improvement Costs in
excess of the Final Pricing Schedule unless approved by Tenant in writing. If
during the course of construction the total Improvement Costs are reasonably
expected to exceed the Final Pricing Schedule, Landlord and Tenant shall
negotiate such modifications to the Landlord Work as may be reasonably required
to reduce the expected total Improvement Costs to the total amount shown in the
Final Pricing Schedule, and the Final Plans and Final Pricing Schedule shall be
adjusted accordingly. If Tenant refuses to consent to such modifications to the
Landlord Work within ten (10) days after Landlord's request, then Tenant shall
be deemed to have consented to completion of the Landlord Work without further
modification.
(b) If the total Improvement Costs is less than the Allowance,
then Tenant shall have the right to have the unused portion of the Allowance
applied to the cost of any future Alterations made by Tenant to the Building D
Premises within one year following the Phase II Commencement Date. Any balance
of the Allowance that is not used by the date which is one year after the Phase
II Commencement Date shall be forfeited by Tenant and retained by Landlord.
(c) Construction of the Landlord Work and all Improvement Costs
shall be maintained on an "open-book" basis, and Tenant shall have the right to
review and make copies of all invoices for the Improvement Costs and to inspect
the Building D Premises during the course of construction.
4. CHANGE REQUESTS.
4.1. No changes to the Final Plans requested by Tenant shall be made
without Landlord's prior approval, which approval shall not be unreasonably
withheld; provided, however, that no change request shall affect the structure
of the Building. Any changes to the Final Plans shall be in writing and shall be
signed by both Landlord and Tenant prior to the change being made.
6
<PAGE>
4.2. The cost of any change orders requested by Tenant and approved by
Landlord, less any credit for reduction of costs associated therewith, shall be
included as an item of Improvement Costs.
4.3. As soon as reasonably possible after receipt of a written change
request from Tenant, Landlord shall notify Tenant of Landlord's approval or
disapproval of the request; and, if the request is approved, of an estimated
increase or decrease in costs and an estimate of the effect the change shall
have on the projected date for substantial completion of the Landlord Work.
4.4. Landlord shall have the authority, without the consent of Tenant,
to order minor changes in the Landlord Work not involving an increase in cost to
Tenant or a delay in the scheduled date of substantial completion and not
inconsistent with the intent of the Final Plans.
5. TENANT DELAYS. As used in this Lease, a "tenant delay" is a delay
attributable to Tenant and caused by:
(a) Tenant's failure to furnish information to Landlord for the
preparation of plans and drawings for the Phase II Improvements in accordance
with this EXHIBIT B;
(b) Tenant's request for special materials, finishes or
installations which are not readily available (provided Landlord has notified
Tenant that such items are not readily available);
(c) Change orders requested and approved by Tenant that result
in delays, but only to the extent of the period of delay specified by Landlord
in its approval of such change order;
(d) Tenant's failure to approve cost estimates if any approvals
are required pursuant to this EXHIBIT B; and
(e) Interference with Landlord's Work caused by Tenant or by
Tenant's agents, provided that Landlord shall have notified Tenant of such
interference and the period of delay anticipated to result therefrom.
INITIALS: JLS CMG
------------- ----------
Landlord Tenant
[end of document]
7
<PAGE>
AMENDMENT NO. 1 TO LEASE
(Building D, 6607 Kaiser Drive, Fremont)
This Amendment No. 1 to Lease (the "Amendment"), dated January 23, 1996 for
reference, amends that certain Lease Agreement (the "Lease"), dated December 8,
1995, by and between Logitech, Inc., a California corporation, as Landlord,
and Mylex Corporation, a Florida corporation, as Tenant, for those premises
located at Building D, Ardenwood Corporate Park, 6607 Kaiser Drive, Fremont,
California.
The Lease is amended as follows:
1. RENTABLE AREA - PHASE I PREMISES. The square footage of the Phase I
Premises Rentable Area is reduced to 20,325 square feet, reflecting a 736
square foot reduction caused by a re-measurement of the Phase I Rentable
Area, as provided for in Section 9.1 of the Lease.
2. MONTHLY INSTALLMENT OF RENT - PHASE I PREMISES. The Monthly
Installment of Rent due with respect to the Phase I Premises is reduced to
$15,243.75. Tenant shall receive a credit of $552 against the Monthly
Installment of Rent due for February 1996. The credit equals the difference
between the Monthly Installment of Rent paid by Tenant upon execution of the
Lease ($15,795.75) and the Monthly Installment of Rent due after taking into
account the reduction in the Rentable Area of the Phase I Premises
($15,243.75).
3. TENANT'S SHARE - PHASE I PREMISES. Tenant's Share is reduced to
6.88% during Tenant's occupancy of the Phase I Rentable Area.
4. PRORATION OF BUILDING D UTILITY EXPENSES. Tenant's Share of
Building D Utility Expenses, as provided in section 10 of the Lease, is
reduced to 34.28%, which is the percentage obtained by dividing the adjusted
Rentable Area of the Phase I Premises (20,325) by the total Rentable Area of
Building D (59,295).
5. OTHER ADJUSTMENTS. All other amounts due under the Lease with
respect to the Phase I Premises which are determined with reference to the
Rentable Area of the Phase I Premises shall be adjusted to reflect the
reduction in the Rentable Area of the Phase I Premises. The adjustments made
by this Amendment shall apply retroactively from the Phase I Commencement
Date.
All other terms and conditions of the Lease shall remain in full force and
effect.
LANDLORD: TENANT:
LOGITECH, INC. MYLEX CORPORATION
a California corporation a Florida Corporation
By: /s/ J. Sacchetti By: /s/ Colleen Gray
---------------------------- ----------------------------
Its: Corporate Real Estate Mgr. Its: VP Finance & CFO
--------------------------- ----------------------------
Date 1/29/96 Date January 26, 1996
--------------------------- ----------------------------
<PAGE>
EXHIBIT 11.0
MYLEX CORPORATION AND SUBSIDIARY
Earnings (Loss) Per Share Computations
Years Ended December 31, 1995, 1994 and 1993
The basis of computing net earnings (loss) per share is described in Note 1 to
the consolidated financial statements, beginning on Page F-1 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
The computation of primary and fully diluted earnings (loss) per share is as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- ----------
<S> <C> <C> <C>
Primary earnings (loss) per share:
Net income (loss) $13,122 $7,509 ($4,444)
---------- --------- ----------
---------- --------- ----------
Weighted average number of common shares
outstanding during the period 15,338 13,622 12,740
Number of common share equivalent resulting
from stock options and warrants, computed
using the treasury stock method 1,067 586 -
---------- --------- ----------
Number of common and common share
equivalents used in computation 16,405 14,208 12,740
---------- --------- ----------
---------- --------- ----------
Primary earnings (loss) per share $0.80 $0.53 ($0.35)
---------- --------- ----------
---------- --------- ----------
Fully diluted earnings (loss) per share:
Net income (loss) $13,122 $7,509 ($4,444)
Interest on convertible subordinated debentures
(net of tax) - 194 -
---------- --------- ----------
Adjusted earnings (loss) $13,122 $7,703 ($4,444)
---------- --------- ----------
---------- --------- ----------
Weighted average number of common shares
outstanding during the period 15,338 13,622 12,740
Number of common share equivalents resulting
from stock options and warrants, computed
using the treasury stock method 1,293 1,038
Number of common share equivalents resulting
from convertible debentures, computed using
the "if converted" method - 587 -
---------- --------- ----------
---------- --------- ----------
---------- --------- ----------
Number of common and common share
equivalents used in computation 16,631 15,247 12,740
---------- --------- ----------
---------- --------- ----------
Fully diluted earnings (loss) per share $0.79 $0.51 ($0.35)
---------- --------- ----------
---------- --------- ----------
</TABLE>
24
<PAGE>
EXHIBIT 13.1
Corporate Profile
Mylex Corporation is the world's leading supplier of high-performance Redundant
Array of Independent Disk (RAID) controllers for PC-based client/server
networks.
Mylex's intelligent I/O, data storage and network management solutions enhance
the performance, capacity and reliability of networked personal computers and
servers. Headquartered in Fremont, California, the company was founded in 1983
and today employs over 300 people. Mylex sells its products through a direct
sales force and a global network of system integrators, resellers and
distributors. The company's wholly owned subsidiary, BusLogic Inc., is based in
Santa Clara, California and is a leading supplier of high-performance SCSI
(Small Computer Systems Interface) I/O solutions used in network file servers,
PCs and work-stations. Mylex's stock is traded under the Nasdaq symbol "MYLX."
<PAGE>
To our shareholders, customers and employees
95 was a year of excellent growth, profitability and expansion for Mylex
Corporation. RAID technology continued to proliferate as the data storage and
intelligent input/output (I/O) solution of choice in the huge and rapidly
growing client/server network computing marketplace. And Mylex continued to
solidify its position as the market leader in providing RAID controller products
to virtually all of today's leading network server original equipment
manufacturers (OEMs).
For the year ended December 31, 1995, Mylex reported revenues of $100.4
million, a 61% increase compared to revenues of $62.5 million in 1994. Net
income for the year was $13.1 million, or $0.79 per share, compared to 1994's
net income of $7.5 million, or $0.51 per share. Mylex ended 1995 with a cash,
cash equivalents and short-term investment balance of $32.2 million, compared to
year-end balances totaling $3.9 million in 1994.
The financial results for 1995 point to the fact that Mylex is the acknowledged
leader in one of the more sophisticated and exciting segments of the network
storage management marketplace. Recognizing that the trend toward client/server
computing had taxed the limits of network storage systems and related I/O
functions, several years ago we shifted our primary focus from motherboards to
RAID controller products - namely, board-level solutions designed to control the
RAID (Redundant Array of Independent Disks) architectures that were beginning to
achieve popularity in the PC-based network server market.
The success of our strategy can be measured by the results of the past few
years. In 1993, for example, Mylex reported revenues of $45.2 million and
overall gross margins of 19.4%. Two years later, 1995 revenues grew to over $100
million, and gross margins soared to 37.5%, with RAID products accounting for a
dominant 95% of all Mylex revenues. By successfully implementing the transition
plan we embarked on just a few short years ago, Mylex has become the world's
leading supplier of RAID controllers for client/server networks, offering
products that provide increased speed, greater capacity and a high degree of
fault tolerance in handling network storage and I/O functions.
Our success in the RAID marketplace, however, is just the beginning of our
expansion strategy. Mylex's objectives, corporate culture and perspective of the
technological trends driving the market are all designed to take advantage of
2
<PAGE>
evolving opportunities in the client/server intelligent I/O arena. Everyone at
the company is dedicated to identifying and capitalizing on these opportunities
as we move forward.
Mylex's success can also be measured by the company we keep. More than 20 of the
world's leading network file server and storage subsystem OEMs have designed
Mylex RAID controllers into their server and storage subsystem products. These
include customers such as IBM, Hewlett-Packard, Digital Equipment Corporation
and NEC, to name just a few prominent examples. Our customer list expanded in
1995 with the addition of Fujitsu, Toshiba and Hitachi, all of whom are now
incorporating Mylex RAID controllers in their PC server products.
A few weeks before the close of 1995, Mylex announced the signing of an
agreement to acquire BusLogic Inc., a Santa Clara, California-based supplier of
high-performance SCSI (Small Computer Systems Interface) I/O solutions used in
network file servers, personal computers and workstations. BusLogic's SCSI host
adapter product family represents the broadest product offering available and
provides a common interface to all of today's PC bus architectures, including
PCI, VESA, EISA, ISA and Micro Channel. The acquisition of BusLogic strengthens
Mylex by adding key SCSI technology and ASIC (Application-Specific Integrated
Circuit) development capabilities to our arsenal of core competencies. BusLogic
will continue to operate under its own name as a wholly owned subsidiary.
Mylex also continues to pursue important relationships with other industry
leaders. One example of this is our coordinated beta site agreement with Intel,
with whom we're devel-oping a RAID controller solution designed to be integrated
directly on the motherboard of future generations of personal computers. Another
example is the distribution agreement Mylex signed during the year with Avnet,
Inc., one of the world's largest technology distributors. We also entered into
agreements with leading Pacific Rim distributors such as Planet Japan and Inno-
Micro to support sales to our growing number of Japanese OEM customers. These
new distributor relationships provide us with value-added alternate sales
channels to complement the efforts of our direct sales force.
In internal news of note, Mylex made several personnel moves to strengthen the
company's management team during the year. We added a new vice president of
human resources, along with a director of business development. In addition,
Stephen McKenzie, former president of Acer America Corporation and chairman of
the board of MicroSpeed, Incorporated, became a member of Mylex's board of
directors. And to keep pace with market demands, we continued to hire new
employees during 1995, expanding the company's headcount by 42%.
In summary, 1995 was a banner year for Mylex. Our leadership in RAID controller
technology places us in an excellent position to take advantage of a
3
<PAGE>
rapidly growing market. This leadership, combined with our acquisition and
expansion efforts, will open the doors to broader opportunities in the data
storage and intelligent I/O arena. The following pages of this report discuss
those opportunities - and Mylex's relationship to them - in greater detail.
In last year's annual report, we talked about how Mylex is a people-oriented
company. More than any other factor, our people were responsible for the
exemplary results that the company was able to achieve in 1995. I want to
express my appreciation for their efforts, and extend my thanks to all of
Mylex's shareholders, customers and partners for their continued support.
Al Montross
President and Chief Executive Officer
4
<PAGE>
raid and mylex
New Dimensions For Network Storage - Client/server computing. In the early
1980s, it was just another buzzword, another hypothetical promise of things to
come. But today, halfway through the 1990s, it's safe to say that the dream has
been delivered, keeping with even the loftiest of expectations. Personal
computer-based networks are ubiquitous. And the client/server model of
computing has become the dominant networking architecture of the Information
Age.
But as with all revolutions, the pace of change has created other issues to be
solved, other needs to be addressed. A network, after all, is only as powerful
as its weakest link. So, while faster microprocessors and increasingly robust
computer bus architectures continue to expand the envelope of client/server
network performance. Functions such as data storage and input/output (I/O)
historically have been hard-pressed to keep pace. The result: system bottlenecks
that can cripple a network's performance and application availability.
But that's not all. Just as client/server networks must face the demand for
ever-higher performance, so too must they meet the need for greater network
storage capacity. The explosive growth of networking and online communications
has created an avalanche of information that must be stored and easily
retrieved. In addition, as today's networks become increasingly vital assets for
disseminating business-critical information, the need has intensified for fault-
tolerant mass storage systems that protect networked data from being lost.
In the early days of client/server architectures, storage and I/O functions were
handled by attaching the hard disk of each PC on the network to a central
server. Unfortunately, network administrators were compelled to frequently back
up the data on each disk to guard against losing information in the event of a
network failure - a time-consuming and labor-intensive process. The resultant
downtime further eroded network performance by reducing the availability of the
network for users. A way had to be found to improve performance, increase
storage capacity and provide a high level of fault tolerance for personal
computer-based client/server networks. And that's when RAID appeared.
reliabilitythrough redundance
RAID: A Technology Whose Time Has Come - In the late 1980s, a team of
researchers at the University of California at Berkeley published a paper that
proposed an architectural solution to the network data storage dilemma. They
called their solution "RAID," an acronym which today in the industry stands for
Redundant Array of Independent Disks.
5
<PAGE>
In essence, RAID distributes data in "stripes" across several disk drives.
Intelligent RAID algorithms allow the main microprocessor in the server to
access those drives simultane-ously, thus increasing system storage and I/O
performance. In addition, RAID configurations are capable of providing a very
high degree of fault tolerance, accomplished by continuously calculating and
storing what is known as a unique parity value. Should any individual drive
fail, the remaining drives in the system can use the parity value to reconstruct
the data on the failed drive, providing the advanced levels of data integrity
that today's client/server networks require.
Originally developed to address the needs of high-end computing and storage
applications, RAID became recognized as an attractive solution for PC-based
networks when corporate computing began to migrate from traditional mainframe-
based implementations to client/server network architectures. Before long,
network server OEMs everywhere began to adopt the technology. More than a
quarter of all servers shipped in 1994, for example, had a RAID configuration -
up from a mere 5% in 1991. And according to industry estimates, in 1997 almost
half of all servers shipped - some 47% - will feature a RAID configuration. All
this, in a server market forecast to grow at a compound annual rate of more than
16% over the next three years. By any estimation, RAID has arrived. And Mylex
is one of the reasons why.
advantage
of proprietary technology
Mylex: The RAID Company - Mylex is the world leader in the design,
manufacture and sale of RAID controllers, with a share of approximately 70% of
the available global market for RAID controllers. Our leadership is illustrated
by the fact that more than 20 of the world's leading network file server and
storage subsystem OEMs - including such companies as IBM, HP, DEC, Intel,
Siemens, NEC, Fujitsu, Toshiba and Hitachi - have designed Mylex controllers
into their products.
Every company must rely on an essential set of core competencies to achieve
success. For Mylex, these core competencies can be identified as market
presence, applications knowledge and proprietary technology. We were one of the
first companies to provide an advanced, intelligent RAID controller solution for
the networked PC marketplace, and today can point to an installed base of more
than 300,000 units around the world. That kind of market presence, in turn,
continues to ensure that we have more practical, working applications knowledge
concerning the data storage and intelligent I/O issues facing network server
OEMs than any other RAID controller supplier in the industry.
6
<PAGE>
But Mylex's ultimate advantage is based on our proprietary technology. Our
board-level controllers integrate a mix of standard off-the-shelf Intel i960
embedded processors, Mylex-designed proprietary application-specific integrated
circuits (ASICs) that serve as interfaces with the host computer, and up to five
SCSI channels to manage the transfer of data to and from the disk drives in the
redundant array. Key to our competitive edge is the embedded software and
firmware that provides the on-board intelligence and algorithms contained in our
products. In addition to programs that implement RAID algorithms, Mylex software
also includes I/O device drivers, along with easy-to-use configuration
administration and monitoring utilities.
As PC bus architectures have evolved over time to offer increased performance
and I/O capabilities, Mylex's products have kept pace. We offer full support of
such established standards as the EISA and Micro Channel busses. And we were the
first company to introduce a RAID controller for the PCI bus, and the advanced
132 Mbps data transfer rates that it provides. Today, Mylex's PCI RAID
controllers form the backbone of our extended product families, complemented by
a range of SCSI-to-SCSI RAID controllers that provide an interface between the
server microprocessor and peripherals attached to virtually any hardware
platform on the network.
influence
on the market
Intelligent I/O: Next Steps - Looking
to the future, Mylex's strategy calls for the introduction of ensuing
generations of RAID controllers that will continue to support multiple system
buses. These controllers will include various design and functional improvements
- - such as supporting the high data-transfer speeds and I/O capabilities required
for video-on-demand and other multimedia applications, for example - to take
advantage of opportunities at the high end of the RAID marketplace.
We also intend to provide lower-cost designs of our products to expand our
customer base and include most price /performance segments of the RAID
controller market. A good example of our efforts at the low end of the
controller market is illustrated by our joint development effort with Intel,
whereby we've developed a software suite that makes it possible to implement
RAID directly on a PC motherboard. Our collaboration with Intel helps
demonstrate that Mylex will continue to lead the way in providing storage
solutions that offer new levels of performance, efficiency and ease of use.
7
<PAGE>
The final element of Mylex's strategy for the next few years is to expand our
presence in the storage management market for networked personal computers by
acquiring and developing technologies that complement our existing RAID and
intelligent I/O capabilities. To that effect, near the end of 1995 we acquired
BusLogic Inc., a privately held supplier of high-performance SCSI I/O products
targeted at network file servers, personal computers and workstations.
BusLogic's MultiMaster-TM- architecture is a proprietary bus master ASIC
technology that provides advanced SCSI I/O solutions for all major operating
platforms. As such, it extends Mylex's reach beyond our RAID controllers to
encompass a broader range of intelligent I/O interface market opportunities.
developing
new opportunities
RAID: Tailor-Made For Tomorrow - As client/server networking continues to
proliferate, RAID will continue to exert a growing influence in the marketplace,
opening up new possibilities for the Information Age. Mylex is in an excellent
position to take advantage of these possibilities. Our market presence, thorough
applications knowledge and unique proprietary technology have enabled us to lead
the way in the industry during the last few years as a provider of RAID
controller solutions for PC-based client/server networks.
Just as RAID has helped solve many of the crucial data storage and I/O needs of
network administrators, so too it has become a solid foundation upon which Mylex
can build and grow our business into the future. We look forward to the
opportunities that lie ahead in a dynamic and exciting marketplace, as
intelligent I/O technology continues to advance the frontiers of today's and
tomorrow's computer networks.
8
<PAGE>
Financial Contents
17 Selected Five Year Consolidated Financial Data
17 Summary Quarterly Data
18 Management Discussion and Analysis of Financial Condition and Results of
Operations
22 Market for Registrant's Common Equity and Related Stockholder Matters
23 Consolidated Balance Sheet
24 Consolidated Statement of Operations
25 Consolidated Statements of Stockholders' Equity
26 Consolidated Statements of Cash Flows
27 Notes to Consolidated Financial Statements
34 Independent auditor's Report
9
<PAGE>
SELECTED FIVE YEAR CONSOLIDATED FINANCIAL DATA
(IN thousands EXCEPT per SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales $ 100,420 $62,513 $45,234 $48,769 $54,264
Cost of Sales 62,733 40,322 36,456 42,112 47,634
Gross Profit 37,687 22,191 8,778 6,657 6,630
Operating Expenses and
Other Income/Expense 17,500 12,130 13,268 11,118 9,931
Income (loss) Before Income Tax 20,187 10,061 (4,490) (4,461) (3,301)
Income Tax Expense (Benefit) 7,065 2,552 (46) (1,461) (1,092)
Net Income (loss) $ 13,122 $ 7,509 ($4,444) ($3,000) ($2,209)
Income (loss) Per Share:
Primary $ 0.80 $ 0.53 ($ 0.35) ($ 0.25) ($ 0.19)
Fully Diluted $ 0.79 $ 0.51 ($ 0.35) ($ 0.25) ($ 0.19)
Average Common Shares Outstanding:
Primary 16,405 14,208 12,740 12,103 11,337
Fully Diluted 16,631 15,247 12,740 12,103 11,337
CONSOLIDATED BALANCE SHEET DATA
Total Assets $ 80,458 $27,358 $14,640 $23,694 $22,433
Working Capital 63,576 16,562 3,461 6,286 8,405
Long-term Obligations 203 493 910 1,293 1,651
Stockholders' Equity 65,201 17,760 4,664 7,963 10,060
</TABLE>
SUMMARY QUARTERLY DATA
(IN thousands EXCEPT per SHARE DATA)
<TABLE>
<CAPTION>
DEC. 31 SEP. 30 JUNE 30 MAR. 31 DEC. 31 SEP. 30 JUNE 30 MAR. 31
QUARTER ENDED 1995 1995 1995 1995 1994 1994 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $33,028 28,176 22,131 17,085 18,619 16,119 14,132 13,642
Gross Profit $12,464 10,545 8,407 6,272 7,458 5,741 5,004 3,988
Income From
Operations $ 7,344 5,407 4,219 3,217 4,025 2,966 2,030 1,603
Net Income $ 5,156 3,208 2,718 2,040 2,851 2,136 1,433 1,089
Net Income Per Share:
Primary $ 0.28 0.20 0.17 0.13 0.19 0.14 0.10 0.07
Diluted $ 0.28 0.20 0.17 0.13 0.19 0.14 0.10 0.07
Weighted Average Shares:
Primary 18,132 16,220 15,688 15,512 14,937 14,820 13,984 14,652
Diluted 18,169 16,267 15,841 15,513 15,540 15,718 14,548 15,249
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS: 1995 vs 1994
YEAR ENDED DECEMBER 31, 1995, COMPARED TO YEAR ENDED DECEMBER 31, 1994
In 1995 the Company continued its profitability and improvement in its financial
condition. Profitability increased as a result of higher revenues and improved
gross margins. The Company's financial condition improved as a result of
profitable operations and the $32.7 million of proceeds received from its
secondary public offering of Common Stock.
Sales and Profits
Net sales increased by 61% to $100.4 million in 1995 from $62.5 million in 1994.
Sales of the Company's RAID controller products increased by 89% in 1995 over
1994 levels, which was a result of the computer industry more widely using RAID
technology as a storage solution. Consequently, the Company's customer base has
begun to ship products with RAID functionality in higher volumes. During 1995,
the Company was awarded additional design wins at several network server
original equipment manufacturers. These new design wins also contributed to the
increase in sales of the Company's RAID controller (disk array) products. Sales
from disk array products represented 95% of total sales in 1995 compared to 81%
in 1994.
The Company continues its commitment to, and is dependent upon, development
of new products as well as enhancement of existing products. The Company
believes its future profitability is dependent to a large extent upon the
industry's continued use of its PCI and SCSI to SCSI disk array product families
and their respective follow on products. However, there can be no assurance
that new products will be successfully developed or, if developed, that such new
products or the Company's current products will achieve and sustain market
acceptance.
The Company depends heavily upon its suppliers to provide high quality
materials on a timely basis, at a reasonable price, and with suitable credit
terms. Although many of the components for the Company's products are available
from numerous sources at competitive prices, some of the most critically-needed
components are sole-sourced. In addition, the company has no long-term supply
contracts. As a result, there can be no assurance that sufficient quantities of
these or other critical components will be available for the Company's
production needs on a timely basis. Furthermore, manufacturers of components on
which the Company relies may choose, for numerous reasons, not to continue to
make those components, or the next generation of those components, available to
the Company in the quantities and on the schedule it requires.
11
<PAGE>
If the Company cannot obtain essential components as required, it may be
unable to meet demand for its products, thereby adversely affecting its
operating results and allowing competitors to gain market share. In addition,
scarcity of such components could result in cost increases and adversely affect
the Company's gross margin.
The Company's largest customer during 1995 was IBM Corporation ("IBM"),
which accounted for 26% of the Company's sales. The Company's next two largest
customers, Hewlett-Packard Company and Digital Equipment Corporation, accounted
for an additional 18% and 15%, respectively, of total sales. Many of the
Company's customers manufacture and sell products in the networked PC market,
which is subject to rapid technological change and intense price competition.
These factors affecting the networked PC market in general, or any of the
Company's customers in particular, could have a material adverse effect on the
Company's future results of operations. The Company has no long-term purchase
commitments from its customers, and customers generally may cancel their orders
on 30-days notice. Accordingly, there can be no assurance that orders from
existing customers, including the Company's principal customers, will continue
at their historical levels, or that the Company will be able to obtain orders
from new customers. Loss of one or more of the Company's current customers,
particularly a principal customer, or cancellation or rescheduling of orders
already placed, could materially and adversely affect the Company's business and
operating results.
Gross profit was $37.7 million or 37.5% of sales in 1995, compared to $22.2
million or 35.5% of sales in 1994. The increase in gross profits in fiscal 1995
was due to higher margin disk array controller products representing both
greater sales volumes as well as an increased percentage of the product mix, in
1995. Gross margins of the Company's disk array controller boards increased
during 1995 due to continued reductions of its material costs. Maintenance of
current gross margins or improvements of gross margins are dependent upon
continued manufacturing cost reductions and the successful development and
market acceptance of the Company's new disk array controller products. There
can be no assurance that the Company will be able to develop and introduce such
products in a timely manner, or that such products will gain or sustain market
acceptance. The Company anticipates increased competition in the market for its
disk array products during 1996. The impact of such competition on the
Company's sales and gross profits is uncertain. However, the Company
anticipates that additional competition could result in a decline in the
selling prices for these products which would impact both gross margins and
operating results.
Selling and Marketing
Sales and marketing expenses were $5.3 million or 5.3% of net sales in 1995,
compared to $3.6 million or 5.7% of net sales in 1994. The increase in sales
and marketing expenses was primarily due to the addition of employees to manage
the increased volume and to higher commission, advertising, trade show and
12
<PAGE>
travel related expenses. The Company expects that sales and marketing expenses
will increase during 1996 as its infrastructure is expanded to support growing
market opportunities through domestic and international distribution channels
and as customer service and technical support activities are increased.
Research and Development
Expenditures for research and development increased by 44% to $4.8 million in
1995 as compared to $3.3 million in 1994. Research and development expenses
decreased as a percent of sales to 4.8% from 5.3% in 1994 due to the
significant growth in net sales. The growth in research and development
expenses was primarily due to the recruitment and addition of new technical
staff. The Company expects to increase its investment in research and
development activities during 1996 in an effort to continue to meet its
commitment to introduce new and innovative products and to continue its strategy
of maintaining technology leadership in the RAID market.
General and Administrative
General and administrative expenses increased to $7.6 million or 7.6% of net
sales in 1995 from $4.6 million or 7.4% of net sales in 1994. The increase in
general and administrative expenses of 65% during 1995 was due primarily to
increased legal expenses. Additionally, there was the addition of personnel to
support the growth in the Company's business combined with higher staffing cost
and related benefits. The Company anticipates that general and administrative
expenses will increase during 1996 due to the planned addition of staffing in
this area to support a higher volume of business activity.
Provision for Uncollectible Accounts Receivable
The Company did not incur any bad debt expense during the year as accounts
written off during 1995 had been fully reserved as of December 31,1994.
Impact of Inflation
The impact of inflation on the Company's business was not material during the
year ended December 31, 1995. The 1995 tax rate reflects the impact of the
reduction of previously available tax benefits.
Interest Income/Expenses and Other
Interest expense decreased by approximately 65% due to repayment of the
Company's line of credit in 1995. This payment was made out of the proceeds of
the Company's secondary public offering. The Company generated interest income
of approximately $500 thousand. Other income/expense reflects the net of other
expenses such as business licenses fees and were in line with the prior year's
similar expenses.
13
<PAGE>
Income Taxes
The Company's combined federal and state effective income tax provision rate was
35% in 1995 and 25% in 1994.
Net Income
Net income increased by $5.6 million to $13.1 million or 13.1% of net sales in
1995 from $7.5 or 12% of sales in 1994, as a result of increased sales and
improved margins.
RESULTS OF OPERATIONS: 1994 vs 1993
YEAR ENDED DECEMBER 31, 1994, COMPARED TO YEAR ENDED DECEMBER 31, 1993
In 1994 the Company returned to profitability and improved its financial
condition. Profitability increased as a result of higher revenues, improved
gross margins and decreased operating expenses. The Company's financial
condition improved as a result of positive cash flow from operations, from the
conversion of subordinated debentures to Common Stock and from employees
purchasing the Company's Common Stock through the Company's 1993 Stock Option
Plan.
Sales and Profits
Net sales increased by 38% to $62.5 million in 1994 from $45.2 million in 1993.
Sales of the Company's disk array controller products increased by 151% in 1994
over 1993 levels, reflecting the Company's numerous design wins in late 1993 and
1994. The net sales growth in 1994 was attributable to overall market growth
and strong demand for the Company's disk array controller products. Sales from
disk array products represented 81% of total sales in 1994 compared to 44% in
1993.
The Company's largest customer during 1994 was IBM Corporation ("IBM"),
which accounted for 22% of the Company's sales. The Company's next two largest
customers, Digital Equipment Corporation and Hewlett-Packard Company, accounted
for an additional 17% and 14%, respectively, of total sales.
Gross profit was $22.2 million or 35.5% of sales in 1994, compared to $8.8
million or 19.4% of sales in 1993. The increase in gross profits in fiscal 1994
was due to higher margin disk array controller products representing both
greater sales volumes, as well as an increased percentage of the product mix in
1994. Gross margins of the Company's disk array controller boards increased
during 1994 due to the replacement of several costly components on the
controller boards with less costly proprietary ASIC chips designed by the
Company which resulted in decreased material costs.
Selling and Marketing
Sales and marketing expenses were $3.6 million or 5.7% of net sales in 1994,
compared to $3.0 million or 6.5% of net sales in 1993. The 21% increase in sales
14
<PAGE>
and marketing expenses was primarily due to the addition of employees to manage
the increased volume and to higher commission, advertising and travel related
expenses.
Research and Development
Expenditures for research and development increased by 35% to $3.3 million in
1994 as compared to $2.5 million in 1993. Research and development expenses
decreased slightly as a percent of sales to 5.3% from 5.5% in 1993 due to the
significant growth of net sales in 1994. The growth in research and development
expenses was primarily due to increased technology development efforts related
to intelligent input/output management projects.
General and Administrative
General and administrative expenses increased to $4.6 million or 7.4% of net
sales in 1994 from $2.7 million or 5.9% of net sales in 1993. The increase in
general and administrative expenses of 73% during 1994 was due to the addition
of personnel to support the growth in the Company's business and significantly
increased legal expenses over those incurred in 1993.
Provision for Uncollectible Accounts Receivable
The provision for uncollectible accounts receivable decreased by $4.7 million in
1994. The Company did not incur any bad debt expense during the year as
accounts written off during 1994 had been fully reserved as of December 31,
1993. The Company wrote off $4.8 million of uncollectible accounts receivable
during 1994, $4.6 million of which was related to products shipped to Northgate
Computer Systems, Inc. The receivable from Northgate was fully reserved during
1993 due to the deterioration of Northgate's financial condition. The
receivable from Northgate was written off during 1994 as a result of Northgate's
filing for bankruptcy and after an analysis of the assets remaining to satisfy
both secured and unsecured creditors. There were no sales to Northgate during
1994.
Impact of Inflation
The impact of inflation on the Company's business was not material during the
year ended December 31, 1994.
Interest Expenses and Other
Interest expense increased by approximately 8% due to increasing interest rates
in the second half of 1994. Other income/expense reflects the net of other
expenses such as business licenses fees and were in line with the prior year's
expenses.
Income Taxes
The Company's combined federal and state effective income tax provision rate of
25% in 1994 is less than the federal statutory rate of 34% primarily due to a
15
<PAGE>
change in the beginning of the year valuation allowance for which no benefit had
been recognized.
Net Income
Net income increased by $11.9 million to $7.5 million or 12% of net sales in
1994 from a net loss of $4.4 in 1993, as a result of increased sales, improved
margins and significantly reduced bad debt expense.
LIQUIDITY AND CAPITAL RESOURCES
During the third quarter of 1995 the Company completed a successful secondary
public offering of 2 million shares of its Common Stock which resulted in net
proceeds of $32.7 million, $25.7 million of which were invested in short term
marketable securities. These securities include U.S. government securities and
municipal notes and bonds with maturities of no longer than two years. Working
capital of the Company as of December 31, 1995 was $63.6 million, an increase of
$47 million from the $16.6 million as of December 31, 1994. Cash balances
improved by $2.5 million to $6.4 million as of December 31, 1995.
Cash flow from financing activities included $1.0 million from the proceeds
of the sale of common stock to employees under stock option plans. The Company
utilized its cash resources primarily for the repayment of $2.4 million of
borrowings against the line of credit, $1.3 million in the purchase of property
and equipment and $1.3 million to fund operating activities. The largest
operating uses of cash were the Company's growth in accounts receivable and
inventories. This increase in the receivable balance did not result in
increased day sales outstanding (DSO). The growth in net inventories was to
support the 61% increase in sales in 1995 and the anticipated sales growth in
the first quarter of 1996. These uses of cash were offset primarily by the
increased profitability of the Company, increases in accounts payable and the
proceeds of the secondary public stock offering described above. The Company's
current ratio was 5.2 to 1 as of December 31, 1995 compared to 2.8 to 1 as of
December 31, 1994.
At December 31, 1995, the Company's principal sources of liquidity
consisted of cash and cash equivalents, short term marketable securities and an
$8 million line of credit. The Company's line of credit, which expires in May
1996, bears interest at the bank's prime rate (8.5% as of December 31, 1995).
The agreement with the Bank contains covenants that include the maintenance of
specific financial ratios and prohibitions on additional indebtedness without
the prior consent of the bank.
The Company presently expects to finance near-term and long-term operations
and capital requirements through its short term marketable securities, cash
provided by continuing operations, existing cash balances, and borrowings under
its bank line of credit. The Company believes that such capital resources will
meet the Company's working capital needs through at least the end of fiscal
1997.
16
<PAGE>
"Safe-Harbor" Statement Under Private Securities Litigation Reform Act of 1995:
The statements contained in the above Management's Discussion and Analysis of
Financial Condition and Results of Operation, and elsewhere in this Annual
Report, that are not historical facts contain forward-looking information with
respect to plans, projections or future performance of the Company, the
occurrence of which involve certain risks and uncertainties, including, without
limitation, demand and competition for the Company's RAID controller products,
the ability of the Company to timely ship ordered products, the impact on the
Company of its recent acquisition of BusLogic, and other risks or uncertainties
detailed in the Company's filings with the Securities and Exchange Commission,
particularly the prospectus with respect to its public offering in September
1995.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock ($0.01 par value) is traded on the National
Association of Securities Dealers National Marketing System ("NMS") and is
quoted on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") under the symbol "MYLX."
The following table sets forth quarterly high and low bid quotations for
the Company's common stock for the two year period ended December 31, 1995 as
quoted by the NASDAQ National Market System. Such bid quotations represent
inter-dealer prices without retail mark-up or mark-down or commission and may
not, therefore, represent actual transaction prices.
COMMON STOCK (MYLEX) HIGH BID LOW BID
1994
First Quarter 7 3/8 4 7/8
Second Quarter 5 3/4 3 5/8
Third Quarter 9 5/8 4 3/8
Fourth Quarter 11 3/4 7 3/4
1995
First Quarter 12 1/16 8 3/8
Second Quarter 13 3/8 10
Third Quarter 19 1/8 13
Fourth Quarter 20 5/8 14
As of January 15, 1996, there were approximately 590 record holders of the
Company's common stock.
DIVIDENDS
The Company has not paid cash dividends on its common stock during either of the
two most recent fiscal years nor during the period subsequent thereto. While
17
<PAGE>
the Board of Directors has general authority over dividend policy, it does not
anticipate paying cash dividends in the foreseeable future.
18
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(In thousands, except share data)
December 31, 1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and equivalents $ 6,446 3,866
Short-term marketable investments 25,708 -
Accounts receivable, net of allowance of $470
and $532 in 1995 and 1994, respectively 19,807 10,789
Inventories 24,138 10,237
Prepaid expenses and other current assets 847 775
Deferred income taxes 1,684 -
Total current assets 78,630 25,667
Property and equipment, net 1,716 1,579
Other assets 112 112
$ 80,458 27,358
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 11,230 3,187
Accrued liabilities 3,516 3,151
Line of credit payable to bank - 2,350
Current portion of long-term capital lease
obligations 308 417
Total current liabilities 15,054 9,105
Long-term capital lease obligations 131 493
Deferred income taxes 72 -
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value;
25,000,000 shares authorized; 16,880,000 and
14,580,000 shares issued and outstanding in
1995 and 1994, respectively 169 146
Additional paid-in capital 47,822 13,526
Retained earnings 17,210 4,088
Total stockholders' equity 65,201 17,760
$ 80,458 27,358
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
Consolidated Statements of Operations
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Net sales, including sales to
affiliate of $5,020 in 1993 $ 100,420 62,513 45,234
Cost of sales 62,733 40,322 36,456
Gross profit 37,687 22,191 8,778
Operating expenses:
Selling and marketing 5,340 3,592 2,962
Research and development 4,800 3,332 2,474
General and administrative 7,580 4,643 2,690
Provision for uncollectible accounts
receivable - - 4,676
Operating income (loss) 19,967 10,624 (4,024)
Other income (expense)
Interest income 507 52 103
Interest expense (179) (512) (475)
Other expense (108) (103) (94)
Income (loss) before
income tax expense (benefit) 20,187 10,061 (4,490)
Income tax expense (benefit) 7,065 2,552 (46)
Net income (loss) $ 13,122 7,509 (4,444)
Earnings (loss) per share:
Primary $ .80 .53 (.35)
Fully diluted $ .79 .51 (.35)
Weighted average number of shares:
Primary 16,405 14,208 12,740
Fully diluted 16,631 15,247 12,740
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
Consolidated Statements of Stockholders' Equity
(In thousands, except share data)
<TABLE>
<CAPTION>
Notes
Additional receivable Retained Total
Common stock paid-in from earnings stockholders'
Shares Amount capital stockholders (deficit) equity
<S> <C> <C> <C> <C> <C> <C>
Balances as of December 31, 1992 12,413,000 $124 6,816 - 1,023 7,963
Common stock issued for cash and
notes receivable from stockholders
upon exercise of options 442,000 4 633 (194) - 443
Subordinated debentures converted 181,000 2 700 - - 702
Net loss - - - - (4,444) (4,444)
Balances as of December 31, 1993 13,036,000 130 8,149 (194) (3,421) 4,664
Common stock issued for cash upon
exercise of options, net of 294,000
shares surrendered at exercise 863,000 9 494 - - 503
Subordinated debentures converted 681,000 7 2,631 - - 2,638
Tax benefit from disqualifying
dispositions of stock options - - 2,252 - - 2,252
Notes receivable from stockholders - - - 194 - 194
Net income - - - - 7,509 7,509
Balances as of December 31, 1994 14,580,000 146 13,526 - 4,088 17,760
Common stock issued for cash upon
exercise of options and warrants 300,000 3 956 - - 959
Issuance of common stock,
net of expenses of $422 2,000,000 20 32,718 - - 32,738
Tax benefit from disqualifying
dispositions of stock options - - 622 - - 622
Net income - - - - 13,122 13,122
Balances as of December 31, 1995 16,880,000 $169 47,822 - 17,210 65,201
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)
Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 13,122 7,509 (4,444)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Tax benefit related to disqualifying
dispositions of stock options 622 2,252 -
Depreciation and amortization 1,127 1,192 987
Provision for uncollectible accounts receivable - - 4,676
Deferred taxes (1,612) - -
Interest expense on convertible debentures
converted to common stock - 313 27
Changes in operating assets and liabilities:
Accounts receivable (9,018) (6,768) (197)
Inventories (13,901) (5,606) 2,469
Prepaid expenses and other
current assets (72) (153) 10
Tax refund receivable - - 2,807
Accounts payable 8,043 708 (5,737)
Accrued liabilities 365 1,774 (131)
Net cash (used in) provided
by operating activities (1,324) 1,221 467
Cash flows from investing activities:
Capital expenditures (1,264) (770) (144)
Purchase of short-term marketable investments (25,708) - -
Change in other assets - - 14
Net cash used in investing
activities (26,972) (770) (130)
Cash flows from financing activities:
Repayments against line of credit, net of borrowings (2,350) (150) (1,864)
Proceeds from issuance of convertible
subordinated debentures - 300 3,000
Repayment of convertible subordinated debentures - (300) -
Repayment of capital lease obligations (471) (385) (348)
Net proceeds from issuance of common stock 32,738 - -
Proceeds from exercise of stock options and warrants 959 503 443
Repayment of notes receivable from stockholders - 194 -
Net cash provided by financing
activities 30,876 162 1,231
Net change in cash and equivalents 2,580 613 1,568
Cash and equivalents at beginning of year 3,866 3,253 1,685
Cash and equivalents at end of year $ 6,446 3,866 3,253
Cash paid during the year:
Interest $ 178 267 363
Income taxes $ 7,098 594 1
Supplemental disclosure of noncash
financing and investing activities:
Conversion of subordinated debentures $ - 2,638 702
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1995, 1994, and 1993
Note 1. Summary of Significant Accounting Policies
Basis of Presentation and Preparation
The accompanying consolidated financial statements include the accounts of Mylex
Corporation (the Company or Mylex) and its wholly owned subsidiary. All
material intercompany accounts have been eliminated in the consolidated
financial statements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
Net sales are recognized upon shipment to customers, including sales made to
distributors under agreements allowing limited right of return and price
protection on merchandise unsold by the distributors. For sales made to
distributors, reserves are provided for expected returns and price protection at
the time of shipment.
Financial Instruments
Cash equivalents consist of highly liquid investments, principally money market
accounts, with a maturity of three months or less at the time of purchase.
The Company has classified its short-term marketable investments as
"available-for-sale." Available-for-sale securities are carried at fair market
value, with the unrealized gains and losses, net of tax, reported in a separate
component of stockholder's equity. Gains and losses on securities sold are
based on the specific identification method.
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and equivalents, short-term
marketable investments, and accounts receivable. The Company's cash equivalents
and short-term marketable investments are primarily in money market accounts,
U.S. government obligations, and municipal notes and bonds that have maturities
ranging from 1996 through 1997. The Company believes no significant
concentration of credit risk exists with respect to these financial instruments.
Generally, the Company requires no collateral on trade receivables, although
certain export sales are guaranteed by letters of credit. The Company believes
that any credit risks are substantially mitigated by its credit evaluation
process.
23
<PAGE>
Inventories
Inventories are valued at the lower of cost (first in, first out) or market.
Property and Equipment
Property and equipment are carried at cost. Assets recorded under capital
leases are stated at the present value of future minimum lease payments at the
inception of the lease. Depreciation on property and equipment is calculated on
the straight-line method over the estimated useful life of the asset (generally
five years). Assets recorded under capital leases are amortized using the
straight-line method over the shorter of the lease term or estimated useful life
of the asset.
Income Taxes
The Company accounts for income taxes using the asset and liability method
whereby deferred assets and liabilities are recorded for differences between the
book and tax carrying amounts of balance sheet items. Deferred liabilities or
assets at the end of each period are determined using the tax rate expected to
be in effect when the taxes are actually paid or recovered. The measurement of
deferred tax assets is reduced, if necessary, by a valuation allowance for any
tax benefits that are not expected to be realized. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Earnings (Loss) Per Share
Primary earnings (loss) per share is based on the weighted average common and
common equivalent shares, if dilutive, outstanding each year. Common equivalent
shares consist of shares issuable upon the exercise of stock options and
warrants, except where antidilutive. In determining fully diluted earnings
(loss) per share, convertible subordinated debentures, if dilutive, are included
in outstanding shares using the "as if converted" method.
Recent Accounting Pronouncements
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 will be effective for fiscal years beginning after
December 15, 1995, and will require that the Company either recognize in its
financial statements costs on a "fair value" basis related to its employee
stock-based compensation plans, such as stock option and stock purchase plans,
or make pro forma disclosures of such costs in a footnote to the financial
statements.
The Company expects to continue to use the intrinsic value based method of
Accounting Principles Board Opinion No. 25, as allowed under SFAS No. 123, to
account for all of its employee stock-based compensation plans. Therefore, in
fiscal 1996, the Company will make the required pro forma disclosures in a
24
<PAGE>
footnote to the financial statements. SFAS No. 123 is not expected to have a
material effect on the Company's results of operations or financial position.
Note 2. Short-Term Marketable Investments
Fair values of short-term marketable investments are based on quoted market
values as of December 31, 1995. As of December 31, 1995, the difference between
the fair value and amortized cost of short-term marketable investments was not
material.
As of December 31, 1995, short-term marketable investments consisted of
$23,615,000 of U.S. government securities and $2,093,000 of municipal notes and
bonds, with $14,667,000 due in one year or less and $11,041,000 due in one to
two years.
Note 3. Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994
<S> <C> <C>
Raw materials $ 16,562 6,924
Work in process 5,612 2,263
Finished goods 1,964 1,050
$ 24,138 10,237
</TABLE>
Note 4. Property and Equipment
Property and equipment consisted of the following (in thousands):
December 31, 1995 1994
<TABLE>
<CAPTION>
<S> <C> <C>
Machinery and equipment $ 3,230 4,122
Furniture and fixtures 625 656
Computer equipment and software 1,036 1,372
4,891 6,150
Less accumulated depreciation and
amortization 3,175 4,571
$ 1,716 1,579
</TABLE>
25
<PAGE>
As of December 31, 1995 and 1994, equipment recorded under capital leases
was $1,605,000 and $2,079,000, respectively, and accumulated amortization
thereon was $1,426,000 and $1,648,000, respectively.
Note 5. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994
<S> <C> <C>
Accrued compensation and benefits $ 1,448 1,234
Accrued legal 565 855
Other 1,503 1,062
$ 3,516 3,151
</TABLE>
Note 6. Line of Credit
The Company has an available $8,000,000 line of credit, which expires in May
1996, bearing interest at the bank's prime rate (8.5% as of December 31, 1995).
The agreement with the Company contains covenants that include the maintenance
of specific financial ratios and prohibitions on additional indebtedness without
the prior consent of the bank. As of December 31, 1995, the Company was in
compliance with these covenants.
Note 7. Income Taxes
Income taxes for the years ended December 31, 1995, 1994, and 1993, were
comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994 1993
<S> <C> <C> <C>
Current tax expense (benefit):
Federal $ 6,496 911 (472)
State 1,266 27 1
Total current 7,762 938 (471)
Deferred tax expense (benefit):
Federal (1,433) (638) 425
State 114 - -
Total deferred (1,319) (638) 425
26
<PAGE>
Charge in lieu of taxes attributable
to employer stock option plans:
Current year 622 1,222 -
Prior years - 1,030 -
Total charge 622 2,252 -
Total tax expense
(benefit) $ 7,065 2,552 (46)
</TABLE>
The reconciliation between the amount computed by applying the federal
statutory rate to income (loss) before income taxes and the actual income tax
expense (benefit) were as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1995 1994 1993
<S> <C> <C> <C>
Statutory federal income tax, at 35%
for 1995 and 34% for 1994 and 1993 $ 7,065 3,421 (1,527)
State income tax, net of federal
tax benefit 1,174 102 (275)
Foreign sales corporation benefit (228) (41) -
Credits available from application
of loss carryback - - (335)
Change in the beginning of the year
valuation allowance, including
losses and credits for which no
benefit has been recognized (1,299) (1,986) 2,081
Credit to paid-in capital - 1,030 -
Other, net 353 26 10
Total tax expense (benefit) $ 7,065 2,552 (46)
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities is presented below (in
thousands).
<TABLE>
<CAPTION>
December 31, 1995 1994
<S> <C> <C>
Deferred tax assets:
Accounts receivable valuation reserves $ 193 214
Lower of cost or market adjustments to inventory
and other tax related adjustments 386 145
Reserves and accruals for reporting
purposes not taken for tax purposes 635 1,059
State tax benefit, including net operating
loss carryovers, net of federal tax reduction 470 -
Valuation allowance - (1,299)
Net deferred tax assets 1,684 119
Deferred tax liabilities:
Depreciation and amortization (72) (119)
Net deferred tax liabilities (72) (119)
Net deferred tax assets $ 1,612 -
</TABLE>
27
<PAGE>
The net change in the valuation allowance for the year ended December 31,
1995, was a decrease of $1,299,000. Management believes that no valuation
allowance is required on deferred tax assets based on current and projected
profitability.
Note 8. Convertible Subordinated Debentures
During 1993, the Company sold $3,000,000 of 8% convertible debentures through a
private placement. The debentures paid interest semiannually and provided for
conversion of the principal and any outstanding accrued interest into common
stock at conversion prices ranging from $3.875 to $5.00 per share. Members of
the Company's Board of Directors purchased $775,000 of the debentures, and,
during 1993, $675,000 of the debentures held by Board members, along with
$27,300 of related accrued interest, were converted to common stock.
Of the $2,325,000 debentures outstanding as of December 31, 1993, $300,000
were due December 31, 1993, and $2,025,000 were due at the earlier of December
31, 1994, or the closing date of a public offering of stock or debt pursuant to
which the Company receives proceeds of at least $10,000,000. The debentures due
December 31, 1993, were repaid in January 1994.
During 1994, an additional $300,000 of 8% convertible debentures were
issued to replace those repaid in January 1994. These debentures and the
$2,025,000 outstanding as of December 31, 1993, along with $313,000 of related
accrued interest, were converted to common stock during 1994 at a rate of $3.875
per share.
Note 9. Commitments and Contingencies
Future minimum payments under leases as of December 31, 1995, are as follows (in
thousands):
<TABLE>
<CAPTION>
Year ending Capital Operating
December 31, leases leases
<S> <C> <C>
1996 $ 337 964
1997 131 1,165
1998 - 1,184
1999 - 1,219
2000 - 1,253
Thereafter - 1,785
Total future minimum lease payments 468 $7,570
Less amount representing interest 29
Present value of capital lease obligations 439
28
<PAGE>
Less current portion 308
Noncurrent portion of capital lease
obligations $131
</TABLE>
The Company leases its facility under a noncancelable lease agreement that
expires in 2003 and provides for renewal options. Under this lease, Mylex is
required to pay property taxes, insurance, and normal maintenance costs.
Rent expense was $743,000, $743,000, and $824,000 in 1995, 1994, and 1993,
respectively.
The former chief executive officer of the Company filed a complaint against
the Company and its outside directors in October 1994, claiming breach of his
employment agreement. The claim is for compensatory and consequential damages
of at least $5 million. The Company believes it has meritorious defenses and
will vigorously defend this lawsuit.
The results of legal proceedings cannot be predicted with certainty;
however, in the opinion of management, the Company does not have a potential
liability in connection with this and any other proceedings that would have a
material adverse effect on the Company.
Note 10. Stockholders' Equity
In December 1995, the Company adopted the 1995 Employee Stock Purchase Plan
which authorizes the issuance of up to 300,000 shares of its common stock. The
plan permits eligible employees to purchase common stock through payroll
deductions at a purchase price of the lower of 85% of the fair market value of
the common stock at the beginning or end of each offering period. As of
December 31, 1995, no shares had been purchased by or distributed to employees
pursuant to the plan.
Mylex's 1983 and 1993 incentive and nonqualified stock option plans provide
for the grant, by the Board of Directors, of stock options to employees,
officers, consultants, and outside directors at an exercise price per share not
less than the fair market value on the date of grant. Incentive stock options
granted under the 1983 plan generally vest ratably over 3 years from date of
grant and expire 10 years from date of grant. Nonqualified stock options vest
ratably over 3 years and expire 5 years from date of grant. Options granted
under the 1993 plan generally vest ratably over 4 years from the date of grant
and expire 10 years from the date of grant.
The 1983 and 1993 plans also provide for automatic grants to outside
directors of options to purchase 50,000 common shares upon election to the Board
of Directors. A summary of stock option transactions under the plans are as
follows:
29
<PAGE>
<TABLE>
<CAPTION>
Shares Outstanding options
available Number Exercise
for grant of shares price
<S> <C> <C> <C>
Balances as of December 31, 1992 812,000 2,203,000 $1.15 - 5.06
Increases in number of shares
available for grant 750,000 - -
Granted (1,168,000) 1,168,000 3.87 - 7.00
Exercised - (442,000) 1.15 - 4.63
Canceled 29,000 (29,000) 2.75 - 4.63
Shares expiring with 1983 plan (404,000) - -
Balances as of December 31, 1993 19,000 2,900,000 1.25 - 7.00
Increases in number of shares
available for grant 625,000 - -
Granted (566,000) 566,000 4.63 - 10.25
Exercised - (1,157,000) 1.25 - 4.13
Canceled under 1983 plan - (491,000) 1.50 - 5.75
Canceled under 1993 plan 41,000 (41,000) 3.88 - 10.25
Balances as of December 31, 1994 119,000 1,777,000 1.50 - 10.25
Increases in number of shares
available for grant 700,000 - -
Granted (551,000) 551,000 10.50 - 18.88
Exercised - (242,000) 1.50 - 5.75
Canceled under 1983 plan - (2,000) 3.88 - 10.63
Canceled under 1993 plan 83,000 (83,000) 4.13 - 4.63
Balances as of December 31, 1995 351,000 2,001,000 2.75 - 18.88
Exercisable as of December 31, 1995 710,000 2.75 - 10.50
</TABLE>
Note 11. Related Party Transaction
During 1992, a group of investors, consisting of certain directors and several
officers and stockholders of the Company, purchased a majority interest in
Northgate Computer Systems, Inc. (Northgate). The Company has no direct equity
interest in Northgate. During 1993, the Company reserved approximately $4.7
million of receivables from Northgate as a result of decreased payments from
Northgate and the continued deterioration of Northgate's financial condition.
Subsequent to August 1993, sales to Northgate were minimal and there have been
no sales to Northgate in 1995. During 1994, all outstanding receivables from
Northgate were written off against the reserve. Northgate filed for bankruptcy
in 1994.
Note 12. Industry Information and Certain Concentrations
30
<PAGE>
The Company operates in one industry and is engaged in the design, manufacture,
marketing and support of high-performance storage management electronics
products for PC and non-PC servers and workstations as well as system boards for
personal computers. The Company sells its products primarily to original
equipment manufacturers and distributors in the personal computer industry.
Sales to major customers, as a percentage of net sales, and the amount
receivable (in thousands) as of December 31, 1995, from such customers were as
follows:
<TABLE>
<CAPTION>
Gross
amount
Customer 1995 1994 1993 receivable
<S> <C> <C> <C> <C>
IBM 26% 22% 18% $2,069
Hewlett-Packard 18% 14% 10% 5,157
Digital Equipment Corporation 15% 17% - 3,620
AST Research - 4% 10% 2
Northgate - - 11% -
</TABLE>
Export sales, principally to Europe and Japan, comprised 39%, 16%, and 21%
of net sales in 1995, 1994, and 1993, respectively. Sales of the Company's RAID
controller products comprised 95%, 81%, and 44% of net sales in 1995, 1994, and
1993, respectively.
Although many of the components of the Company's products are available
from numerous sources, several of the most critical components, including
microprocessors, SCSI I/O processors, and custom designed integrated circuits,
are presently available to the Company from only one source. Furthermore,
because of high industry demand, there have been instances of worldwide
shortages of DRAM SIMM memory modules. If the Company cannot obtain essential
components as required, the Company could be unable to meet demand for its
products, thereby adversely affecting its operating results. In addition,
scarcity of such components could result in cost increases and adversely affect
the Company's gross margin.
Included in the Company's consolidated balance sheet as of December 31,
1995, are the net assets of the Company's manufacturing operations and
administrative headquarters, all of which are located in a single facility in
Fremont, California.
Note 13. Subsequent Event (Unaudited)
31
<PAGE>
On February 9, 1996, the Company closed a business combination pursuant to which
it issued 2,710,738 shares of its common stock for all of the capital stock of
BusLogic Inc. (BusLogic), a supplier of storage input/output solutions for use
in network file servers, personal computers, and workstations. The transaction
will be accounted for as a pooling of interests and, accordingly, the Company's
historical consolidated financial statements presented in future reports will be
restated to include the accounts and results of operations of BusLogic.
The following unaudited pro forma data summarizes the combined results of
operations of the Company and BusLogic as if the merger had occurred at the
beginning of fiscal 1993 (in thousands, except per share data).
<TABLE>
<CAPTION>
Unaudited pro forma 1995 1994 1993
<S> <C> <C> <C>
Net sales $127,455 92,589 69,474
Net income $13,308 8,813 (2,924)
Primary earnings per share $.68 .51 (.20)
</TABLE>
32
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Mylex Corporation:
We have audited the accompanying consolidated balance sheets of Mylex
Corporation and subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Mylex
Corporation and subsidiary as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
San Jose, California
January 30, 1996, except as to Note 13, which is as of February 9, 1996
33
<PAGE>
corporate directory
Officers and Directors
Mr. Ismael Dudhia
Chairman of the Board
Mylex Corporation
Mr. Al Montross
President, Chief Executive
Officer and Director
Mylex Corporation
Dr. M. Yaqub Mirza
Director and Secretary
Mylex Corporation
President and
Chief Executive Officer
Mar-Jac Investments
Herndon, Virginia
Dr. Inder Singh
Director
Mylex Corporation
President
Lynx Real-Time Systems Inc.
Los Gatos, California
Mr. Richard Love
Director and Treasurer
Mylex Corporation
Principal
RJL Capital Management
Santa Barbara, California
Mr. Stephen McKenzie
Director
Mylex Corporation
Chairman of the Board
Microspeed, Incorporated
Fremont, California
34
<PAGE>
Ms. Colleen gray
Vice President, Finance
and Chief Financial Officer
Mylex Corporation
Mr. Peter Shambora
Vice President, Marketing
Mylex Corporation
MR. Krishnakumar Rao
Vice President, Engineering
Mylex Corporation
MR. Joseph Schmidt
Vice President, Human Resources
Mylex Corporation
MR. William Prosnik
Vice President, Sales
Mylex Corporation
Corporate Counsel
BROWN & BAIN
600 Hansen Way
Palo Alto, California 94304
Independent Auditors
KPMG Peat Marwick LLP
50 West San Fernando Street
San Jose, California 95113
Transfer Agent
Continental Stock Transfer
and Trust Company
2 Broadway
New York, New York 10004
35
<PAGE>
Corporate Headquarters
Mylex Corporation
34551 Ardenwood Blvd.
Fremont, California 94555
Financial Public Relations
Lippert/Heilshorn & Associates
800 Third Avenue
New York, New York 10022
Form 10-K
The Company has filed an annual report on Form 10-K with the Securities and
Exchange Commission. Stockholders may obtain a copy at no extra charge by
writing to the Company at:
P.O. Box 5035, Fremont,
California 94537-5035
Attn: Investor Relations
Stock Listing
Mylex Corporation common stock is traded on the NASDAQ National Market under the
symbol MYLX.
Annual Meeting
The annual meeting of stockholders will be held at:
Mylex Corporation
34551 Ardenwood Blvd
Fremont, California 94555
At 2:00 pm, April 30th, 1996
36
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 6,446
<SECURITIES> 25,708
<RECEIVABLES> 20,276
<ALLOWANCES> (469)
<INVENTORY> 24,138
<CURRENT-ASSETS> 78,630
<PP&E> 4,890
<DEPRECIATION> (3,175)
<TOTAL-ASSETS> 80,458
<CURRENT-LIABILITIES> 15,054
<BONDS> 0
0
0
<COMMON> 169
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 80,458
<SALES> 100,420
<TOTAL-REVENUES> 105,440
<CGS> 62,732
<TOTAL-COSTS> 80,452
<OTHER-EXPENSES> 108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (328)<F1>
<INCOME-PRETAX> 20,187
<INCOME-TAX> 7,065
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,122
<EPS-PRIMARY> .80
<EPS-DILUTED> .79
<FN>
<F1>Net of $507 interest income and $179 interest expense
</FN>
</TABLE>
