Maxtor Form 10-Q (9-29-01)

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

As of November 7, 2001, 239,799,343 shares of the registrant’s Common Stock, $.01 par value, were issued and outstanding.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The consolidated financial statements include the accounts of Maxtor Corporation (“Maxtor” or the “Company”) and its wholly owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. All adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of the results for the interim periods have been made. It is recommended that the interim financial statements be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the fiscal year ended December 30, 2000 incorporated in the Company’s Annual Report on Form 10-K. Interim results are not necessarily indicative of the operating results expected for later quarters or the full fiscal year.

On April 2, 2001, Maxtor completed the business combination transaction with the hard disk drive business of Quantum Corporation (“Quantum HDD”). The merger was approved by the stockholders of both companies on March 30, 2001. The merger was accounted for as a purchase. As of the effective time of the merger, each share of Quantum HDD common stock was converted into 1.52 shares of Maxtor common stock, and each outstanding Quantum HDD option assumed by Maxtor was converted into an option to purchase Maxtor common stock, with appropriate adjustment to the exercise price and share numbers in accordance with the exchange ratio.

As a result of the merger, Maxtor issued 121.0 million shares of Maxtor common stock and assumed options to purchase 12.8 million shares of Maxtor common stock.

The total purchase price and preliminary purchase price allocation of the Quantum HDD merger was as follows (in millions):

The purchase price allocation is preliminary as the Company is currently evaluating various matters related to the acquisition including warranty provision, tax liabilities and other accruals.

Under purchase accounting rules, the Company recorded $26.5 million for estimated severance pay associated with termination of approximately 700 employees in the United States. In addition, during the three months ended June 30, 2001, the Company expensed and paid in cash $25.5 million for severance pay associated with termination of approximately 600 Quantum Corporation (“Quantum”) employees. As a result, the total severance cost amounted to $52.0 million and the total number of terminated employees, including Quantum transitional employees was approximately 1,300. Under purchase accounting rules, the Company also recorded liabilities that include $64.6 million for estimated facility exit costs for the closure of certain Quantum HDD offices and research and development facilities located in Milpitas, California, and $12.7 million for certain non-cancelable adverse inventory and other purchase commitments. In the nine months ended September 29, 2001, the Company paid $25.5 million and $6.5 million related to severance pay in the second and third quarters of fiscal year 2001, respectively. The Company also paid $12.7 million related to certain non-cancelable adverse inventory and other purchase commitments in the nine months ended September 29, 2001. The remainder of the severance accrual is expected to be paid during the fourth quarter of fiscal year 2001. The Company has not paid any amounts related to the estimated facility exit costs. The Company expects to pay these amounts starting in the first quarter of fiscal year 2002.

A portion of the purchase price has been allocated to developed technology and acquired in-process research and development. Developed technology and in-process research and development were identified and valued through analysis of data provided by Quantum HDD concerning developmental products, their stage of development, the time and resources needed to complete them, if applicable, their expected income generating ability, target markets and associated risks. The income approach, which includes an analysis of the markets, cash flows and risks associated with achieving such cash flows, was the primary technique utilized in valuing the developed technology and in-process research and development. Where developmental projects had reached technological feasibility, they were classified as developed technology, and the value assigned to developed technology was capitalized. Where the developmental projects had not reached technological feasibility and had no future alternative uses, they were classified as in-process research and development and were charged to expense upon closing of the merger.

At the time of the merger, Quantum HDD was developing new products that qualify as in-process research and development in multiple product areas. For the purposes of determining which projects qualified as in-process research and development, technological feasibility is defined as being equivalent to completion of design verification testing, when the design is finalized and ready for pilot manufacturing. The following is a general description of in-process research and development efforts: current engineering efforts are focused on developing new products, integrating new technologies, improving designs to enable manufacturing efficiencies, improving product performance and integrating multiple functions into single components and multiple components into modules. The principal products to which research and development efforts are as follows: Self-Servo Writer Technology, Desktop, High-end, Core Technology and other identified projects. There is a risk that these developments will not be competitive with other products using alternative technologies that offer comparable functionality. The analysis of research and development projects was conducted as of April 2, 2001.

Self-Servo Writer Technology: Quantum HDD’s Self-Servo Writer technology was being developed to write servo tracks onto the disk media during the manufacturing process, replacing the need to purchase and use servo writer equipment. Quantum HDD expected the development cycle for the current research and development project with respect to the Self-Servo Writer technology to continue for another 6 months, with expected completion dates in the fourth quarter of the calendar year 2001. The development cycle was approximately 85% complete with estimated cost to complete to be incurred ratably over the remainder of the development cycles.

High End: Quantum HDD’s High-End development efforts supported future generation high-end hard disk drives. Quantum HDD expected the development cycle for the current research and development project with respect to the High-end technology to continue for another 21 months, with expected completion dates in the first quarter of the calendar year 2003. The development cycle was approximately 40% complete with estimated cost to complete to be incurred ratably over the remainder of the development cycles.

Core Technology: Quantum HDD’s Core technology development efforts supported future generation hard disk drives. Quantum HDD expected the development cycle for the current research and development project with respect to these products to continue for another 21 months with expected completion dates in the first quarter of the calendar year 2003. The development cycle was approximately 44% complete with estimated cost to complete to be incurred ratably over the remainder of the development cycle.

Desktop: Quantum HDD’s core technology development efforts supported the development of 3.5 inch hard disk drives. Quantum HDD expected the development cycle for the current research and development project with respect to the Desktop technology to continue for another 5 months, with expected completion dates in the third quarter of the calendar year 2001. The development cycle was approximately 75% complete with estimated cost to complete to be incurred ratably over the remainder of the development cycles.

The value assigned to in-process research and development was determined by considering the importance of each project to the overall development plan, estimating costs to develop the purchased in-process research and development into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present value. The revenue estimates used to value the purchased in-process research and development were based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by Quantum HDD and its competitors. The rates utilized to discount the net cash flows to their present value are based on Quantum HDD weighted average cost of capital. Given the nature of the risks associated with the difficulties and uncertainties in completing each project and thereby achieving technological feasibility, anticipated market acceptance and penetration, market growth rates and risks related to the impact of potential changes in future target markets, the weighted average cost of capital was adjusted. Based on these factors, a discount rate of 23% for High-end and Desktop and other identified projects and a discount rate of 28% for Core Technology and Self Servo-Writer Technology were deemed appropriate. The estimates used in valuing in-process research and development were based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable. The assumptions may be incomplete or inaccurate, and no assurance can be given that unanticipated events and circumstances will not occur. Accordingly, actual results may vary from the projected results. Following were the estimated completion percentages with respect to the research and development efforts and technology lives at the close of the Quantum HDD acquisition:

The preliminary values assigned to each acquired in-process research and development project were as follows (in millions):

The acquired existing technology, which comprises products that are already technologically feasible, includes products in most of Quantum HDD’s product lines. The Company is amortizing the acquired core and existing technology of $286.1 million on a straight-line basis over an estimated remaining useful lives of three to five years.

The acquired assembled workforce was composed of approximately 1,650 skilled employees across Quantum HDD’s Executive, Research and Development, Manufacturing, Supervisor/ Manager, and Sales and Marketing groups. The Company is currently amortizing the value assigned to the assembled workforce of $43 million on a straight-line basis over an estimated remaining useful life of three years. The Company will adopt Statements of Financial Accounting Standards No. 142 (“SFAS 142”) effective December 30, 2001, which will result in the Company no longer amortizing its existing acquired assembled workforce and reclassifying the balance to goodwill.

Goodwill, which represents the excess of the purchase price of an investment in an acquired business over the fair value of the underlying net identifiable assets, is currently being amortized on a straight-line basis over its estimated remaining useful life of five years. The Company will adopt SFAS 142 effective December 30, 2001, which will result in the Company no longer amortizing its existing goodwill.

The following unaudited pro forma summary presents the consolidated results of operations of the Company, excluding the charge for acquired in-process research and development, as if the acquisition of Quantum HDD had occurred at the beginning of each period and does not purport to be indicative of what would have occurred had the acquisition been made as of the beginning of each period or of results which may occur in the future.

On September 2, 2001, Maxtor completed the acquisition of MMC Technology, Inc. (“MMC”), a wholly-owned subsidiary of Hynix Semiconductor America Inc. (“Hynix”). MMC, based in San Jose, California, designs, develops and manufactures media for hard disk drives. Prior to the acquisition, sales to Maxtor comprised 95% of MMC’s annual revenues. The primary reason for Maxtor acquiring MMC was to provide the Company with an assured source of supply of media. The acquisition has been accounted for as a purchase with a total cost of $17.9 million, which consisted of cash consideration of $1 million, $16 million of loan forgiveness and $0.9 million of estimated direct transaction costs. In connection with the acquisition, the Company has also assumed liabilities of $105.7 million. Included in this amount is $7.3 million owed by MMC to Hynix which is non-interest bearing through March 31, 2002, and any balance remaining thereafter bears interest at nine percent. MMC’s results of operations are included in the financial statements from the date of acquisition, and the assets and liabilities acquired were recorded based on their fair values as of the date of acquisition.

The total purchase price and the preliminary purchase price allocation of the MMC acquisition was as follows (in millions):

The purchase price allocation is preliminary as the Company is currently evaluating various matters related to the acquisition, including other accrued expenses.

A portion of the purchase price has been allocated to developed technology and acquired in-process research and development. Developed technology and in-process research and development were identified and valued through analysis of data provided by MMC concerning developmental products, their stage of development, the time and resources needed to complete them, if applicable, their expected income-generating ability, target markets and associated risks. The income approach, which includes an analysis of the markets, cash flows and risks associated with achieving such cash flows, was the primary technique utilized in valuing the developed technology and in-process research and development. Where developmental products had reached technological feasibility, they were classified as developed technology, and the value assigned to developed technology was capitalized. Where the developmental projects had not reached technological feasibility and had no future alternative uses, they were classified as in-process research and development and were charged to expense upon closing of the acquisition.

The value assigned to in-process research and development was determined by considering the importance of each project to the overall development plan, estimating costs to develop the purchased in-process research and development into commercially viable products, estimating the resulting net cash flows from the projects when completed and discounting the net cash flows to their present value. The revenue estimates used to value the purchased in-process research and development were based on estimates of relevant market sizes and growth factors, expected trends in technology and the nature and expected timing of new product introductions by MMC and its competitors. The rates utilized to discount the net cash flows to their present value were based on an average cost of capital of publicly traded companies comparable to MMC. Given the nature of the risks associated with the difficulties and uncertainties in completing each project and thereby achieving technological feasibility, anticipated market acceptance and penetration, market growth rates and risks related to the impact of potential changes in future target markets, the weighted average cost of capital was adjusted. Based on these factors, an average discount rate of 28.5% for the 80GB Project and the 120GB Project was deemed appropriate. The estimates used in valuing in-process research and development were based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable. The assumptions may be incomplete or inaccurate, and no assurance can be given that unanticipated events and circumstances will not occur. Accordingly, actual results may vary from the projected results.

The allocation of revenue to existing and in-process technology was based on the obsolescence rate for mechanical and magnetic technology. MMC’s acquired existing technology and in-process research and development consisted of magnetic, mechanical and process technology related primarily to its 80GB and 120GB products. The development cycle for the current research and development with respect to the 80GB

Program will continue, with the expected completion dates in the third quarter of calendar year 2002. The development cycle for the current research and development with respect to the 120GB Program will continue, with expected completion dates by the fourth quarter of calendar year 2003. Following are the estimated completion percentages with respect to the research and development efforts and technology lives:

The Company is amortizing the acquired existing technology of $2.8 million on a straight-line basis over an estimated remaining useful life of five years.

Goodwill, which represents the excess of the purchase price of an investment in an acquired business over the fair value of the underlying net identifiable assets, is reflected in the financial statements of the Company. In accordance with SFAS 142, the Company is not amortizing the amount of goodwill associated with the MMC acquisition. The Company expects that none of the goodwill amount will be deductible for tax purposes.

The Company’s restricted cash balance of $98.6 million at September 29, 2001, is associated with short-term letters of credits (“LOCs”), where the Company has chosen to provide cash security in order to lower the cost of the LOCs.

In accordance with the disclosure requirements of Statements of Financial Accounting Standards No. 128, “Earnings per Share” a reconciliation of the numerator and denominator of the basic and diluted net

income (loss) per share calculations is provided as follows (in thousands, except share and per share amounts):

The number of basic weighted average common shares for the three and nine months ended September 29, 2001 does not include 1,541,240 contingently issuable shares and 3,309,144 shares as their effect would be anti-dilutive:

The 5.75% Subordinated Debentures due March 1, 2012 require semi-annual interest payments and annual sinking fund payments of $5.0 million, which commenced March 1, 1998. The Debentures are subordinated in right to payment to all senior indebtedness.

In September 1999, Maxtor Peripherals (S) Pte Ltd entered into a four-year Singapore dollar denominated loan agreement with the Economic Development Board of Singapore (the “Board”), which is

being amortized in seven equal semi-annual installments ending September 2003. As of September 29, 2001, the balance was equivalent to $16.9 million. Interest is charged by the Board at 3.5% at September 29, 2001, subject to a minimum of three and one-half percent per year. This loan is supported by a two-year guaranty from a bank. Cash is currently provided as collateral for this guaranty but the Company may, at its option, substitute other assets as security.

In connection with the acquisition of the Quantum HDD business, Maxtor agreed to indemnify Quantum for the Quantum HDD pro rata portion of Quantum’s outstanding $287.5 million 7% convertible subordinated notes due August 1, 2004, and accordingly the principal amount of $95.8 million has been included in the Company’s long term debt. Quantum is required to pay interest semi-annually on February 1 and August 1, and principal is payable on maturity. The Company is required to reimburse Quantum for interest or principal payments relating to the $95.8 million representing Quantum HDD’s pro rata portion of such notes.

In connection with the merger with Quantum HDD, the Company acquired real estate and related mortgage obligations. The term of the mortgages is ten years, at an interest rate of 9.2%, with monthly payments based on a twenty-year amortization schedule, and a balloon payment at the end of the 10-year term, which is September 2006.

In connection with the acquisition of MMC, the Company assumed equipment loans and capital leases amounting to $66.3 million at September 29, 2001, which have maturity dates ranging from December 2001 to October 2004 and interest rates averaging 9.9%. In addition, the Company assumed a note for $7.3 million owing to Hynix, which bears no interest through March 31, 2002; thereafter, unpaid principal amounts bear interest at 9% per annum (the “Maxtor Note”). On January 5, 2001, Hynix issued a promissory note to Maxtor for $2 million in principal amount, representing Hynix’s share of a settlement relating to litigation between Maxtor and Hynix and Stormedia; the note bears interest at 9% per annum, with the payment of principal and interest due on December 31, 2001 (the “Hynix Note”). Hynix and Maxtor have agreed that the principal and accrued interest on the Hynix Note as of December 28, 2001 will be offset against the principal amount of the Maxtor Note, such that the Hynix Note shall be fully paid and the Maxtor Note shall have a principal amount of approximately $5.1 million.

Based on the criteria set forth in SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information,” the Company has determined that it has two reportable segments; hard disk drive operations and network systems group. The Company has a worldwide sales, service and distribution network. Products are marketed and sold through a direct sales force to original equipment manufacturers (“OEMs”), distributors and retailers in the United States, Europe and Asia Pacific.

The following table presents net revenue and operating income (loss) for each operating segment:

The following table presents the reconciliation of segment operating income (loss) to the consolidated income (loss) before provision for (benefit from) income taxes:

Assets of the segment groups are not meaningful for management of the business or for disclosure.

Maxtor operations outside the United States primarily consist of its manufacturing facilities in Singapore that produce subassemblies and final assemblies for the Company’s disk drive products. Revenue by destination information by geographic area for the three and nine months ended September 29, 2001 and September 30, 2000 is presented in the following table:

2001 represented 47.7% and 40.8% of total revenue, respectively, compared to 29.4% and 29.0%, respectively, for the corresponding periods in fiscal year 2000. Sales to Dell were 10.8% and 12.6% of total revenue in the three and nine months ended September 29, 2001, respectively, compared to 14.1% and 13.3% of total revenue, respectively, in the corresponding periods of fiscal 2000. Dell was the only customer with over 10% of total revenue for the three and nine month periods of fiscal years 2001 and 2000.

Long-lived asset information by geographic area as of September 29, 2001 and December 30, 2000 is presented in the following table:

Long-lived assets located outside the United States consist primarily of the Company’s manufacturing operations located in Singapore.

On September 29, 2001, $150 million of accounts receivable was securitized under an asset securitization program and was excluded from the Company’s accounts receivable balance. The program is scheduled to expire on November 24th, 2001. The Company has reached an agreement in principle with three banks with respect to the terms of a $300 million asset securitization program under which the Company will sell its eligible US and Canadian trade accounts receivables on a non-recourse basis through a special purpose entity. The Company expects funding under this facility on or about November 15th, 2001. In the event the new facility does not become effective prior to November 24th, 2001, our business and financial condition may be harmed.

The Company purchases certain component parts from MMC Technology, Inc., previously a wholly owned subsidiary of Hynix Semiconductor America Inc. (“Hynix,”), which also owns more than 5% of Maxtor’s common stock. On September 2, 2001, Maxtor completed the acquisition of MMC. MMC’s results of operations are included in the Company’s financial statements from the date of acquisition. As part of the acquisition of MMC, Maxtor assumed a note for $7.3 million owing to Hynix, which bears no interest through March 31, 2002; thereafter, unpaid principal amounts bear interest at 9% per annum (the “Maxtor Note”). On January 5, 2001, Hynix issued a promissory note to Maxtor for $2 million in principal amount, representing Hynix’s share of a settlement relating to litigation between Maxtor and Hynix and Stormedia; the note bears interest at 9% per annum, with the payment of principal and interest due on December 31, 2001 (the “Hynix Note”). Hynix and Maxtor have agreed that the principal and accrued interest on the Hynix Note as of December 28, 2001 will be offset against the principal amount of the Maxtor Note, such that the Hynix Note shall be fully paid and the Maxtor Note shall have a principal amount of approximately $5.1 million. Cost of revenue includes $27 million and $99 million for the two and eight months ended September 1, 2001, respectively, compared to $40 million and $121 million for the three and nine months ended September 30, 2000 for such purchases.

On March 18, 1999, Maxtor was sued by Papst Licensing, GmbH, a German corporation, for infringement of a number of patents that relate to hard disk drives. Quantum Corporation (“Quantum”) had also been sued by Papst prior to the merger. Both lawsuits, filed in the United States District Court for the Northern District of California, were transferred by the Judicial Panel on Multidistrict Litigation to the United States District Court for the Eastern District of Louisiana for coordinated pre-trial proceedings with several other pending litigations involving the Papst patents. Papsts’ infringement allegations are based on spindle motors that Maxtor and Quantum purchased from third party motor vendors, and the use of such spindle motors in hard disk drives. Maxtor purchased the overwhelming majority of the spindle motors used in its hard disk drives from vendors that were licensed under Papst’s patents. Quantum purchased many spindle motors used in its hard disk drives from vendors that were not licensed under Papst’s patents. As part of the Quantum/ Maxtor merger, Maxtor assumed Quantum’s potential liabilities to Papst.

While the Company believes it has valid defenses to Papst’s claims, the results of any litigation are inherently uncertain and other infringement claims relating to current patents, pending patent applications, and/or future patent applications or issued patents could be asserted by Papst. Additionally, there can be no assurance the Company will be able to successfully defend itself against this or any other Papst lawsuit. The Papst complaint asserts claims to an unspecified dollar amount of damages. A favorable outcome for Papst in this lawsuit could result in the issuance of an injunction against the Company and its products and/or the payment of monetary damages equal to a reasonable royalty. In the case of a finding of a willful infringement, the Company could also be required to pay treble damages and Papst’s attorney’s fees. Accordingly, a litigation outcome favorable to Papst could harm the Company’s business, financial condition, and operating results.

On May 22, 2001, Maxtor was sued by Cambrian Consultants, a California corporation, for patent infringement. The complaint alleges infringement by both Maxtor and Quantum products. An answer and counter-claim have been filed. Discovery is ongoing. While the Company believes it has valid defenses to Cambrian’s claims, the results of any litigation are inherently uncertain. Additionally, there can be no assurance the Company will be able to successfully defend itself against this lawsuit. The Cambrian complaint asserts claims to an unspecified dollar amount of damages. A favorable outcome for Cambrian in this lawsuit could result in the payment of monetary damages equal to a reasonable royalty. In the case of a finding of a willful infringement, the Company could also be required to pay treble damages and Cambrian’s attorney’s fees. Accordingly, a litigation outcome favorable to Cambrian could harm the Company’s business, financial condition, and operating results.

The Company adopted Statement of Financial Accounting Standards No. 133 (“SFAS 133”), Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting Standards No. 137 (“SFAS 137”), Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133, and Statement of Financial Accounting Standards No. 138 (“SFAS 138”), Accounting for Certain Derivative Instruments and Certain Hedging Activities, also an amendment of SFAS 133, on January 1, 2001. There has been no material impact to the financial statements resulting from the adoption of SFAS 133, SFAS 137 or SFAS 138.

In June 2001, the EITF issued EITF Issue No. 00-25, “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products.” EITF Issue No. 00-25 addresses whether consideration from a vendor to a reseller is (a) an adjustment of the selling prices of the vendor’s products and, therefore, should be deducted from revenue when recognized in the vendor’s income statement or (b) a cost incurred by the vendor for assets or services received from the reseller and, therefore, should be included as a cost or expense when recognized in the vendor’s income statement. EITF 00-25 is effective for the interim

and year-end periods beginning after December 15, 2001. The Company believes that the adoption of EITF 00-25 will not have a significant impact on its financial statements.

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Business Combinations.” SFAS 141 requires the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for the recognition of intangible assets separately from goodwill. The Company has applied SFAS 141 for the acquisition of MMC and will follow the requirements of this statement for all future acquisitions.

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets,” which is effective for fiscal years beginning after December 15, 2001. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the testing for impairment of existing goodwill and other intangibles. The Company will adopt SFAS 142 effective December 30, 2001, which will result in the Company no longer amortizing its existing goodwill and acquired assembled workforce. At September 29, 2001, goodwill approximated $700.4 million and goodwill amortization approximated $37.7 million and $76.0 million for the three and nine months ended September 29, 2001, respectively. Acquired assembled workforce approximated $43.9 million and related amortization approximated $4.6 million and $8.2 million for the three and nine months ended September 29, 2001, respectively. In addition, the Company is required to reclassify the existing acquired assembled workforce balance to goodwill as it does not meet the separate recognition criterion according to SFAS 142. The Company will also be required to measure goodwill for impairment as part of the transition provisions. The Company is required to complete transition impairment tests no later than December 28, 2002. Any impairment resulting from these transition tests is anticipated to be recorded as of December 30, 2001 and will be recognized as of the cumulative effect of a change in accounting principle. The Company will not be able to determine if impairment will be required until completion of such impairment tests. In accordance with SFAS 142, the Company is not amortizing the amount of goodwill associated with the MMC acquisition that was completed on September 2, 2001.

In August 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations.” This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applies to legal obligations associated with the retirement of long-loved assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations or lessees. This Statement also amends SFAS No., 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies.” SFAS 143 is effective for financial statements issued for fiscal years beginning after June 25, 2002. The Company expects that the initial application of SFAS 143 will not have a material impact on its financial statements.

In October 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-lived Assets.” The objectives of SFAS 144 are to address significant issues relating to the implementation of FASB Statement 121 (“SFAS 121”), “Accounting for the Impairment of Long-lived assets to be Disposed of,” and to develop a single accounting model, based on the framework established by SFAS 121, for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. Although SFAS 144 supercedes SFAS 121, it retains some fundamental provisions of SFAS 121. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those fiscal years. The Company expects that the initial application of SFAS 144 will not have a material impact on its financial statements.

On October 9, 2001, Hynix sold 23,329,843 shares (including underwriters over-allotments) of Maxtor common stock in a registered secondary public offering. Maxtor did not receive any proceeds from the sale of the Maxtor shares sold by Hynix. Under the agreement with Hynix, Maxtor repurchased 5,000,000 shares from Hynix at $4 per share, the same price offered to the public, or an aggregate purchase price of $20,000,000. These repurchased shares are being held as treasury shares.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the condensed consolidated financial statements and the accompanying notes included in Part I. Financial Information, Item 1. Condensed Consolidated Financial Statements of this report.

This report contains forward-looking statements within the meaning of the U.S. federal securities laws that involve risks and uncertainties. The statements contained in this report that are not purely historical, including, without limitation, statements regarding our expectations, beliefs, intentions or strategies regarding the future, are forward-looking statements including those discussed in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations: “Results of Operations”; “Liquidity and Capital Resources”; “Certain Factors Affecting Future Performance”; and elsewhere in this report. In this report, the words “anticipate,” “believe,” “expect,” “intend,” “future”, “may,” “will,” “should,” “could,” “would,” “might,” “plan,” “estimate,” “predict,” “potential,” “continue,” and similar expressions also identify forward-looking statements. These statements are only predictions. We make these forward-looking statements based upon information available on the date hereof, and we have no obligation (and expressly disclaim any such obligation) to update or alter any such forward-looking statements whether as a result of new information, future events, or otherwise. Our actual results could differ materially from those anticipated in this report as a result of certain factors including, but not limited to, those set forth in the following risk factors and elsewhere in this report.

On April 2, 2001, we completed our acquisition of the hard disk drive business of Quantum Corporation (“Quantum HDD”). The merger agreement provided for the exchange of 1.52 shares of our common stock and options to purchase shares of our common stock for each common share and outstanding option of Quantum HDD, respectively. The total purchase price of $1,269.4 million included consideration of 121.0 million shares of our common stock valued at an average of $9.40 per common share. The average market price is based on the average closing price for two trading days prior and two trading days subsequent to October 4, 2000 (the announcement date of the terms of the merger). The value of the options ($107.1 million) as well as estimated direct transaction costs ($28.8 million), have been included as part of total purchase costs. The purchase price allocation is preliminary as we are currently evaluating various matters related to the acquisition, including warranty provision, tax liabilities and other accruals. For additional information regarding the Quantum HDD acquisition, see note 2 of the Notes to Condensed Consolidated Financial Statements.

On September 2, 2001, we completed the acquisition of MMC Technology, Inc. (“MMC”), a wholly-owned subsidiary of Hynix Semiconductor America Inc. (“Hynix”). MMC, based in San Jose, California, designs, develops and manufactures media for hard disk drives. Prior to the acquisition, sales to Maxtor comprised 95% of MMC’s annual revenues. The primary reason for our acquisition of MMC was to provide us with an assured source of supply of media. The acquisition has been accounted for as a purchase with a total cost of $17.9 million, which consisted of cash consideration of $1 million, $16 million of loan forgiveness and $0.9 million of estimated direct transaction costs. In connection with the acquisition, we have also assumed liabilities of $105.7 million. Included in this amount is $7.3 million owed by MMC to Hynix which is non-interest bearing through March 31, 2002, and any balance remaining thereafter bears interest at nine percent. The purchase price allocation is preliminary as we are currently evaluating various matters related to the acquisition, including other accrued expenses. MMC’s results of operations are included in the financial statements from the date of acquisition, and the assets and liabilities acquired were recorded based on their fair values as of the date of acquisition. For additional information regarding the MMC acquisition, see note 3 of the Notes to Condensed Consolidated Financial Statements.

Total revenue for the three and nine months ended September 29, 2001 increased 68.7% and 37.4%, respectively, from the corresponding periods in fiscal year 2000, primarily reflecting the acquisition of Quantum HDD in April 2001. Total shipments for the third fiscal quarter 2001 were 12.5 million units, which was 6.1 million units or 93.2% higher compared to the third fiscal quarter a year ago. Units increased substantially in the three months ended September 29, 2001, compared to the corresponding period in fiscal year 2000, primarily as a result of the Quantum HDD acquisition. However, revenue did not increase at the same rate primarily due to a decrease in average selling price.

Revenues on a proforma basis (as if Quantum HDD had been acquired on January 1, 2000) were $1,045.0 million and $1,443.0 million for the three months ended September 29, 2001 and September 30, 2000, respectively. Proforma revenues were $3,368.0 million and $4,566.9 million for the nine months ended September 29, 2001 and September 30, 2000, respectively. On a pro forma basis, the percentage decreases were 27.6% and 26.3%, respectively, in the three and nine months ended September 29, 2001 compared to the corresponding periods in fiscal year 2000, primarily reflecting the slowdown in demand for hard disk drives and the continued pricing pressures in the market.

Sales to OEMs for the three and nine months ended September 29, 2001 represented 52.3% and 59.2% of total revenue, respectively, compared to 70.6% and 71.0%, respectively, for the corresponding periods in fiscal year 2000. Sales to the distribution and retail channels for the three and nine months end September 29, 2001 represented 47.7% and 40.8% of total revenue, respectively, compared to 29.4% and 29.0%, respectively, for the corresponding periods in fiscal year 2000. Revenue to distribution channels increased in the three and nine months ended September 29, 2001 compared to the corresponding periods in fiscal year 2000, primarily reflecting the current PC market condition coupled with our acquisition of Quantum HDD in April 2001. Sales to our top five customers in the three and nine months ended September 29, 2001 represented 37.1% and 36.6% of revenue, respectively, compared to 36.5% and 33.9% of revenue, respectively, for the corresponding periods in fiscal year 2000. Sales to Dell Corporation were 10.8% and 12.6% of total revenue in the three and nine months ended September 29, 2001, respectively, compared to 14.1% and 13.3% of total revenue in the corresponding periods of fiscal year 2000. Dell was the only customer with over 10% of total revenue for the three and nine month periods of fiscal years 2001 and 2000.

Gross profit as a percentage of revenue decreased to 7.8% in the three months ended September 29, 2001 from 10.2% in the same quarter of fiscal year 2000. Gross profit as a percentage of revenue decreased to 9.1% in the nine months ended September 29, 2001 from 13.7% in the same period of fiscal year 2000. The decrease in gross profit is primarily due to the decrease in the average selling price compared to the average unit cost and the acceleration of end-of-life sales. Unfavorable product mix and competitive pricing pressures contributed to the overall decrease in average selling price and gross margin.

R&D expenditures were $124.5 million in the third quarter of 2001 compared to $54.9 million in the third quarter of 2000 and $322.7 million for the nine months ended September 29, 2001 compared to $171.4 million for the corresponding prior year period. The increase in R&D expenses was primarily due to the inclusion of Quantum HDD expenses during the fiscal year 2001 periods, coupled with continued investments to expand the product portfolio in the Network Systems Group.

SG&A expenditures were $53.6 million in the third quarter of 2001 compared to $23.3 million in the third quarter of 2000 and $189.0 million for the nine months ended September 29, 2001 compared to $75.2 million for the corresponding prior year period. The increase in SG&A is primarily due to the inclusion of Quantum HDD and other post-merger related expenses, including costs of transitional services. Included in the transitional services costs was $25.5 million of severance expense for approximately 600 Quantum Corporation transitional employees.

On April 2, 2001, as part of the acquisition of Quantum HDD, we assumed the following options and restricted stock:


	•	All Quantum HDD options and Quantum HDD restricted stock held by employees who accepted offers of employment with Maxtor, or “transferred employees,” whether or not options or restricted stock have vested;

	•	Vested Quantum HDD options and vested Quantum HDD restricted stock held by Quantum employees whose employment is terminated prior to the separation, or “former service providers”; and

	•	Vested Quantum HDD restricted stock held by any other individual.

In addition, Maxtor assumed vested Quantum HDD options held by Quantum employees who will continue to provide services during a transitional period, or “transitional employees.” The outstanding options to purchase Quantum HDD common stock held by transferred employees and vested options to purchase

Quantum HDD common stock held by former Quantum employees, consultants and transition employees were assumed by Maxtor and converted into options to purchase Maxtor common stock according to the exchange ratio of 1.52 shares of Maxtor common stock for each share of Quantum HDD common stock. Vested and unvested options for Quantum HDD common stock assumed in the merger represented options for 7,650,965 shares and 4,655,236 shares of Maxtor common stock, respectively.

Included in SG&A expenses and R&D expenses are charges for amortization of stock compensation resulting from both Maxtor options and options issued by Quantum to employees who joined Maxtor in connection with the merger on April 2, 2001. Stock compensation charges were as follows (in thousands):

In addition, Quantum Corporation issued restricted DSS shares to Quantum employees who joined Maxtor in connection with the merger in exchange for the fair value of DSS options held by such employees. A portion of the acquisition purchase price has been allocated to this deferred compensation, recorded as prepaid expense, and is amortized to expenses over the vesting period as the vesting of the shares are subject to continued employment with Maxtor. Amortization as of September 29, 2001 was as follows (in thousands):

During September 2001, the Company expensed IPR&D costs of $0.4 million as a result of the acquisition of MMC. As a result of the business combination transaction with Quantum HDD in April 2001, the Company expensed IPR&D costs of $94.7 million. These amounts were expensed because the acquired technology had not yet reached technological feasibility and had no future alternative uses. For additional information regarding the MMC and Quantum HDD acquisitions and the costs associated with purchased in-process research and development, see Note 3 and Note 2, respectively, of the Notes to Condensed Consolidated Financial Statements.

Amortization of goodwill and other intangible assets represents the amortization of goodwill, workforce, customer list and other current products and technology, arising from our acquisitions of Creative Design Solutions, Inc. (“CDS”) in September 1999, Quantum HDD in April 2001 and MMC in September 2001. In accordance with SFAS 142, we are not amortizing the amount of goodwill associated with the MMC acquisition. When we adopt SFAS 142, effective December 30, 2001, we will discontinue amortizing our existing goodwill and acquired assembled workforce associated with CDS and Quantum HDD.

Interest expense increased by $2.8 million in the third quarter of 2001 and increased by $4.3 million for the first nine months of fiscal year 2001 compared to the corresponding periods in fiscal year 2000. The increases were primarily due to the debt assumed in conjunction with the acquisitions of MMC and Quantum HDD and the obligation to reimburse Quantum for interest due on the Quantum HDD pro rata portion of Quantum’s convertible subordinated notes in connection with the acquisition of Quantum HDD. Total short-term and long-term outstanding borrowings were $107.7 million as of September 30, 2000 compared to $299.5 million as of September 29, 2001.

Interest and other income decreased $3.6 million and $1.2 million for the three and nine months ended September 29, 2001, respectively, when compared to the corresponding periods in fiscal year 2000. The decreases were principally due to one-time gains in fiscal year 2000 pertaining to repayment of notes and retirement of bonds. Total cash and cash equivalents, restricted cash and marketable securities were $645.1 million as of September 29, 2001 compared to $351.0 million as of September 30, 2000.

The provision for income taxes consists primarily of state and foreign taxes. Due to our net operating losses (“NOL”), NOL carryforwards and favorable tax status in Singapore and Switzerland, we have not incurred any significant foreign, U.S. federal, state or local income taxes for the current or prior fiscal periods. We have not recorded a tax benefit associated with our loss carry-forward because of the uncertainty of realization.

The Company recorded approximately $196.2 million of deferred tax liabilities in connection with the acquisition of Quantum HDD in April 2001. The deferred taxes were recorded principally to reflect the taxes which would become payable upon the repatriation of the cash which was invested abroad by Quantum HDD. In addition, the Company recorded approximately $142 million in other liabilities associated with Maxtor’s agreement to reimburse Quantum Corporation for income tax liabilities for certain years prior to the acquisition of Quantum HDD by Maxtor.

As of September 29, 2001, we had $645.1 million in cash and cash equivalents, restricted cash and marketable securities as compared to $376.2 million at December 30, 2000.

Operating activities used cash of $4.1 million in the nine months ended September 29, 2001. Uses of cash from operating activities reflect a net loss after adjustment for depreciation and amortization, purchased in-process research and development, stock compensation expense, and a decrease in accounts payable and accrued liabilities. This was partially offset by decreases in accounts receivable, inventory and other assets.

Investing activities provided cash of $189.5 million during the first nine months of 2001, primarily reflecting cash acquired from the Quantum HDD acquisition, offset in part by investment in property, plant and equipment, and restricted cash providing security to short-term letter of credits.

As of September 29, 2001, our outstanding debt was comprised of $77.6 million of publicly-traded subordinated debentures, due March 1, 2012, and a Singapore dollar denominated loan equivalent to $16.9 million from the Economic Board of Development of Singapore, which is guaranteed by a bank. The Singapore dollar denominated loan has seven consecutive semi-annual installment payments, ending September 2003. The Company has assumed two mortgages totaling $37.5 million due October 31, 2006, for properties acquired in the acquisition of Quantum HDD. In connection with our acquisition of the Quantum HDD business, we agreed to indemnify Quantum for the Quantum HDD pro rata portion of Quantum’s outstanding $287.5 million 7% convertible subordinated notes due August 1, 2004, and accordingly we have included the principal amount of $95.8 million in our long term debt. Quantum is required to pay interest semi-annually on February 1 and August 1, and principal is payable on maturity; we are required to reimburse Quantum for interest or principal payments relating to the $95.8 million representing Quantum HDD’s pro rata portion of such notes. Our outstanding subordinated debentures are entitled to annual sinking fund payments of $5.0 million, which commenced March 1, 1998. These debentures no longer are convertible into our common stock or any other security of Maxtor.

In connection with the acquisition of MMC, we have assumed equipment loans and capital leases amounting to $66.3 million, which have maturity dates ranging from December 2001 to October 2004 and interest rates averaging 9.9%. In addition, we assumed a note for $7.3 million owing to Hynix, which bears no interest through March 31, 2002; thereafter, unpaid principal amounts bear interest at 9% per annum (the “Maxtor Note”). On January 5, 2001, Hynix issued a promissory note to us for $2 million in principal amount, representing Hynix’s share of a settlement relating to litigation between Maxtor and Hynix and Stormedia; the note bears interest at 9% per annum, with the payment of principal and interest due on December 31, 2001 (the “Hynix Note”). Hynix and Maxtor have agreed that the principal and accrued interest on the Hynix Note as of December 28, 2001 will be offset against the principal amount of the Maxtor Note, such that the Hynix Note shall be fully paid and the Maxtor Note shall have a principal amount of approximately $5.1 million.

Under an agreement with Hynix, on October 9, 2001, Maxtor repurchased 5 million shares of Maxtor Common Stock owned by Hynix at the same price as shares of Maxtor common stock were sold to the public in a registered secondary public offering by Hynix, for an aggregate purchase price of $20 million; these repurchased Maxtor common shares have been returned to the status of treasury shares.

We believe the existing capital resources, together with cash generated from operations and borrowing capacity will be sufficient to fund our operations through at least the next twelve months. We require

substantial working capital to fund our business, particularly to finance accounts receivable and inventory, and to invest in property, plant and equipment. During 2001, capital expenditures are expected to be between approximately $130.0 million and $150.0 million, primarily used for manufacturing upgrades, product development, and updating our information technology systems. We intend to seek financing arrangements to fund our future capacity expansion and working capital, as necessary. However, our ability to generate cash will depend on, among other things, demand in the desktop hard disk drive market and pricing conditions. If we need additional capital, there can be no assurance that such additional financing can be obtained, or, if obtained, that it will be available on satisfactory terms. See discussion below under the heading “Certain Factors Affecting Future Performance.”

The Company adopted Statement of Financial Accounting Standards No. 133 (“SFAS 133”), Accounting for Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting Standards No. 137 (“SFAS 137”), Accounting for Derivative Instruments and Hedging Activities — Deferral of the Effective Date of FASB Statement No. 133, and Statement of Financial Accounting Standards No. 138 (“SFAS 138”), Accounting for Certain Derivative Instruments and Certain Hedging Activities, also an amendment of FASB Statement No. 133 (referred to hereafter as “FAS 133”), on January 1, 2001. There has been no material impact to the financial statements resulting from the adoption of SFAS 133, SFAS 137 or SFAS 138.

In July 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141 (“SFAS 141”), “Business Combinations.” SFAS 141 requires the purchase method of accounting to be used for all business combinations initiated after June 30, 2001 and establishes specific criteria for the recognition of intangibles assets separately from goodwill. The Company has applied SFAS 141 for the acquisition of MMC and will follow the requirements of this statement for all future acquisitions.

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets,” which is effective for fiscal years beginning after December 15, 2001. SFAS 142 requires, among other things, the discontinuance of goodwill amortization. In addition, the standard includes provisions upon adoption for the reclassification of certain existing recognized intangibles as goodwill, reassessment of the useful lives of existing recognized intangibles, reclassification of certain intangibles out of previously reported goodwill and the testing for impairment of existing goodwill and other intangibles. The Company will adopt SFAS 142 effective December 30, 2001, which will result in the Company no longer amortizing its existing goodwill and acquired assembled workforce. At September 29, 2001, goodwill approximated $700.4 million and goodwill amortization approximated $37.7 million and $76.0 million for the three and six months ended September 29, 2001, respectively. Acquired assembled workforce approximated $43.9 million and related amortization approximated $4.6 million and $8.2 million for the three and nine months ended September 29, 2001, respectively. In addition, the Company is required to reclassify the existing acquired assembled workforce balance to goodwill as it does not meet the separate recognition criterion according to SFAS 142. The Company will also be required to measure goodwill for impairment as part of the transition provisions. The Company is required to complete transition impairment tests no later than December 31, 2002. Any impairment resulting from these transition tests is anticipated to be recorded as of December 30, 2001 and will be recognized as of the cumulative effect of a change in accounting principle. The Company will not be able to determine if an impairment will be required until completion of such impairment

In August 2001, the FASB issued Statement of Financial Accounting Standards No. 143 (“SFAS 143”), “Accounting for Asset Retirement Obligations.” This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applies to legal obligations associated with the retirement of long-loved assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations or lessees. This Statement also amends SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies.” SFAS 143 is effective for financial statements issued for fiscal years beginning after June 25, 2002. The Company expects that the initial application of SFAS 143 will not have a material impact on its financial statements.

We have a history of significant losses. In the last five fiscal years, we were profitable in only fiscal years 1998 and 2000 and Quantum HDD was profitable only in fiscal year 1997. In the six months following the acquisition of Quantum HDD business, we incurred a net loss of $485.5 million, which included approximately $327.2 million in merger related expenses. Furthermore, MMC, which we acquired on September 2, 2001, has not been profitable in any of the last three years. We cannot assure you that the combined company will ever achieve profitability.

A number of factors, including the failure to retain existing customers of both businesses and the failure to retain key employees, could prevent us from achieving the benefits of integrating the business of Quantum HDD with us, which could harm our business, financial condition and operating results.

Having acquired Quantum HDD in April 2001, we need to continue to integrate the two operations. We expect the combination of Maxtor and Quantum HDD will result in beneficial synergies for the combined company. Achieving these anticipated synergies and the potential benefits underlying our reasons for entering into the merger will depend on a number of factors, some of which include the ability of the combined company to:


	•	reduce expenses through elimination of redundancies in sales, marketing and administrative services and overhead expenses;

	•	take advantage of complementary products, channels, partners, technology, logistics, critical skills and manufacturing approaches;

	•	explore and pursue emerging and higher-profit storage opportunities;

	•	migrate to a common product platform in the future;

	•	manufacture effectively in one or more locations;


	•	manage inventory for multiple products; and

	•	execute successfully in time-to-market introduction and time-to-volume production of high quality products at competitive prices.

It is not certain that all or any of the anticipated benefits related to the integration of Maxtor and Quantum HDD will be realized. The risks of unsuccessful integration of the businesses include:


	•	impairment and/or loss of relationships with employees, customers and/or suppliers;

	•	disruption of the combined company’s business;

	•	distraction of management; and

	•	adverse financial results related to unanticipated expenses associated with integration of the two businesses.

The combined company may not succeed in addressing these risks. The hard disk drive business is fiercely competitive and has significant capital requirements. Moreover, we expect average selling prices to continue to decline, demand for hard disk drive products to continue to be volatile and industry margins to continue to be tight, all of which heighten the potential risks of a failure to achieve successful integration or expected expense reductions. Further, the growth rate of the combined company may not equal the historical growth rates experienced by us or Quantum HDD considered separately.

Our financial results will suffer as a result of purchase accounting treatment of our merger with Quantum HDD. The accounting charges attributable to amortization of goodwill and other intangible assets in the merger will amount to approximately $35.8 million and $23.6 million, respectively, per fiscal quarter in fiscal year 2001.

As a result of the merger, we allocated approximately $716.0 million and $329.1 million of purchase consideration to goodwill and to other intangible assets, respectively. We will amortize approximately $35.8 million of goodwill each of the fiscal quarters beginning April 2, 2001 until the end of fiscal year 2001, at which time we will discontinue amortizing goodwill in accordance with Statement of Financial Accounting Standards No. 142 (“SFAS 142” or “Goodwill and other Intangible Assets”). In addition, we will be required to measure goodwill for impairment as part of the transition provisions stipulated by SFAS 142. Any impairment resulting from these transition tests will be recorded as of December 30, 2001 and will be recognized as a cumulative effect of a change in accounting principle. We will not be able to determine if an impairment will be required until completion of such impairment tests. We will amortize approximately $23.6 million of other intangible assets per fiscal quarter in fiscal year 2001 and will continue to do so over the remainder of their estimated useful lives of three to five years. As a result, purchase accounting treatment of the merger will result in reduction in earnings and earnings per share for the foreseeable future. This charge could cause the market price of our common stock to decline.

If Quantum incurs non-insured tax as a result of its split-off of Quantum HDD, our financial condition and operating results could be negatively affected.

In connection with our merger with Quantum HDD, we agreed to indemnify Quantum for the amount of any tax payable by Quantum as a result of the split-off of Quantum HDD from Quantum DSS to the extent such tax is not covered by insurance, unless imposition of the tax is the result of Quantum’s actions, or acquisitions of Quantum stock, after the split-off. The amount of the tax not covered by insurance could be substantial. In addition, if it is determined that Quantum owes federal or state tax as a result of the split-off and the circumstances giving rise to the tax are covered by our indemnification obligations, we will be required to pay Quantum the amount of the tax at that time, whether or not reimbursement may be allowed under the insurance policy. Even if a claim is available, made and pending under the tax opinion insurance policy, there may be a substantial period after we pay Quantum for the tax before the outcome of the insurance claim is finally known, particularly if the claim is denied by the insurance company and the denial is disputed by us and/or Quantum. Moreover, the insurance company could prevail in a coverage dispute. In any of these

circumstances, we would have to either use our existing cash resources or borrow money to cover our obligations to Quantum. In either case, our payment of the tax, whether covered by insurance or not, could harm our business, financial condition and operating results.

Because we have to abide by potentially significant restrictions with respect to our equity securities for two years after the merger in order to mitigate the risk of triggering a tax obligation of Quantum as a result of the split-off, our ability to attract and retain key personnel or be acquired could be harmed.

Under the federal tax rules applicable to the split-off, the following events occurring during the two-year period after the merger may cause the split-off to become taxable to Quantum under circumstances in which the tax opinion insurance policy will not cover the tax:


	•	we issue our equity securities to acquire other companies or businesses or to raise financing for our operations or other business purposes;

	•	we issue our equity securities as equity compensation, such as the grant of options or restricted stock, other than in the ordinary course of business consistent with past practices; or

	•	a 50% or greater interest in us is acquired by another party.

Because of the foregoing restrictions, we may be at a competitive disadvantage in attracting and retaining key personnel because:


	•	we may have to forego significant growth and other business opportunities;

	•	we may not be deemed an attractive acquisition target, reducing opportunities for our stockholders to sell or exchange their shares in attractive transactions which might otherwise be proposed; and

	•	we will be restricted in our ability to initiate a business combination that our board of directors might wish to pursue because we will not be able to structure the transaction as an acquisition, even if that would otherwise be the most attractive structure.

If we are unable to attract and retain key personnel, our business, financial condition and operating results could suffer.

In addition, the restrictions relating to our securities under which we must operate could discourage potential acquisition proposals, could delay or prevent a change of control of the company and also could diminish the opportunities for a holder of our common stock to participate in tender offers, including offers at a price above the then-current market price for our common stock.

The decline of average selling prices in the hard disk drive industry could cause our operating results to suffer and make it difficult for us to achieve profitability.

It is very difficult to achieve and maintain profitability and revenue growth in the hard disk drive industry because the average selling price of a hard disk drive rapidly declines over its commercial life as a result of technological enhancement, productivity improvement and increase in the industry supply. End-user demand for the computer systems that contain our hard disk drives has historically been subject to rapid and unpredictable fluctuations. In addition, intense price competition among personal computer manufacturers may cause the price of desktop hard disk drives to decline. As a result, the hard disk drive market tends to experience periods of excess capacity and intense price competition. Competitors’ attempts to liquidate excess inventories, restructure, or gain market share also tend to cause average selling prices to decline. This intense price competition could force us to lower prices, which would reduce margins, cause operating results to suffer and make it difficult for us to achieve or maintain profitability. If we are unable to lower the cost of our hard disk drives for the lower-priced personal computer market, we will not be able to compete effectively and our operating results would suffer.

We have only recently developed products that we believe can be produced at low enough costs to be successfully sold to the consumer electronics market. We anticipate the cost of consumer electronics products will also decline over time. If this decline occurs and we are unable to continue to lower the cost of our hard

Intense competition in the hard disk drive segment could reduce the demand for our products or the prices of our products, which could reduce our revenues.

The desktop computer market segment and the overall hard disk drive market are intensely competitive even during periods when demand is stable. We compete primarily with manufacturers of 3.5 inch hard disk drives, including Fujitsu, Hitachi, IBM, Samsung, Seagate Technology and Western Digital. Many of our competitors historically have had a number of significant advantages, including larger market shares, a broader array of product lines, preferred vendor status with customers, extensive name recognition and marketing power, and significantly greater financial, technical and manufacturing resources. Some of our competitors make many of their own components, which may provide them with benefits including lower costs. Our competitors may also:


	•	consolidate or establish strategic relationships among themselves to lower their product costs or to otherwise compete more effectively against us;

	•	lower their product prices to gain market share;

	•	bundle their products with other products to increase demand for their products; or

	•	develop new technology which would significantly reduce the cost of their products.

Although we are the largest hard disk drive manufacturer, based on units shipped both in 2000 and the first quarter of 2001 by Maxtor and Quantum HDD combined and in the second and third quarters by Maxtor, we are not the largest in terms of revenue and our size alone will not eliminate all of the advantages of our competitors.

Competition could reduce the demand for our products and/or the prices of our products by introducing technologically better and cheaper products, which could reduce our revenues. In addition, new competitors could emerge and rapidly capture market share. If we fail to compete successfully against current or future competitors, our business, financial condition and operating results will suffer.

Our quarterly operating results have fluctuated significantly in the past and are likely to fluctuate in the future.

Our quarterly operating results have fluctuated significantly in the past and may fluctuate significantly in the future. Our future performance will depend on many factors, including:


	•	the average selling price of our products;

	•	fluctuations in the demand for our products as a result of the cyclical and seasonal nature as well as the overall economic environment of the desktop computer industry and the markets for personal computers, Intel-based servers, consumer electronics applications and NAS devices;

	•	the availability, and efficient use, of manufacturing capacity;

	•	competitors introducing better products at competitive prices before we do;

	•	new competitors entering our market;

	•	our ability to successfully qualify our products with our customers;

	•	our customers canceling, rescheduling or deferring orders;

	•	our ability to purchase components at competitive prices;

	•	our ability to purchase products from MKE at competitive prices;

	•	the availability of adequate capital resources; and

Many of our expenses are relatively fixed and difficult to reduce or modify. As a result, the fixed nature of our operating expenses will magnify any adverse effect of a decrease in revenue on our operating results. Because of these and other factors, we believe that period to period comparisons of our and Quantum HDD’s combined historical results of operations are not a good predictor of our future performance. If our future operating results are below the expectations of stock market analysts, our stock price may decline. Due to current economic conditions and their impact on IT spending, particularly personal computer sales, our ability to predict demand for our products and our financial results for current and future periods may be severely diminished. This may adversely affect both our ability to adjust production volumes and expenses and our ability to provide the financial markets with forward looking information.

We depend on MKE to manufacture a substantial portion of our hard disk drives and adverse developments in our relationship with MKE could lead to involuntary shortages or surpluses.

We depend on MKE for a substantial portion of our hard disk drives. We have entered into a master agreement and a hard disk drives purchase agreement with MKE governing our relationship. The purchase agreement expired on November 2, 2001. We are in the process of negotiating the terms of ongoing purchases from MKE. We expect to purchase hard disk drives from MKE by purchase order, generally consistent with the terms of the purchase agreement. However, such purchases may not be in adequate volumes or on terms advantageous to us. In these cases, our revenue may be lower than projected and our operating results would suffer.

We rely on MKE to quickly achieve volume production of new hard disk drives at competitive costs, to meet our quality requirements and to respond quickly to product delivery schedules. If MKE fails to meet these requirements, our operating results could suffer. In addition, MKE’s production schedule is based on forecasts of purchase requirements. We may have limited rights to modify short-term purchase orders. Our failure to accurately forecast our requirements or successfully adjust MKE’s production schedule could lead to inventory shortages or surpluses or losses due to obsolescence, which could cause our operating results to suffer.

In connection with our purchase of MMC, we may experience additional costs and risks.

As a result of our recently completed acquisition of MMC, MMC became a component source internal to us. In connection with our purchase of MMC, we may incur additional risks, including the risks that:


	•	we may not have sufficient media supply sources in the event that the MMC component supply is inadequate;

	•	competing media suppliers may not deal with us or may not deal with us on the same terms and conditions we have previously enjoyed;

	•	component suppliers of MMC may not deal with us on favorable terms;

	•	patent infringement that might be committed or alleged to be committed by MMC would no longer be indemnified, and we would be responsible for past infringements committed or alleged to be committed by MMC;

	•	MMC’s costs of operations may exceed the prices we have historically paid for components or the prices that might be otherwise available to us from other vendors; and

	•	we may be distracted by management of the MMC operations, which is not in our core business.

In any of these cases, our profit margins or revenue may be lower and our operating results would suffer. In addition, capital expenditures and working capital investments required for MMC’s business will utilize additional cash; for example, upon the closing of the transaction, we assumed MMC’s equipment loans and capital lease obligations amounting to $66.3 million and employed an additional 1,054 employees.

If we do not have adequate manufacturing capacity in the future because of a disaster at one of our plants, or an inability to acquire needed additional manufacturing capacity, or MKE’s inability or unwillingness to meet our manufacturing requirements, our growth will be adversely impacted and our business could suffer.

Both our and MKE’s volume manufacturing operations are based primarily in Singapore. A flood, earthquake, political instability or other disaster or condition that adversely affects our or MKE’s facilities or ability to manufacture could harm our business, financial condition and operating results. In addition, we will need to acquire additional manufacturing capacity in the future. Our inability to add capacity to allow us to meet customers’ demands in a timely manner may limit our future growth and could harm our business, financial condition and operating results. Our future growth will also require that MKE continue to devote substantial financial resources to property, plant and equipment to support the manufacture of a significant portion of our products. If MKE is unable or unwilling to meet our manufacturing requirements, an alternative manufacturing source may not be available in the near term and our business, financial condition and operating results would suffer.

If we fail to qualify as a supplier to desktop computer manufacturers or subcontractors for the future generation of hard disk drives, then these manufacturers or subcontractors may not purchase any units of an entire product line, which will have a significant impact on our sales.

Most of our products are sold to desktop computer manufacturers or to subcontractors of the desktop computer manufacturers. These manufacturers select or qualify their hard disk drive suppliers, either directly with us or through their subcontractors, based on quality, storage capacity, performance and price. Manufacturers typically seek to qualify three or four suppliers for each hard disk drive product generation. To qualify consistently with these manufacturers, and thus succeed in the desktop hard disk drive industry, we must consistently be among the first-to-market introduction and first-to-volume production at leading storage capacity per disk, offering competitive prices and high quality. Once a manufacturer has chosen its hard disk drive suppliers for a given desktop computer product, it often will purchase hard disk drives from those suppliers for the commercial lifetime of that product line. If we miss a qualification opportunity, we may not have another opportunity to do business with that manufacturer until it introduces its next generation of products. The effect of missing a product qualification opportunity is magnified by the limited number of high-volume manufacturers of personal computers. If we do not reach the market or deliver volume production in a timely manner, we may lose opportunities to qualify our products. In such case, our business, financial condition and operating results would be adversely affected.

If we do not diversify our operations, expand into new hard drive market segments, or continue to maintain our presence in the desktop market, our revenues will suffer.

To remain a significant supplier of hard disk drives to major manufacturers of personal computers, we will need to offer a broad range of hard disk drive products to our customers. Although our current products are designed for the desktop computer (the largest segment of the hard disk drive industry) and the Intel-based server, demand in these segments may shift to products we do not offer or volume demand may shift to other segments. Such segments may include laptop personal computers or handheld consumer products, which none of our products currently serves. Accordingly, we will need to develop and manufacture new products that address additional hard disk drive segments and emerging technologies to remain competitive in the hard disk drive industry. We cannot assure you that we will:


	•	successfully or timely develop or market any new hard disk drives in response to technological changes or evolving industry standards;

	•	avoid technical or other difficulties that could delay or prevent the successful development, introduction or marketing of new hard disk drives;

	•	successfully qualify new hard disk drives, particularly high-end hard disk drives, with customers by meeting their performance and quality specifications;


	•	quickly achieve high volume production of new hard disk drives; or

	•	achieve market acceptance of our new products.

Any failure to successfully develop and introduce new products for our existing customers or to address additional market segments could harm our business, financial condition and operating results.

Because we are substantially dependent on desktop computer drive sales, a decrease in the demand for desktop computers could reduce demand for our products.

Our revenue growth and profitability depend significantly on the overall demand for desktop computers and related products and services. In recent quarters, demand for desktop computers has been adversely affected by unfavorable economic conditions. If the economic conditions in the United States and globally do not improve, or if we experience a worsening in the global economic slowdown, we may experience a further decrease in demand for desktop computers. Because we rely substantially on the desktop segment of the personal computer industry, we will be affected more by changes in market conditions for desktop computers than a company with a broader range of products. Any decrease in the demand for desktop computers could reduce the demand for our products, harming our business.

The loss of one or more of our significant customers or a decrease in their orders of products would cause our revenues to decline.

We sell most of our products to a limited number of customers. For the nine months ended September 29, 2001, one customer, Dell Corporation, accounted for 12.6% of our total revenue, and our top five customers accounted for 36.6% of our revenue. We expect that a relatively small number of customers will continue to account for a significant portion of our revenue, and the proportion of our revenue from these customers could continue to increase in the future. These customers have a wide variety of suppliers to choose from and therefore can make substantial demands on us. Even if we successfully qualify a product for a given customer, the customer generally will not be obligated to purchase any minimum volume of products from us and generally will be able to terminate its relationship with us at any time. Our ability to maintain strong relationships with our principal customers is essential to our future performance. If we lose a key customer or if any of our key customers reduce their orders of our products or require us to reduce our prices before we are able to reduce costs, our business, financial condition and operating results to suffer.

Costly new demands by our customers have increased the risk of inventory obsolescence and could result in an increase in our operating costs and a decline in average selling prices.

Our customers have adopted more sophisticated business models that place additional strains on our business. For example, nearly all personal computer manufacturers have adopted a subcontractor model that requires us to contract directly with companies that provide manufacturing services for the personal computer manufacturers. This exposes us to increased credit risk because these subcontractors are generally less capitalized than the personal computer manufacturers themselves, and presents greater inventory and other logistical challenges because each personal computer manufacturer may require us to deal with several separate subcontractors. Some personal computer manufacturers have adopted build-to-order manufacturing models that reduce their component inventories and related costs and enable them to tailor their products more specifically to the needs of consumers. Finally, our manufacturing customers have adopted just-in-time inventory management processes that require component suppliers to maintain inventory at or near the customer’s production facility. These policies have complicated inventory management strategies and made it more difficult to match manufacturing plans with projected customer demand. As a result, there is an increased risk that our inventory could become obsolete, our operating costs could increase or our average selling prices could decline, any of which could cause our operating results to suffer.

If we fail to match production with product demand or to manage inventory, we may incur additional costs.

We base our inventory purchases and commitments on forecasts from our customers, who are not obligated to purchase the forecast amounts. If actual orders do not match our forecasts, or if any products become obsolete between order and delivery time, we may have excess or inadequate inventory of our products. Due to the current slowdown in the economy, some of our customers are not purchasing their forecast amounts of our products. In addition, some customers have adopted build-to-order manufacturing models or just-in-time inventory management processes that require component suppliers to maintain inventory at or near the customer’s production facility. These policies have complicated inventory management strategies and made it more difficult to match manufacturing plans with projected customer demand and cause us to carry inventory for more time and to incur additional costs to manage inventory which could cause our operating results to suffer. Excess inventory could materially adversely affect our operating results due to increased storage or obsolescence costs and cause our operating results to suffer.

Because we are dependent on a limited number of suppliers, component shortages could result in delays of product shipments and damage our business and operating results.

Both we and MKE depend on a limited number of qualified suppliers for components and subassemblies, including recording heads, media and integrated circuits. Currently, we purchase recording heads from three sources, digital signal processor/controllers from two sources and spin/servo integrated circuits from one source. We recently purchased one supplier of media, MMC, and also purchase media from one other supplier, which recently filed for protection under Chapter 11 of the U.S. Bankruptcy Code. MKE is also dependent on a limited number of suppliers for its components. As we have experienced in the past, some required parts may be periodically in short supply. As a result, we will have to allow for significant ordering lead times for some components. In addition, we may have to pay significant cancellation charges to suppliers if we cancel orders for components because we reduce production due to market oversupply, reduced demand, transition to new products or technologies or for other reasons. We order the majority of our components on a purchase order basis and we have limited long-term volume purchase agreements with only some of our existing suppliers. If we cannot obtain sufficient quantities of high-quality parts when needed, product shipments would be delayed and our business, financial condition and operating results could suffer. In addition, our historical relationship with our suppliers may suffer as a result of our new relationship with MKE or our recent acquisition of MMC.

Because we purchase all of our parts from third party suppliers, we are subject to the risk that we may be unable to acquire quality components in a timely manner, or effectively integrate parts from different suppliers, and these problems would cause our business to suffer.

Unlike some of our competitors, we do not manufacture any of the parts used in our products, other than media as a result of our acquisition of MMC. Instead, our products incorporate parts designed by and purchased from third party suppliers. Consequently, the success of our products depends on our ability to gain access to and integrate parts that use leading-edge technology. To successfully manage the integration of parts, we must:


	•	obtain high-quality parts;

	•	hire skilled personnel;

	•	effectively integrate different parts from a variety of suppliers;

	•	manage difficult scheduling and delivery problems; and

	•	develop and maintain relationships with key suppliers.

If we are unable to successfully integrate parts obtained from third party suppliers, our business would suffer.

The terrorist attacks that took place in the United States on September 11, 2001 were unprecedented events that have created many economic and political uncertainties, some of which may adversely impact our business and operating results, including transportation and supply-chain disruptions and deferrals of customer purchasing decisions. The long-term effects of the attacks on our business and operating results are unknown. The potential for future terrorist attacks, the national and international responses to terrorist attacks, and other acts of war or hostility have created many economic and political uncertainties, which could adversely affect our business and operating results in the short- or long-term in ways that cannot presently be predicted.

Our success depends upon the continued contributions of key employees, many of whom would be extremely difficult to replace. Like many other technology companies, we have recently implemented workforce reductions that may result in the termination of key employees who have substantial knowledge of our business. These workforce reductions may also adversely affect the morale of, and our ability to retain, employees who have not been terminated, which may result in the further loss of key employees. We do not have key person life insurance on any of our personnel. Worldwide competition for skilled employees in the hard disk drive industry is extremely intense. If we are unable to retain existing employees or to hire and integrate new employees, our business, financial condition and operating results could suffer. In addition, companies in the hard disk drive industry whose employees accept positions with competitors often claim that the competitors have engaged in unfair hiring practices. We may be the subject of such claims in the future as we seek to hire qualified personnel and we could incur substantial costs defending ourselves against those claims.

We may need additional capital in the future which may not be available on favorable terms or at all and our ability to issue equity securities has been severely limited by our merger with Quantum HDD.

Our business is capital intensive and we may need more capital in the future. Our future capital requirements will depend on many factors, including:


	•	the rate of our sales growth;

	•	the level of our profits or losses;

	•	the timing and extent of our spending to expand manufacturing capacity, support facilities upgrades and product development efforts;

	•	the timing and size of business or technology acquisitions; and

	•	the timing of introductions of new products and enhancements to our existing products.

In addition, our ability to raise capital has been affected as a result of our merger with Quantum HDD. To mitigate the risk of triggering a tax obligation of Quantum as a result of the split-off of Quantum HDD from Quantum DSS and the merger of Quantum HDD with Maxtor, we are restricted in our ability to issue additional equity securities to raise capital for two years after the split-off and merger. In the event we decide to nevertheless raise capital by issuing equity securities, such financing will decrease the percentage equity ownership of our stockholders and may, depending on the price at which the equity is sold, result in significant economic dilution to them. Our board of directors is authorized under our charter documents to issue preferred stock with rights, preferences or privileges senior to those of the common stock without stockholder approval.

In the event our asset securitization program does not become effective, our business and financial condition could be harmed.

respect to the terms of a $300 million asset securitization program under which the Company will sell its eligible US and Canadian trade accounts receivables on a non-recourse basis through a special purpose entity. The Company expects funding under this facility on or about November 15th, 2001. In the event the new facility does not become effective prior to November 24th, 2001, our business and financial condition may be harmed.

Protection of our intellectual property is limited and it is exposed to third party claims of infringement.

Any failure to adequately protect and enforce our intellectual property rights could harm our business. Our protection of our intellectual property is limited. For example, we have patent protection on only some of our technologies. We may not receive patents for our pending or future patent applications, and any patents that we own or that are issued to us may be invalidated, circumvented or challenged. Moreover, the rights granted under any such patents may not provide us with any competitive advantages. Finally, our competitors may develop or otherwise acquire equivalent or superior technology. We also rely on trade secret, copyright and trademark laws as well as the terms of our contracts to protect our proprietary rights. We may have to litigate to enforce patents issued or licensed to us, to protect trade secrets or know-how owned by us or to determine the enforceability, scope and validity of our proprietary rights and the proprietary rights of others. Enforcing or defending our proprietary rights could be expensive and might not bring us timely and effective relief. We may have to obtain licenses of other parties’ intellectual property and pay royalties. If we are unable to obtain such licenses, we may have to stop production of our products or alter our products. In addition, the laws of certain countries in which we sell and manufacture our products, including various countries in Asia, may not protect our products and intellectual property rights to the same extent as the laws of the United States. Our remedies in these countries may be inadequate to protect our proprietary rights.

We are subject to existing infringement claims which are costly to defend and may harm our business.

Prior to our merger with Quantum HDD, we, on the one hand, and Quantum and MKE, on the other hand, each were sued by Papst Licensing, GmbH, a German corporation, for infringement of a number of patents that relate to hard disk drives. Both lawsuits, filed in the United States District Court for the Northern District of California, were transferred by the Judicial Panel on Multidistrict Litigation to the United States District Court for the Eastern District of Louisiana for coordinated pre-trial proceedings with several other pending litigations involving the Papst patents. Papst’s infringement allegations are based on spindle motors that Maxtor and Quantum purchased from third party motor vendors, including MKE, and the use of such spindle motors in hard disk drives. Maxtor purchased the overwhelming majority of the spindle motors used in our hard disk drives from vendors that were licensed under the Papst patents. Quantum purchased many spindle motors used in its hard disk drives from vendors that were not licensed under the Papst patents, including MKE. As a result of the merger with Quantum HDD, we assumed Quantum’s potential liabilities to Papst. The results of any litigation are inherently uncertain and Papst may assert other infringement claims relating to current patents, pending patent applications, and/or future patent applications or issued patents. Additionally, we cannot assure you we will be able to successfully defend ourselves against this or any other Papst lawsuit. The Papst complaint asserts claims to an unspecified dollar amount of damages. A favorable outcome for Papst in this lawsuit could result in the issuance of an injunction against us and our products and/or the payment of monetary damages equal to a reasonable royalty. In the case of a finding of a willful infringement, we also could be required to pay treble damages and Papst’s attorney’s fees. Accordingly, a litigation outcome favorable to Papst could harm our business, financial condition and operating results. In addition to the Papst lawsuit, a complaint was filed by Cambrian Consultants on May 22, 2001 in the United States District Court for the Central District of California against us, alleging infringement of U.S. Patent No. 4,371,903. The patent, which expired on September 28, 2001, claims an emergency head retract system for magnetic disk drives. Drives manufactured and sold by Maxtor and Quantum are alleged to incorporate head retract systems that fall within the scope of the claims. Cambrian seeks a royalty payment for Maxtor’s alleged unauthorized use of Cambrian’s technology. We answered the complaint and filed counter-claims on June 18, 2001. Discovery is ongoing. Analysis and investigation of the claims is ongoing and formal discovery is about to commence. The results of any litigation are inherently uncertain and we cannot assure you that we will be able to successfully defend ourselves against this lawsuit. The Cambrian complaint asserts claims to an

unspecified dollar amount of damages. A favorable outcome for Cambrian in this lawsuit could result in the payment of monetary damages equal to a reasonable royalty. In the case of a finding of a willful infringement, we also could be required to pay treble damages and Cambrian’s attorney’s fees. Accordingly, a litigation outcome favorable to Cambrian could harm our business, financial condition, operating results and cash flows.

We conduct most of our manufacturing and testing operations and purchase a substantial portion of our key parts outside the United States. In particular, manufacturing operations for our products are concentrated in Singapore, where both our and MKE’s principal manufacturing operations are located, with management oversight of MKE from Japan. Such concentration of manufacturing operations in Singapore will likely magnify the effects on us of any labor shortages, political disruption, trade or tariff treaty changes, or natural disasters relating to Singapore. In addition, we also sell a significant portion of our products to foreign distributors and retailers. As a result, we will be dependent on revenue from international sales. Inherent risks relating to our overseas operations include:


	•	difficulties associated with staffing and managing international operations;

	•	economic slowdown and/or downturn in the computer industry in foreign markets;

	•	international currency fluctuations;

	•	general strikes or other disruptions in working conditions;

	•	political instability;

	•	trade restrictions;

	•	changes in tariffs;

	•	generally longer periods to collect receivables;

	•	unexpected changes in or impositions of legislative or regulatory requirements;

	•	reduced protection for intellectual property rights in some countries;

	•	potentially adverse taxes; and

	•	delays resulting from difficulty in obtaining export licenses for certain technology and other trade barriers.

The specific economic conditions in each country impact our international sales. For example, our international contracts are denominated primarily in U.S. dollars. Significant downward fluctuations in currency exchange rates against the U.S. dollar could result in higher product prices and/or declining margins and increased manufacturing costs. In addition, we attempt to manage the impact of foreign currency exchange rate changes by entering into short-term, foreign exchange contracts. If we do not effectively manage the risks associated with international operations and sales, our business, financial condition and operating results could suffer.

We will be subject to risks related to product defects, which could subject us to warranty claims in excess of our warranty provision or which are greater than anticipated due to the unenforceability of liability limitations.

Our products may contain defects. We generally warrant our products for one to five years and prior to the merger, Quantum HDD also generally warranted its products for one to five years. We assumed Quantum HDD’s warranty obligation as a result of the merger. The standard warranties used by us and Quantum HDD contain limits on damages and exclusions of liability for consequential damages and for negligent or improper use of the products. We generally establish and, prior to the merger, Quantum HDD established, a warranty provision at the time of product shipment in an amount equal to estimated warranty expenses. We are currently evaluating possible defects in certain Quantum HDD products that we acquired in the merger, and

which are no longer being manufactured. We have established a warranty provision for these products. As our evaluation proceeds, we may determine that our warranty provision in this instance is insufficient. If our warranty provision is not sufficient, we will be required to increase the goodwill charge associated with the merger and we may incur additional operating expenses.

We could be subject to environmental liabilities which could increase our expenses and subject us to liabilities.

Because of the chemicals we use in our manufacturing and research operations, we are subject to a wide range of environmental protection regulations in the United States and Singapore. While we do not believe our operations to date have been harmed as a result of such laws, future regulations may increase our expenses and harm our business, financial condition and results of operations. Even if we are in compliance in all material respects with all present environmental regulations, in the United States environment regulations often require parties to fund remedial action regardless of fault. As a consequence, it is often difficult to estimate the future impact of environmental matters, including potential liabilities. If we have to make significant capital expenditures or pay significant expense in connection with future remedial actions or to continue to comply with applicable environmental laws, our business, financial condition and operating results could suffer.

The market price of our common stock fluctuated substantially in the past and is likely to fluctuate in the future as a result of a number of factors, including the release of new products by us or our competitors, the loss or gain of significant customers or changes in stock market analysts’ estimates.

The market price of our common stock and the number of shares traded each day have varied greatly. Such fluctuations may continue due to numerous factors, including:


	•	quarterly fluctuations in operating results;

	•	announcements of new products by us or our competitors such as products that address additional hard disk drive and NAS products segments;

	•	gains or losses of significant customers such as Dell or Compaq;

	•	changes in stock market analysts’ estimates;

	•	the presence or absence of short-selling of our common stock;

	•	sales of a high volume of shares of our common stock by our large stockholders;

	•	events affecting other companies that the market deems comparable to us;

	•	general conditions in the semiconductor and electronic systems industries; and

	•	general economic conditions in the United States and abroad.

Our stock price may be affected by sales of our common stock by Hynix or holders of DECS securities.

Hynix holds 12.5 million shares of our common stock which are pledged to DECS Trust IV to secure its obligations to DECS. In February 1999, DECS Trust IV, a newly formed trust, sold 12.5 million DECS in a registered public offering. The DECS are securities that represent all of the beneficial interest in DECS Trust IV, which owns U.S. treasury securities and a prepaid forward contract to purchase up to 12.5 million shares of our common stock from Hynix. Hynix could sell these 12.5 million shares by substituting other collateral in accordance with the terms of its agreement with the trust at any time. Our stock price may be affected if Hynix sells all or part of such 12.5 million shares, which Hynix has informed us that it may consider selling at a time it deems appropriate. The trust will terminate on or shortly after February 15, 2002, and may be liquidated earlier under certain circumstances. When the trust terminates, Hynix will deliver, at its option, either cash or our common stock to the trust. If holders of DECS receive shares of our common stock at the termination of the trust, they may sell those shares in the open market. If Hynix delivers cash instead, the 12.5 million shares it has pledged to secure its obligations to the trust will be released from the pledge and may be resold by it without substituting any other collateral. We cannot predict whether Hynix will deliver shares

of our stock to the trust on its termination or when or whether holders of the DECS will resell any shares of our stock they receive. Further, any market that develops for the DECS could reduce the demand for our common stock or otherwise negatively impact the market price of our common stock.

Our stock price may be affected by sales of our common stock by stockholders who received our common stock in our merger with Quantum HDD.

In connection with our merger with Quantum HDD, we issued 121,060,500 shares of common stock to former Quantum HDD stockholders. Because these stockholders were not originally holders of our common stock, they may be less inclined to hold our stock than those persons who owned our stock prior to the merger. In the event the former Quantum HDD stockholders sell a significant volume of our stock, the price of our common stock may decline.

We conduct substantial operations in the state of California and rely on a continuous power supply to conduct operations. California’s recent energy crisis could substantially disrupt our operations and increase our expenses. During an acute power shortage, that is, when power reserves for the state of California fall below 1.5%, California has on some occasions implemented, and may in the future continue to implement, rolling blackouts throughout the state. If blackouts continue in the future, our power supply may be interrupted and we may be temporarily unable to continue operations at our facilities. Any such interruption in our ability to continue operations at our facilities could delay the development of our products and disrupt communications with our customers, suppliers or our manufacturing operations. Such interruptions could damage our reputation and could result in lost revenue, either of which could substantially harm our business and results of operations. Furthermore, the deregulation of the energy industry instituted in 1996 by the California government and shortages in wholesale electricity supplies have caused power prices to increase. If wholesale prices continue to increase, our operating expenses will likely increase which will have a negative effect on our operating results.

Antitakeover provisions in our certificate of incorporation could discourage potential acquisition proposals or delay or prevent a change of control.

We have a number of protective provisions in place designed to provide our board of directors with time to consider whether a hostile takeover is in our best interests and that of our stockholders. For example, in connection with our merger with Quantum HDD, we amended our certificate of incorporation to eliminate temporarily the requirement that our three classes of directors be reasonably equal in number. As a result of this amendment, a person could not take control of the board until the third annual meeting after the closing of the merger, since a majority of our directors will not stand for election until that third annual meeting. This and other provisions could discourage potential acquisition proposals and could delay or prevent a change in control of the company and also could diminish the opportunities for a holder of our common stock to participate in tender offers, including offers at a price above the then-current market price for our common stock. These provisions also may inhibit fluctuations in our stock price that could result from takeover attempts.

We maintain an investment portfolio of various holdings, types, and maturities. These marketable securities are generally classified as available for sale and, consequently, are recorded on the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income. Part of this portfolio includes investments in bank issues, corporate bonds and commercial papers. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to

these factors, the Company’s future investment income may fall short of expectations due to changes in interest rates or the Company may suffer losses in principal if forced to sell securities which have declined in market value due to changes in interest rates. We do not currently hedge these interest rate exposures.

The following table presents the hypothetical changes in fair values in the financial instruments held at September 29, 2001 that are sensitive to changes in interest rates. These instruments are not leveraged and are held for purposes other than trading. The hypothetical changes assume immediate shifts in the U.S. Treasury yield curve of plus or minus 50 basis points (“bps”), 100 bps, and 150 bps.

We are exposed to certain equity price risks on our investments in common stock. These equity securities are held for purposes other than trading. The following table presents the hypothetical changes in fair values of the public equity investments that are sensitive to changes in the stock market. The modeling technique used measures the hypothetical change in fair value arising from selected hypothetical changes in the stock price. Stock price fluctuations of plus or minus 15 percent, plus or minus 25 percent, and plus or minus 50 percent were selected based on the probability of their occurrence.

We enter into foreign exchange forward contracts to manage foreign currency exchange risk associated with its manufacturing operations in Singapore and a corporate income tax liability in Switzerland. The foreign exchange forward contracts we enter into generally have original maturities ranging from one to three months. We do not enter into foreign exchange forward for trading purposes. We do not expect gains or losses on these contracts to have a material impact on our financial results.

On March 18, 1999, Maxtor was sued by Papst Licensing, GmbH, a German corporation, for infringement of a number of patents that relate to hard disk drives. Quantum had also been sued by Papst prior to the merger. Both lawsuits, filed in the United States District Court for the Northern District of California, were transferred by the Judicial Panel on Multidistrict Litigation to the United States District Court for the Eastern District of Louisiana for coordinated pre-trial proceedings with several other pending litigations involving the Papst patents. Papsts’ infringement allegations are based on spindle motors that Maxtor and Quantum purchased from third party motor vendors, and the use of such spindle motors in hard disk drives. Maxtor purchased the overwhelming majority of the spindle motors used in its hard disk drives from vendors that were licensed under Papst’s patents. Quantum purchased many spindle motors used in its hard disk drives from vendors that were not licensed under Papst’s patents. As part of the Quantum/ Maxtor merger, Maxtor assumed Quantum’s potential liabilities to Papst.

lawsuit could result in the issuance of an injunction against us and our products and/or the payment of monetary damages equal to a reasonable royalty. In the case of a finding of a willful infringement, we also could be required to pay treble damages and Papst’s attorney’s fees. Accordingly, a litigation outcome favorable to Papst could harm our business, financial condition, and operating results.

On May 22, 2001, Maxtor was sued by Cambrian Consultants, a California corporation, for patent infringement. The complaint alleges infringement by both Maxtor and Quantum products. An answer and counter-claim have been filed. Discovery is ongoing. While the Company believes it has valid defenses to Cambrian’s claims, the results of any litigation are inherently uncertain. Additionally, we cannot assure you that we will be able to successfully defend ourselves against this lawsuit. The Cambrian complaint asserts claims to an unspecified dollar amount of damages. A favorable outcome for Cambrian in this lawsuit could result in the payment of monetary damages equal to a reasonable royalty. In the case of a finding of a willful infringement, we also could be required to pay treble damages and Cambrian’s attorney’s fees. Accordingly, a litigation outcome favorable to Cambrian could harm our business, financial condition, and operating results.

Maxtor filed a Current Report on Form 8-K dated August 28, 2001, setting forth in Item 7 the audited financial statements of Quantum HDD for the fiscal year ended March 31, 2001 and the unaudited pro forma condensed combined financial statements giving pro forma effect to the acquisition of Quantum HDD as of March 31, 2001 (filing date August 28, 2001).

Maxtor filed a Current Report on Form 8-K dated September 26, 2001, setting forth in Item 7 its press release dated September 26, 2001, announcing its updated outlook for its financial results for the third fiscal quarter ended September 26, 2001 (filing date October 2, 2001).

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


	By	/s/ PAUL J. TUFANO



	Paul J. Tufano
	Executive Vice President,
	Chief Financial Officer, and
	Chief Operating Officer

43 EX-10.1 3 f76661orex10-1.txt EXHIBIT 10.1 Exhibit 10.1 LEASE AMENDMENT AND NOVATION AGREEMENT THIS LEASE AMENDMENT AND NOVATION AGREEMENT (this "Agreement") is made as of August 31, 2001, by and between FORTUNEFIRST, LLC, a California limited liability company ("FortuneFirst"), whose address is 3101 North First Street, San Jose, California 95134, HYNIX SEMICONDUCTOR AMERICA INC., a California corporation ("Hynix"), whose address is 3101 North First Street, San Jose, California 95134, and MMC TECHNOLOGY, INC., a California corporation ("MMC Technology"), whose address is 2001 Fortune Drive, San Jose, California 95131. This Agreement is also consented to by CAPMARK SERVICES, L.P., a Texas limited partnership ("CapMark"), as authorized agent of La Salle Bank, National Association, as Trustee for Nomura Asset Capital Securities Corporation Commercial Mortgage Pass-Through Certificates, Series 1998-D6. In this Agreement, FortuneFirst, Hynix and MMC Technology are sometimes identified, each as, a "Party" and collectively as, the "Parties." The Parties hereby refer to the following facts: A. In connection with that certain $47,634,000 conduit mortgage loan made by Nomura Asset Capital Corporation ("Nomura"), as lender, to FortuneFirst, as borrower, dated as of February 27, 1998 (the "Nomura Loan"), FortuneFirst, as landlord, and Hynix, as tenant, entered into that certain Lease Agreement, dated as of February 27, 1998 (the "Fortune Drive Lease"), for those certain premises consisting of approximately 141,187 square feet of space within three buildings located at 2001 Fortune Drive, San Jose, California (the "Fortune Drive Premises"). A true and correct copy of the Fortune Drive Lease is attached hereto as Exhibit A. B. Also, in connection with the Nomura Loan, Hynix Semiconductor Inc. (formerly known as Hyundai Electronics Industries Co., Ltd.), a corporation of the Republic of Korea ("Guarantor"), entered into a Lease Guaranty for the Fortune Drive Lease in favor of FortuneFirst, dated as of February 27, 1998 (the "Guaranty"). C. Pursuant to the provisions of the Fortune Drive Lease, Hynix is not required to obtain the prior written consent of Nomura or CapMark, the Nomura Loan servicing agent, for any sublease entered into by and between Hynix and an Affiliate (as such term is defined in Section 9.1 of the Fortune Drive Lease). In reliance thereon, FortuneFirst and Hynix have permitted their Affiliate, MMC Technology, to occupy and conduct its business in the Fortune Drive Premises, and have not required MMC Technology to enter into a written sublease agreement with Hynix. D. Maxtor Corporation, a Delaware corporation ("Maxtor"), is acquiring all of the capital stock of MMC Technology from Hynix, as evidenced by that certain Agreement and Plan of Reorganization dated as of August 17, 2001 (the "Plan of Reorganization"), and as a consequence thereof the Parties desire to enter into an amendment and a novation of the Fortune Drive Lease, to be effective as of the Effective Date (defined below), so that: (1) Hynix is released from all of its obligations under the Fortune Drive Lease, as amended, (2) Hynix assigns and transfers all of its right, title and interest under the Fortune Drive Lease, as amended, to MMC Technology, (3) MMC Technology assumes all of Hynix's obligations under the Fortune Drive Lease, as amended, and (4) FortuneFirst considers MMC Technology to be its tenant for all purposes under the Fortune Drive Lease, as amended. E. This Agreement is not intended to be construed as in any way modifying the loan obligations for which the Fortune Drive Premises are pledged as collateral. F. In connection with the execution and delivery of this Agreement, Maxtor will enter into a lease guaranty in favor of FortuneFirst with respect to the obligations of MMC Technology under the Fortune Drive Lease, as amended by this Agreement. NOW, THEREFORE, the Parties hereby agree as follows: 1. Effective Date. The effective date of this Agreement shall be the date that Maxtor acquires all of the capital stock of MMC Technology from Hynix (the "Effective Date"). 2. Fortune Drive Lease Amendments. As of the Effective Date of this Agreement, the Fortune Drive Lease is amended as follows: a. Definition of Tenant. For all purposes, the term Tenant (defined in the Preamble of the Fortune Drive Lease) means and refers exclusively to "MMC Technology, Inc., a California corporation," and all references made in the Fortune Drive Lease to "Hyundai Electronics America, a California corporation," are deleted. b. Term. The first paragraph of Section 3.1 of the Fortune Drive Lease is deleted and replaced in its entirety by the following: "3.1 Commencement Date; Initial Term. The initial term of this Lease (the "Initial Term") shall commence on the Commencement Date and shall expire on the tenth (10th) anniversary of the day preceding the first full calendar month of the Initial Term." c. Minimum Rent. Section 5.1 of the Fortune Drive Lease is deleted and replaced in its entirety by the following: "5.1 Minimum Rent. The annual minimum rent ("Minimum Rent") payable by Tenant to Landlord during the Initial Term shall be in accordance with the following schedule: Beginning on the Effective Date through February 28, 2008, Tenant shall pay to Landlord in advance of the first day of each month of the term hereof the sum of $162,365.05 which is rate of $1.15 per square foot per month. Rent for any period during the Initial Term hereof which is for less than one full month shall be a daily prorated portion of the monthly installment. Rent shall be payable in lawful money of the United States to Landlord at the address stated herein or to such other persons or at such other places as Landlord may designate in writing." d. Exhibit B - "CPI Factor" Definition. Exhibit B to the Fortune Drive Lease is deleted in its entirety. 2 e. Permitted Uses; Use Restrictions. Section 5.4 of the Fortune Drive Lease is amended by deleting the section heading and the first two sentences thereof and replacing them with the following section heading and sentences: "5.4 Permitted Uses; Use Restrictions. The Premises shall be used and occupied only for the offices and manufacturing operations heretofore conducted on said Premises, specifically the manufacture of discs for the computer hard drive market and related development and for no other purposes. Use of hazardous or noxious materials is authorized within the scope of the prior uses heretofore conducted on the Premises by Tenant and in accordance with such intended purposes above set forth, and only in accordance with all Federal, State and local statutes, regulations, ordinances and permitting requirements applicable to the Tenant's business and the materials utilized; provided, however, that such uses will not: (i) have a material adverse effect on the fair market value of the Premises, or (ii) result in or give rise to any material environmental deterioration or degradation of the Premises, including without limitation, mining or the removal of oil, gas or minerals. Tenant shall not create or suffer to exist any public or private nuisance, hazardous condition (except as specifically provided above), illegal condition or waste on or with respect to the Premises. Tenant and its employees and business invitees shall observe and cooperate with the legal requirements of such permitted operations and as may be from time to time required by the laws, regulations, permitting authorities and by the Landlord for the operation of the facility on the Premises." f. Subordination and Nondisturbance Agreement. Section 8.1 of the Fortune Drive Lease is amended by adding the following sentence to the end of the existing paragraph: "The form of nondisturbance and attornment agreement attached to this Lease as Exhibit B is hereby accepted by Nomura Asset Capital Corporation (or by CapMark, its loan servicing agent), Landlord and Tenant for the purpose of securing the rights of Tenant under this Lease against any bankruptcy, foreclosure, or other insolvency action, filed as a result of a default by Landlord under the provisions of that certain $47,634,000 conduit mortgage loan made by Nomura Asset Capital Corporation to Landlord, and dated as of February 27, 1998." g. Foreclosure. Section 8.3 of the Fortune Drive Lease is amended by deleting the words "upon request of any Successor" from subparagraph (ii) thereof. h. Paramount Lease. Section 8.4 of the Fortune Drive Lease is deleted in its entirety. i. Landlord's Right of Entry. Section 22 of the Fortune Drive Lease is amended by adding the following sentence to the end of the existing paragraph: 3 "As used in this Section 22, the phrase "at all reasonable times" shall mean that Landlord, the Holder of any Mortgage, or any other third party who intends to enter the Premises, must first provide Tenant with forty-eight (48) hours prior written notice of any non-emergency entry to be undertaken by any such party." j. Notices. Section 28 of the Fortune Drive Lease is amended by deleting the address for notice to Hyundai Electronics America in its entirety and by replacing it with the following: "If to Tenant: MMC Technology, Inc.; 2001 Fortune Drive; San Jose, California 95134; Attention: Manager;" and "with a copy to: Maxtor Corporation; 500 McCarthy Boulevard; Milpitas, California 95035; Attention: General Counsel" k. Operations. Section 44.5 of the Fortune Drive Lease is amended by adding the following sentence to the beginning of the existing paragraph: "Except as is necessary or required in connection with Tenant's business of the manufacturing of disk drive media on the Premises," l. Exhibits and Attachments. Section 48 of the Fortune Drive Lease is deleted in its entirety and is replaced by the following: "Section 48. EXHIBITS. The following exhibits are attached hereto and form a part of this Lease: A. Exhibit A - Legal Description of the Premises; and B. Exhibit B - Form of Nondisturbance and Attornment Agreement." 3. No Other Amendments to Fortune Drive Lease. Except as expressly provided in this Agreement, all other terms and conditions of the Fortune Drive Lease shall remain unchanged and in full force and effect. 4. Warranties. Hynix hereby warrants that it has full power and authority to enter into a novation and amendment of the Fortune Drive Lease, and that, except for the use by MMC Technology, its Affiliate (as such term is defined in Section 9.1 of the Fortune Drive Lease), that is referenced in Recital C, it has not previously sold, subleased, assigned, hypothecated or otherwise transferred any of its right, title and interest in and to the Fortune Drive Lease. 5. Option to Extend Initial Term. The Parties anticipate that fee title to the real property located at 2001 Fortune Drive, San Jose, California (the "Property") will be reconveyed by FortuneFirst to Hynix when the loan by Nomura, as serviced by CapMark, has been paid in full on or about February 27, 2008. When such reconveyance of fee title to the Property is effected, as a result of the full repayment of the Nomura Loan or in connection with the refinancing of the Nomura Loan, FortuneFirst and Hynix hereby agree, each for itself, that MMC 4 Technology shall have the option (the "Lease Option") to extend the term of the Fortune Drive Lease for the Fortune Drive Premises for a period of five (5) years following the expiration of the Initial Term, on such commercially reasonable terms as are in effect at the time for comparable space in similar buildings in the metropolitan area of San Jose, California. MMC Technology shall provide written notice of its intent to exercise the Lease Option no earlier than nine (9) months and no later than six (6) months prior to the expiration of the Initial Term. 6. Acknowledgment and Novation. The Parties hereby acknowledge and agree that as of the Effective Date of this Agreement: (a) Hynix is released from all of its obligations under the Fortune Drive Lease, as amended, (b) Hynix assigns and transfers all of its right, title and interest under the Fortune Drive Lease, as amended, to MMC Technology, (c) MMC Technology assumes all of Hynix's obligations under the Fortune Drive Lease, as amended, and (d) FortuneFirst considers MMC Technology to be its tenant for all purposes under the Fortune Drive Lease, as amended. 7. Estoppel. As of the Effective Date of this Agreement, FortuneFirst certifies: (a) to its knowledge, the copy of the Fortune Drive Lease attached hereto as Exhibit A is a complete and accurate copy of the Fortune Drive Lease as currently in effect; (b) to its knowledge, neither FortuneFirst nor Hynix is in default of its respective obligations under the Fortune Drive Lease, and no event has occurred which, with the giving of notice or lapse of time or both, would constitute a breach or default by either FortuneFirst or Hynix under the Fortune Drive Lease; (c) except as amended and modified pursuant to the terms of this Agreement, the Fortune Drive Lease has not been previously amended or modified; and (d) Hynix has not prepaid any Minimum Rent, Additional Rent or other charges for any period commencing at any time after July 1, 2001 under the Fortune Drive Lease. 8. Attorneys' Fees. In the event of the bringing of any action or suit by a Party hereto against another Party hereunder by reason of any breach of any of the provisions on the part of the other Party arising out of this Agreement, then in that event the Prevailing Party shall be entitled to have and recover of and from the other Party all costs and expenses of the action or suit, including reasonable attorneys' fees (whether incurred in litigation, on appeal, discretionary review or otherwise), it being understood and agreed that the determination of "Prevailing Party" shall be included in the matters which are the subject of such action or suit. 9. Miscellaneous. This Agreement shall be governed by, interpreted under, and construed and enforced in accordance with, the laws of the State of California, and shall be binding upon and inure to the benefit of the successors, assigns, personal representatives, heirs and legatees of the respective parties hereto. This Agreement may be executed in two or more counterparts each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument, and may not be amended or modified except in writing executed by all of the Parties hereto. The headings of sections are inserted for convenience only and are not intended to limit or define the scope or effect of any provision of this Agreement. The invalidity, illegality or unenforceability of any provision of this Agreement shall not affect the enforceability of any other provision of this Agreement, all of which shall remain in full force and effect. Time is of the essence of this Agreement and of the obligations required hereunder. The Parties agree to execute all documents and instruments reasonably required in order to consummate the transactions contemplated by this Agreement. Capitalized terms used 5 in this Agreement and not otherwise defined shall have the same meanings given to them in the Fortune Drive Lease. IN WITNESS HEREOF, the Parties have executed this Agreement on the date first referenced above. "FORTUNEFIRST" "HYNIX" FORTUNEFIRST, LLC, HYNIX SEMICONDUCTOR AMERICA INC., a California limited liability company a California corporation By: /s/ Thomas J. Thomas By: /s/ Thomas J. Thomas ------------------------------------ ---------------------------- Name: Thomas J. Thomas Name: Thomas J. Thomas ---------------------------------- -------------------------- Title: CFO Title: CFO --------------------------------- ------------------------- "MMC TECHNOLOGY" MMC TECHNOLOGY, INC., a California corporation By: /s/ Taj Giulamani ------------------------------------ Name: Taj Giulamani ---------------------------------- Title: VP Finance --------------------------------- 6 CONSENT CapMark Services, LP, a Texas limited partnership, as authorized agent of La Salle Bank, National Association, as Trustee for Nomura Asset Capital Securities Corporation Commercial Mortgage Pass-Through Certificates, Series 1998-D6, hereby gives its unconditioned consent to the provisions of this Lease Amendment and Novation Agreement. "CapMark" La Salle Bank, National Association, as Trustee for Nomura Asset Capital Securities Corporation Commercial Mortgage Pass-Through Certificates, Series 1998-D6 By: CapMark Services, L.P., a Texas limited partnership, its authorized agent By: Pearl Mortgage, Inc. a Delaware corporation, its sole general partner By: /s/ Thomas J. Bauer ---------------------------- Name: Thomas J. Bauer -------------------------- Title: Servicing Officer V.P. 7 EXHIBIT A [Copy of Fortune Drive Lease] 8 EXHIBIT B [Form of Subordination, Nondisturbance and Attornment Agreement] 9 2001 FORTUNE DRIVE LEASE AGREEMENT by and between FORTUNEFIRST LLC (Landlord) and HYUNDAI ELECTRONICS AMERICA (Tenant) LEASE AGREEMENT THIS LEASE AGREEMENT is made as of February 27. 1998 (the "Effective Date") by and between, FORTUNEFIRST LLC, a California limited ("Landlord"), and HYUNDAI ELECTRONICS AMERICA, a California corporation ("Tenant"). EXPLANATORY STATEMENT Tenant desires to least the Premises with a Building of approximately 137,187 square feet, as more Particularly shown on Exhibit A (the "Building"), from Landlord and Landlord desires to rent the Premises to Tenant, subject to and in accordance with the terms and provisions hereafter set forth. FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, mutually agree as follows: SECTION 1. DEFINITIONS. The following terms are defined in the following sections of this Lease:

2 ~~Term 3.2 Transfer 9.4 Twenty Year Treasury Rate 5.1~~

SECTION 2. LEASE OF THE PREMISES. In consideration of the rents, agreements and conditions herein contained, Landlord hereby leases to Tenant and Tenant Hereby rents from Landlord, the Premises. SECTION 3. INITIAL TERM. 3.1 Commencement Date; Initial Term. The initial term of this Lease (the "INITIAL TERM") shall commence on the Commencement Date and shall expire on the fifteenth (15th) anniversary of the day preceding the first full calendar month of the Initial Term. For purposes of this Lease, the term "COMMENCEMENT DATE" shall mean February 27, 1998. Landlord and Tenant agree, upon demand of the other, to execute an agreement stipulating the Commencement Date and the termination dare of the Initial Term as soon as the Commencement Date has been determined. 3.2 Definition of "Term". As used in this Lease, the word "Term" means the Initial Term. SECTION 4. LEASE YEAR. The first lease year of this Lease shall commence on the Commencement Dare and shall end at the Close of the twelfth (12th) full calendar month of the Term; thereafter, each lease year shall consist of twelve (12) full calendar months commencing with each anniversary of the first day of the first full calendar month of the first lease year, except for the last lease year, which shall end on the last day of the Term. SECTION 5. MINIMUM RENT. 5.1 Minimum Rent. The annual minimum rent ("MINIMUM RENT") payable by Tenant to Landlord (A) during the first ten (10) years of the Initial Term, shall be an amount equal to the product obtained by multiplying $1,893,181 by the CPI Factor and (B) during the last five (5) years of the Initial Term, shall be an amount equal to the product obtained by multiplying (i) the quotient obtained by dividing (a) the product obtained by multiplying $1,893,181 by the Increased Rate by (b) 8.50% by (ii) the CPI Factor. For purposes hereof, "INCREASED RATE" means a percentage equal to the greater of (i) the sum of 8.50% plus 5%, and (ii) as of the date that is ten (10) years after the Commencement Date, the sum of the Twenty Year Treasury Rate plus 6.50%, such Increased Rate not to exceed the maximum late charge permitted to be charged under the laws of the State of California. For purposes hereof, "CPI FACTOR" is defined on Exhibit B. For purposes hereof, "TWENTY YEAR TREASURY RATE" means the yield, calculated by linear interpolation (rounded to three decimal places) of the yields of United States Treasury Constant Maturities with terms (one longer and one shorter) most nearly 3 approximating that of noncallable United States Treasury obligations having maturities as close as possible to twenty (20) years from the date that is ten (10) years after the Commencement Date on the basis of Federal Reserve Statistical Release H.15-Selected Interest Rates under the heading U.S. Governmental Security/Treasury Constant Maturities, or other recognized source of financial market information selected by Lender for the week prior to the date that is ten (10) years after the Commencement Date. 5.2 Payment of Minimum Rent. Tenant shall pay to Landlord all Minimum Rent payable by Tenant under this Lease in equal monthly installments, in advance, on each payment date (hereinafter, the "PAYMENT DATE"). The- Payment Date shall be the eighth (8th) day of each calendar month during the Term of the Lease; provided, however, that for purposes of making payments hereunder, if the eighth (8th) day of a given month shall not be a Business Day (as such term is defined below), then the Payment Date for such month shall be the next succeeding Business Day. For purposes of this Lease Agreement, "BUSINESS DAY" shall mean any day other than (i) a Saturday or a Sunday, and (ii) a day on which federally insured depository institutions in New York, New York, Chicago, Illinois or the jurisdiction where the Building is located, are authorized or obligated by law, regulation, governmental decree or executive order to be closed. 5.3 Late Charge; Interest. In the event any installment of Minimum Rent or Additional Rent shall not be paid by Tenant on the date such installment is due, then Tenant shall pay (A) an administrative late charge equal to the lesser of (i) five percent (5%) of any unpaid amount and (ii) the maximum late charge permitted to be charged under the laws of the State of California and (B) all unpaid Minimum Rent payments and all future Minimum Rent Payments shall be increased by the lesser of (i) a percentage equal to the quotient obtained by dividing (A) the sum of 8.50% and 5% by (B) 8.50% and (ii) the maximum late charge permitted to be charged under the laws of the State of California (A) and (B) above, collectively, the "DEFAULT RATE"). 5.3.1 Tenant's Continuing Obligations. In the event that Tenant ceases conducting business at the Premises, then Tenant shall retain all of its other obligations under this Lease, including the obligation to pay Rent and Additional Rent. 5.4 Use Restrictions. Tenant may occupy and use the Premises for an office headquarters and related uses, or for any other lawful purpose, (except that the Premises may not be used for or associated with a pornographic shop, adult book store, or massage parlor) so long as such other lawful purpose would not (i) have an adverse effect on the value of the Premises, (ii) increase (when compared to use as an office headquarters) the likelihood of incurring liability under any provisions of any Environmental Laws, or (iii) result in or give rise to any material environmental deterioration or degradation of the Premises, including without limitation, mining or the removal of oil, gas or minerals, or (iv) violate any covenants, easement agreements, deed restrictions, agreements of record affecting the Premises, or applicable laws. Tenant shall not create or suffer to exist any public or private nuisance, hazardous or illegal condition or waste on or with respect to the Premises. Tenant shall not use, occupy or permit any of the Premises to be used or 4 occupied, nor do or permit anything to be done in or on any of the Premises, in a manner which would (A) make void or voidable any insurance which Tenant is required hereunder to maintain then in force with respect to any of the Premises or (B) affect the ability of Tenant to obtain any insurance which Tenant is required to furnish hereunder, or (C) impair Landlord's title to the Premises, or in such manner as might reasonably make possible a claim or claims of adverse usage or adverse possession by the public, as such, or third Persons, or of implied dedication of the Premises or any portion thereof. Nothing contained in this Lease Agreement and no action by Landlord shall be construed to mean that Landlord has granted to Tenant any authority to do any act or make any agreement that may create any such third party or public right, title, interest, lien, charge or other encumbrance upon the estate of the Landlord in the Premises. SECTION 6. REAL ESTATE TAXES AND IMPOSITIONS. 6.1 Payment. In addition to the Minimum Rent referred to above, Tenant shall pay to the Landlord throughout the Term hereof, as Additional Rent hereunder, on or before the Payment Date (or sooner if elsewhere herein required), an amount equal to one-tenth of the annual impositions as estimated by Landlord. As used in this Lease Agreement, "IMPOSITIONS" shall mean: all ground rents and all taxes (including, without limitation, all real estate, ad valorem or value added, sales (including those imposed on lease rentals), use, single business, gross receipts, value added, intangible transaction privilege, privilege, license or similar taxes), assessments (including, without limitation, to the extent not discharged prior to the date hereof, all assessments for public improvements or benefits, whether or not commenced or completed within the terms of this Lease), water, sewer or other rents and charges, excises, levies, fees (including, without limitations license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, foreseen or unforeseen, of every character in respect of the Premises and/or Building, (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a lien (or anything similar in any way) upon (i) Landlord (including, without limitation, all income, franchise, single business or other taxes imposed on Landlord for the privilege of doing business in the jurisdiction in which the Premises and/or Building is located) or Holder, (ii) the Premises and/or Building or any part thereof, or (iii) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Premises and/or Building or the leasing or use of the Premises and/or Building or any part thereof, or the acquisition or financing of the acquisition of the Premises and/or Building by Landlord. "Impositions" and the amount required to be paid by Tenant shall also include all amounts which Landlord may be required to pay, or shall have agreed to pay, in lieu of any item within the definition of "Impositions" set forth hereinabove. If at any time prior to the expiration of the Terms of this Lease, any new Imposition shall be imposed upon Landlord or the Premises in lieu or in place of, or in addition to any other Imposition included in this Section 6.1 above, and shall be measured by or based upon net income or profits derived from real estate (as distinguished from net income or profits generally), then such new Imposition shall be included in "Impositions" to the extent that such new Imposition would be payable if the Premises were the only property of Landlord 5 subject thereto and the income and profits received by Landlord from the Premises were the only income and profits of Landlord. Tenant also shall pay to Landlord, at least thirty days before any fine, penalty, interest or cost may be added thereto for the non-payment thereof the amount by which the Impositions becoming due exceed the monthly payments on account thereof previously made by Tenant. The amounts paid to Landlord pursuant to this Section 6.1 shall be used by Landlord co pay the "Imposition," but such amounts shall not be deemed to be trust fund, and no interest shall be payable thereon. SECTION 7. UTILITIES. Tenant shall contract for, and pay promptly when due, the charges for all utility services rendered or furnished to the Premises (whether by meter or submeter) including but not limited to hear, water, gas, electricity and telephone. If Tenant defaults in the payment of any such utility charges, Landlord may, at its option, pay them for Tenant's account, in which event Tenant shall promptly reimburse Landlord within two (2) days after Landlord's written request therefore. Landlord shall have no liability to Tenant for disruption of utilities to the Premises. SECTION 8. SUBORDINATION AND NONDISTURBANCE. 8.1 Agreement. Unless Landlord elects otherwise, Tenant's rights under this Lease are and shall always be subordinate to (be operation and effect of any superior lease, mortgage, or deed of trust now or hereafter placed upon the Premises or any part thereof by Landlord, or any renewal, modification, consolidation, replacement, or extension of any such mortgage or deed of trust (the "Mortgage"); provided, however, that with respect to any ground or land lease, mortgage, or deed of trust such subordination shall not be effective unless each holder of an interest in the Premises which may be superior to Tenant's interest under this Lease (the "HOLDER") executes a nondisturbance, subordination, and attornment agreement in standard form as reasonably required by any tender of Landlord or otherwise as reasonably acceptable to Tenant and such Holder. The foregoing subordination shall be automatic and without the necessity of any further act on the part of Tenant to effectuate such subordination. However, Tenant agrees to execute and deliver upon demand such instruments evidencing and confirming such subordination of this Lease as shall be desired by the Holder of any Mortgage. 8.2 Lease May Be Superior. Notwithstanding Section 8.1, any Holder of any Mortgage may at any time subordinate its Mortgage to this Lease without Tenant's consent, b) notice in writing co Tenant, and thereupon this Lease shall be deemed prior to such Mortgage without regard their respective dates of execution and delivery and in that event such Holder shall have the same rights with respect to this Lease as though it had been executed prior to the execution and delivery of the Mortgage and had been assigned to such Holder. 8.3 Foreclosure. If any Mortgage is foreclosed, or Landlord's interest under this Lease is conveyed or transferred in lieu of foreclosure, (i) no person which, as a result of any of the foregoing, has succeeded to the interest of Landlord in this Lease and none of the successor's of assigns of such person (any such person, and his or its successors and assigns, being hereinafter called a "SUCCESSOR") shall be liable for any default by 6 Landlord or any other matter which occurred prior to the date such Successor succeeded to Landlord's interest in this Lease nor shall such Successor be bound by or subject to any offsets or defenses which Tenant may against any predecessor in interest of such Successor, (ii) upon request of any Successor, Tenant shall attorn, as Tenant under this Lease subject to the provisions of this Section 8.3, to such Successor and shall execute and deliver such instruments as may be necessary or appropriate to evidence such attornment within 10 days after receipt of a written request to do so; and (iii) no Successor shall be bound to recognize any prepayment by more than 30 days of any rent, additional rent or other sum payable hereunder. 8.4 Paramount Lease. If Landlord is or becomes lessee of the Premises or the building, then, subject to the provisions of Section 8.1 above, Tenant agrees that Tenant's possession and estate shall be that of a subtenant and subordinate to the interest of Landlord's lessor, its heirs, personal representatives, successors and assigns (such lessor and other persons being hereinafter collectively referred to as the "OVERLESSOR") without the necessity of any further action on the part of Tenant to effectuate such subordination, but notwithstanding the foregoing if Landlord's tenancy shall terminate either by expiration, forfeiture or otherwise, then, if Overlessor shall so request, Tenant shall attorn to Overlessor and recognize Overlessor as Tenant's landlord upon the terms and conditions of this Lease for the balance of the term hereof; and any extensions or renewals hereof. Tenant shall execute, acknowledge and deliver, upon demand by Landlord or any Overlessor, such further instruments evidencing such subordination of Tenant's right, title and interest under this Lease to the interests of Overlessor, and such further instruments of attornment and nondisturbance, as shall be desired by such Overlessor, which instruments, if Overlessor is an institutional lender, shall contain such other provisions as are normally included therein by Overlessor. SECTION 9. ASSIGNMENT AND SUBLETTING. 9.1 Consent Required. Except as herein expressly provided, neither this Lease nor any interest of Tenant hereunder shall be assigned, mortgaged, pledged or otherwise encumbered, or the Premises sublet, in whole or in part, or used or occupied, to or by anyone without Landlord's prior written consent, which consent may be withheld in the sole and absolute discretion of Landlord; provided, however, that Tenant may sublease to an Affiliate of Tenant without Lender's prior written consent. For the purposes of this Lease, "Affiliate" of any specified entity means any other entity controlling, controlled by or under common control with such specified entity. For the purposes of this Lease, "control" when used with respect to any specified entity means the power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities or other beneficial interests, by contract or otherwise; and the terms "controls," "controlling" and "controlled" have the meanings correlative to the foregoing. If Tenant is a corporation or other entity, any transfer, sale, pledge or other disposition, in any single transaction or cumulatively prior to the expiration of the term of this Lease, of fifty percent or more of the stock, or interest in, Tenant, shall be deemed an assignment of this Lease and, therefore, prohibited without the prior written consent of Landlord. 7 9.2 Additional Requirements. In the case of any assignment or subletting permitted pursuant to this Section 9, Tenant or anyone holding under Tenant shall in each case comply with each of the following conditions: (a) A duplicate original executed copy of any such assignment or sublease shall be delivered to Landlord thirty (30) days before the commencement date thereof; and, in the case of any assignment, an assumption by assignee of all obligations of Tenant arising under this Lease, reasonably satisfactory in form and substance to Landlord; and (b) Each sublease shall provide that, in the event of cancellation of this Lease, the subtenant under such sublease shall, at the option of Landlord, attorn to and become the direct subtenant of Landlord on the same terms and conditions as are provided in the Sublease, except that Landlord shall not be liable for defaults of Tenant as sublandlord occurring before such attornment. 9.3 Continuing Liability. Notwithstanding anything herein to the contrary, no assignment or subletting shall operate to release or discharge Tenant from liability hereunder, it being understood and agreed that the liability of Tenant and each assignee of Tenant's interest shall be joint and several and survive any such assignment or sublease, and shall continue with the same force and effect as if no such assignment or sublease had been made. 9.4 Proceeds, Etc. If there is an assignment or subletting of any kind, (a "TRANSFER"), then Tenant shall pay to Landlord forthwith upon Tenant's receipt thereof, as additional rent, all sums and other economic consideration (whether by lump sum payment or otherwise) received by Tenant in any month as a result of the Transfer whether denominated rentals or otherwise which exceed, in the aggregate, the Minimum Rent and Additional Rent which Tenant is obligated to pay Landlord under this Lease in the same month (prorated to reflect obligations allocable to that portion of the Premises which is the subject of the Transfer), all without affecting or reducing any other obligation of Tenant hereunder: provided that in the case of an assignment of this Lease such additional rent payment by Tenant to Landlord shall equal the entire consideration for such assignment. If Landlord gives Landlord's written consent to Transfer or if a Request Notice is given and such Transfer is not made within sixty (60) days thereafter, then Landlord's written consent to the Transfer shall be automatically null, void and of no force or effect whatsoever and/or another Request Notice must be sent. The right to terminate shall not be exhausted by any one exercise thereof by Landlord but shall be exercisable from time to time and as often as there is an applicable proposed Transfer. If after receipt of the Request-Notice Landlord requests additional or further information which Landlord reasonably requires to consider the proposed Transfer, Tenant shall promptly deliver such information to Landlord. 9.5 In Bankruptcy. Notwithstanding any other provision in this Lease, any person to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq., shall be deemed without further act to have assumed all of the 8 obligations and burdens arising under this Lease on or after the date of such assignment. Any such assignee shall upon demand execute and deliver to Landlord an instrument satisfactory to Landlord confirming such assumption. SECTION 10. MAINTENANCE OF PREMISES. Tenant shall, throughout the Term of this Lease and at its sole cost and expense, take good care of the Building and the other improvements now or hereafter located upon the Premises, and any sidewalks, parking areas, curbs and access ways upon the Premises, and keep them in good order and condition, and promptly at Tenant's own cost and expense make all repairs necessary to maintain such good order and condition, whether such repairs be interior or exterior, structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen. When used in this Section, the term "repairs" shall include replacements and renewals when necessary to maintain such Building and other improvements in good order and condition, and all such repairs made by Tenant shall be at least equal in quality and usefulness to the Building and such other improvements as may from time to time be located upon the Premises. Tenant shall keep and maintain all portion of the Premises and any sidewalks, parking areas, curbs and access ways adjoining them in a clean and orderly condition free of accumulation of dirt, rubbish, snow and ice. SECTION 11. TENANT'S ALTERATIONS. 11.1 Exterior and/or Structural Alterations. Tenant shall not make any alterations, additions, or improvements ("Alterations") of a structural nature to the exterior portions of the Premises or any structural Alterations to the interior of the Premises, without Landlord's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. Any Alterations made by Tenant shall immediately become the property of Landlord and shall remain upon the Premises. No such Alterations shall increase or decrease the footprint of the Premises. 11.2 Interior Nonstructural Alterations. Tenant may make nonstructural interior Alterations, as it deems necessary from time to time without Landlord's consent as long as such Alterations are done in compliance with applicable law and in a good and workmanlike manner and at the end of the Term Tenant removes any such Alterations as are requested by Landlord, in writing, and repairs any damage caused by the installation, removal or presence of such Alterations. SECTION 12. SIGNS. Tenant shall have the right to install at its expense Tenant's standard signage, both interior and exterior on or about the Premises, provided that Such Signs Comply with applicable provisions of law, and will not reduce the value of the Building and the Premises. Tenant agrees to maintain any sign, billboard, marquee, awning, display, decoration, placard, lettering, or advertising matter in good condition and repair at all times and in compliance with all applicable provisions of law. Tenant shall have the full and exclusive control over the design, content, shape, and color of its signage at the Premises, provided such signage will not reduce the value of the Building and the Premise. 9 SECTION 13. OPEN AREAS AND FACILITIES. 13.1 Operation and Maintenance of Open Areas and Facilities. Tenant, at its sole cost, shall operate, manage, equip, light, keep and maintain the areas of the Premises not covered by the Building (the "OPEN AREAS AND FACILITIES") in good order and repair, including, but not limited to, restriping of parking areas; repairing and replacing paving and the substrata thereof for parking, driveway, sidewalk and curb facilities; keeping the Open Areas and Facilities properly drained, reasonably free of ice, snow, trash, rubbish, waste, and obstruction; and in a neat, clean, orderly and sanitary condition; keeping the Open Areas and Facilities suitably lit; promptly removing abandoned cars other debris; maintaining signs, markers, and other means and methods of pedestrian and vehicular traffic control; keeping all bushes adequately mulched, grass cut and plants trimmed and pruned; and keeping all landscaping adequately irrigated. Also, Tenant shall, at its cost, be responsible for cleaning and repair of sidewalks, curbs, elevated walkways and stairways, maintenance and repair of the landscaping and the irrigation systems; maintenance and repair of the lighting systems in the parking and walkway areas; janitorial services in the Open Areas and Facilities, maintenance and repair of the storm drainage and sanitary sewer systems; trash disposal, maintenance and repair of utility systems; and compliance with environmental requirements; remediating any condition resulting from the improper or unlawful discharge, disposal, or release by Tenant or any other person of any Hazardous Substance as defined in Section 44.5. SECTION 14. NET LEASE; BOND LEASE. 14.1 TENANT PAYS ALL CHARGES. TENANT ACKNOWLEDGES AND AGREES THAT, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, THIS LEASE IS A COMPLETE NET LEASE TO LANDLORD, THAT THIS LEASE SHALL YIELD TO LANDLORD THE NET MINIMUM RENT (AND ADDITIONAL RENT, IF ANY) SPECIFIED HEREIN, THAT LANDLORD IS NOT RESPONSIBLE FOR ANY COSTS, CHARGES, EXPENSES, OR OUTLAYS OF ANY NATURE WHATSOEVER ARISING FROM OR RELATING TO THE PREMISES OR THE USE AND OCCUPANCY THEREOF, OR THE CONTENTS THEREOF OR THE BUSINESS CARRIED ON THEREIN, AND TENANT SHALL PAY ALL CHARGES, IMPOSITIONS, COSTS, AND EXPENSES OF EVERY NATURE AND KIND RELATING TO THE PREMISES. 14.2 BOND LEASE. THIS LEASE IS A BOND LEASE AND THE MINIMUM RENT, ADDITIONAL RENT AND ALL OTHER SUMS PAYABLE BY TENANT HEREUNDER SHALL BE PAID IN ALL EVENTS AND WITHOUT NOTICE OR DEMAND, AND WITHOUT COUNTERCLAIM, SETOFF, DEDUCTION, DEFENSE, ABATEMENT, SUSPENSION, DEFERMENT, OR DIMUTION OF ANY KIND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN. THIS LEASE SHALL NOT TERMINATE, NOR SHALL TENANT HAVE ANY RIGHT TO TERMINATE OR AVOID THIS LEASE OR BE ENTITLED TO THE ABATEMENT OF ANY RENTS HEREUNDER OR ANY REDUCTION THEREOF, NOR SHALL THE OBLIGATIONS AND LIABILITIES OF TENANT HEREUNDER 10 BE IN ANY WAY AFFECTED FOR ANY REASON INCLUDING (A) DAMAGE TO, DESTRUCTION OF OR ANY TAKING OF ANY PART OF THE PREMISES, (B) ANY RESTRICTION OF OR INTERFERENCE WITH ANY USE OF THE PREMISES, (C) ANY MATTER AFFECTING TITLE TO, OR ANY EVICTION FROM, THE PREMISES, (D) ANY PROCEEDING RELATING TO LANDLORD, OR ACTION TAKEN WITH RESPECT TO THIS LEASE BY ANY TRUSTEE OR RECEIVER OF LANDLORD OR BY ANY COURT IN ANY PROCEEDINGS, (E) ANY FAILURE BY LANDLORD TO PERFORM OR COMPLY WITH THIS LEASE OR ANY OTHER AGREEMENT OR BUSINESS DEALINGS WITH TENANT, (F) LANDLORD'S ACQUISITION OF OWNERSHIP OF ALL OR PART OF THE PREMISES OR OF LANDLORD'S INTEREST THEREIN OTHER WISE THAN AS PROVIDED HEREIN, (G) ANY OTHER OCCURRENCE WHATSOEVER, WHETHER SIMILAR OR DISSIMILAR TO THE FOREGOING, ANY PRESENT OR FUTURE LAW TO THE CONTRARY NOTWITHSTANDING AND WHETHER OR NOT TENANT SHALL HAVE NOTICE OR KNOWLEDGE OF ANY OF THE FOREGOING. THE OBLIGATIONS OF TENANT HEREUNDER SHALL BE SEPARATE AND INDEPENDENT COVENANTS AND AGREEMENTS. TENANT WILL REMAIN OBLIGATED UNDER THIS LEASE IN ACCORDANCE WITH ITS TERMS, AND TENANT WAIVES ALL RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE OR OTHERWISE TO MODIFY OR AVOID STRICT COMPLIANCE WITH THIS LEASE. 14.3 CANCELLATION RIGHTS. NO RIGHT OF LANDLORD OR TENANT TO CANCEL OR TERMINATE THIS LEASE FOR ANY REASON PRIOR TO THE EXPIRATION OF THE TERM MAY BE EXERCISED WITHOUT THE PRIOR WRITTEN CONSENT OF ANY HOLDER AND, WITHOUT SUCH CONSENT, ANY PURPORTED CANCELLATION OR TERMINATION SHALL BE NULL AND VOID AND OF NO FURTHER FORCE OR EFFECT. SECTION 15. INSURANCE. 15.1 Types. Tenant, at Tenant's sole cost and expense, shall maintain and keep in effect throughout the Term: (i) insurance against loss or damage to the Building and all other improvements now or hereafter located on the Premises by fire and all other casualties as may be included in forms of all risk insurance from time to time commonly available in the state where the Premises are located, in an amount equal to the full insurable replacement value (without depreciation) of such Building and improvements, such replacement value to be determined from time to time, at Tenant's expense, whenever requested by Landlord, but not more frequently than every three years, by an appraiser selected by Tenant and approved by Landlord; (ii) insurance on an occurrence basis against claims for personal injury (including death) and property damage arising from occurrences on, in or about the Premises, with broad form commercial liability, coverage, under a policy or policies of 11 comprehensive general liability insurance or commercial general liability insurance, with such limits as may be reasonably requested by Landlord from time to time, but not less than $5,000,000 per occurrence and $5,000,000 annual aggregate for the Premises and, without limitations of the foregoing, within 30 days after Landlord's request, Tenant shall have such annual aggregate increased (by the same or different policies) to such amount as Landlord may reasonably request by reason of occurrences during any policy year and, in respect of such increase shall make the deliveries specified in Section 15.3 below; (iii) boiler insurance, plate glass insurance, war risk insurance (when available), rent insurance and such other forms of insurance and endorsements as may be specified from time to time by Landlord; all such insurance shall be in such reasonable amounts as may be specified from time to time by Landlord; and (iv) any other insurance that is set forth in the Mortgage. 15.2 Insured Parties. The policies of insurance described in subsections 15.1(i), 15,1(iii) and 15.1(iv) above shall name Landlord (and such other parties as Landlord may from time to time specify) as the sole insured(s), and in addition shall contain a standard mortgagee endorsement in favor of the Holders of any Mortgages which may at any time be a lien upon the Premises or any part thereof. The policies of the insurance described in subsection 15.1(ii) above shall name Tenant and Landlord (and such other parties as Landlord may from time to time specify) as the insured parties, shall contain a severability of interests endorsement, and shall state that they are primary over any insurance carried by Landlord or such other parties, however, in lieu of including Landlord and other parties specified by Landlord as named insureds in Tenant's liability insurance policy. Tenant may include them in such policy as additional insureds if Tenant also provides Landlord and any other parties specified by Landlord with a separate policy of insurance having the limits specified in subsection 15.1(ii) and in which they are the only named insureds, in which case Tenant's policy and such separate policy shall each state that they are primary over any insurance carried by Landlord or such other parties. 15.3 Insurers; Replacement. Each policy shall provide that it shall not be cancelable without at least thirty (30) days' prior written notice to Landlord and each policy shall be issued by an insurer of recognized responsibility, licensed to do business in the state where the Premises are located and satisfactory to Landlord. Forthwith upon the execution of this Lease, each policy (or a duplicate original hereof) shall be delivered by Tenant to Landlord unless Landlord requests that it be delivered to the Holder of any Mortgage, in which case Tenant shall deliver the policy to such Holder and shall deliver to Landlord a certificate (in the cast of the insurance required under subsection 15.1(ii)) or the document known in the insurance business as an "evidence of property insurance" (in the case of the insurance required under subsections 15.1(i), 15.1(iii) and 15.1(iv)), from the insurance carrier in form satisfactory to Landlord and certifying or evidencing that the policy so delivered has been issued and is in effect and the duration thereof. At least thirty days before any policy, Tenant shall deliver to Landlord a replacement policy and certificate or evidence of Property insurance meeting the foregoing requirements, and 12 at least ten days prior to the date that the premium on any policy shall become due and payable, Tenant shall cause Landlord to be finished with satisfactory evidence of its payment- Each policy shall have attached thereto an endorsement to the effect that no act or omission of Tenant shall affect the obligation of the insurer to pay the full amount of any loss sustained. Each policy shall be in such form as Landlord may from time to time reasonably require. 15.4 Evidence of Payment. If Tenant shall fail, refuse or neglect to obtain such insurance or maintain it, or to furnish Landlord with satisfactory evidence that it has done so and satisfactory evidence of payment of the premium of any policy, within the time required as set forth above, Landlord shall have the right, at Landlord's option and without regard to any opportunity to cure provided for elsewhere in this Lease, to purchase such insurance and to pay the premiums thereon or to pay the premiums on insurance which Tenant should have paid for. All such payments made by Landlord shall be recoverable by landlord from Tenant on demand as Additional Rent hereunder. 15.5 Uninsured Loss. If Tenant fails to provide and keep in. force insurance as aforesaid, Landlord shall not be limited in the proof of any damages which Landlord may claim against Tenant to the amount of the insurance premium or premiums not paid or incurred and which would have been payable upon such insurance, but Landlord shall also be entitled to recover as damages for such breach the uninsured amount of any loss, to the extent of any deficiency in the insurance required by the provisions of this Lease, and damages, expenses of suit and costs, including without limitation reasonable cancellation fees, suffered or incurred during any period when Tenant shall have failed to provide or keep in force insurance as aforesaid. 15.6 Other Insurance Obtained by Tenant. Tenant shall -not take out separate insurance concurrent in form or contributing, in the event of loss, with that required hereunder to be furnished by Tenant, or increase the amounts of any then existing insurance by securing an additional policy or additional policies, unless such separate insurance or additional policy(s) shall conform to all the requirements of Section 15.2 above. 15.7 Waiver of Subrogation; Rights under Insurance Policies. Each of the parties hereto hereby releases the other and the other's partners, agents and employees, to the extent of each party's insurance coverage, from any and all liability for any loss or damage which may be inflicted upon the property of such releasing party even if -such loss or damage shall be brought about by the fault or negligence of the other party, its partners, agents or employees; provided, however, that this release shall be effective only with respect to loss or damage occurring during such time as the appropriate policy of insurance shall contain a clause to the effect that this release shall not affect said policy or the right of the insured to recover thereunder. If any policy does not permit such a waiver, and if the party to benefit therefrom requests that such a waiver be obtained, the other party agrees to obtain an endorsement to its insurance policies permitting such waiver of subrogation if it is available. If an additional premium is charged for such 13 waiver, the party benefiting therefrom, if it desires to have the waiver, agrees to pay to the other the amount of such additional premium promptly upon being billed therefor. SECTION 16. INDEMNIFICATION. 16.1 Indemnification. Tenant agrees to indemnify and save harmless Landlord and Landlord's partners and members and its and their officers, directors, managers and employees, from and against any and all claims by or on behalf of any person, arising from the occupancy, conduct, operation or of the Premises or from any work or thing whatsoever done or not done in, on or about the Premises, or arising from any breach or default on the part of Tenant in the performance of any Covenant or agreement on the part of Tenant to be performed pursuant to the Terms of this Lease, or under the law, or arising from any act, neglect or negligence of Tenant, or any of its agents, contractors, servants, employees, invitees or licensees, causing injury, death or damage to any person (including, without limitation, any employee of Tenant) or property, or arising from any injury, death or damage whatsoever caused to any person (including. without limitation any employee of Tenant) or property in or about the Premises, or arising from any other event whatsoever, including any negligence of Landlord or any of its partners, officers, directors, agents, employees, servants and contractors, whether such negligence occurred or occurs before or after the execution of this Lease, and from and against all costs, expenses, penalties, fines and liabilities incurred in connection with any such claim or action or proceeding brought thereon (including, without rotation the fees of attorneys, investigators and experts) and Tenant covenants that in case any action or proceeding be brought against Landlord or any other party to be indemnified hereunder by reason of any such claim, Tenant upon notice from Landlord or any other party to be indemnified hereunder, at Tenant's cost and expense, shall defend the requesting Landlord or other party in such action or proceeding or cause it to be resisted or defended by an insurer. 16.2 Release. Landlord, its partners, members, officers, directors, managers, agents, employees and contractors, shall not be liable for, and Tenant hereby releases Landlord and each of them from, all claims for loss of life, personal injury or damage to property or business sustained by Tenant or any person claiming by, through or under Tenant resulting from fire, accident, occurrence or condition in, on or about the Premises, including, but not limited to, any such claims for loss of life, personal injury or damage resulting from any defect, latent or otherwise in the Premises, any defect, latent or otherwise, in, or any failure of, any equipment, machinery, utilities, appliances or apparatus, or any falling of fixtures or other items, leakage of water, snow or ice, broken glass, or any other event whatsoever, including any negligence of Landlord or any of its partners, officers, directors, agents, employees, servants and contractors, whether such negligence occurred or occurs before or after the execution of this Lease, and any failure of Landlord to perform any of its obligations under this Lease. SECTION 17. MECHANICS' LIENS, ETC. 17.1 No Liens. Tenant will not create or suffer or permit to be created or remain, and will discharge, any lien, encumbrance or charge (levied on account of any 14 imposition or any mechanic's, laborer's or materialman's lien) which might be or become a lien, encumbrance or charge upon the Premises or any part thereof or the income therefrom, having any priority or preference over or ranking on a parity with the estate, rights and interest of Landlord in the Premises or any part thereof or the income therefrom, and Tenant will not suffer any other matter or thing whereby the estate, rights and interest of Landlord in the Premises or any part thereof might be impaired provided that any mechanic's, laborer's or materialman's lien may be discharged in accordance with Section 17.2 of this Section. 17.2 Discharge of Liens. If any mechanics, laborer's or materialman's lien shall at any time be filed against the Premises or any part thereof, Tenant, within fifteen days after notice of the filing thereof, will cause it to be discharged of record by payment, deposit, bond, order of a court of competent jurisdiction or otherwise. If Tenant shall fail to cause such lien to be discharged within the period aforesaid, then in addition to any other right or remedy, Landlord may, but shall not be obligated to, discharge it either by paying the amount claimed to be due or by procuring the discharge of such lien by deposit or by bonding proceedings, and in any such event, Landlord shall be entitled, if Landlord so elects to compel the prosecution of any action for the foreclosure of such lien by the lienor and to pay the amount of the judgment in favor of the lienor with interest, costs and allowances. Any amount so paid by Landlord and all costs and expenses incurred by Landlord in connection therewith, together with interest thereon at the Default Rate from the respective dates of Landlord's making of the payments and incurring of the costs and expense, shall constitute additional rent payable by Tenant under this Lease and shall be paid by Tenant to Landlord on demand. SECTION 18. INTENTIONALLY OMITTED. SECTION 19. TENANT'S COVENANTS. Tenant represents, warrants, and covenants to Landlord as follows: (a) to pay all sums due as rent and Additional Rent herein when and as the same shall become due and payable in accordance with the terms of this Lease; (b) to perform and/or observe all of the terms, provisions and conditions required to be performed and/or observed by Tenant under this Lease; (c) not to injure, overload, deface, or otherwise harm the building or any part thereof or any equipment or installation therein, nor commit any nuisance; nor burn any trash on the Premises; nor make any use of the Premises or of any part thereof or equipment therein which is improper, offensive or contrary to applicable laws, rules and regulations; (d) if any of Tenant's lenders forecloses on any property of Tenant located at the Premises, Tenant shall promptly replace such property with new property satisfactory to Lender at Tenant's sole cost and expense. 15 SECTION 20. FIRE OR OTHER CASUALTY. 20.1 Damage to Premises. (a) If the Building or other improvements on the Premises shall be damaged or destroyed by fire or other casualty, Tenant, at Tenant's sole cost and expense, shall promptly and diligently repair, rebuild or replace such Building and other improvements, so as to restore the Premises to the condition in which they were immediately prior to such damage or destruction. The net proceeds of any insurance (other than rent insurance) recovered by reason of such damage or destruction in excess of the cost of adjusting the insurance claim and collecting the insurance proceeds (such excess being hereinafter called the "net insurance proceeds") shall be held in trust by Landlord or held by any Holder and released for the purposes of paying the fair and reasonable cost of restoring such Building and other improvements. Such net insurance proceeds shall be released from time to time as the work progresses to Tenant or to Tenant's contractors. Prior to the commencement of the work, Tenant shall deliver to Landlord reasonable proof at such net insurance proceeds are adequate to pay the cost of such restoration. If such net insurance proceeds are not adequate, Tenant shall pay, out of funds other than such net insurance proceeds, the amount by which such cost will exceed such net insurance proceeds, and shall furnish proof to Landlord of the payment of such excess for work performed, before Landlord or any such Holder shall release any part of such net insurance proceeds. If such net insurance proceeds are more than adequate, the amount by which such not insurance proceeds exceed the cost of restoration will be retained by Landlord or applied to repayment of any Mortgage Loan. If a Holder shall decline to make the net insurance proceeds available for the restoration provided herein and Landlord does not elect to substitute other funds for such insurance proceeds, Landlord shall have the right to terminate this Lease. (b) Notwithstanding anything in this Lease Agreement to the Contrary for any time period during which the Mortgage is outstanding, the net proceeds of any insurance that is recovered shall be applied in the manner set forth in the mortgage. SECTION 21. EMINENT DOMAIN. 21.1 Condemnation of Entire Premises. If all of the Premises is taken or condemned for a public or quasi-public use, this Lease shall terminate as of the date title to the condemned real estate vests in the condemnor and the rent herein reserved shall be apportioned and paid in full by Tenant to Landlord to that date and all rent prepaid for periods beyond that date shall forthwith be repaid by Landlord to Tenant and neither party shall thereafter have any liability hereunder. 21.2 Partial Condemnation. If only part of the Premises is taken or condemned for a public or quasi-public use, Tenant shall restore the building and other improvements upon the Premises to a condition and size as nearly comparable as reasonably possible to the condition and size thereof immediately prior to the taking, and there shall be an equitable abatement of the minimum rent according to the value of the Premises before and after the taking. In the event that the parties are unable to agree upon the amount of such abatement, either party may submit the issue for arbitration pursuant to the rules 16 then obtaining of the American Arbitration Association and the determination or award rendered by the arbitrator shall be final, conclusive and binding upon the parties and not subject to appeal, and judgment thereon may be entered in any court of competent jurisdiction. 21.3 Award. Tenant shall have the right to make a claim against the condemnor for moving and related expenses which are payable to tenants under applicable law without reducing the awards otherwise payable to Landlord and the Holders. Except as aforesaid, Tenant hereby all claims against Landlord and all claims against the condemnor, and Tenant hereby assigns to Landlord all claims against the condemnor including, without rotation, all claims for leasehold damages and diminution in the value of Tenant's leasehold, interest. If only part of the Premises is taken or condemned for a public or quasi-public use, the nor proceeds of any condemnation award recovered by reason of any taking or condemnation of the Premises in excess of the cost of collecting the award and in excess of any portion thereof attributable to the then current market value of the land taken or condemned (such excess being hereinafter called the "net condemnation proceeds") shall be held in trust by Landlord of any Holder and released for the purpose of paying the fair and reasonable cost of restoring the Building and Other improvements damaged by reason of the taking or condemnation. Such net condemnation proceeds shall be released from time to time as the work, progresses to Tenant or to Tenant's contractors. Prior to the condemnation of the work, Tenant shall deliver to Landlord reasonable proof that such net condemnation proceeds are adequate to pay the cost of such restoration. If such net condemnation proceeds are not adequate, Tenant shall pay, out of funds other than such net condemnation proceeds, the amount by which such cost will exceed such net condemnation proceeds and shall furnish proof to Landlord of the payment of such excess for work performed before Landlord or any such Holder shall release any part of such net condemnation proceeds. If such net condemnation proceeds are more than adequate, the amount by which such net condemnation proceeds exceed the cost of restoration shall be retained by Landlord or applied to repayment of any Mortgage Loan secured by the Premises. In the event that the parties are unable to agree upon the Portion of the award attributable to the then current market value of the land taken or condemned, either party may submit the issue for arbitration pursuant to the rules then obtaining of the American Arbitration Association and the determination or award rendered by the arbitrator shall be final, conclusive and binding upon the parties and not subject to appealed and judgment thereon may be entered in any court of competent jurisdiction. 21.4 Temporary Taking. If the condemnation should take only the right to possession for a fixed period of time or for the duration of an emergency or other temporary condition, then, notwithstanding anything hereinabove provided, this Lease shall continue in full force and effect without any abatement of rent, but the amounts payable by the condemnor with respect to any period of time prior to the expiration or sooner termination of this Lease, shall be paid by the condemnor to Landlord and the condemnor shall be considered a Subtenant of Tenant. If the amount payable hereunder by the condemnor are paid in monthly installments, Landlord shall apply the amount of such installments, or as much thereof as may be necessary for the purpose, toward the 17 amount of rent due from Tenant as rent for that period, and Tenant shall pay to Landlord any deficiency between the monthly amount thus paid by the condemnor and the amount of the rent, while Landlord shall pay over to Tenant any excess of the amount of the award or the amount of the rent. 21.5 Outstanding Mortgage. Notwithstanding anything in this Lease Agreement to the contrary, for any time period during which the Mortgage is outstanding, any condemnation proceeds awarded in accordance with Sections 21.1. 21.2, 21.3 or 21.4 herein shall be applied in the manner set forth in the Mortgage. SECTION 22. LANDLORD'S RIGHT OF ENTRY. Tenant agrees to permit Landlord and the authorized representatives of Landlord and of the Holder of any Mortgage or any prospective Holder to enter the Premises at all reasonable times for the purpose of inspecting them, including the performance of reasonable rents, samplings, or other investigations to satisfy itself that Tenant has complied with the provisions of this Lease, and making any necessary repairs thereto and performing any work therein that may be necessary by reason of Tenant's failure to make such repairs or perform any such work required of Tenant under this Lease. Nothing herein shall imply any duty upon the part of Landlord to make any such inspection, test, sampling or other investigations and nothing herein shall imply any duty on the part of Landlord co do any other work which under any provision of this Lease Tenant may be required to perform, and the performance thereof by Landlord shall not constitute a waiver of Tenant's default in failing to perform it. During the progress of any work, inspection, testing, sampling or investigation, Landlord may keep and store in the Premises all necessary materials, tools and equipment. Landlord shall not in any event be liable for inconvenience, annoyance, disturbance, or other damage to Tenant by reason of making such repairs or the performance of such work in the Premises or on account of bringing materials, supplies and equipment into or through the Premises during the course thereof and the obligations of Tenant under this Lease shall not thereby be affected in any manner whatsoever, and the cost of each of such repairs or the performance of such work shall be payable by Tenant to Landlord on demand as Additional Rent. Landlord also shall have the right to enter the Premises at all reasonable times to exhibit the premises to any prospective purchaser, tenant and/or mortgagee thereof. SECTION 23. SURRENDER. Upon expiration or termination of this Lease, or, any extension thereof, Tenant will quit and surrender the Premises, broom clean, in good order and condition, ordinary wear and tear excepted, without the necessity of any notice from either Landlord or Tenant to terminate the same, and Tenant hereby waives notice to vacate said Premises and agrees that Landlord shall be entitled to the benefit of all provisions of law respecting the summary recovery of possession of said Premises from a tenant holding over to the same extent as if statutory notice had been given Tenant shall remove its trade fixtures, stock, and other personal property at the expiration or sooner termination of the Term. SECTION 24. HOLDING. In the event that Tenant remains in possession of the Premises after the expiration of this Lease, it shall be deemed to be occupying the 18 Premises as a holdover tenant, subject to all the conditions, provisions, and obligations of this Lease insofar as the same are applicable to a holdover tenancy, provided, however, chat the minimum rental payment shall be increased by fifty percent (50%). SECTION 25. DEFAULTS AND REMEDIES. 25.1 If Tenant defaults in the performance of any of its obligations under this Lease, including, without limiting the generality of the foregoing, its obligation to pay rent or Additional Rent or any part thereof when due, or to make any other payment herein provided, or to perform any other covenant, obligation, agreement. or duty on Tenant's part to be performed hereunder, and if such default shall continue as to as to nonmonetary defaults only for a period of thirty (30) days after notice thereof to Tenant and. if such default or omission so specified is other than a monetary default, if Tenant has not in good faith commenced curing or remedying such default within such thirty (30) day period and does not thereafter diligently proceed therewith to completion, then and in any such event either Landlord may cancel this Lease by notice to Tenant (if the Term has not commenced) or Landlord may serve upon Tenant a notice that this Lease and the Term will terminate (if the Term has commenced) on a date specified therein, which shall be not less than thirty (30) days after the giving of such notice. Upon the date so specified, this Lease and the Term, if any, shall terminate as fully and completely as if such date were the date herein definitely fixed for the end and expiration of this Lease and Tenant shall then quit and surrender the Premises to Landlord; provided, however, that Tenant shall remain liable as hereinafter set forth. In the event that Tenant breaches or threatens to breach or anticipatorily repudiates this Lease before taking possession of the Premises, then in addition to, and not in limitation of, any other rights or remedies accruing to Landlord by operation of law and/or equity, by or under any legal proceedings or by the provisions of this Lease, Landlord may, after thirty (30) days notice to Tenant and opportunity to cure or retract such anticipatory repudiation, in its sole discretion, terminate this Lease by giving Tenant notice of its intent to do so, and Landlord, at its sole option, may proceed to relet the Premises with no liability or obligation to Tenant whatsoever. This shall be self-operative, and no further instrument of cancellation shall be required of Tenant and Landlord. 25.2 The occurrences of any one or more of the following shall constitute an "EVENT OF DEFAULT": (a) The occurrence of any of the events described in Section 25.1 gives rise to Landlord's right to terminate this Lease or to give notice of termination of this Lease; (b) The occurrence of any of the following: (i) the making by Tenant of any general assignment for the benefit of creditors; 19 (ii) the filing by or against Tenant of a petition under the Bankruptcy Code, including a petition for reorganization or arrangement (unless. in the case of a petition filed against Tenant, the same is dismissed within ninety (90) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within sixty (60) days; or (iv) the attachment, execution, or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such seizure is not discharged within thirty (30) days. 25.3 If, during the Term, any one or more of the acts or occurrences Section 25.2 shall happen, then, and in any such Event of Default shall continue and notwithstanding the fact that the Landlord may have any other remedy hereunder or at law or in equity, by notice to Tenant, designate a date, not less than thirty (30) days after the giving of such notice, on which this Lease shall terminate; and thereupon, on such date, the Term of this Lease and the estate hereby granted shall expire and terminate upon the date specified in such notice with the same force and effect as if the date specified in such notice as the date hereinbefore fixed for the expiration of the Term of this Lease, and all rights of Tenant hereunder shall expire and terminate, but Tenant shall remain liable as hereinafter provided. Additionally, Tenant agrees to pay, as Additional Rent, all reasonable attorneys' fees and other expenses incurred by Landlord in enforcing any of the obligations under this Lease, this covenant to survive the expiration or sooner termination of this Lease. 25.4 If this Lease is terminated as provided in Section 25.1 or 25.3 above, or as permitted by law, Tenant shall peaceably quit and surrender the Premises to Landlord, and Landlord may, without further notice, enter upon, reenters possess, and repossess the same by summary proceedings, ejectment, or other legal proceedings, and again have, repossess, and enjoy the same as if this Lease had not been made, and in any such event neither Tenant nor any person claiming through or under Tenant by virtue of any law or an order of any court shall be entitled to possession or to remain in possession of the Premises, and Landlord, at its option, shall forthwith, notwithstanding any other provision of this Lease, be entitled to recover from Tenant (in lieu of all other claims for damages on account of such terminations as and for liquidated damages an amount equal to the excess of all rents reserved hereunder for the unexpired portion of the Term of this Lease discounted at the rate of .1% per annum to the then present worth, over the fair rental value of the Premises as determined by Landlord at the time of termination for such unexpired portion of the Term and similarly discounted. Nothing herein contained shall limit or prejudice the right of Landlord, in any bankruptcy or reorganization or insolvency proceeding, to prove for and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any bankruptcy or reorganization or insolvency proceedings, or to prove for and obtain as liquidated damages by reason of such termination an amount equal to the maximum allowed by any statute or rule of law, whether such amount shall be greater or less than the excess referred to above. 20 25.5 If Landlord reenters and obtains possession of the Premises following an Event of Default, Landlord shall have the right, without notice, to repair or alter the Premises in such a manner as Landlord may deem necessary or advisable so as to put the Premises in good order and to make the same rentable, and shall have the right at Landlord's option, to relet the Premises or a part thereof, and Tenant shall pay to Landlord on demand all reasonable expenses, incurred by Landlord in obtaining possession, and in altering, repairing and putting the Premises in good order and condition and in reletting the same, including reasonable fees of attorneys and architects, and all other reasonable expenses of commissions, and Tenant shall pay to Landlord upon the rent payment dates following the date of such reentry to and including the date for the expiration of the Tern of this Lease in effect immediately before such reentry the sums of money which would have been payable by Tenant as rent hereunder on such rent payment dates if Landlord had not reentered and resumed possession of the Premises, deducting only the net amount of rent, if any, which Landlord shall actually receive (after deducting from the gross receipts the expenses, costs, and payments of Landlord which in accordance: with the terms of this Lease would have been borne by Tenant) in the meantime from and by any reletting of the Premises, and Tenant shall remain liable for all sums otherwise payable by Tenant under this Lease, including but not limited to the expenses of Landlord aforesaid, as well as for any deficiency aforesaid, and Landlord shall have the right from time to time to begin and maintain successive actions or other legal proceedings against Tenant for the recovery of such deficiency, expenses, or damages or for a sum equal to any Minimum Rent payment and Additional Rent. The obligation and liability of Tenant to pay the Minimum Rent and Additional Rent shall survive the commencement, prosecution, and termination of any action to secure possession of the building. Nothing herein contained shall be deemed to require Landlord to wait to begin such action or other legal proceedings until the date this Lease would have expired had there not been an Event of Default. 25.6 Tenant hereby waives all right of redemption to which Tenant or any person under it may be entitled by any law now or hereafter in force. Landlord's remedies hereunder are in addition to any remedy allowed by law. In addition, in the event of an Event of Default which results in Landlord's recovering possession of the Premises, Landlord's duty to mitigate Tenant's damages shall be limited to its use of reasonable efforts to relet the Premises. 25.7 In the event of any breach or threatened breach by Tenant of any of the agreements, terms, covenants, or conditions contained in this Lease, Landlord shall be entitled to enjoin such breach or threatened breach and shall have the right to invoke any right or remedy allowed by law, or in equity or by statute or otherwise as though reentry, summary dispossess proceedings, and other remedies were not provided for in this Lease. During the pendency of any proceedings brought by Landlord to recover possession by reason of default, Tenant shall continue all money payments required to be made to Landlord, and Landlord may accept such payments for use and occupancy of the Premises. In such event Tenant waives its right in such proceedings to claim as a defense that the receipt of such money payments by Landlord constitutes a waiver by Landlord of such default. 21 25.8 Landlord shall not be deemed to be in default in the performance of any obligation required to be performed by it hereunder unless and until it has failed to perform such obligation within sixty (60) days after written notice by Tenant to Landlord and any Holder (the name and address of which has been supplied to Tenant) specifying wherein Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than sixty (60) days are required for its performance, then Landlord shall not be deemed to be in default if it shall commence such performance within such sixty (60) day period and thereafter diligently prosecute the same to completion. Holder may perform on behalf of Landlord. Under no circumstances may Tenant terminate this Lease by reason of any one or more defaults by Landlord hereunder. SECTION 26. ADA REQUIREMENTS. Tenant, at its sole expense, shall comply with all requirements of the Americans with Disabilities Act of 1990, as amended default from time to time, and with all rules, regulations, and guidelines thereunder, in connection with the Premises. SECTION 27. ADDITIONAL RENT. Whenever under the terms of this Lease any sum of money is required to be paid by Tenant in addition to the Minimum Rent herein reserved, whether or not such sum is herein designated as Additional Rent or provision is made for the collection of said sum as additional rent, said sum shall nevertheless be deemed Additional Rent and shall be collectible as such with the first installment of rent thereafter failing due hereunder. SECTION 28. NOTICES. All notices, demands, requests, approvals, and consents required or permitted under this Lease ("Notices") shall be in writing and shall be (i) personally delivered against receipt, or (ii) sent by first class certified or registered mail, return receipt requested, postage prepaid, or (iii) sent by a nationally-recognized overnight courier the provides a signed delivery receipt, addressed as follows: If to Landlord: FORTUNEFIRST LLC 3101 N. First Street San Jose, CA 95134 With a copy to: any Holder the name and address of which has been supplied to Tenant If to Tenant: HYUNDAI ELECTRONICS AMERICA 3101 N. First Street San Jose, CA 95134 All notices personally delivered shall conclusively be deemed delivered at the time of such delivery. All notices sent by certified mail shall conclusively be deemed delivered three (3) business days after the deposit thereof in the United States mails. 22 All notices delivered by overnight courier shall conclusively be deemed delivered on the date of such receipted delivery. Any party may designate a change of address by notice to the other party given at least ten (10) days before such change of address is to become effective. SECTION 29. BROKERAGE COMMISSION. Tenant shall defend, indemnify and save harmless Landlord from any claim for commissions or brokerage fees made by any real estate firm, agent, salesman or broker asserting that it is entitled to a fee or commission regarding this Lease. SECTION 30. RECORDATION. The parties agree co execute a memorandum or other short form of this Lease in a form reasonable, acceptable to Landlord and Tenant, which may, at the desire of either party, be recorded among the land records of the jurisdiction where the Premises are located, the expense thereof to be borne by the recording party. This Lease shall not be recorded by either party. SECTION 31. PARTIAL INVALIDITY. If any term, covenant, condition, or provision of this Lease or the application thereof to any person or circumstance shall, at any time; or to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant, condition, and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. SECTION 32. ENTIRE AGREEMENT. This Lease contains the entire agreement between the parties hereto and supersedes in their entirety any and all prior discussions, understandings, or agreements. No agreement hereafter made shall operate to change, modify, terminate, or discharge this Lease in whole or in part unless such agreement is in writing and signed by each of the parties hereto. Landlord has made no representations or promises with respect to the Premises except as are herein expressly set forth. SECTION 33. HEADINGS AND CAPTIONS. The headings and captions of this Lease are for convenience of reference only and are not a part of this Lease. SECTION 34. SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and inure to the benefit of the parties and their respective successor and assigns. SECTION 35. ESTOPPEL CERTIFICATES. 35.1 Upon request by Landlord and within ten (10) days after the date thereof, Tenant shall deliver to Landlord and to such mortgagee or other party as may be designated by Landlord a signed and acknowledged statement setting forth the following. (i) this Lease is unmodified, in full force and effect, free of existing defaults of Landlord and free of defenses against enforceability (or if there have been modifications or defaults, or if Tenant claims defenses against the enforceability hereof, then stating the 23 modifications, defaults. and/or defenses), (ii) the dates to which Minimum Rent and Additional Rent have been paid, (iii) the commencement and expiration dates of the Term, (iv) that Tenant has no outstanding claims against Landlord (or if there are any claims, then stating the nature and amount of such claims); (v) the status of any other obligation of either party under or with respect to this Lease; and (vi) any other matters relating to this Lease or the status of performance of obligations of the parties hereunder as may be reasonably requested by Landlord. In the event that Tenant fails to provide such certificate within ten (10) days after request by Landlord therefor, Tenant shall be deemed to have approved the contents of any such certificate submitted to Tenant by Landlord and Landlord is hereby authorized to so certify. In addition, such failure shall be an Event of Default not subject to any opportunity to cure. 35.2 Within ten (10) days after written request of Tenant, Landlord shall deliver to Tenant and to such other party as may be designated by Tenant, a signed and acknowledged statement setting forth the following: (i) this Lease is unmodified, in full force and effect, free of existing defaults of Tenant, and free of defenses against enforceability (or if there have been modifications or defaults, or if Landlord claims defenses against the enforceability hereof, then stating the modifications, defaults. and/or defenses), (ii) the dates to which Minimum Rent and Additional Rent have been paid; (iii) the commencement and expiration dates of the Term; (iv) that Landlord has no outstanding claims against Tenant (or if there are any claims, then stating the nature and amount of such claims); (v) the status of any other obligation of either party under or with respect to this lease; and (vi) any other matters relating to this Lease or the status of performance of obligations of the parties hereunder as may be reasonably requested by Tenant in the event that Landlord fails to provide such certificate within ten (10) days after request by Tenant therefor, Landlord shall be deemed to have approved the contents of any such certificate submitted to Landlord by Tenant and Tenant is hereby authorized to so certify. SECTION 36. DEFINITION OF LANDLORD. The term "Landlord" as used herein means the Landlord named herein and any subsequent owner of Landlord's estate hereunder for the period of such ownership, but any owner of Landlord's estate hereunder shall be :-relieved of all liability under this Lease after the date that it ceases to be the owner of Landlord's estate (except for any liability arising before such date) provided that the party succeeding to Landlord's estate shall have executed an agreement wherein it assumes and agrees to perform all of Landlord's obligations under this Lease from and after the date it acquire Landlord's estate. Landlord's liability hereunder shall be limited solely to Landlord's interest in the Premises. SECTION 37. WAIVERS. No waiver by Landlord of any provision of this Lease shall be deemed to be a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision. Landlord's consent to or approval of any act by Tenant requiring Landlord's consent or approval shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act by Tenant, whether or not similar to the act so consented to or approved. 24 SECTION 38. PAYMENTS. No payment by Tenant or receipt by Landlord of a lesser amount than the Minimum Rent and Additional Rent herein stipulated shall be deemed to be other than on account of the earliest stipulated Minimum Rent and Additional Rent, nor shall any endorsement or statement on any check, or in any letter accompanying any check, in payment of Minimum Rent and Additional Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's right to recover the balance of such Minimum Rent and Additional Rent or pursue any other remedy in this Lease provided. SECTION 39. NO PARTNERSHIP. It is agreed that nothing contained in this Lease shall be deemed or construed as creating a partnership, joint venture, or any other association between Landlord and Tenant, or cause Landlord to be responsible in any way for the debts or obligations of Tenant, and neither the method of computing Minimum Rent and Additional Rent nor any other provision contained in this Lease nor any acts of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. SECTION 40. NO OPTION. The submission of this Lease Agreement for examination does not constitute a reservation of, or option for, the Premises, and this Lease Agreement becomes effective as a Lease Agreement only upon execution and delivery thereof by Landlord and Tenant. SECTION 41. PERSONAL LIABILITY. Notwithstanding anything to the contrary provided in this Lease, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Lease by Landlord. that there shall be absolutely no personal liability on the part of Landlord, its successors, assigns or any mortgagee in possession (for the purposes of this section, collectively referred to as "Landlord"), with respect to any of the terms, covenants, and conditions of this Lease and that Tenant shall look solely to the equity of Landlord in the Premises for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord of any of the terms, covenants, and conditions of this Lease to be performed by Landlord, such exculpation of liability to be absolute and without any exceptions whatsoever. The foregoing limitation of liability shall be noted in any judgment secured against Landlord and in the judgment index. SECTION 42. MORTGAGEE MODIFICATION. Tenant hereby agrees that it will execute any and all modifications of this Lease requested by Landlord in connection with the financing of the Premises. as long as same do not increase Tenant's obligations hereunder or reduce any rights granted Tenant hereunder. Any provisions granting a mortgagee an opportunity to cure the defaults of Landlord or any provisions extending cure periods or notice periods shall be permitted pursuant to the preceding sentence. SECTION 43. CORPORATE AUTHORITY. If Tenant is a corporation, the persons executing this Lease on behalf of Tenant hereby covenant and warrant that (a) they are duly authorized by appropriate resolution and/or the articles- and bylaws of 25 the corporation to execute this Lease and thereby bind Tenant to all the terms and conditions thereof, (b) Tenant is a duly qualified corporation and all steps have been taken before the execution of this Lease to qualify Tenant to do business in the state where the Premises is situated, (c) all franchise and corporate taxes have been paid as of the date of execution, and (d) all future forms, reports, fees, and other documents necessary to comply with applicable laws will be filed when due. SECTION 44. ENVIRONMENTAL COVENANTS. 44.1 Compliance With Law. Tenant shall conduct, and cause to be conducted, all operations and activity at the Premises in compliance with, and shall in all other respects applicable to the Premises comply with, all applicable present and future federal, state, municipal and other governmental statutes, ordinances, regulations, orders, directives, guidelines and other requirements, and all present and future requirements of common law, concerning the environment (hereinafter called "Environmental Statutes") including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Sections 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Sections 9601 et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et seq., and the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., and (i) those relating to the generation, use, handling, treatment, storage, transportation, release, emission, disposal, remediation or presence of any material, substance, liquid, effluent or product, including, without limitation, hazardous substances, hazardous waste or hazardous materials, (ii) those concerning conditions at, above or below the surface of the ground and (iii) those concerning conditions in, at or outside of buildings. 44.2 Permits. Tenant, in a timely manner, shall obtain and maintain in full force and effect all permits, licenses and approvals, and shall make and file all notifications and registrations, as required by Environmental Statutes. Tenant shall at all times comply with the terms and conditions of any such permits, licenses, approvals, notifications and registrations. 44.3 Documents. Tenant shall provide to Landlord copies of the following, forthwith after each shall have been submitted, prepared or received by Tenant or any occupant of the Premises: (i) all applications and associated materials submitted to any governmental agency relating to any Environmental Statute; (ii) all notifications, registrations reports and other documents, and supporting information, prepared, submitted or maintained in connection with any Environmental Statute; (iii) all permits, licenses, approvals, and amendments or modifications thereof, obtained under any Environmental Statute; and (iv) any correspondence, notice of violation, summons, order, complaint, or other document received by Tenant or any occupant of the Premises pertaining to compliance with any Environmental Statute. 44.4 Tanks. Tenant, without the prior written consent of Landlord, shall not install or cause, suffer or permit the installation of, any above or underground storage tank at the Premises. If Tenant does install or cause, suffer or permit the installation of any such tank, Tenant shall comply with all applicable laws as to its installation, 26 maintenance, operation and closure, including any requirement for the maintenance of liability insurance with respect to risks associated with any such tank. If such liability insurance is required to be maintained, Landlord shall be named as an additional insured thereunder and the provisions of Section 19.3 hereof shall apply thereto. Upon termination of this Lease, Landlord shall have the option of requiring that Tenant, at Tenant's sole cost and expense, remove any tank installed by Tenant and any associated contaminated material and other contamination and perform all tests required by Landlord and any required by Environmental Statutes and any Other applicable governmental requirements and provide Landlord and all required government agencies with the results of such tests in such form as reasonably required by Landlord or as required by law. 44.5 Operations. Tenant shall not cause or suffer or permit to occur at, in, on or under the Premises any generation, use, manufacturing, refining, transportation, emission, release, treatment, storage, disposal, presence or handling of hazardous substances, hazardous wastes or hazardous materials (as such terms are now or hereafter defined under any Environmental Statute) (herein called "Hazardous Substances') or any other material, substance, liquid, effluent or product now or hereafter regulated by any Environmental Statute (also called "Hazardous Substances'), except that construction materials (other than asbestos or polychlorinated biphenyls), office equipment, fuel and similar products (if contained in vehicles) and cleaning solutions, and other maintenance materials that are or contain Hazardous Substances may be used, generated, handled or stored on the Premises, provided such is incident to and reasonably necessary for the operation and maintenance of the Premises as permitted hereunder and is in compliance with all Environmental Statutes and all other applicable governmental requirements. Should any release of any Hazardous Substance occur at the Premises, Tenant shall immediately contain, remove and dispose of off the Premises, such Substances, and any that was contaminated by the release and remedy and mitigate all threats to human health or the environment relating to such release. When conducting any such measures, Tenant shall comply with Environmental Statutes. 44.6 Required Governmental Approval of Property Transfers. If the use of the Premises by Tenant, of any operation or activity conducted at the Premises during the term of this Lease, shall be such as requires, under any present or future Environmental Statute, the obtaining of an approval (herein called an "Environmental Approval of Transfer or Change") by any governmental agency, or an acknowledgment by such agency that such approval is not required, (i) in order to change or transfer ownership of the Premises or any interest in Landlord or in any entity which directly or indirectly controls Landlord, (ii) in order to change or Transfer Tenant's interest in this Lease or any interest in Tenant or in any entity which directly or indirectly controls Tenant or (iii) in connection with: (A) cessation of all or any operations or activity at the Premises for any reason or (B) a change in or transfer of any operations or activity at the Premises or (C) the expiration or termination of this Lease (each of the transactions and occurrences referred to in the foregoing clauses (i), (ii) or (iii) being hereinafter called a "Change"), Tenant, at Tenant's sole cost and expense. shall, in compliance with all Environmental Statutes, apply for, and prior to the Change deliver to Landlord, a copy of the required - -approval or acknowledgment and Tenant shall perform all remedial actions required by 27 such governmental agency for the issuance of the approval, in whole or in part by reason of Tenant's use of the Premises or operations or activities at the Premises during the term of this Lease: provided that as to any Change which is a change or transfer of ownership of the Premises or of an interest in Landlord or in any entity which directly or indirectly controls Landlord. Tenant shall instead (x) promptly comply with any request of Landlord to provide such information, statements or affidavits as to operations and activities at the Premises during the term of this Lease, and as to the use of the Premises by Tenant, as may be determined by Landlord to be necessary, (y) either promptly perform or, at the option of Landlord, reimburse Landlord within 15 days after demand for Landlord's costs of, all remedial actions required by any governmental agency for issuance of the Environmental Approval of Transfer or Change and (z) pay, or reimburse Landlord for, all other costs and expenses which are attributable to the existence of Tenant's tenancy or to Tenant's use of the Premises or to any operation or activity at the Premises during the term of this Lease and were incurred to obtain such required approval or acknowledgment. Tenant covenants, represents and warrants that any application, statement or information made or provided by or through Tenant pursuant to this subsection shall be true and complete. If there should be an Environmental Statute which requires an Environmental Approval of Transfer or Change, but such requirement shall not have been made applicable by Tenant's use of the Premises or operations or activities conducted at the Premises during the term of this Lease, and if an official statement of such non-applicability shall be obtainable from the applicable governmental agency, then, whether or not the obtaining of such statement is required by law, Tenant, at Tenant's sole cost and expense, shall obtain and deliver such statement to Landlord before the change occurs (in the case of a change described in clause (ii) or clause (iii) above) or promptly upon request of Landlord (in the case of a change described in clause (i) above). 44.7 Activities of Others. Tenant agrees that any contracts or agreements of any kind entered into or renewed by Tenant, for the occupancy of or the performance of activities on the Premises will contain the same limitations on the activities of the other contracting party as are placed on Tenant by Sections 44. 1 through 44.5 above. 44.8 Inspection. Tenant agrees to permit Landlord and its authorized representatives to enter, inspect and assess the Premises at reasonable times for the purpose of determining Tenant's compliance with the provisions of this Section 44. Such inspections and assessments may include obtaining samples and performing tests of soil. surface water, groundwater or other media. 44.9 Indemnification. Tenant hereby agrees to indemnify and to hold harmless Landlord of, from and against any and all expense, loss or liability suffered by Landlord by reason of Tenant's breach of any of the provisions of this Section 44, including, but not limited to, (i) any and all expenses that Landlord may incur in complying with any Environmental Statutes, (ii) any and all costs that Landlord may incur in studying, assessing, containing, removing, remedying, mitigating, or otherwise responding to, the 28 release of any Hazardous Substance or waste at or from the Premises, (iii) any and all costs for which Landlord may be liable to any governmental agency for studying assessing, containing, removing, remedying, mitigating, or otherwise responding to, the release of a Hazardous Substance or waste at or from the Premises, (iv) any and all fines or penalties assessed, or threatened to be assessed, upon Landlord by reason of a failure of Tenant to comply with any obligations, covenants or conditions set forth in this Section 44, and (v) any and all legal fees and costs incurred by Landlord in connection with any of the foregoing. 44.10 Modifications. No subsequent modification or termination of this Lease by agreement of the parties, or otherwise shall be construed to waive, or to modify, any provisions of this Section 44, unless the termination or modification agreement or other document so states in writing and makes specific reference to this Section 4.4. SECTION 45. COMPLIANCE WITH LAW. Tenant shall, throughout the term of this Lease, at Tenant's sole cost and expense, promptly comply with all laws, ordinances. notices, orders, rules, regulations and requirements of all federal, state and municipal governments and appropriate departments, commissions, boards and officers thereof, and notices, orders, rules and regulations of the National Board of Fire Underwriters, or any other body now or hereafter constituted exercising similar functions, foreseen or unforeseen, ordinary as well as extraordinary and future as well as present, relating to all or any part of the Premises. exterior as well as interior, structural as well as non-structural, or to the use or manner of use of the Premises or to the sidewalks, parking areas, curbs and access ways adjoining the Premises. Without limiting the generality of the foregoing, Tenant shall keep in force at all times all licenses, consents and permits necessary for the lawful use of the Premises for the purpose herein provided and Tenant shall pay all personal property taxes, income taxes, license fees. and other taxes which are or may be assessed, levied or imposed upon Tenant in connection with Tenant's operation of its business upon the Premises, Tenant shall likewise observe and comply with the requirements of all policies of liability, fire and other insurance at any time in force with respect to the Premises. Notwithstanding the foregoing, Tenant may, in good faith (and wherever necessary, in the name of, but without expense to, Landlord, and having secured Landlord to its reasonable satisfaction by cash, securities, or a surety company bond against loss or damage), contest the validity or application in whole or in part of any such legal requirements and may, pending the final determination of such contest, postpone compliance therewith, but not so as to subject Landlord of any superior landlord to any fine or penalty or to prosecution for a crime, or to cause the Premises, or any part thereof, to be placed in danger of forfeiture, sale, or condemnation. SECTION 46. LANDLORD'S WAIVER OF LIEN. Except as may be expressly provided herein, Landlord hereby waives any lien (other than a judgment lien) of interest it may have in any personal property of Tenant or any subtenant, assignee, licensee. or concessionaire of Tenant, including but not limited to any inventory. machinery, equipment, and trade fixtures of Tenant or any subtenant, assignee, licensee, or concessionaire of Tenant, that may from time to time be located at or upon the Premises. SECTION 47. RULE AGAINST PERPETUITIES. If the rule against perpetuities would invalidate this Lease or any portion hereof or would limit the time 29 during which this entire Lease or any portion hereof shall be effective due to the potential failure of an interest in property created herein to vest within a particular time, then each such interest in property shall be effective only from the date hereof until the passing of twenty-one (21) years after the death of the last survivor of the members of the Senate or the United States of America representing the State of Maryland who arc serving on the date hereof, but each such interest in property shall be extinguished after such time, and all other -interests in property created herein and all other provisions hereof shall remain valid and effective without modification. SECTION 48. EXHIBITS. The following exhibits are attached hereto and form a part of this Lease- A. Legal Description of Premises SECTION 49. TITLE. 49.1 Adverse Possession. Tenant shall not suffer or permit the premises or any portion thereof to be used by the public, as such, without restriction or in such manner as might reasonably tend to impair Landlord's title to the Premises or in such manner as reasonably make possible a claim or claims of adverse usage or adverse possession by the public, as such, or of implied dedication of the Premises or any portion thereof. Condition of Title and Premises. Tenant represents that the Premises, the title thereto, the zoning thereof, the street or streets, sidewalks. parking areas, curbs and access ways adjoining them, any surface and subsurface conditions thereof, and the present uses and nonuses thereof, have been examined by Tenant, and Tenant accepts them in the condition or state in which they now are, or any of them now is, without representation, covenant or warranty, express or implied, in fact or in law, by Landlord and without recourse to Landlord, as to the title thereto, encumbrances thereon, appurtenances, the nature, condition or usability thereof or the use or uses to which the Premises or any part thereof may be put. IN WITNESS WHEREOF, the parties have hereunto set their hands and seas the day and year first written above. LANDLORD: FORTUNEFIRST, LLC By: /s/ T. J. Thomas ------------------------------------ Name: Thomas J. Thomas ---------------------------------- Title: V.P. Finance & CFO --------------------------------- TENANT: 30 HYUNDAI ELECTRONICS AMERICA By: /s/ T. J. Thomas ------------------------------------ Name: Thomas J. Thomas ---------------------------------- Title: V.P. Finance & CFO --------------------------------- 31 EXHIBIT "A" Real property in the City of San Jose, County of Santa Clara, State of California, described as: PARCEL ONE: Parcel 13, as shown on that certain Parcel Map filed for record in the office of the Recorder of the County of Santa Clara, State of California on January 28, 1977, in Book 388 of Maps page(s) 16 through 27. EXCEPTING THEREFROM the underground water rights without rights of surface entry as conveyed to San Jose Water Works, a California corporation, by Deed recorded May 22, 1985, in Book J353, Page 153 of Official Records. APN: 244-17-003 ARB: 243-19-004.01; 243-19-011.01 32 EXHIBIT "B" "CPI Factor" means an amount expressed as a percentage equal to the sum of (a) 100% plus (b) either (i) during the first year of the Initial Term, 0%, or (ii) for each successive year of the Initial Term beginning with the second year of the Initial Term, the excess, calculated as a percentage, of (A) the CPI Index on the first day of each such successive year over (B) the CPI Index on the date hereof; provided, however, (i) in no event shall the CPI Factor ever be less than 100% and (ii) in the event the CPI Index does not exist on the date of any required calculation in this definition, then Landlord shall designate a comparable index published by the government or a recognized financial or academic institution. For purposes hereof, "CPI Index" means The Consumer Price Index for Urban Consumers (CPI-U), All Items, U.S. City Average (1982-1984 equals 100), published by the United States Department of Labor, Bureau of Statistics. 33 TABLE OF CONTENTS
Page ---- EXPLANATORY STATEMENT.................................................................2 SECTION 1. DEFINITION................................................................2 SECTION 2. LEASE OF THE PREMISES.....................................................3 SECTION 3. INITIAL TERM..............................................................3 3.1 Commencement Date; Initial Term........................................3 3.2 Definition of "Term"...................................................3 SECTION 4. LEASE YEAR................................................................3 SECTION 5. MINIMUM RENT..............................................................3 5.1 Minimum Rent...........................................................3 5.2 Payment of Minimum Rent................................................4 5.3 Late Charge; Interest..................................................4 5.4 Use Restrictions.......................................................4 SECTION 6. REAL ESTATE TAXES AND IMPOSITIONS.........................................5 6.1 Payment................................................................5 SECTION 7. UTILITIES.................................................................6 SECTION 8. SUBORDINATION AND NONDISTURBANCE..........................................6 8.1 Agreement..............................................................6 8.2 Lease May Be Superior..................................................6 8.3 Foreclosure............................................................6 8.4 Paramount Lease........................................................7 SECTION 9. ASSIGNMENT AND SUBLETTING.................................................7 9.1 Consent Required.......................................................7 9.2 Additional Requirements................................................8 9.3 Continuing Liability...................................................8 9.4 Proceeds, Etc..........................................................8 9.5 In Bankruptcy..........................................................8 SECTION 10. MAINTENANCE OF PREMISES..................................................9 SECTION 11. TENANT'S ALTERATIONS.....................................................9 11.1 Exterior and/or Structural Alterations.................................9 11.2 Interior Nonstructural Alterations.....................................9 SECTION 12. SIGNS....................................................................9 SECTION 13. OPEN AREAS AND FACILITIES................................................9 13.1 Operation and Maintenance of Open Areas and Facilities................10
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Page ---- SECTION 14. NET LEASE; BOND LEASE...................................................10 14.1 TENANT PAYS ALL CHARGES...............................................10 14.2 BOND LEASE............................................................10 14.3 CANCELLATION RIGHTS...................................................11 SECTION 15. INSURANCE...............................................................11 15.1 Types.................................................................11 15.2 Insured Parties.......................................................12 15.3 Insurers; Replacement.................................................12 15.4 Evidence of Payment...................................................13 15.5 Uninsured Loss........................................................13 15.6 Other Insurance Obtained by Tenant....................................13 15.7 Waiver of Subrogation; Rights under Insurance Policies................13 SECTION 16. INDEMNIFICATION.........................................................14 16.1 Indemnification.......................................................14 16.2 Release...............................................................14 SECTION 17. MECHANICS' LIENS, ETC...................................................14 17.1 No Liens..............................................................14 17.2 Discharge of Liens....................................................15 SECTION 18. Intentionally Omitted...................................................15 SECTION 19. TENANT'S COVENANTS......................................................15 SECTION 20. FIRE OR OTHER CASUALTY..................................................15 20.1 Damage to Premises....................................................15 SECTION 21. EMINENT DOMAIN..........................................................16 21.1 Condemnation of Entire Premises.......................................16 21.2 Partial Condemnation..................................................16 21.3 Award.................................................................17 21.4 Temporary Taking......................................................17 21.5 Outstanding Mortgage..................................................18 SECTION 22. LANDLORD'S RIGHT OF ENTRY...............................................18 SECTION 23. SURRENDER...............................................................18 SECTION 24. HOLDING.................................................................18 SECTION 25. DEFAULTS AND REMEDIES...................................................18
ii TABLE OF CONTENTS (continued)
Page ---- SECTION 26. ADA REQUIREMENTS........................................................22 SECTION 27. ADDITIONAL RENT.........................................................22 SECTION 28. NOTICES.................................................................22 SECTION 29. BROKERAGE COMMISSION....................................................22 SECTION 30. RECORDATION.............................................................23 SECTION 31. PARTIAL INVALIDITY......................................................23 SECTION 32. ENTIRE AGREEMENT........................................................23 SECTION 33. HEADINGS AND CAPTIONS...................................................23 SECTION 34. SUCCESSORS AND ASSIGNS..................................................23 SECTION 35. ESTOPPEL CERTIFICATES...................................................23 SECTION 36. DEFINITION OF LANDLORD..................................................24 SECTION 37. WAIVERS.................................................................24 SECTION 38. PAYMENTS................................................................24 SECTION 39. NO PARTNERSHIP..........................................................25 SECTION 40. NO OPTION...............................................................25 SECTION 42. MORTGAGEE MODIFICATION..................................................25 SECTION 43. CORPORATE AUTHORITY.....................................................25 SECTION 44. ENVIRONMENTAL COVENANTS.................................................26 44.1 Compliance With Law...................................................26 44.2 Permits...............................................................26 44.3 Documents.............................................................26 44.4 Tanks.................................................................26 44.5 Operations............................................................27 44.6 Required Governmental Approval of Property Transfers..................27 44.7 Activities of Others..................................................28 44.8 Inspection............................................................28 44.9 Indemnification.......................................................28
iii TABLE OF CONTENTS (continued)
Page ---- 44.10 Modifications.........................................................29 SECTION 45. COMPLIANCE WITH LAW.....................................................29 SECTION 46. LANDLORD'S WAIVER OF LIEN...............................................29 SECTION 47. RULE AGAINST PERPETUITIES...............................................29 SECTION 48. EXHIBITS................................................................30 SECTION 49. TITLE...................................................................30 49.1 Adverse Possession....................................................30 49.2 Condition of Title and Premises.......................................30
iv RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Maxtor Corporation 500 McCarthy Boulevard Milpitas, CA 95035 Attn: William O. Sweeney, Esq. - -------------------------------------------------------------------------------- SPACE ABOVE THIS LINE FOR RECORDER'S USE SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement") is made and entered into as of August 31, 2001, by and among LASALLE BANK, NATIONAL ASSOCIATION, AS TRUSTEE FOR NOMURA ASSET SECURITIES CORPORATION COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1998-D6 ("Lender"), FORTUNEFIRST, LLC, a California limited liability company ("Landlord"), and MMC TECHNOLOGY, INC., a California corporation ("Tenant"). The effective date of this Agreement shall be the date that Maxtor Corporation, a Delaware corporation, acquires all of the capital stock of Tenant from Hynix (the "Effective Date"). 1. RECITALS. 1.1 Deed of Trust. Lender is the holder of a Promissory Note dated February 27, 1998, in the original principal amount of $47,634,000 made by Landlord, which is secured, inter alia, by that certain Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the "Deed of Trust") and that certain Assignment of Leases and Rents (the "Lease Assignment") covering the real property located at 2001 Fortune Drive, San Jose, California, as more particularly described in the Deed of Trust (the "Premises"), and in the legal description attached hereto as Exhibit A. 1.2 Lease. Landlord and Tenant entered into that certain Lease Agreement, dated as of February 27, 1998, as amended and novated by that certain Lease Amendment and Novation Agreement by and among Landlord, Hynix Semiconductor America Inc., a California corporation ("Hynix"), and Tenant, dated as of August 31, 2001 (as amended and novated, the "Lease"), whereby Landlord demised to Tenant those certain premises consisting of approximately 141,187 square feet of space located within the Premises (the "Demised Premises"). A true and correct copy of the Lease (inclusive of all riders and exhibits thereto) is attached hereto as Exhibit B. 1 2. CONSIDERATION. The terms of the Lease, as amended and novated, constitute a material inducement to Lender's consent thereto and entering into and performing this Agreement. 3. SUBORDINATION OF THE LEASE. As of the Effective Date, the Lease shall be made subject and subordinate to the Deed of Trust. 4. NON-DISTURBANCE. On and after the Effective Date, Lender shall not, in the exercise of any right, remedy or privilege granted by the Deed of Trust or the Lease Assignment, or otherwise available to Lender at law or in equity, disturb Tenant's possession under the Lease so long as: (a) Tenant is not in default under any provision of the Lease or this Agreement at the time Lender exercises any such right, remedy or privilege; (b) The Lease at that time is in full force and effect according to its original terms, or with such amendments or modifications as Lender shall have approved, if such approval is required by the terms of the Deed of Trust or the Lease Assignment; (c) Tenant thereafter continues to fully and punctually perform all of its obligations under the Lease without default thereunder beyond any applicable cure period; and (d) Tenant attorns to Lender, or at the direction of Lender, as provided in Paragraph 5. Without limiting the foregoing, and so long as the foregoing conditions are met, Lender agrees that (i) Tenant will not be named as a party to any foreclosure or other proceeding instituted by Lender to enforce the terms of the Deed of Trust or the Lease Assignment; (ii) any sale or other transfer of the Demised Premises or of the Landlord's interest in the Lease, pursuant to foreclosure or any voluntary conveyance or other proceeding in lieu of foreclosure, will be subject and subordinate to Tenant's possession under the Lease; and (iii) the Lease will continue in full force and effect according to its original terms, or with such amendments as Lender shall have approved, if such approval is required by the terms and conditions of the Deed of Trust or the Lease Assignment. 5. ATTORNMENT. On and after the Effective Date, Tenant shall attorn to Lender, to any receiver or similar official for the Demised Premises appointed at the instance and request, or with the consent, of Lender and to any person who acquires the Demised Premises, or the Landlord's interest in the Lease, or both, pursuant to Lender's exercise of any right, remedy or privilege granted by the Deed of Trust, or otherwise at law or in equity. Without limitation, Tenant shall attorn to any person or entity that acquired the Demised Premises pursuant to foreclosure of the Deed of Trust, or by any proceeding or voluntary conveyance in lieu of such foreclosure, or from Lender, whether by sale, exchange or otherwise. Any attornment to anyone other than Lender shall be conditioned upon Tenant receiving a non-disturbance from such entity. 2 Upon any attornment under this Paragraph 5, the Lease shall continue in full force and effect as a direct lease between Tenant and the person or entity to whom Tenant attorns, except that such person or entity shall not be: (i) liable for any breach, act or omission of any prior landlord; (ii) subject to any offsets, claims or defenses which Tenant might have against any prior landlord; (iii) bound by any rent or additional rent or other payment in lieu of rent which Tenant might have paid to any prior landlord more than thirty (30) days in advance of its due date under the Lease or which such person or entity has physical possession of; (iv) bound by any amendment or modification of the Lease made without Lender's consent, where such consent is required by the Deed of Trust; (v) bound by any notice given by Tenant to Landlord, whether or not such notice is given pursuant to the terms of the Lease, unless a copy thereof was then also given to Lender; or (vi) be liable for any security deposit or other sums held by any prior landlord, unless actually received. The person or entity to whom Tenant attorns shall be liable to Tenant under the Lease only during such person or entity's period of ownership, and such liability shall not continue or survive as to the transferor after a transfer by such person or entity of its interest in the Lease and the Demised Premises. 6. REPRESENTATIONS AND WARRANTIES. 6.1 Joint and Several. As of the Effective Date, Landlord and Tenant hereby jointly and severally represent and warrant to Lender as follows regarding the Lease: (a) A true and correct copy of the Lease (inclusive of all riders and exhibits thereto) is attached as Exhibit B to the counterpart of this Agreement being delivered to Lender. There are no other oral or written agreements, understandings or the like between Landlord and Tenant relating to the Demised Premises or the Lease transaction. (b) Tenant has accepted possession of the Demised Premises, is in occupancy thereof under the Lease, and the term commenced on February 27, 1998. (c) Under the Lease, Tenant is presently obligated to pay rent without present right of defense or offset, at the rate of $162,365.05 per month. Rent is paid through and including August 1, 2001. No rent has been paid more than thirty (30) days in advance, and Tenant has no claim against the Landlord for any deposits or other sums. 3 (d) Except as disclosed in this Agreement, The Lease has not been modified, altered or amended in any respect. (e) All of the improvements contemplated by the Lease have been entirely completed as required therein. (f) The addresses for notices to be sent to Tenant and Landlord are as set forth in the Lease. (g) To Tenant's knowledge, Tenant has no right of first refusal, option or other right to purchase the Premises or any part thereof, including, without limitation, the Demised Premises. 6.2 Several. As of the Effective Date, Landlord and Tenant hereby severally represent and warrant to Lender with respect to themselves, but not with respect to one another: (a) The execution of the Lease was duly authorized, the Lease was properly executed and is in full force and effect and is valid, binding and enforceable against Tenant and Landlord and there exists no default, nor state of facts which with notice, the passage of time, or both, could ripen into a default, on the part of either Tenant or Landlord. (b) There has not been filed by or against nor, to the best of the knowledge and belief of the representing party, is there threatened against or contemplated by, Landlord or Tenant, a petition in bankruptcy, voluntary or otherwise, any assignment for the benefit of creditors, any petition seeking reorganization or arrangement under the bankruptcy laws of the United States or of any state thereof, or any other action brought under said bankruptcy laws. (c) There has not been any assignment, hypothecation or pledge of the Lease or rents accruing under the Lease, other than pursuant to the Deed of Trust and the Lease Assignment. Tenant makes the representation set forth in this subparagraph only to its best knowledge and belief. 7. RENTS. Landlord and Tenant jointly and severally acknowledge that the Lease Assignment provides for the direct payment to Lender of all rents and other monies due and to become due to Landlord under the Lease upon the occurrence of certain conditions as set forth in the Lease Assignment without Lender's taking possession of the Demised Premises or otherwise assuming Landlord's position or any of Landlord's obligations under the Lease. Upon receipt from Lender of written notice to pay all such rents and other monies to or at the direction of Lender, Landlord authorizes and directs Tenant thereafter to make all such payments to or at the direction of Lender, releases Tenant of any and all liability to Landlord for any and all payment so made, and shall defend, indemnify and hold Tenant harmless from and against any and all claims, demands, losses, or liabilities asserted by, through or under Landlord (except by Lender) for any and all payments so made. Upon receipt of such notice, Tenant thereafter shall pay all monies then due and becoming due from Tenant under the Lease to Lender or at the direction of 4 Lender, notwithstanding any provision of the Lease to the contrary. Tenant agrees that neither Lender's demanding or receiving any such payments, nor Lender's exercising any other right, remedy, privilege, power or immunity granted by the Deed of Trust or the Lease Assignment, will operate to impose any liability upon Lender for performance of any obligation of Landlord under the Lease unless and until Lender elects otherwise in writing. Such payments shall continue until Lender directs Tenant otherwise in writing. Tenant agrees not to pay any rent under the Lease more than thirty (30) days in advance without Lender's consent. The provisions of this Paragraph 7 will apply from time to time throughout the term of the Lease. 8. CURE. If Tenant becomes entitled to terminate the Lease or offset, withhold or abate rents because of any default by Landlord, then Tenant shall give Lender written notice specifying Landlord's default. Lender then shall have the right, but not the obligation, to cure the specified default within the following time periods: (a) Fifteen (15) days after receipt of such notice with respect to defaults that can be cured by the payment of money; or (b) Thirty (30) days after receipt of such notice with respect to any other default; unless the cure requires Lender to obtain possession of the Demised Premises, in which case such thirty (30) day period shall not commence until Lender acquires possession, so long as Lender proceeds promptly to acquire possession of the Demised Premises with due diligence, by foreclosure of the Deed of Trust or otherwise. Nothing contained in this Paragraph 8 shall require Lender to commence or continue any foreclosure or other proceedings, or, if Lender acquires possession of the Demised Premises, to continue such possession, if all defaults specified by Tenant in its notice are cured. Possession by a receiver, or other similar official appointed at the instance, or with the consent, of Lender shall constitute possession by Lender for all purposes under this Paragraph. 9. ESTOPPEL LETTERS. Whenever reasonably requested by Lender, Landlord and Tenant from time to time shall severally execute and deliver to or at the direction of Lender, and without charge to Lender, one or more written certifications of all of the matters as set forth in Paragraph 6, whether Tenant has exercised any renewal option or options and any other information the Lender may reasonably require to confirm the current status of the Lease, including, without limitation, a confirmation that the Lease is and remains subordinated as provided in this Agreement. 10. CASUALTY AND EMINENT DOMAIN. Landlord and Tenant jointly and severally agree that the Deed of Trust permits Lender, at its option, to apply to the indebtedness from time to time secured by the Deed of Trust any and all insurance proceeds payable with respect to any casualty loss at the Demised Premises and any and all awards or other compensation that may be payable for the condemnation of all or any portion of the Demised Premises, or any interest therein, or by way of negotiated settlement or conveyance in lieu of condemnation; and Landlord and Tenant jointly and severally consent to any such application by 5 Lender. Notwithstanding the foregoing, Landlord and Lender agree that any and all insurance or condemnation proceeds payable with respect to Tenant's property, or the interruption or relocation of Tenant's business (except for rental loss insurance proceeds) will be paid to Tenant, so long as they do not reduce the proceeds otherwise payable to Lender. 11. NOTICES. All notices, demands, and other communications that must or may be given or made in connection with this Agreement must be in writing and, unless receipt is expressly required, will be deemed delivered or made five (5) days after having been mailed by registered or certified mail, return receipt requested, or by express mail, in any event with sufficient postage affixed, and addressed to the parties as follows: TO LENDER: CAPMARK SERVICES, L.P. 245 Peachtree Center Avenue, N.E. Suite 1800 Atlanta, GA 30303 Attn: Asset Management Group TO LANDLORD: FORTUNEFIRST, LLC 3101 North First Street San Jose, CA 95134 Attn.: Manager TO TENANT: MMC TECHNOLOGY, INC. 2001 Fortune Drive San Jose, CA 95134 Attn.: Manager COPY TO: MAXTOR CORPORATION 500 McCarthy Boulevard Milpitas, CA 95035 Attn.: General Counsel Such addresses may be changed by notice pursuant to this Paragraph 11; but notice of change of address is effective only upon receipt. Landlord and Tenant jointly and severally agree that they will furnish Lender with copies of all notices relating to the Lease. All communications to Lender shall reference CapMark Loan No.: 400030616. 12. SUCCESSORS AND ASSIGNS: As used in this Agreement, the word "Tenant" shall mean Tenant and any subsequent holder or holders of an interest under the Lease, as the text may require, provided that the interest of such holder is acquired in accordance with the terms and provisions of the Lease and the word "Lender" shall mean Lender or any other subsequent holder or holders of the Deed of Trust or any party acquiring title to the Demised Premises by purchase at a foreclosure sale, by deed of the Lender, or otherwise. Subject to the foregoing, this Agreement shall bind and inure to the benefit of Landlord, Tenant and Lender, their legal representatives, successors and assigns. The terms Lease, Deed of Trust and Lease Assignment shall include any and all amendments, modifications, replacements, substitutions, extensions, renewals and supplements thereto. 6 13. FURTHER ASSURANCES. Landlord and Tenant from time to time shall execute and deliver at Lender's request all instruments that may be necessary or appropriate to evidence their agreement hereunder provided such instrument neither increases Tenant's obligations or decreases its rights under the Lease. 14. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all such counterparts shall constitute one and the same instrument. 15. SEVERABILITY. A determination that any provision of this Agreement is unenforceable or invalid shall not affect the enforceability or validity of any other provision, and any determination that the application of any provision of this Agreement to any person or to particular circumstances is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. REMAINDER OF PAGE LEFT INTENTIONALLY BLANK 7 16. ATTORNEYS' FEES. If any legal action, arbitration, or other proceeding is commenced to enforce any provision of this Agreement, the prevailing party shall be entitled to an award of its actual expenses, including reasonable attorneys' fees. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. LENDER: LASALLE BANK, NATIONAL ASSOCIATION, AS TRUSTEE FOR NOMURA ASSET SECURITIES CORPORATION COMMERCIAL MORTGAGE PASS- THROUGH CERTIFICATES, SERIES 1998-D6 By: CapMark Services, L.P., a Texas limited partnership, its authorized agent By: Pearl Mortgage, Inc., a Delaware corporation, its sole general partner By: /s/ Thomas J. Bauer ---------------------------- Name: Thomas J. Bauer -------------------------- Title: Servicing Officer LANDLORD: FORTUNEFIRST, LLC, a California limited liability company By: /s/ Thomas J. Thomas ------------------------------------ Name: Thomas J. Thomas ---------------------------------- Title: CFO --------------------------------- TENANT: MMC TECHNOLOGY, INC., a California corporation By: /s/ Taj Giulamani ------------------------------------ Name: Taj Giulamani ---------------------------------- Title: VP Finance --------------------------------- 8 EXHIBIT A Real property in the City of San Jose, County of Santa Clara, State of California, described as PARCEL ONE: Parcel 13, as shown on that certain Parcel Map filed for record in the office of the Recorder of the County of Santa Clara, State of California on January 28, 1977, in Book 388 of Maps page(s) 16 through 27. EXCEPTING THEREFROM the underground water rights without rights of surface entry as conveyed to San Jose Water Works, a California corporation, by Deed recorded May 22, 1985, in Book J353, Page 153 of Official Records. APN: 244-17-003 ARB: 243-19-004.01; 243-19-011.01 9 EXHIBIT B [Copy of Lease] 10 STATE OF GEORGIA ) ) ss. COUNTY OF FULTON ) On 8-28-01 before me, Geryle D. Smith, Notary Public, personally appeared Thomas J. Bauer, , personally known to me - -------------- Or proved to me on the basis of satisfactory evidence - -------------- to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal /s/ Geryle D. Smith ------------------------------------ Geryle D. Smith SIGNATURE OF NOTARY PUBLIC (S E A L) 11 STATE OF CALIFORNIA ) ) ss. COUNTY OF SANTA CLARA ) On Aug. 30, 2001 before me, Joan L. Miller, Notary Public, personally appeared Taj Giulamani, , personally known to me - -------------- Or proved to me on the basis of satisfactory evidence - -------------- to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal /s/ Joan L. Miller --------------------------------------- Joan L. Miller SIGNATURE OF NOTARY PUBLIC (S E A L) 12 STATE OF CALIFORNIA ) ) ss. COUNTY OF SANTA CLARA ) On 8-30-01 before me, Joan L. Miller, Notary Public, personally appeared Thomas J. Thomas, , personally known to me - -------------- Or proved to me on the basis of satisfactory evidence - -------------- to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal /s/ Joan L. Miller --------------------------------------- Joan L. Miller SIGNATURE OF NOTARY PUBLIC (S E A L) 13 EX-10.2 4 f76661orex10-2.txt EXHIBIT 10.2 Exhibit 10.2 TERMINATION OF LEASE AGREEMENT THIS TERMINATION OF LEASE AGREEMENT ("Agreement") is executed effective September 30, 2001, by and between PRATT LAND LIMITED LIABILITY COMPANY, a Colorado limited liability company ("LANDLORD") and MAXTOR CORPORATION, a Delaware corporation ("TENANT") WITNESSETH: WHEREAS, LANDLORD and TENANT are parties to certain lease agreements ("Lease") as follows with respect to vacated premises located in Longmont, Colorado ("Vacated Premises"): 1821 Lefthand Circle Lease dated October 19, 1994 1841 Lefthand Circle Lease dated October 19, 1994 1851 Lefthand Circle Lease dated October 19, 1994 1900 Pike Road Lease dated February 24, 1995 2040 Miller Drive Lease dated February 28, 1995 2040 Miller Drive Lease dated June 20, 1995 2120 Miller Drive Lease dated October 27, 1998 2121 Miller Drive Lease dated October 19, 1994 2190 Miller Drive Lease dated October 19, 1994 WHEREAS, LANDLORD and TENANT executed a lease agreement dated November 2, 1999 for premises located at 2452 Clover Basin Drive, Longmont, Colorado ("2452"), containing Paragraph 39.4 - Termination of Existing Leases. WHEREAS, LANDLORD and TENANT desire herein to enter into an Agreement with respect to termination of the remaining term of each of the Vacated Premises, with the exception of the lease agreement for 2452. NOW, THEREFORE, in consideration of mutual covenants and conditions contained herein and for such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. TENANT acknowledged and affirms that the lease agreement for 2452 is in full force and effect, and TENANT occupies 2452. 2. Effective Sunday, September 30th, 2001, TENANT has vacated the Vacated Premises. 3. TENANT acknowledged and affirms that the lease agreement for 2150 Miller Drive executed September 22, 1998 and amended by Addendum executed April 17, 2001, is in full force and effect, and TENANT occupies the premises. 4. LANDLORD hereby terminates the lease agreements for the Vacated Premises effective midnight, October 1, 2001, subject to the terms and conditions of Paragraph 39.4 - Termination of Leases as defined in the lease agreement for 2452. 5. Nothing in this Agreement shall relieve TENANT or LANDLORD from each of their respective indemnification obligations under Paragraph 21 of each lease relating to Environmental compliance. 6. Upon execution of this Termination of Lease Agreement, TENANT hereby releases and forever discharges LANDLORD, its agents, contractors, employees, successors and/or assigns, from any and all actions, causes of action, liabilities, suits, claims, damages, costs or expenses, including attorneys' fees, now existing or hereafter arising, whether known or unknown, arising out of or resulting from each lease, except as noted in Section 5 above. 7. Subject to TENANT'S compliance with Section 4 above, and the payment of all rents and other charges due under the respective leases, LANDLORD hereby releases and forever discharges TENANT, its agents, contractors, employees, successors and/or assigns, from any and all actions, causes of action, liabilities, suits, claims, damages, costs or expenses, including attorneys' fees, now existing or hereafter arising, whether known or unknown, arising out of or resulting from each lease, except as noted in Section 5 above. 8. This Agreement and the releases contained herein shall inure to the benefit of and be binding upon successors, legal representatives and assigns of the parties hereto. 9. In the event of any conflict between this Agreement and the provisions of each Lease, this Agreement shall control. In the event of any controversy, claim or dispute between the parties affecting or related to the subject matter or performance of this Agreement, the prevailing party shall be entitled to recover from the non-prevailing party all of its reasonable expenses, including but not limited to attorneys' fees, accountant's fees and costs. IN WITNESS WHEREOF, the parties hereto have executed this Termination of Lease Agreement as of the date first written above. LANDLORD: TENANT: PRATT LAND LIMITED LIABILITY MAXTOR CORPORATION COMPANY By: /s/ Richard D. Gonzales By: /s/ William Sweeney ----------------------------- ---------------------------------- Richard D. Gonzales William Sweeney Manager Assoc. General Counsel - --------------------------------- -------------------------------------- Title Title EX-10.3 5 f76661orex10-3.txt EXHIBIT 10.3 EXHIBIT 10.3 GUARANTY This Guaranty (this "Guaranty") is made as of September 2, 2001, by Maxtor Corporation, a corporation organized and existing under the laws of the State of Delaware with its office at 500 McCarthy Boulevard, Milpitas, California 95035 ("Guarantor"), to and for the benefit of CIT Technologies Corporation, a corporation organized under the laws of the State of Michigan, successor in interest to AT&T Commercial Finance Corporation and its assignees, with an address at 2285 Franklin Road, 2nd Floor, Bloomfield Hills, Michigan 48302, and its assignees (collectively the "Beneficiary"). RECITALS A. Beneficiary and Hynix Semiconductor America Inc., formerly known as Hyundai Electronics America, Inc. ("HSA"), entered into that certain Master Equipment Lease Agreement, (as amended, modified, renewed, extended, restated or supplemented, the "Master Lease") dated January 17, 1997, under which Beneficiary agreed to lease to HSA certain media manufacturing, assembly and test equipment. B. Subsequent to the execution of the Master Lease, HSA and Beneficiary entered into Master Equipment Lease Agreement Schedules (as amended, modified, renewed, extended, restated or supplemented, the "Schedules"), pursuant to which Beneficiary leased to HSA certain equipment, as more particularly described in the Schedules (the "Equipment"). C. Pursuant to those certain Assignment and Assumption Agreements, dated October 1, 1998, October 10, 1998, March 31, 1999 and June 18, 1999, by and between HSA and MMC Technology Inc. ("MMC"), HSA assigned to MMC all of HSA's right, title and interest as Lessee, in and to certain of the Schedules and the Master Lease relating to said Schedules, which Schedules are listed on the attached Exhibit A (as amended, modified, renewed, extended, restated or supplemented, the "Assigned Equipment Schedules"), and MMC assumed all such right, title, interest and obligations relating thereto (collectively, the "MMC Assignment and Assumption Documents"). Pursuant to the MMC Assignment and Assumption Documents, HSA acknowledged and agreed that it would remain responsible for all obligations imposed upon the Lessee under the Assigned Equipment Schedules. D. Pursuant to that certain Guaranty (the "Original Guaranty"), dated July 17, 1997, Hyundai Electronics Industries Co., Ltd. (now known as Hynix Semiconductor Inc.) ("HEI") guaranteed the payment and performance of HSA's obligations under the Original Agreements, including the Assigned Equipment Schedules and other obligations. In conjunction with the MMC Assignment and Assumption Documents, HEI executed and delivered in favor of Beneficiary Confirmations of Guaranty, pursuant to which HEI acknowledged and confirmed that the Original Guaranty continued in full force and effect. E. Pursuant to that certain Agreement and Plan of Reorganization dated as of August 15, 2001, between and among HSA, MMC, Lime Acquisition Corporation ("Merger Sub") and Guarantor, Guarantor intends to acquire MMC from HSA through the merger of Merger Sub with and into MMC (the "Merger"), with MMC being the surviving corporation. Pursuant to and as a requirement for authorization of the Merger, Guarantor has agreed to guarantee the payment and performance of MMC's obligations under the Assigned Equipment Schedules and the MMC Assignment and Assumption Documents (the Assigned Equipment Schedules and the MMC Assignment and Assumption Documents are herein collectively referred to as the "Agreements".) F. Prior to the consummation of the Merger, MMC was a wholly owned subsidiary of HSA. G. Upon consummation of the Merger, MMC shall be a wholly-owned subsidiary of Guarantor and Guarantor will derive commercial benefit from the provisions of this Guaranty. H. The Original Guaranty shall remain in full force and effect. The Original Guaranty and this Guaranty and any other Guaranty given at any time by any person or entity in favor of Beneficiary relating to any of the Agreements are intended to be the joint and several obligations of said guarantors. AGREEMENT NOW, THEREFORE, Guarantor agrees as follows: 1. Guaranty and Indemnity 1.1 In order to induce Beneficiary to consent to the Merger and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby irrevocably and unconditionally guarantees to Beneficiary, as a primary obligor and not as merely a surety, the due, full and punctual observance and performance of all of the terms, conditions and covenants on the part of MMC contained in the Agreements and the payment of each and every sum which from time to time MMC is liable to pay under the Agreements (including interest accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or similar proceeding, relating to MMC, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) and which is not paid on the due date (whether by acceleration or otherwise), and accordingly Guarantor undertakes to pay any such sum immediately on Beneficiary's request. 1.2 Guarantor hereby irrevocably and unconditionally guarantees to pay interest (both before and after judgment) on all such sums demanded pursuant to Section 1.1 for the period from and including the date of first demand for payment thereof until payment in full, such interest being payable and calculated at the rate and in the manner stipulated in the Agreements in respect of overdue amounts (or if there is no such stipulation in the Agreements, then at the highest prime rate published in the "Money Rates" section of The Wall Street Journal on the date of first demand for payment plus two percent (2%) per annum). (If The Wall Street Journal no longer publishes prime rate information, Beneficiary shall select a different publication and furnish Guarantor with notice of said selection.) 1.3 Guarantor shall indemnify and hold Beneficiary harmless on demand against any loss sustained by Beneficiary as a result of any of MMC's payment obligations under the 2 Agreements being or becoming void, voidable or unenforceable for any reason whatsoever, whether or not known to Beneficiary. 1.4 The obligations of Guarantor hereunder shall be continuing and accordingly shall not be satisfied by any intermediate payment of any sum outstanding under the Agreements but shall remain in full force and effect until all sums which may at any time be outstanding under the Agreements have been paid in full and all other obligations of MMC under the Agreements have been discharged in full. 1.5 Beneficiary shall not be obligated, before making any demand of Guarantor hereunder, to make any demand of MMC or any other person or entity directly or indirectly obligated under the Agreements (an "Other Person"), to take any legal proceedings against MMC or any Other Person, to make or file any claim in a winding-up or dissolution of MMC or any Other Person, or to exercise any right which Beneficiary may have under any security or against any other guarantor or surety for the obligations of MMC under the Agreements. 1.6 Guarantor hereby waives notice of acceptance of this Guaranty and notice of any liability to which it may apply, and waives diligence, presentment, demand of payment, protest, notice of dishonor, nonperformance, or nonpayment of any such liability, suit or taking of other action by Beneficiary against, and any other notice to, any party liable thereon (including Guarantor or any other guarantor), all affirmative defenses, offsets and counterclaims against Beneficiary, any right to the benefit of any security or statute of limitations, any requirement that Beneficiary proceed first against MMC or any Other Person, any other guarantor or any collateral security, and all defenses based on suretyship or impairment of collateral. Guarantor hereby waives any right to require that Beneficiary apply any payments or proceeds received toward satisfaction of the obligations guaranteed hereunder in any particular order, including any right to require Beneficiary to apply payments first to principal. Guarantor hereby unconditionally and irrevocably waives and releases any and all claims (as defined in and under Section 101 of Title 11, United States Code and any successor statute or code) against MMC now or hereafter arising out of or related directly or indirectly to any of the obligations of Guarantor under the Guaranty or any liabilities of MMC to Beneficiary, including (without limitation) any and all such claims arising from rights of subrogation, indemnity, reimbursement, contribution or setoff of Guarantor against MMC, whether arising by contract or otherwise. 1.7 Beneficiary may, at any time and from time to time, without the consent of or notice to Guarantor, without incurring any responsibility to Guarantor, and without impairing or releasing the obligations of Guarantor under this Guaranty: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew or alter, any of the obligations guaranteed hereunder, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guarantee herein made shall apply to the obligations guaranteed hereunder as so changed, extended, renewed or altered; (b) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or 3 mortgaged to secure or howsoever securing, the obligations guaranteed hereunder any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against MMC or any Other Person or others or otherwise act or refrain from acting; (d) settle or compromise, as against MMC or any Other Person, any of the obligations guaranteed hereunder, any security therefor, or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof; (e) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of MMC to Beneficiary under the Agreements regardless of what liability or liabilities of MMC remain unpaid; (f) consent to or waive any breach of, or any act, omission or default under the Agreements or otherwise amend, modify or supplement the Agreements; and/or (g) act or fail to act in any manner referred to in this Guaranty which may deprive Guarantor of its right to subrogate against MMC to recover full indemnity for any payments made pursuant to this Guaranty. 1.8 The obligations of Guarantor hereunder are absolute, continuing, unlimited, independent and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, diminished, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including without limitation: (a) any extension of time (whether as to payment or otherwise) or other indulgence given by Beneficiary to MMC or any Other Person in respect of any obligation of MMC or any Other Person under the Agreements; (b) any variation of any provision of the Agreements or this Guaranty (whether or not Guarantor is a party to or cognizant of the same); (c) any action or inaction by Beneficiary as contemplated in Section 1.7; (d) any illegality, invalidity, irregularity or unenforceability of any provision of the Agreements or of any part of the obligations guaranteed hereunder; (e) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by MMC against Beneficiary; (f) any dissolution, winding-up or corporate reorganization of MMC or Guarantor; 4 (g) any transfer or extinction of any of the liabilities of MMC or Guarantor by any law, regulation, decree, judgment, order or similar instrument; (h) any other act, omission, circumstance or thing which, but for this provision, would or might constitute a legal or equitable discharge or defense of a surety; (i) the failure by the Beneficiary to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral relating to the obligations guaranteed hereunder; (j) any judicial or governmental action affecting Beneficiary, the Equipment, the Agreements, or the obligations guaranteed hereunder, including, but not limited to, Beneficiary's release from the obligations guaranteed hereunder or the rejection or disaffirmance of the Agreements or other agreement or any of the terms thereof; (k) any assignment or transfer of any rights relating to the obligations guaranteed hereunder; or (l) the disallowance of all or any portion of Beneficiary's claim(s) for repayment of the guaranteed obligations under any bankruptcy or insolvency law or any other law regarding the rights of creditors generally, including, without limitation, Section 502 of Title 11 of the United States Code. 1.9 Any moneys received or recovered by Beneficiary hereunder may at its discretion be credited to any suspense or impound account and may be held in that account for so long as it thinks fit pending their application at its discretion from time to time in or towards payment of sums from time to time falling due from MMC under the Agreements. 1.10 So long as any sums are or may become outstanding under the Agreements, any right which Guarantor may have by reason of the performance of its obligations hereunder: (a) to be indemnified by MMC; (b) to prove in a winding-up of MMC for any moneys owed to it; (c) to claim any contribution from any other surety for MMC's obligations under the Agreements; (d) to take the benefit, in whole or in part, of any security held by Beneficiary for the obligations of MMC under the Agreements; or (e) to be subrogated to any of Beneficiary's rights under the Agreements: shall not be exercisable by it without the prior written consent of Beneficiary and then only in such manner and upon such terms as Beneficiary requires, and Guarantor shall hold any moneys at any time received or recovered by it as a result of the exercise of any such right in trust for 5 Beneficiary for application in or towards payment of sums from time to time falling due from MMC under the Agreements. 1.11 Guarantor shall indemnify Beneficiary against any loss or expense, including legal fees, which it may sustain or incur as a consequence of any default by Guarantor in the performance of any of the obligations expressed to be assumed by it herein. 1.12 Guarantor agrees that all payments made by MMC or Guarantor to Beneficiary will, when made, be final. Guarantor agrees that if any such payment is recovered from or repaid by Beneficiary, in whole or in part, in any bankruptcy, insolvency or similar proceeding instituted by or against MMC or Guarantor, this Guaranty shall continue to be fully applicable to the obligations guaranteed hereunder to the same extent as though the payment so recovered or repaid had never been originally made. 2. Deductions and Taxes 2.1 All sums payable by Guarantor pursuant to this Guaranty (collectively, the "Payments") shall be paid, except to the extent required by law in each case: (a) free of any restriction or condition; (b) without deduction or withholding on account of any other amount, whether by way of set-off or otherwise; and (c) free and clear and without any deduction or withholding on account of any tax. 2.2 If Guarantor is required at any time under any law to withhold or deduct any tax from any Payment, the sum payable by Guarantor in respect of which such withholding or deduction is required to be made shall be increased to the extent necessary to ensure that, after the making of the required withholding or deduction, Beneficiary receives and retains (free from any liability in respect of any such withholding or deduction) a net sum equal to the sum which it would have received and retained if no such withholding or deduction had been made or required to be made. Any such withheld or deducted amount shall be immediately paid to the competent tax office, and Guarantor shall obtain from the competent tax authorities and forward to Beneficiary a certificate of payment of such withholding tax or deduction in such form as shall be acceptable to the tax authorities having jurisdiction over Beneficiary. 3. Representations and Warranties 3.1 Guarantor represents and warrants to Beneficiary that: (a) it is duly incorporated and validly existing under the laws of the State of Delaware and has the necessary corporate power to enter into, exercise its rights and timely perform and comply with its obligations under this Guaranty; 6 (b) all corporate action required on the part of Guarantor, its shareholders, directors and officers to authorize this Guaranty and its execution and performance have been properly taken in accordance with the laws of the State of Delaware and its Certificate of Incorporation or other constitutional documents, and this Guaranty has been validly executed and constitutes legal, valid, and binding obligations on its part enforceable in accordance with the terms hereof; (c) all approvals (governmental or otherwise) which are required to enable Guarantor to enter into this Guaranty and to perform and comply with its obligations hereunder have been obtained and are in full force and effect; (d) entering into this Guaranty will not infringe or constitute a default or breach of any other agreement to which Guarantor is a party, which could reasonably be expected to have a Material Adverse Effect (as hereinafter defined); (e) there is no current, pending or, so far as Guarantor is aware, threatened litigation, arbitration or administrative proceeding against or affecting Guarantor before any court, governmental agency or arbitrator which may, in any one case or in the aggregate, be reasonably expected to have a Material Adverse Effect (as hereinafter defined). (f) its obligations to pay principal, interest and all other amounts payable hereunder rank and will continue to rank at least pari passu in all respects with all other present and future unsecured and non-subordinated loans, debts, guarantees or other obligations, except for such claims as may be preferred by operation of law; and (g) Guarantor is the legal and beneficial owner of all of the issued and outstanding stock of MMC. For purposes of this Guaranty, the term "Material Adverse Effect" shall mean a material adverse effect on or relating to (i) the conditions, operations, assets, businesses or prospects of MMC or Guarantor; (ii) MMC's or Guarantor's ability to pay or perform its obligations under the Agreements or this Guaranty, as applicable, or (iii) Beneficiary's ability to exercise its rights and/or enforce its remedies under the Agreements or this Guaranty. 4. Covenants of Guarantor; Conditions to Effectiveness of Guaranty. 4.1 Guarantor hereby covenants with Beneficiary that for so long as the Agreements remain in effect: (a) it will furnish to Beneficiary: (i) as soon as the same become available, copies of all documents sent to Guarantor's creditors generally in their capacity as such; 7 (ii) with reasonable promptness, details of any material litigation, arbitration or administrative proceeding current or threatened by or against or otherwise affecting Guarantor, which could reasonably be expected to have a Material Adverse Effect; and (iii) within such period as Beneficiary may specify, all such other information relating to its financial condition and business operations as Beneficiary may reasonably request; (b) it will promptly advise Beneficiary in writing upon becoming aware of: (i) any material adverse factor which may inhibit Guarantor in the performance of its obligations hereunder, including, without limitation, any material adverse change in Guarantor's, MMC's, or any of its or their subsidiaries' financial condition; and (ii) any such current, pending or threatened litigation, arbitration of administrative proceeding as is referred to in Section 3.1(e); (c) it will at all times comply with any law or directive and any conditions of any consent relating to this Guaranty; (d) it will ensure that the payment obligations hereunder rank and will at all times rank at least equally and ratably in all respects with all its other unsecured and unsubordinated indebtedness, except for such claims as may be preferred by operation of law; (e) it will not merge or consolidate with or into any other corporation unless (i) MMC is not in default under its obligations under the Agreements; (ii) Guarantor is not in default under this Guaranty; (iii) Guarantor is the surviving entity of any such merger or consolidation; and (iv) Guarantor's net worth immediately after such merger or consolidation shall be at least equal to Guarantor's net worth immediately preceding such merger or consolidation. The reference in this Section 4.1(e) to "net worth" shall mean, on the particular date of determination, all shareholder's equity on Guarantor's balance sheet determined in accordance with generally accepted accounting principles consistently applied; and (f) it will not take any step with a view to dissolution, liquidation or winding-up. 4.2 As to each Agreement, this Guaranty shall become effective automatically and without further action upon delivery by Guarantor to Beneficiary of an acknowledgement substantially in the form attached as Exhibit B hereto confirming that Guarantor has received and reviewed the Agreement and that the Agreement is to be included as one of the "Agreements" (as defined in this Guaranty). 8 5. Calculations and Evidence 5.1 The entries made in the accounts maintained by Beneficiary in respect of this Guaranty or the Agreements in accordance with its usual practice shall, in the absence of manifest error, be conclusive evidence of the existence and amounts of the obligations of Guarantor and/or MMC therein recorded. 5.2 A certificate issued by Beneficiary as to any applicable rate of interest, lease rate factor or daily interest charge, the amount advanced under the Agreements or any sum, fee or other payment payable to it under this Guaranty or the Agreements and any other certificate, determination, notification or opinion of Beneficiary provided for in this Guaranty or the Agreements shall, in the absence of manifest error, be conclusive evidence that such is so payable or as to any other matter covered thereby. 6. Set-Off 6.1 Guarantor authorizes Beneficiary, without prior notice to Guarantor, to set-off any liabilities of Beneficiary to MMC or Guarantor in or towards the satisfaction of all or any of the obligations of MMC or Guarantor to Beneficiary under the Agreements or this Guaranty, and for such purpose, Beneficiary is authorized to use all or any part of any such credit balance or liability to buy such other currencies as may be necessary to effect such application or set-off. 6.2 Beneficiary shall not be obligated to exercise any of its rights under Section 6.1, which rights shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which it is any time otherwise entitled, whether by operation of law, contract or otherwise. 7. Dispute Resolution 7.1 This Guaranty and all disputes arising out of or in connection with this Guaranty shall be governed by, interpreted under, and construed and enforceable in accordance with, the internal laws (without the application of the conflict of laws principals) of the State of New Jersey, U.S.A. Guarantor will, contemporaneous with its execution of this Guaranty, deliver to Beneficiary an executed Consent to Jurisdiction and Service of Process in the form attached as Exhibit C hereto. 8. Miscellaneous 8.1 Modifications. This Guaranty shall not be modified, amended, canceled or altered in any way, and may not be modified by custom, usage of trade or course of dealing, except by an instrument in writing signed by Beneficiary. 8.2 Waiver. The performance of any obligation required of Guarantor hereunder may be waived only by a written waiver signed by Beneficiary, and such waiver shall be effective only with respect to the specific obligation described. The waiver by Beneficiary of a breach of 9 any provision of this Guaranty by Guarantor shall not operate or be construed as a waiver of any subsequent breach of the same provision or another provision of this Guaranty. 8.3 Severability. If any provision hereof is found invalid, illegal or unenforceable pursuant to any executive, legislative, judicial or other decree or decision, the remainder of this Guaranty shall remain valid, legal and enforceable according to its terms, and such invalid, illegal or unenforceable provision shall be replaced with a provision that approximates the substance and spirit of the invalid, illegal or unenforceable provision as closely as possible without being invalid, illegal or unenforceable. 8.4 Assignment. Guarantor shall not have the right, power or authority to assign or transfer this Guaranty or any of its rights or obligations hereunder to any third party. Beneficiary shall have the unqualified right to assign or otherwise transfer this Guaranty or any portion thereof or any benefits hereunder, in whole or in part, to any party(ies), without the consent of Guarantor or MMC and such assignee(s) shall have all of the rights, privileges and powers granted hereunder to Beneficiary as it would have had if it had been a party to this Guaranty and shall have the right to rely upon this Guaranty. 8.5 Third Party Benefits. This Guaranty shall be binding upon, and inure to the benefit of, Beneficiary and its successors and assigns. 8.6 Time. Time shall be of the essence of this Guaranty, but no failure on the part of Beneficiary to exercise, and no delay on its part in exercising, any right or remedy under this Guaranty will operate as a waiver thereof, nor will any single or partial exercise of any right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy. 8.7 Cumulation of Remedies. The rights and remedies provided in this Guaranty are cumulative and not exclusive of any rights or remedies provided by law. 8.8 Notices. All notices, demands, requests, consents or other communications hereunder shall be in writing and in English and shall be given by personal delivery, by express courier, by registered or certified mail with return receipt requested, or by telex or facsimile, to the parties at the addresses shown below, or to such other address as may be designated by written notice given by either party to the other party. Any communication under this Guaranty shall be deemed to be received upon delivery if personally delivered, one (1) day after dispatch if sent by express courier, three (3) days after dispatch if sent by registered or certified mail with return receipt requested, or upon dispatch if sent by telex or facsimile. To Guarantor: Maxtor Corporation 2190 Miller Drive Longmont, CO 80501 Attention: Glenn H. Stevens, Esq. 10 To Beneficiary: CIT Technologies Corporation 2285 Franklin Road, 2nd Floor Bloomfield Hills, MI 48302 Attention: Chief Counsel Facsimile: (248) 339-1596 8.9 Counterparts. This Guaranty may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.10 Captions. The section headings and captions contained herein are for purposes of reference and convenience only and shall not in any way affect the meaning or interpretation of this Guaranty. 8.11 Number and Gender. Whenever used in this Guaranty, the singular terms shall include the plural and the plural the singular, and the use of any gender shall be applicable to all genders. 8.12 Currency. All obligations guaranteed hereunder shall be measured in U.S. dollars. 8.13 Costs and Expenses. Guarantor agrees to pay all costs and expenses, including without limitation, all court costs and legal fees and expenses incurred by Beneficiary in connection with the enforcement of this Guaranty. 8.14 Waiver of Jury Trial. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND THIS GUARANTY. 8.15 Assistant Secretary's Certificate. Contemporaneous with the execution of this Guaranty, Guarantor will deliver to Beneficiary a duly executed Assistant Secretary's Certificate in the form of Exhibit D hereto. 8.16 Advice of Counsel; Understanding With Respect to Waivers and Consents. GUARANTOR CONFIRMS AND ACKNOWLEDGES THAT IT HAS CONSULTED LEGAL COUNSEL AND SUCH OTHER ADVISORS AS IT DEEMS APPROPRIATE IN CONNECTION WITH ITS REVIEW OF THE AGREEMENTS AND ITS NEGOTIATION, EXECUTION AND DELIVERY OF THIS GUARANTY AND THE CONSENTS TO JURISDICTION AND SERVICE OF PROCESS ATTACHED HERETO AS EXHIBIT C. Guarantor understands and agrees that each of the waivers and consents set forth herein is made with full knowledge of its significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which Guarantor otherwise may have against Beneficiary or others or against any collateral. 11 8.17 Entire Agreement. This document contains the entire agreement of the parties concerning the guarantee of Agreements by the undersigned, and may not be amended or modified except in a writing signed by Guarantor and Beneficiary. 8.18 Joint and Several. Guarantor's obligations are intended to and shall be joint and several with any other person or entity executing and delivery, at any time, guaranty agreements in favor of Beneficiary relating to the Agreements. IN WITNESS WHEREOF, Guarantor executed this Guaranty as of the date first above written. MAXTOR CORPORATION CIT TECHNOLOGIES CORPORATION By: /s/ GLENN H. STEVENS By: /s/ S. LYNN STENBACK ---------------------------------- ------------------------------- Name: Glenn H. Stevens Name: S. Lynn Stenback ------------------------------- ----------------------------- Title: Senior Vice President, Title: VP & Asst. Gen. Counsel General Counsel and Secretary ---------------------------- ------------------------------ 12 EXHIBIT A ASSIGNED EQUIPMENT SCHEDULES Equipment Schedule IA0 Dated June 18, 1997 Equipment Schedule IA1 Dated September 18, 1997 Equipment Schedule IA2 Dated October 17, 1997 Equipment Schedule IA3 Dated October 18, 1997 Equipment Schedule IA4-1 Dated November 18, 1997 Equipment Schedule IA4-2 Dated November 18, 1997 Equipment Schedule IA4-3 Dated November 18, 1997 Equipment Schedule IA4-4 Dated November 18, 1997 Equipment Schedule IA5 Dated February 15, 1998 Equipment Schedule IA6 Dated July 22, 1998 Equipment Schedule IA7-A Dated January 16, 1999 Equipment Schedule IA7-A(1) Dated January 16, 1999 Equipment Schedule IA7-B Dated January 16, 1999 Equipment Schedule IA7-C Dated January 16, 1999 Equipment Schedule IA8-A Dated February 15, 1999 Equipment Schedule IA8-B Dated February 15, 1999 Equipment Schedule IA8-C Dated February 15, 1999 Equipment Schedule IA8-D Dated February 15, 1999 Equipment Schedule IA8-E Dated February 15, 1999 Equipment Schedule II-H Dated October 18, 1997 Equipment Schedule II-C Dated October 18, 1997 Equipment Schedule MMC-001 Dated December 23, 1998 Equipment Schedule PLATE-1 Dated April 17, 1998 Equipment Schedule POLISH-1 Dated February 15, 1998 Equipment Schedule POLISH-2 Dated February 15, 1998 Equipment Schedule POLISH-3 Dated December 1, 1998 Equipment Schedule TS-1 Dated October 18, 1997 Equipment Schedule TS-2 Dated October 18, 1997 Equipment Schedule TS-3 Dated October 18, 1997 Equipment Schedule TS-4 Dated October 18, 1997 Equipment Schedule 001U Dated June 18, 1997 Equipment Schedule 002U Dated June 18, 1997 Equipment Schedule 003U Dated June 18, 1997 Equipment Schedule 004U Dated June 18, 1997 Equipment Schedule 005U Dated June 18, 1997 Equipment Schedule 006U Dated June 18, 1997 Equipment Schedule 007U Dated August 22, 1997 Equipment Schedule 008U Dated August 22, 1997 Equipment Schedule 009U Dated September 22, 1997 Equipment Schedule 010U Dated September 22, 1997 Equipment Schedule 011U Dated October 10, 1997

EXHIBIT B REVIEW AND ACKNOWLEDGEMENT OF AGREEMENTS Reference is made to the Guaranty dated as of September 2, 2001 by Maxtor Corporation ("Guarantor") in favor of CIT Technologies Corporation ("Beneficiary"). Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Guaranty. Guarantor confirms that it has received and reviewed the documents listed below (the "Subject Agreements") and that these documents are to be included as "Agreements" (as defined in the Guaranty), the payment and performance of MMC under which is guaranteed by Guarantor: - MASTER LEASE AGREEMENT (AS DEFINED IN THE GUARANTY) - ASSIGNED EQUIPMENT SCHEDULES (AS DEFINED IN THE GUARANTY) - ASSIGNMENT AND ASSUMPTION AGREEMENTS (AS DEFINED IN THE GUARANTY) Attached hereto as Exhibit A is a true and correct copy of the minutes of the meeting (or other corporate action) of the Board of Directors of Guarantor duly adopting resolutions (a) approving the execution and delivery of this acknowledgement and the guaranty, (pursuant to the Guaranty) of the obligations of MMC under the Subject Agreements and (b) authorizing the officer whose signature appears below to execute and deliver this acknowledgement, and such resolutions have not been amended or rescinded and are currently in full force and effect. IN WITNESS WHEREOF, the undersigned officer of Guarantor has duly executed this acknowledgement as of ________, 2001. MAXTOR CORPORATION By: ----------------------------------- Name: -------------------------------- Title: -------------------------------- 14 REVIEW AND ACKNOWLEDGEMENT OF AGREEMENTS Reference is made to the Guaranty dated as of September 2, 2001 by Maxtor Corporation ("Guarantor") in favor of CIT Technologies Corporation ("Beneficiary"). Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Guaranty. Guarantor confirms that it has received and reviewed the documents listed below (the "Subject Agreements") and that these documents are to be included as "Agreements" (as defined in the Guaranty), the payment and performance of MMC under which is guaranteed by Guarantor: - MASTER LEASE AGREEMENT (AS DEFINED IN THE GUARANTY) - ASSIGNED EQUIPMENT SCHEDULES (AS DEFINED IN THE GUARANTY) - ASSIGNMENT AND ASSUMPTION AGREEMENTS (AS DEFINED IN THE GUARANTY) Attached hereto as Exhibit A is a true and correct copy of the minutes of the meeting (or other corporate action) of the Board of Directors of Guarantor duly adopting resolutions (a) approving the execution and delivery of this acknowledgement and the guaranty, (pursuant to the Guaranty) of the obligations of MMC under the Subject Agreements and (b) authorizing the officer whose signature appears below to execute and deliver this acknowledgement, and such resolutions have not been amended or rescinded and are currently in full force and effect. IN WITNESS WHEREOF, the undersigned officer of Guarantor has duly executed this acknowledgement as of ________, 2001. MAXTOR CORPORATION By: /s/ GLENN H. STEVENS ------------------------------------ Name: Glenn H. Stevens -------------------------------- Title: Senior Vice President, General -------------------------------- Counsel and Secretary -------------------------------- REVIEW AND ACKNOWLEDGEMENT OF AGREEMENTS Reference is made to the Guaranty dated as of September 2, 2001 by Maxtor Corporation ("Guarantor") in favor of CIT Technologies Corporation ("Beneficiary"). Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Guaranty. Guarantor confirms that it has received and reviewed the documents listed below (the "Subject Agreements") and that these documents are to be included as "Agreements" (as defined in the Guaranty), the payment and performance of MMC under which is guaranteed by Guarantor: - MASTER LEASE AGREEMENT (AS DEFINED IN THE GUARANTY) - ASSIGNED EQUIPMENT SCHEDULES (AS DEFINED IN THE GUARANTY) - ASSIGNMENT AND ASSUMPTION AGREEMENTS (AS DEFINED IN THE GUARANTY) Attached hereto as Exhibit A is a true and correct copy of the minutes of the meeting (or other corporate action) of the Board of Directors of Guarantor duly adopting resolutions (a) approving the execution and delivery of this acknowledgement and the guaranty, (pursuant to the Guaranty) of the obligations of MMC under the Subject Agreements and (b) authorizing the officer whose signature appears below to execute and deliver this acknowledgement, and such resolutions have not been amended or rescinded and are currently in full force and effect. IN WITNESS WHEREOF, the undersigned officer of Guarantor has duly executed this acknowledgement as of August 30, 2001. MAXTOR CORPORATION By: /s/ GLENN H. STEVENS ------------------------------------ Name: Glenn H. Stevens -------------------------------- Title: Senior Vice President, General -------------------------------- Counsel and Secretary -------------------------------- EXHIBIT A BOARD RESOLUTIONS MAXTOR CORPORATION ASSISTANT SECRETARY'S CERTIFICATE I, William Sweeney, in my capacity as Assistant Secretary of Maxtor Corporation, a Delaware corporation (the "CORPORATION"), and on behalf of the Corporation, do hereby certify as set forth below: 1. I am the duly elected, qualified and acting Assistant Secretary of the Corporation, and as such, I am authorized to execute and deliver this certificate on behalf of the Corporation. 2. Attached hereto as EXHIBIT A is a true, complete and correct copy of resolutions duly and validly adopted at a regular meeting of the board of directors of the Corporation (the "BOARD") held on August 7, 2001, pursuant to which the Board approved the execution and delivery of the Agreement and Plan of Reorganization (the "AGREEMENT"), by and among the Corporation, Lime Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of the Corporation ("MERGER SUB"), MMC Technology, Inc., a California corporation, and Hynix Semiconductor America, Inc., a California corporation, the performance by the Corporation of all of the terms thereof, and the consummation of all of the transactions contemplated thereby. Such resolutions have not been amended or modified, are in full force and effect and are the only resolutions adopted by the Board relating to the Agreement and the transactions contemplated thereby. IN WITNESS WHEREOF, the undersigned has caused this Assistant Secretary's Certificate to be executed as of the 15th day of August 2001. MAXTOR CORPORATION /s/ WILLIAM SWEENEY ------------------------------------ William Sweeney Assistant Secretary EXHIBIT A RESOLUTIONS OF THE BOARD OF DIRECTORS OF MAXTOR CORPORATION AUGUST 7, 2001 I. AUTHORIZATION OF MERGER. WHEREAS, the Board of Directors (the "Board") of Maxtor Corporation, a Delaware corporation (the "Corporation") has determined that it is desirable and in the best interests of the Corporation and its stockholders, based on the recommendation of the Affiliated Transactions Committee, to enter into the Agreement and Plan of Reorganization by and between the Corporation, Lime Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of the Corporation ("Merger Sub"), MMC Technology, Inc., a California corporation (the "Target"), and Hynix Semiconductor America Inc., a California corporation, in substantially the form attached hereto as Attachment I (the "Merger Agreement"), providing for, among other things, the merger of the Target with and into Merger Sub pursuant to which the Target shall be the surviving corporation and become a wholly-owned subsidiary of the Corporation (the "Merger"). WHEREAS, the Board has determined, based on the recommendation of the Affiliated Transactions Committee, that is desirable and in the best interests of the Corporation and its stockholders to consummate the transactions contemplated by the Merger Agreement. NOW, THEREFORE, BE IT RESOLVED, that, based on the recommendation of the Affiliated Transactions Committee, the terms and conditions of the Merger as set forth in the Merger Agreement are hereby authorized and approved, with such changes and modifications as the officers of the Corporation may consider necessary or appropriate. RESOLVED FURTHER, that the form of the Merger Agreement, substantially in the form attached hereto as Attachment 1, is hereby approved, and the officers of the Corporation be, and each of them is, authorized and directed to execute and deliver the Merger Agreement and such other agreements as are provided as set forth in the exhibits to the Merger Agreement, and such other instruments and documents, as may be necessary or appropriate to consummate the transactions contemplated by the Merger, together with such changes, modifications, additions or deletions as the officer of the Corporation executing the same may deem necessary or appropriate, such approval to be conclusively evidenced by the execution and deliver thereof. RESOLVED FURTHER, that the officers of the Corporation be, and each of them is, authorized and directed to create and form a wholly owned subsidiary of the Corporation under Delaware law named Lime Acquisition Corporation. RESOLVED FURTHER, that in furtherance of the Merger, the officers of the Corporation be, and each of them is, authorized and directed to execute and file with the Secretary of State of the State of California a certificate of merger ("Certificate of Merger") pursuant to the California General Corporation Law, such Certificate of Merger to be in the form approved by the officer executing the same, and, if appropriate, such other certificates, instruments, and documents as may be required to be filed by the Corporation with the Secretary of State of the State of California or any other state, together with such changes, modifications, additions or deletions as the officer of the Corporation executing the same may deem necessary or appropriate, such approval to be conclusively evidenced by the execution and filing thereof. RESOLVED FURTHER, that all prior actions taken by any officer of the Corporation with respect to the preparation, negotiation and execution of the Merger Agreement and all agreements related thereto and otherwise to effect the purposes and intent of the Merger Agreement, are hereby ratified, confirmed and approved. 2. ENABLING RESOLUTIONS. RESOLVED, that any officer of the Corporation is hereby authorized to take such further actions as any of them shall deem necessary or advisable in order to carry out and perform the purpose and intent of the foregoing resolutions. RESOLVED FURTHER, that any actions taken prior to the date of the foregoing resolutions by any officer of the Corporation that are within the authority conferred upon such officer, are hereby ratified, confirmed and approved as the acts and deeds of the Corporation. EXHIBIT C CONSENT TO JURISDICTION AND SERVICE OF PROCESS IN THE UNITED STATES Reference is made to the attached Guaranty ("Agreement") dated the 2nd day of September, 2001 by Maxtor Corporation ("Guarantor") in favor of CIT Technologies Corporation ("CIT"). As an inducement for CIT to execute and deliver such Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby unconditionally and irrevocably consents to the jurisdiction of any court of record of the State of New Jersey, or of the United States District Court for the District of New Jersey, and the courts of any other appropriate jurisdiction as CIT may elect in any action or proceeding arising out of or relating to such Agreement. Guarantor hereby consents to the jurisdiction and Guarantor hereby accepts the jurisdiction of such courts, for the purpose of any such action or proceeding. Guarantor unconditionally and irrevocably consents to the service of process in any action or proceeding in said courts by CIT mailing such service of process by United States Registered or Certified Mail, postage prepaid, or by receipt courier to Guarantor at the address set forth below, or to such other address as the Guarantor provides to CIT in writing. If the Guarantor is a foreign government, or entity thereof, Guarantor hereby further unconditionally and irrevocably waives any immunity or claim for immunity from the jurisdiction of the courts of the United States or any State thereof which it may otherwise have. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND THIS GUARANTY. Guarantor: Maxtor Corporation _________________________ _________________________ _________________________ Attention: ______________ Facsimile: ______________ [Remainder of page intentionally left blank] 15 MAXTOR CORPORATION By: ----------------------------------- Authorized Signature -------------------------------------- Print Name -------------------------------------- Title Accepted by CIT Technologies Corporation this ______ day of ____________, 2001. CIT TECHNOLOGIES CORPORATION By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- 16 CONSENT TO JURISDICTION AND SERVICE OF PROCESS IN THE UNITED STATES Reference is made to the attached Guaranty ("Agreement") dated the 2nd day of September, 2001 by Maxtor Corporation ("Guarantor") in favor of CIT Technologies Corporation ("CIT"). As an inducement for CIT to execute and deliver such Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby unconditionally and irrevocably consents to the jurisdiction of any court of record of the State of New Jersey, or of the United States District Court for the District of New Jersey, and the courts of any other appropriate jurisdiction as CIT may elect in any action or proceeding arising out of or relating to such Agreement. Guarantor hereby consents to the jurisdiction and Guarantor hereby accepts the jurisdiction of such courts, for the purpose of any such action or proceeding. Guarantor unconditionally and irrevocably consents to the service of process in any action or proceeding in said courts by CIT mailing such service of process by United States Registered or Certified Mail, postage prepaid, or by receipt courier to Guarantor at the address set forth below, or to such other address as the Guarantor provides to CIT in writing. If the Guarantor is a foreign government, or entity thereof, Guarantor hereby further unconditionally and irrevocably waives any immunity or claim for immunity from the jurisdiction of the courts of the United States or any State thereof which it may otherwise have. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND THIS GUARANTY. Guarantor: Maxtor Corporation 2452 Clover Basin Drive Longmont, CO 80503 Attention: Glenn H. Stevens, Esq. Facsimile: 303-678-3111 [Remainder of page intentionally left blank] MAXTOR CORPORATION By: /s/ GLENN H. STEVENS ----------------------------------------- Glenn H. Stevens Senior Vice President, General Counsel and Secretary Accepted by CIT Technologies Corporation this ______ day of ____________, 2001. CIT TECHNOLOGIES CORPORATION By: /s/ S. LYNN STENBACK ----------------------------------- Name: S. Lynn Stenback --------------------------------- Title: VP & Asst. Gen Counsel -------------------------------- CONSENT TO JURISDICTION AND SERVICE OF PROCESS IN THE UNITED STATES Reference is made to the attached Guaranty ("Agreement") dated the 2nd day of September, 2001 by Maxtor Corporation ("Guarantor") in favor of CIT Technologies Corporation ("CIT"). As an inducement for CIT to execute and deliver such Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby unconditionally and irrevocably consents to the jurisdiction of any court of record of the State of New Jersey, or of the United States District Court for the District of New Jersey, and the courts of any other appropriate jurisdiction as CIT may elect in any action or proceeding arising out of or relating to such Agreement. Guarantor hereby consents to the jurisdiction and Guarantor hereby accepts the jurisdiction of such courts, for the purpose of any such action or proceeding. Guarantor unconditionally and irrevocably consents to the service of process in any action or proceeding in said courts by CIT mailing such service of process by United States Registered or Certified Mail, postage prepaid, or by receipt courier to Guarantor at the address set forth below, or to such other address as the Guarantor provides to CIT in writing. If the Guarantor is a foreign government, or entity thereof, Guarantor hereby further unconditionally and irrevocably waives any immunity or claim for immunity from the jurisdiction of the courts of the United States or any State thereof which it may otherwise have. GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND THIS GUARANTY. Guarantor: Maxtor Corporation 2452 Clover Basin Drive Longmont, CO 80503 Attention: Glenn H. Stevens, Esq. Facsimile: 303-678-3111 [Remainder of page intentionally left blank] MAXTOR CORPORATION By: /s/ GLENN H. STEVENS ----------------------------------------- Glenn H. Stevens Senior Vice President, General Counsel and Secretary Accepted by CIT Technologies Corporation this ______ day of ____________, 2001. CIT TECHNOLOGIES CORPORATION By: [SIGNATURE ILLEGIBLE] ----------------------------------- Name: [ILLEGIBLE] --------------------------------- Title: VP & Asst. Gen Counsel -------------------------------- EXHIBIT D ASSISTANT SECRETARY'S CERTIFICATE I, _____________________, Assistant Secretary of Maxtor Corporation, a corporation duly organized and existing under the laws of the State of Delaware (the "Company"), hereby certify: 1. that attached hereto as Exhibit A is a true and correct copy of the Articles of Incorporation of the Company, and all amendments thereto, as in effect on the date hereof, which Articles of Incorporation and amendments thereto continue and are in full force and effect; 2. that attached hereto as Exhibit B is a true and correct copy of the Bylaws of the Company, including all amendments thereto as of the date hereof, which Bylaws continue and are in full force and effect; 3. that attached hereto as Exhibit C is a true and correct copy of the minutes of the meeting of the Board of Directors of the Company duly held on August 7, 2001, at which a quorum of Directors was present and acting throughout and adopted resolutions (i) approving the execution, delivery and performance of a guarantee (the "Guaranty") to be made by the Company in favor of CIT Technologies Corporation, and its assignees (collectively, the "Beneficiary") under the Assigned Equipment Schedules and the MMC Assignment and Assumption Documents (as defined in the Guaranty) (collectively, the "Agreements"), and (ii) authorizing certain officers of the Company to execute and deliver the Guaranty and any documents to be delivered by the Company pursuant thereto, which resolutions have not been amended or rescinded and are currently in full force and effect; 4. that the seal impression of each of the Directors of the Company affixed on the minutes of the meeting of the Board of Directors referred to above is genuine; 5. that the representations and warranties set forth in the Guaranty are, true and correct as of the date hereof; 17 6. that the following persons hold the respective titles indicated opposite their names, that the specimen signatures set forth opposite their titles are their genuine signatures, and that each of them is authorized in the name of and on behalf of the Company to execute and deliver the Guaranty and any other documents and instruments contemplated therein and to bind the Company thereby: Name Title Signature - ---- ----- --------- IN WITNESS WHEREOF, I have executed this Certificate on ____________, 2001. _____________________________ Name Title: Assistant Secretary 18 ASSISTANT SECRETARY'S CERTIFICATE I, William Sweeney, Assistant Secretary of Maxtor Corporation, a corporation duly organized and existing under the laws of the State of Delaware (the "Company"), hereby certify: 1. that attached hereto as Exhibit A is a true and correct copy of the Articles of Incorporation of the Company, and all amendments thereto, as in effect on the date hereof, which Articles of Incorporation and amendments thereto continue and are in full force and effect; 2. that attached hereto as Exhibit B is a true and correct copy of the Bylaws of the Company, including all amendments thereto as of the date hereof, which Bylaws continue and are in full force and effect; 3. that attached hereto as Exhibit C is a true and correct copy of the minutes of the meeting of the Board of Directors of the Company duly held on August 7, 2001, at which a quorum of Directors was present and acting throughout and adopted resolutions (i) approving the execution, delivery and performance of a guarantee (the "Guaranty") to be made by the Company in favor of CIT Technologies Corporation, and its assignees (collectively, the "Beneficiary") under the Assigned Equipment Schedules and the MMC Assignment and Assumption Documents (as defined in the Guaranty) (collectively, the "Agreements"), and (ii) authorizing certain officers of the Company to execute and deliver the Guaranty and any documents to be delivered by the Company pursuant thereto, which resolutions have not been amended or rescinded and are currently in full force and effect; 4. that the seal impression of each of the Directors of the Company affixed on the minutes of the meeting of the Board of Directors referred to above is genuine; 5. that the representations and warranties set forth in the Guaranty are, true and correct as of the date hereof; 6. that the following persons hold the respective titles indicated opposite their names, that the specimen signatures set forth opposite their titles are their genuine signatures, and that each of them is authorized in the name of and on behalf of the Company to execute and deliver the Guaranty and any other documents and instruments contemplated therein and to bind the Company thereby: Name Title Signature - ---- ----- --------- Glenn H. Stevens Senior Vice President, /s/ GLENN H. STEVENS General Counsel & Secretary IN WITNESS WHEREOF, I have executed this Certificate on August 30, 2001. /s/ WILLIAM SWEENEY - ------------------------------------ Name: William Sweeney Title: Assistant Secretary 2 ASSISTANT SECRETARY'S CERTIFICATE I, William Sweeney, Assistant Secretary of Maxtor Corporation, a corporation duly organized and existing under the laws of the State of Delaware (the "Company"), hereby certify: 1. that attached hereto as Exhibit A is a true and correct copy of the Articles of Incorporation of the Company, and all amendments thereto, as in effect on the date hereof, which Articles of Incorporation and amendments thereto continue and are in full force and effect; 2. that attached hereto as Exhibit B is a true and correct copy of the Bylaws of the Company, including all amendments thereto as of the date hereof, which Bylaws continue and are in full force and effect; 3. that attached hereto as Exhibit C is a true and correct copy of the minutes of the meeting of the Board of Directors of the Company duly held on August 7, 2001, at which a quorum of Directors was present and acting throughout and adopted resolutions (i) approving the execution, delivery and performance of a guarantee (the "Guaranty") to be made by the Company in favor of CIT Technologies Corporation, and its assignees (collectively, the "Beneficiary") under the Assigned Equipment Schedules and the MMC Assignment and Assumption Documents (as defined in the Guaranty) (collectively, the "Agreements"), and (ii) authorizing certain officers of the Company to execute and deliver the Guaranty and any documents to be delivered by the Company pursuant thereto, which resolutions have not been amended or rescinded and are currently in full force and effect; 4. that the seal impression of each of the Directors of the Company affixed on the minutes of the meeting of the Board of Directors referred to above is genuine; 5. that the representations and warranties set forth in the Guaranty are, true and correct as of the date hereof; 6. that the following persons hold the respective titles indicated opposite their names, that the specimen signatures set forth opposite their titles are their genuine signatures, and that each of them is authorized in the name of and on behalf of the Company to execute and deliver the Guaranty and any other documents and instruments contemplated therein and to bind the Company thereby: Name Title Signature - ---- ----- --------- Glenn H. Stevens Senior Vice President, /s/ GLENN H. STEVENS General Counsel & Secretary IN WITNESS WHEREOF, I have executed this Certificate on August 30, 2001. /s/ WILLIAM SWEENEY - ------------------------------------ Name: William Sweeney Title: Assistant Secretary 2 EXHIBIT A ARTICLES OF INCORPORATION 3 PAGE 1 State of Delaware Office of the Secretary of State ________________________________ I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF CORRECTION OF "MAXTOR CORPORATION", FILED IN THIS OFFICE ON THE FIRST DAY OF MARCH, A.D. 2001, AT 8:30 O'CLOCK A.M. A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE COUNTY RECORDER OF DEEDS. /s/ HARRIET SMITH WINDSOR ----------------------------------------- [SEAL] Harriet Smith Windsor, Secretary of State 2097120 8100 AUTHENTICATION: 1001731 010102374 DATE: 03-02-01 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 08:30 AM 03/01/2001 010102374 - 2097120 CERTIFICATE OF CORRECTION TO THE RESTATED CERTIFICATE OF INCORPORATION OF MAXTOR CORPORATION Maxtor Corporation (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: 1. The name of the Corporation is Maxtor Corporation. 2. A Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on November 13, 2000 and said Certificate requires correction as permitted by subsection (f) of Section 103 of the General Corporation Law of the State of Delaware ("DGCL"). 3. The inaccuracy or defect of said Restated Certificate of Incorporation to be corrected is that paragraph 2 on page 1 of said Restated Certificate of Incorporation is incorrect in that it recites that the Restated Certificate of Incorporation further amended the Certificate of Incorporation of the Corporation in accordance with Sections 242 and 245 of the DGCL when in fact the Restated Certificate only restated and integrated the provisions of the Certificate of Incorporation in accordance with Section 245 of the DGCL. 4. The Restated Certificate of Incorporation should be corrected so that paragraph 2 on page 1 reads as follows: "2. This Restated Certificate of Incorporation restates and integrates the provisions of the Certificate of Incorporation of this corporation and has been duly adopted in accordance with Section 245 of the General Corporation Law of the State of Delaware ("DGCL")." IN WITNESS WHEREOF, the Corporation has caused this Certificate of Correction to the Restated Certificate of Incorporation to be executed this 28th day of February, 2001. MAXTOR CORPORATION By: /s/ GLENN H. STEVENS ------------------------------------ Name: Glenn H. Stevens Title: VP., General Counsel ?? PAGE 1 State of Delaware Office of the Secretary of State ________________________________ I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF "MAXTOR CORPORATION", FILED IN THIS OFFICE ON THE THIRTEENTH DAY OF NOVEMBER, A.D. 2000, AT 9 O'CLOCK A.M. /s/ HARRIET SMITH WINDSOR ----------------------------------------- [SEAL] Harriet Smith Windsor, Secretary of State 2097120 8100 AUTHENTICATION: 1071394 010173183 DATE: 04-09-01 STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 11/13/2000 001569154 - 2097120 RESTATED CERTIFICATE OF INCORPORATION OF MAXTOR CORPORATION Maxtor Corporation, a corporation organized and existing under the laws of the State of Delaware, hereby certifies that: 1. The name of the corporation is Maxtor Corporation. The corporation's original certificate of incorporation was filed with the Secretary of State of the State of Delaware on July 24, 1986. 2. This Restated Certificate of Incorporation restates, integrates and amends the provisions of the Certificate of Incorporation of this corporation and has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware ("DGCL"). 3. The text of the Certificate of Incorporation of this corporation is hereby restated to read in its entirety as follows: FIRST: The name of the corporation is Maxtor Corporation (hereinafter sometimes referred to as the "Corporation"). SECOND: The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the registered agent at that address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the DGCL. FOURTH: (A) The total number of shares of all classes of stock which the Corporation shall have authority to issue is three hundred forty-five million (345,000,000), consisting of: (1) ninety-five million (95,000,000) shares of Preferred Stock, par value one cent ($.01) per share (the "Preferred Stock"); and (2) two hundred fifty million (250,000,000) shares of common stock, par value one cent ($.01) per share. The shares of Preferred Stock authorized by this Restated Certificate of Incorporation may be issued from time to time in one or more series. (B) The Preferred Stock may be divided into such number of series as the Board of Directors may determine. The Board of Directors is authorized to determine and alter the rights, preferences, privileges and restrictions granted to and imposed upon any wholly unissued series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock and the 1 designation of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. FIFTH: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: (A) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Restated Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. (B) The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide. (C) Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. (D) Special meetings of stockholders of the Corporation may be called only by the Board of Directors, the Chairman of the Board of Directors or the Chief Executive Officer. SIXTH: (A) The number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). The directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 1994 annual meeting of stockholders, the term of office of the second class to expire at the 1995 annual meeting of stockholders and the term of office of the third class to expire at the 1996 annual meeting of stockholders, provided that the term of office of directors in office on the date of filing of this Restated Certificate of Incorporation is unaffected by the filing of this Restated Certificate of Incorporation. At each annual meeting of stockholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. All directors shall hold office until the expiration of the term for which elected, and until their respective successors are elected, except in the case of the death, resignation, or removal of any director. (B) Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation or other cause (including removal from office by a vote of the stockholders) may be filled only by a 2 majority vote of the directors then in office, though less than a quorum, or by sole remaining director, and directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders at which the term of office of the class to which they have been elected expires, and until their respective successors are elected, except in the case of the death, resignation, or removal of any director. (C) Subject to the rights of the holders of any series of Preferred Stock then outstanding, any directors, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. SEVENTH: The Board of Directors is expressly empowered to adopt, amend or repeal Bylaws of the Corporation. The stockholders shall also have power to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of Bylaws of the Corporation by the stockholders shall require, in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Restated Certificate of Incorporation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. EIGHTH: A director of this Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing provisions of this Article EIGHTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. NINTH: The Corporation reserves the right to amend or repeal any provision contained in this Restated Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any other provision of this Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Restated Certificate of Incorporation, the affirmative vote of the holders of at least 66-2/3% of the then outstanding shares of the Capital Stock of the Corporation entitled to vote generally in the election or directors, voting together as a single class, shall be 3 required to amend or appeal this Article NINTH, Article FIFTH, Article SIXTH, Article SEVENTH, or Article EIGHTH. TENTH: (A) In anticipation that: (1) the Corporation will cease to be a majority-owned subsidiary of Hyundai Electronics America ("HEA") but that HEA will remain, for some period of time, a stockholder of the Corporation and along with certain other Hyundai Affiliates (as defined in Article ELEVENTH) have continued contractual, corporate and business relations with the Corporation; (2) the Corporation, on the one hand, and any Hyundai Affiliates or their customers or suppliers, on the other hand, may enter into contracts or otherwise transact business with each other and that the Corporation may derive benefits therefrom; and (3) the Corporation may from time to time enter into contractual, corporate or business relations with one or more of its directors, or one or more corporations, partnership, associations or other organizations in which one or more of its directors have a financial interest (collectively, "Related Entities"); the provisions of this Article TENTH are set forth to regulate and guide certain contractual relations and other business relations of the Corporation as they may involve certain Hyundai Affiliates, Related Entities and their respective officers and directors, and the powers, rights, duties and liabilities of the Corporation and its officers, directors and stockholders in connection therewith. (B) The provisions of this Article TENTH are in addition to, and not in limitation of, the provisions of the DGCL and the other provisions of this Restated Certificate of Incorporation. Any contract or business relation which does not comply with procedures set forth in this Article TENTH shall not by reason thereof be deemed void or voidable or result in any breach of any fiduciary duty to, or duty of loyalty to, or failure to act in good faith or in the best interests of, the Corporation, or the derivation of any improper personal benefit, but shall be governed by the remaining provisions of this Restated Certificate of Incorporation, the Bylaws, the DGCL and other applicable law. (C) No contract, agreement, arrangement or transaction between the Corporation and any Hyundai Affiliate or any Related Entity or between the Corporation and one or more of the directors or officers of the Corporation, any Hyundai Affiliate or any Related Entity, or any amendment, modification or termination thereof, shall be void or voidable solely for the reason that any Hyundai Affiliate, any Related Entity or any one or more of the officers or directors of the Corporation, any Hyundai Affiliate or any Related Entity are parties thereto, or solely because any such directors or officers are present at or participate in the meeting of the Board of Directors or committee thereof which authorizes such contract, agreement, arrangement, transaction, amendment, modification or termination (each, a "Transaction") or solely because his or their votes are counted for such purpose, and any Hyundai Affiliate, any Related Entity and such directors and officers (i) shall have fully satisfied and fulfilled any fiduciary duties they 4 may have to the Corporation and its stockholders with respect thereto, (ii) shall not be liable to the Corporation or its stockholders for any breach of fiduciary duty they may have by reason of the entering into, performance or consummation of any such Transaction, (iii) shall be deemed to have acted in good faith and in a manner such Persons reasonably believed to be in or not opposed to the best interests of the Corporation, to the extent such standard is applicable to such Persons' conduct, and (iv) shall be deemed not to have breached any duties of loyalty to the Corporation or its stockholders they may have and not to have derived an improper personal benefit therefrom, if: (w) the material facts as to the Transaction are disclosed or are known to the Board of Directors or the committee thereof that authorizes the Transaction and the Board of Directors or such committee in good faith authorizes or approves the Transaction by the affirmative vote of a majority of the Disinterested Directors (as defined in Article ELEVENTH) on the Board of Directors or such committee (even though the Disinterested Directors be less than a quorum); (x) the material facts as to the Transaction are disclosed or are known to the holders of voting stock entitled to vote thereon, and the Transaction is specifically approved in good faith by vote of the holders of a majority of the then outstanding voting stock not owned by any Hyundai Affiliate or such Related Entity, voting together as a single class, as the case may be; or (y) such Transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders of the Corporation. In addition, each Transaction authorized, approved or effected, as described in (w) or (x) above, shall be deemed to be entirely fair to the Corporation and its stockholders; provided, however, that if such authorization or approval is not obtained, or such Transaction is not so effected, no presumption shall arise that such Transaction is not fair to the Corporation and its stockholders. (D) Directors of the Corporation who are also directors or officers of any Hyundai Affiliate or any Related Entity may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee that authorizes or approves any such Transaction and may vote at such meeting in accordance with the provisions of paragraph (C) of this Article TENTH. Equity securities with voting rights which are owned by any Hyundai Affiliate and any Related Entities may be counted in determining the presence of a quorum at a meeting of stockholders that authorizes or approves any such Transaction and may be voted at such meeting in accordance with the provisions of paragraph (C) of this Article TENTH. (E) No Hyundai Affiliates shall be liable to the Corporation or its stockholders for breach of any fiduciary duty it may have by reason of the fact that any Hyundai Affiliate takes any action or exercises any rights or gives or withholds any consent in connection with any Transaction between any Hyundai Affiliate and the Corporation. No vote cast or other action taken by any Person (as defined in Article ELEVENTH) who is an officer, director or other representative of any Hyundai Affiliate, which vote is cast or action is taken by such Person in 5 his capacity as a director of the Corporation, shall constitute an action of, or the exercise of a right by, or a consent of, any Hyundai Affiliate for the purpose of any such Transaction. (F) For purposes of this Article TENTH, any Transaction with any corporation, partnership, joint venture, association or other entity in which the Corporation Beneficially Owns (as defined in Article ELEVENTH), directly or indirectly, fifty percent (50%) or more of the outstanding voting stock, voting power or similar voting interests, or with any officer or director thereof, shall be deemed to be a Transaction with the Corporation. (G) Notwithstanding anything in this Restated Certificate of Incorporation to the contrary, and in addition to any vote of the Board of Directors required by applicable law or this Restated Certificate of Incorporation, the affirmative vote of the holders of more than sixty-six and two-thirds percent (66-2/3%) of the voting power of the Corporation's equity then outstanding, voting together as a single class; shall be required to alter, amend or repeal in a manner adverse to the interests of any Hyundai Affiliate or adopt any provision adverse to the interests of any Hyundai Affiliate and inconsistent with, any provision of this Article TENTH. Neither the alteration, amendment or repeal of this Article TENTH nor the adoption of any provision inconsistent with this Article TENTH shall eliminate or reduce the effect of this Article TENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article TENTH, would accrue or arise, prior to such alteration, amendment, repeal or adoption. (H) Any Person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article TENTH. ELEVENTH: (A) In anticipation that: (1) the Corporation will cease to be a majority-owned subsidiary of HEA but that HEA will remain, for some period of time, a stockholder of the Corporation; (2) the Corporation and certain Hyundai Affiliates may engage in the same or similar activities or lines of business and may have an interest in the same or similar areas of corporate opportunities; (3) there will be benefits to be derived by the Corporation through its continued contractual, corporate and business relation with the Hyundai Affiliates (including without limitation service of officers of certain Hyundai Affiliates as directors of the Corporation); (4) there will be benefits in providing guidelines for directors and officers of the Hyundai Affiliates and of the Corporation with respect to the allocation of corporate opportunities and other matters; the provisions of this Article ELEVENTH are set forth to regulate, define and guide the conduct of certain affairs of the Corporation as they may involve the Hyundai Affiliates and their officers 6 and directors, and the powers, rights, duties and liabilities of the Corporation and its officers, directors and stockholders in connection therewith. (B) Except as HEA may otherwise agree in writing, HEA shall have the right to, and shall have no duty not to, (i) engage in the same or similar business activities or lines of business as the Corporation, (ii) do business with any potential or actual customer or supplier of the Corporation, or (iii) employ or otherwise engage any officer or employee of the Corporation. Neither HEA nor any officer or director thereof (except as provided in paragraph (C) of this Article ELEVENTH) shall be liable to the Corporation or its stockholders for breach of any fiduciary duty by reason of such activities (set forth in the preceding sentence) of HEA or the participation therein of such Person. In the event that HEA acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both HEA and the Corporation, HEA shall have no duty to communicate or present such opportunity to the Corporation and shall not be liable to the Corporation or its stockholders for breach of any fiduciary duty as a stockholder of the Corporation by reason of the fact that HEA pursues or acquires such corporate opportunity for itself, directs such opportunity to another Person, or does not present such corporate opportunity to the Corporation. (C) If a director or officer of the Corporation who is also a director or officer of a Hyundai Affiliate acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both the Corporation and any Hyundai Affiliate such director or officer of the Corporation (i) shall have fully satisfied and fulfilled the fiduciary duties of such director or officer to the Corporation and its stockholders with respect to such corporate opportunity, (ii) shall not be liable to the Corporation or its stockholders for breach of any fiduciary duty by reason of the fact that any Hyundai Affiliate pursues or acquires such corporate opportunity for itself or directs such corporate opportunity to another Person (including, without limitation, another Hyundai Affiliate) or does not communicate information regarding such corporate opportunity to the Corporation, (iii) shall be deemed to have acted in good faith and in a manner such Person reasonably believes to be in or not opposed to the best interests of the Corporation, and (iv) shall be deemed not to have breached his or her duty of loyalty to the Corporation or its stockholders and not to have derived an improper benefit therefrom, if such director or officer acts in a manner consistent with the following policy: (x) a corporate opportunity offered to any Person who is a director but not an officer of the Corporation and who is also an officer (whether or not a director) of any Hyundai Affiliate shall belong to such Hyundai Affiliate, unless such opportunity is expressly offered, in writing, to such Person primarily in his or her capacity as a director of the Corporation, in which case such opportunity shall belong to the Corporation; (y) a corporate opportunity offered to any Person who is an officer (whether or not a director) of the Corporation and who is also a director but not an officer of any Hyundai Affiliate shall belong to the Corporation, unless such opportunity is expressly offered, in writing, to such Person primarily in his or her capacity as a director of a Hyundai Affiliate, in which case such opportunity shall belong to such Hyundai Affiliate; and (z) a corporate opportunity offered to any other Person who is either (i) an officer of both the Corporation and a Hyundai Affiliate or (ii) a director of both the Corporation 7 and a Hyundai Affiliate and not an officer of either entity, shall belong to such Hyundai Affiliate or to the Corporation, as the case may be, if such opportunity is expressly offered, in writing, to such Person primarily in his or her capacity as an officer or director of the Corporation or of such Hyundai Affiliate, respectively, otherwise, such opportunity shall belong to the Corporation. (D) Any corporate opportunity that belongs to a Hyundai Affiliate or to the Corporation pursuant to the foregoing policy shall not be pursued by the other, or directed by the other to another Person, unless and until the Hyundai Affiliate or the Corporation, as the case may be, determines not to pursue the opportunity. Notwithstanding the preceding sentence, if the party to whom the corporate opportunity belongs does not within a reasonable period of time begin to pursue, or thereafter continue to pursue, such opportunity diligently and in good faith, the other party may then pursue such opportunity or direct it to another Person. (E) For purposes of this Restated Certificate of Incorporation, "Hyundai Affiliates" shall mean Hyundai Electronics America, a California corporation ("HEA"), Hyundai Electronics Industries Co., Ltd. ("HEI"), all successors to HEA or HEI by way of merger, consolidation or sale of all or substantially all its assets, and all corporations, partnerships, joint ventures, associations and other entities that directly or indirectly, through one or more intermediaries, are controlled by HEA or HEI, other than the Corporation and all corporations, partnerships, joint ventures, associations and other entities directly or indirectly controlled by the Corporation. The term "control," as used in the immediately preceding sentence, shall mean with respect to a corporation or limited liability company the right to exercise, directly or indirectly, more than fifty percent (50%) of the voting rights attributable to the controlled corporation or limited liability company, and, with respect to any individual, partnership, trust, other entity or association, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity. (F) For purposes of this Article ELEVENTH, "corporate opportunities" shall consist of business opportunities which (i) the Corporation is financially able to undertake, (ii) are, from their nature, in the line or lines of the Corporation's business and are of practical advantage to it, and (iii) are ones in which the Corporation has an interest or reasonable expectancy. In addition, "corporate opportunities" shall not include any transaction in which the Corporation or any Hyundai Affiliate is permitted to participate pursuant to any subsequent agreement between the Corporation and any Hyundai Affiliate approved pursuant to Article TENTH hereof, it being acknowledged that the rights of the Corporation under any such agreement shall be deemed to be contractual rights and shall not be corporate opportunities of the Corporation for any purpose; provided, however, that no presumption or implication as to corporate opportunities relating to any transaction not explicitly covered by such an agreement shall arise from the existence or absence of any such agreement. (G) If any contract, agreement, arrangement or transaction between the Corporation and any Hyundai Affiliate involves a corporate opportunity and is approved in accordance with the procedures set forth in Article TENTH hereof, a Hyundai Affiliate and its officers and directors shall also, for the purposes of this Article ELEVENTH and the other provisions of this Restated Certificate of Incorporation, be deemed to have fully satisfied and fulfilled any fiduciary duties they may have to the Corporation and its stockholders. Any such contract, agreement, arrangement or transaction involving a corporate opportunity not so approved shall 8 not by reason thereof result in any such breach of any fiduciary duty, but shall be governed by the other provisions of this Article ELEVENTH, this Restated Certificate of Incorporation, the Bylaws, the DGCL and other applicable law. (H) For purposes of this Article ELEVENTH, the "Corporation" shall mean the Corporation and all corporations, partnerships, joint ventures, associations and other entities in which the Corporation Beneficially Owns, directly or indirectly, thirty-three and one-third percent (33-1/3%) or more of the outstanding voting stock, voting power or similar voting interests. For purposes of this Article ELEVENTH and Article TENTH, (i) "Beneficial Owners," "Beneficially Own," "Beneficially Owned," "Beneficial Ownership," and words of similar import shall have the meaning ascribed to such terms in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, or as successor rule, (ii) "Person" shall mean any individual, firm, corporation or other entity; and (iii) "Disinterested Director" shall mean a director of the Corporation who is not and has never been an officer, employee or paid consultant of any Hyundai Affiliate or the Corporation. (I) For purposes of this Article ELEVENTH, a director of the Corporation who is Chairman of the Board of Directors of the Corporation or a committee thereof shall not be deemed to be an officer of the Corporation by reason of holding such position (regardless of whether such position is deemed an office of the Corporation under the Bylaws of the Corporation), unless such Person is a full-time employee of the Corporation. (J) Notwithstanding anything in this Restated Certificate of Incorporation to the contrary and in addition to any vote of the Board of Directors required by applicable law or this Certificate of Incorporation, the affirmative vote of the holders of more than sixty-six and two-thirds percent (66-2/3%) of the voting power of the Company's equity securities then outstanding, voting together as a single class, shall be required to alter, amend or repeal in a manner adverse to the interests of the Hyundai Affiliates, or adopt any provision adverse to the interests of any Hyundai Affiliate and inconsistent with, any provision of this Article ELEVENTH. Neither the alteration, amendment or repeal of this Article ELEVENTH nor the adoption of any provision inconsistent with this Article ELEVENTH shall eliminate or reduce the effect of this Article ELEVENTH in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article ELEVENTH, would accrue or arise, prior to such alteration, amendment, repeal or adoption. (K) Any Person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article ELEVENTH. 9 IN WITNESS WHEREOF, the corporation has caused this Restated Certificate of Incorporation to be signed by its President and Chief Executive Officer and attested to by its Secretary this 10th day of December, 2000. /s/ MICHAEL R. CANNON -------------------------------------- Michael R. Cannon President and Chief Executive Officer Attest: /s/ GLENN H. STEVENS - ----------------------------------- Glenn H. Stevens, Secretary 10 EXHIBIT B BYLAWS 4 MAXTOR CORPORATION, a Delaware Corporation AMENDED AND RESTATED BYLAWS ARTICLE 1 STOCKHOLDERS Section 1. Annual Meeting. An annual meeting of the stockholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date, and at such time as the Board of Directors shall each year fix, which date shall be within thirteen months subsequent to the last annual meeting of stockholders, or if no such meeting has been held, the date of incorporation. Section 2. Special Meetings. Special meetings of the stockholders, for any purpose or purposes prescribed in the notice of the meeting, may be called only by (i) the Board of Directors, (ii) the Chairman of the Board or (iii) the Chief Executive Officer of the Corporation, and shall be held at such place, on such date, and at such time as they or he or she shall fix. Business transacted at special meetings shall be confined to the purpose or purposes stated in the notice of the meeting. In the event a special meeting is rightfully called by a person other than the Board of Directors, the Board shall cooperate in causing the meeting to be properly noticed and the matter as to which the meeting was called to be properly brought before the meeting. Section 3. Notice of Meetings. Written notice of the place, date, and time of all meetings of the stockholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation of the Corporation, as amended from time to time). The Notices of all meetings shall state the place, date and hour of the meeting. The notice of a special meeting shall state, in addition, the purpose or purposes for which the meeting is called. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the 1 adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 4. Quorum. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time. If a notice of any adjourned special meeting of stockholders is sent to all stockholders entitled to vote thereat, stating that it will be held with those present constituting a quorum, then except as otherwise required by law, those present at such adjourned meeting shall constitute a quorum, and all matters shall be determined by a majority of the votes cast at such meeting. Section 5. Conduct of Stockholders' Meeting. At every meeting of the stockholders, the Chairman of the Board, if there is such an officer, or if not, the person appointed by the Board of Directors, shall act as Chairman. The Secretary of the corporation or a person designated by the Chairman of the meeting shall act as Secretary of the meeting. Unless otherwise approved by the Chairman of the meeting, attendance at the stockholders' meeting is restricted to stockholders of record, persons authorized in accordance with Section 8 of these By-laws to act by proxy, and officers of the corporation. The Chairman of the meeting shall call the meeting to order, establish the agenda, and conduct the business of the meeting in accordance therewith or, at the Chairman's discretion, it may be conducted otherwise in accordance with the wishes of the stockholders in attendance. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. The Chairman shall also conduct the meeting in an orderly manner, rule on the precedence of, and procedure on, motions and other procedural matters, and exercise discretion with respect to such procedural matters with fairness and good faith toward all those entitled to take part. The Chairman may impose reasonable limits on the amount of time taken up at the meeting on discussion in general or on remarks by any one stockholder. Should any person in attendance become unruly or obstruct the meeting proceedings, the Chairman shall have the power to have such person removed from participation. Notwithstanding anything in the By-laws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 5. The Chairman of a meeting shall, if the facts warrant, determine and declare to the meeting that any proposed item of business was not brought before the meeting in accordance with the provisions of this Section 5, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. 2 Section 7. Notice of Stockholder Business. At any meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) properly brought before the meeting by or at the direction of the Board of Directors, or (c) properly brought before an annual meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder proposal to be presented at an annual meeting shall be received at the Corporation's principal executive offices not less than 120 calendar days in advance of the date that the Corporation's (or the Corporation's predecessor's) proxy statement was released to stockholders in connection with the previous year's annual meeting of stockholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been advanced by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholders to be timely must be received not later than the close of business on the tenth day following the day on which the public announcement of the date of such meeting is first made. A stockholder's notice to the Secretary of the Corporation shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. For purposes of this Section 7, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Notwithstanding the foregoing provisions of this Section 7, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 7. Nothing in this Section 7 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act. Section 8. Proxies and Voting. Each stockholder shall have one vote for each share of stock entitled to vote held of record by such stockholder and a proportionate vote for each fractional share so held, unless otherwise provided by law. Each stockholder of record entitled to vote at a meeting of stockholders, may vote in person or may authorize any other person or persons to vote or act for him by written proxy executed by the stockholder or his authorized agent or by a transmission permitted by law and delivered to the Secretary of the corporation. No stockholder may authorize more than one proxy for his shares. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile transmission or other reproduction shall be a complete reproduction of the entire original writing or transmission. 3 Section 9. Action at Meeting. When a quorum is present at any meeting, any election shall be determined by a plurality of the votes cast by the stockholders entitled to vote at the election, and all other matters shall be determined by a majority of the votes cast affirmatively or negatively on the matter (or if there are two or more classes of stock entitled to vote as separate classes, then in the case of each such class, a majority of each such class present or represented and voting affirmatively or negatively on the matter), except when a different vote is required by express provision of law or these By-laws. All voting, including on the election of directors, but excepting where otherwise required by law, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or his or her proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. The corporation may, and to the extent required by law, shall in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The corporation may designate one or more persons as an alternate inspector to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. Section 9. Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in his or her name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Section 10. No Stockholders Action Without Meeting. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. 4 ARTICLE II BOARD OF DIRECTORS Section 1. Number and Term of Office. AS IN EFFECT PRIOR TO THE EFFECTIVE TIME OF THE MERGER (AS SUCH TERMS ARE DEFINED IN THE AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (THE "AMENDED MERGER AGREEMENT"), DATED AS OF OCTOBER 3, 2001 BY AND AMONG QUANTUM CORPORATION ("QUANTUM"), A DELAWARE CORPORATION, SPINCO CORPORATION, A DELAWARE CORPORATION AND A WHOLLY-0WNED SUBSIDIARY OF QUANTUM, HAWAII ACQUISITION CORPORATION, A DELAWARE CORPORATION AND WHOLLY-OWNED SUBSIDIARY OF THE CORPORATION, AND THE CORPORATION): The number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board for adoption). The directors shall be divided into three classes, as nearly equal in number as reasonably possible, with the term of office of the first class to expire at the 1994 annual meeting of stockholders, the term of office of the second class to expire at the 1995 annual meeting of stockholders and the term of office of the third class to expire at the 1996 annual meeting of stockholders, provided that the term of office of directors in office on the date these Amended and Restated Bylaws are adopted is not affected by the adoption of these Amended and Restated Bylaws. At each annual meeting of stockholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election. All directors shall hold office until the expiration of the term for which elected and until their respective successor are elected, except in the case of the death, resignation or removal of any director. AS IN EFFECT AFTER THE EFFECTIVE TIME OF THE MERGER: The number of directors shall be fixed from time to time exclusively by the Board of Directors. Prior to the annual meeting of stockholders held in 2004, the directors shall be divided into three classes, which need not be equal in number, the size to be fixed exclusively by the Board of Directors. From and after the annual meeting of stockholders to be held in 2004, the classes shall be as nearly equal in number as reasonably possible as determined exclusively by Board of Directors. All determinations by the Board of Directors under this Section 1 shall be pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorship at the time any such resolution is presented to the Board of Directors for adoption). Each director shall be elected to a three-year term. Section 2. Vacancies and Newly Created Directorships. Except as provided in the Certificate of Incorporation of the Corporation, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause 5 may be filled only by a majority vote of the directors then in office, though less than a quorum, and directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which they have been elected expires. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 3. Removal. Any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least a majority of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class. Section 4. Regular Meetings. Regular meetings of the Board of Directors shall be held at such place or places, on such date or dates, and at such time or times as shall have been established by the Board of Directors and publicized among all directors. A notice of each regular meeting shall not be required. A regular meeting of the Board of Directors may be held without notice immediately after and at the same place as the annual meeting of stockholders. Section 5. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President and Chief Executive Officer, two or more directors, or by one director in the event there is only a single director in office, and shall be held at such place, on such date, and at such time as they or he or she shall fix. Notice of the place, date, and time of each such special meeting shall be given each director by whom it is not waived (i) by giving notice to such director in person or by telephone or electronic voice message system at least 24 hours in advance of the meeting, (ii) by sending a telegram, telecopy or telex, or delivering written notice by hand, to his last known business or home address at least 24 hours in advance of the meeting, or (iii) by mailing written notice to his last known business or home address at least five (5) days in advance of the meeting. A notice or waiver of notice of a meeting of the Board of Directors need not specify the purposes of the meeting. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting. Section 6. Quorum. At any meeting of the Board of Directors, a majority of the total number of authorized directors shall constitute a quorum for all purposes. In the event one or more of the directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (1/3) of the number so fixed constitute a quorum. In the absence of a quorum at any such meeting, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or at a meeting of a committee which authorizes a particular contract or transaction. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of those present shall be sufficient to take any action, unless a different vote is specified by law or these By-Laws. Section 7. Participation in Meetings by Conference Telephone. Members of the Board of Directors, or of any committee thereof, may participate in a meeting of such Board or committee 6 by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting. Section 8. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee of the Board of Directors may be taken without a meeting, if all members of the Board or committee, as the case may be, consent to the action in writing. Any such written consents shall be filed with the minutes of proceedings of the Board or committee. Section 9. Compensation of Directors. Directors, as such, may receive, pursuant to resolution of the Board of Directors, fixed fees and other compensation for their services as directors, including, without limitation, their services as members of committees of the Board of Directors. Section 10. Nomination of Director Candidates: Subject to the rights of holders of any class or series of Preferred Stock then outstanding, nominations for the election of Directors may be made by the Board of Directors or a proxy committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of Directors generally. However, any stockholder entitled to vote in the election of Directors generally may nominate one or more persons for election as Directors at a meeting only if timely notice of such stockholder's intent to make such nomination or nominations has been given in writing to the Secretary of the Corporation. To be timely, a stockholder nomination for a director to be elected at an annual meeting shall be received at the Corporation's principal execute offices not less than 120 calendar days in advance of the date that the Corporation's proxy statement was released to stockholders in connection with the previous year's annual meeting of stockholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been advanced by more than 30 calendar days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholders to be timely must be received not later than the close of business on the tenth day following the day on which the public announcement of the date of such meeting is first made. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote for the election of Directors on the date of such notice and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (e) the consent of each nominee to serve as a director of the Corporation if so elected. For purposes of this Section 10, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Company with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. Notwithstanding the foregoing provisions of this 7 Section 10, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 10. Nothing in this Section 10 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange Act. In the event that a person is validly designated as a nominee in accordance with this Section 10 and shall thereafter become unable or unwilling to stand for election to the Board of Directors, the Board of Directors or the stockholder who proposed such nominee, as the case may be, may designate a substitute nominee upon delivery, not fewer than five days prior to the date of the meeting for the election of such nominee, of a written notice to the Secretary setting forth such information regarding such substitute nominee as would have been required to be delivered to the Secretary pursuant to this Section 10 had such substitute nominee been initially proposed as a nominee. Such notice shall include a signed consent to serve as a director of the Corporation, if elected, of each such substitute nominee. If the chairman of the meeting for the election of Directors determines that a nomination of any candidate for election as a Director at such meeting was not made in accordance with the applicable provisions of this Section 10, such nomination shall be void; provided, however, that nothing in this Section 10 shall be deemed to limit any voting rights upon the occurrence of dividend arrearages provided to holders of Preferred Stock pursuant to the Preferred Stock designation for any series of Preferred Stock. ARTICLE III COMMITTEES Section 1. Committees of the Board of Directors. The Board of Directors may from time to time designate committees of the Board, with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of the Board and shall, for those committees and any others provided for herein, elect a director or directors to serve as the member or members, designating, if it desires, other directors as alternate members who may replace any absent or disqualified member at any meeting of the committee. Any such committee, to the extent provided in the resolution of the Board of Directors and subject to the provisions of the General Corporation Law of the State of Delaware, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each such committee shall keep minutes and make such reports as the Board of Directors may from time to time request. Except as the Board of Directors may otherwise determine, any committee may make rules for the conduct of its business, but unless otherwise provided by such rules, its business shall be conducted as nearly as possible in the same manner as is provided in these By-laws for the Board of Directors. Any committee so designated may exercise the power and authority of the Board of Directors to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law if the resolution which designates the committee or a supplemental resolution of the Board of Directors shall so provide. In the absence or 8 disqualification of any member of any committee and any alternate member in his place, the member or members of the committee present at the meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the Board of Directors to act at the meeting in the place of the absent or disqualified member. Section 2. Conduct of Business. Each committee may determine the procedural rules for meeting and conducting its business and shall act in accordance therewith, except as otherwise provided herein or required by law. Adequate provision shall be made for notice to members of all meetings; one-third of the authorized members shall constitute a quorum unless the committee shall consist of one or two members, in which event one member shall constitute a quorum; and all matters shall be determined by a majority vote of the members present. Action may be taken by any committee without a meeting if all members thereof consent thereto in writing, and the writing or writings are filed with the minutes of the proceedings of such committee. ARTICLE IV OFFICERS Section 1. Generally. The officers of the Corporation shall consist of a President, a Secretary, a Treasurer and such other officers with such other titles as the Board of Directors shall determine, including, at the discretion of the Board of Directors, a Chairman of the Board, and one or more Vice Presidents and Assistant Secretaries. Except as otherwise provided in the Certificate of Incorporation of the Corporation, officers shall be elected by the Board of Directors, which shall consider that subject at its first meeting after every annual meeting of stockholders. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. The Chairman of the Board, if there be such an officer, and the President shall each be members of the Board of Directors. Any number of offices may be held by the same person. Section 2. Chairman of the Board. The Board of Directors may appoint a Chairman of the Board. If the Board of Directors appoints a Chairman of the Board, he shall perform such duties and possess such powers as are assigned to him by the Board of Directors. Unless otherwise provided by the Board of Directors, he shall preside at all meetings of the stockholders, and, if he is a director, at all meetings of the Board of Directors. Section 3. President. The President shall be the chief executive officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board of Directors, he or she shall have the responsibility for the general management and control of the business and affairs of the Corporation and shall perform all duties and have all powers which are commonly incident to the office of chief executive or which are delegated to him or her by the Board of Directors. He or she shall have power to sign all stock certificates, contracts and other instruments of the Corporation which are authorized and shall have general supervision and direction of all of the other officers, employees and agents of the Corporation, other than the Chairman of the Board, if there be such an officer. 9 Section 4. Vice President. Each Vice President shall have such powers and duties as may be delegated to him or her by the Board of Directors or the President. In the event of the absence, inability or refusal to act of the President, the Vice President (or if there shall be more than one, the Vice Presidents in the order determined by the Board of Directors) shall perform the duties of the President and when so performing shall have at the powers of and be subject to all the restrictions upon the President. The Board of Directors may assign to any Vice President the title of Executive Vice President, Senior Vice President or any other title selected by the Board of Directors. Section 5. Treasurer. The Treasurer shall perform such duties and shall have such powers as may from time to time be assigned to him by the Board of Directors or the President. In addition, the Treasurer shall perform such duties and have such powers as are incident to the office of chief financial officer, including without limitation, the duty and power to keep and be responsible for all funds and securities of the corporation, to maintain the financial records of the Corporation, to deposit funds of the corporation in depositories as authorized, to disburse such funds as authorized, to make proper accounts of such funds, and to render as required by the Board of Directors accounts of all such transactions and of the financial condition of the corporation. Any Assistant Treasurer shall perform such duties and possess such powers as the Board of Directors, the President or the Treasurer may from time to time prescribe. In the event of the absence, inability or refusal to act of the Treasurer, the Assistant Treasurer (or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Treasurer. Section 6. Secretary. The Secretary shall perform such duties and shall have such powers as the Board of Directors or the President may from time to time prescribe. In addition, the Secretary shall perform such duties and have such powers as are incident to the office of the Secretary, including, without limitation, the duty and power to give notices of all meetings of stockholders and special meetings of the Board of Directors, to keep a record of the proceedings of all meetings of stockholders and the Board of Directors, to maintain a stock ledger and prepare lists of stockholders and their addresses as required, to be custodian of corporate records and the corporate seal and to affix and attest to the same on documents. Any Assistant Secretary shall perform such duties and possess such powers as the Board of Directors, the President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors) shall perform the duties and exercise the powers of the Secretary. In the absence of the Secretary or any Assistant Secretary at any meeting of stockholders or directors, the person presiding at the meeting shall designate a temporary secretary to keep a record of the meeting. 10 Section 7. Delegation of Authority. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officers or agents, notwithstanding any provision hereof. Section 8. Removal. Except as otherwise provided in the Certificate of Incorporation of the Corporation, any officer of the Corporation may be removed at any time, with or without cause, by the Board of Directors. Section 9. Action With Respect to Securities of Other Corporations. Unless otherwise directed by the Board of Directors, the President or any officer of the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of securities in such other corporation. ARTICLE V STOCK Section 1. Certificates of Stock. Each stockholder shall be entitled to a certificate, in such a form as may be prescribed by law, signed by, or in the name of the Corporation by, the President or as Vice President, and by the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of shares owned by him or her. Any of or all the signatures on the certificate may be facsimile. Each certificate for shares of stock which are subject to any restriction on transfer pursuant to the Certificate of Incorporation, the By-laws, applicable securities laws or any agreement among any number of stockholders or among such holders and the corporation shall have conspicuously noted on the face or back of the certificate either the full text of the restriction or a statement of the existence of such restriction. Section 2. Transfers of Stock. Except as otherwise established by rules and regulations adopted by the Board of Directors, and subject to applicable law, shares of stock may be transferred on the books of the corporation by the surrender to the corporation or its transfer agent of the certificate representing such shares properly endorsed or accompanied by a written assignment or power of attorney properly executed, and with such proof of authority or authenticity of signature as the corporation or its transfer agent may reasonably require. Except as may be otherwise required by law, by the Certificate of Incorporation or the By-Laws, the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to vote with respect to such stock, regardless of any transfer, pledge or other disposition of such stock until the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-Laws. 11 Section 3. Record Date. The Board of Directors may fix in advance a date as a record date for the determination of the stockholders entitled to notice of or to vote at any meeting of stockholders or to express consent (or dissent) to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights in respect of any change, concession or exchange of stock, or for the purpose of any other lawful action. Such record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action to which such record date relates. If no record date is fixed, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day before the day on which the meeting is held. The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed. The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 4. Lost, Stolen or Destroyed Certificates. In the event of the loss, theft or destruction of any certificate of stock, another may be issued in its place pursuant to such regulations as the Board of Directors may establish concerning proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds of indemnity. Section 5. Regulations. The issue, transfer, conversion or registration of certificates of stock shall be governed by such other regulations as the Board of Directors may establish. ARTICLE VI NOTICES Section 1. Notices. Except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery to the recipient thereof, by depositing such notice in the mails, postage paid, or by sending such notice by prepaid telegram, mailgram, telecopy or commercial courier service. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at his or her last known address as the same appears on the books of the Corporation. The time when such notice is received by such stockholder, director, officer, employee or agent, or by any person accepting such notice on behalf of such person, if hand delivered, or dispatched, if delivered through the mails or by prepaid telegram, mailgram, telecopy or commercial courier service, shall be the time of the giving of the notice. 12 Section 2. Waivers. A written waiver of any notice, signed by a stockholder, director, officer, employee or agent, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required to be given to such stockholder, director, officer, employee or agent. Neither the business nor the purpose of any meeting need be specified in such a waiver. ARTICLE VII MISCELLANEOUS Section 1. Facsimile Signatures. In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof. Section 2. Corporate Seal. The Board of Directors may provide a suitable seal, containing the name of the Corporation, which seal shall be in the charge of the Secretary. If and when so directed by the Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer. Section 3. Reliance Upon Books, Reports and Records. Each director, each member of any committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of account or other records of the Corporation, including reports made to the Corporation by any of its officers, by an independent certified public accountant, or by an appraiser selected with reasonable care. Section 4. Fiscal Year. The fiscal year of the Corporation shall be as fixed by the Board of Directors. Section 5. Time Periods. In applying any provision of these Bylaws which require that an act be done or not done a specified number of days prior to an event or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ("proceeding"), by reason of the fact that he or she or a person of whom he or she is the legal representative, is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer or employee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is 13 alleged action in an official capacity as a director, officer or employee or in any other capacity while serving as a director, officer or employee, shall, to the extent such person is an officer or director of the Corporation, and may otherwise on the resolution of the Board of Directors, be indemnified and held harmless by the Corporation to the fullest extent authorized by Delaware Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said Law permitted the Corporation to provide prior to such amendment) against all expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, amounts paid or to be paid in settlement and amounts expended in seeking indemnification granted to such person under applicable law, this by-law or any agreement with the Corporation) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer or employee and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 of this Article VIII, the Corporation shall indemnify any such person seeking indemnity in connection with an action, suit or proceeding (or part thereof) initiated by such person only if such action, suit or proceeding (or part thereof) was authorized by the board of directors of the Corporation. Such right shall be a contract right and shall include the right to be paid by the Corporation expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law then so requires, the payment of such expenses incurred by a director of officer of the Corporation in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of such proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it should be determined ultimately that such director or officer is not entitled to be indemnified under this Section or otherwise. Section 2. Right of Claimant to Bring Suit. If a claim under Section 1 is not paid in full by the Corporation within twenty (20) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if such suit is not frivolous or brought in bad faith, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to this Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such 14 applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. Section 3. Non-Exclusivity of Rights. The rights conferred on any person in Sections 1 and 2 shall not be exclusive of any other right which such persons may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Section 4. Indemnification Contracts. The Board of Directors is authorized to enter into a contract with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than, those provided for in this Article VIII. Section 5. Insurance. The Corporation shall maintain insurance to the extent reasonably available, at its expense, to protect itself and any such director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. Section 6. Effect of Amendment. Any amendment, repeal or modification of any provision of this Article VIII by the stockholders and the directors of the Corporation shall not adversely affect any right or protection of a director or officer of the Corporation existing at the time of such amendment, repeal or modification. ARTICLE IX AMENDMENTS Section 1. By the Board of Directors. Except as is otherwise set forth in these By-laws, these By-laws may be altered, amended or repealed or new By-laws may be adopted by the affirmative vote of a majority of the directors present at any regular or special meeting of the Board of Directors at which a quorum is present. Section 2. By the Stockholders. Except as otherwise set forth in these By-laws, these By-laws may be altered, amended or repealed or new By-laws may be adopted by the affirmative By-laws may be altered, amended or repealed or new By-laws may be adopted by the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the shares of the capital stock of the corporation issued and outstanding and entitled to vote at any annual meeting of stockholders, or at any special meeting of stockholders, provided notice of such alteration, amendment, repeal or adoption of new By-laws shall have been stated in the notice of such special meeting. 15 CERTIFICATE OF SECRETARY I, Glenn H. Stevens, hereby certify: 1. That I am the duly elected and acting Secretary of MAXTOR CORPORATION, a Delaware corporation (the "Corporation"); and 2. That the foregoing Bylaws comprising sixteen (16) pages, constitute the Amended and Restated Bylaws of the Corporation as duly adopted by the Board of Directors at a meeting October 3, 2000. IN WITNESS WHEREOF, I have hereunder subscribed my name this 12th day of March, 2001. /s/ GLENN H. STEVENS ---------------------------------- Glenn H. Stevens, Secretary 16 EXHIBIT C BOARD RESOLUTIONS 5 MAXTOR CORPORATION ASSISTANT SECRETARY'S CERTIFICATE I, William Sweeney, in my capacity as Assistant Secretary of Maxtor Corporation, a Delaware corporation (the "CORPORATION"), and on behalf of the Corporation, do hereby certify as set forth below: 1. I am the duly elected, qualified and acting Assistant Secretary of the Corporation, and as such, I am authorized to execute and deliver this certificate on behalf of the Corporation. 2. Attached hereto as EXHIBIT A is a true, complete and correct copy of resolutions duly and validly adopted at a regular meeting of the board of directors of the Corporation (the "BOARD") held on August 7, 2001, pursuant to which the Board approved the execution and delivery of the Agreement and Plan of Reorganization (the "AGREEMENT"), by and among the Corporation, Lime Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of the Corporation ("MERGER SUB"), MMC Technology, Inc., a California corporation, and Hynix Semiconductor America, a California corporation, the performance by the Corporation of all of the terms thereof, and the consummation of all of the transactions contemplated thereby. Such resolutions have not been amended or modified, are in full force and effect and are the only resolutions adopted by the Board relating to the Agreement and the transactions contemplated thereby. IN WITNESS WHEREOF, the undersigned has caused this Assistant Secretary's Certificate to be executed as of the 15th day of August 2001. MAXTOR CORPORATION /s/ WILLIAM SWEENEY ---------------------------------------- William Sweeney Assistant Secretary EXHIBIT A RESOLUTION OF THE BOARD OF DIRECTORS OF MAXTOR CORPORATION AUGUST 7, 2001 I. AUTHORIZATION OF MERGER. WHEREAS, the Board of Directors (the "Board") of Maxtor Corporation, a Delaware corporation (the "Corporation") has determined that it is desirable and in the best interests of the Corporation and its stockholders, based on the recommendation of the Affiliated Transactions Committee, to enter into the Agreement and Plan of Reorganization by and between the Corporation, Lime Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of the Corporation ("Merger Sub"), MMC Technology, Inc., a California corporation (the "Target"), and Hynix Semiconductor America Inc., a California corporation, in substantially the form attached hereto at Attachment 1 (the "Merger Agreement"), providing for, among other things, the merger of the Target with and into Merger Sub pursuant to which the Target shall be the surviving corporation and become a wholly-owned subsidiary of the Corporation (the "Merger"). WHEREAS, the Board has determined, based on the recommendation of the Affiliated Transactions Committee, that is desirable and in the best interests of the Corporation and its stockholders to consummate the transactions contemplated by the Merger Agreement. NOW, THEREFORE, BE IT RESOLVED, that, based on the recommendation of the Affiliated Transactions Committee, the terms and conditions of the Merger as set forth in the Merger Agreement are hereby authorized and approved, with such changes and modifications as the officers of the Corporation may consider necessary or appropriate. RESOLVED FURTHER, that the form of the Merger Agreement, substantially in the form attached hereto as Attachment 1, is hereby approved, and the officers of the Corporation be, and each of them is, authorized and directed to execute and deliver the Merger Agreement and such other agreements as are provided as set forth in the exhibits to the Merger Agreement, and such other instruments and documents, as may be necessary or appropriate to consummate the transactions contemplated by the Merger, together with such changes, modifications, additions or deletions as the officer of the Corporation executing the same may deem necessary or appropriate, such approval to be conclusively evidenced by the execution and delivery thereof. RESOLVED FURTHER, that the officers of the Corporation be, and each of them is, authorized and directed to create and form a wholly owned subsidiary of the Corporation under Delaware law named Lime Acquisition Corporation. RESOLVED FURTHER, that in furtherance of the Merger, the officers of the Corporation be, and each of them is, authorized and directed to execute and file with the Secretary of State of the State of California a certificate of merger ("Certificate of Merger") pursuant to the California General Corporation Law, such Certificate of Merger to be in the form approved by the officer executing the same, and, if appropriate, such other certificates, instruments, and documents as may be required to be filed by the Corporation with the Secretary of State of California or any other state, together with such changes, modifications, additions or deletions as the officer of the Corporation executing the same may deem necessary or appropriate, such approval to be conclusively evidenced by the execution and filing thereof. RESOLVED FURTHER, that all prior actions taken by any officer of the Corporation with respect to the preparation, negotiation and execution of the Merger Agreement and all agreements related thereto and otherwise to effect the purposes and intent of the Merger Agreement, are hereby ratified, confirmed and approved. 2. ENABLING RESOLUTIONS. RESOLVED, that any officer of the Corporation is hereby authorized to take such further actions as any of them shall deem necessary or advisable in order to carry out and perform the purpose and intent of the foregoing resolutions. RESOLVED FURTHER, that any actions taken prior to the date of the foregoing resolutions by any officer of the Corporation that are within the authority conferred upon such officer, are hereby ratified, confirmed and approved as the acts and deeds of the Corporation. MAXTOR RECEIVABLES CORPORATION UNANIMOUS WRITTEN CONSENT OF THE SOLE SHAREHOLDER IN LIEU OF SPECIAL MEETING The undersigned, being the sole shareholder of all of the outstanding shares of Maxtor Receivables Corporation, a California corporation (the "Corporation"), in accordance with Section 603 of the California Corporations Code and Section 2.12 of Article II of the Bylaws of the Corporation, hereby consents to the taking of the following actions and adoption of the following resolutions, and directs that this Consent be executed in lieu of and for the purposes of and with the same effects as a special meeting of the sole shareholder, and be filed with the Minutes of the meetings of the sole shareholder by the Secretary of the Corporation: AMENDMENT OF ARTICLES OF INCORPORATION WHEREAS, the Board of Directors of this Corporation has adopted, by unanimous written consent dated as of the date hereof (the "Consent"), resolutions approving the amendment and restatement of the Articles of Incorporation, a copy of such Consent which is attached hereto as EXHIBIT A and made a part hereof; NOW, THEREFORE, BE IT RESOLVED, that the undersigned shareholder does hereby adopt, approve and consent to the aforementioned amendment and restatement of the Articles of Incorporation, a copy of which is attached hereto as EXHIBIT B and made a part hereof. AMENDMENT OF BYLAWS WHEREAS, the Board of Directors of this Corporation has adopted, by unanimous written Consent dated as of the date hereof, resolutions approving the amendment and restatement of the Bylaws, as amended, a copy of such Consent which is attached hereto as EXHIBIT A and made a part hereof; NOW, THEREFORE, BE IT RESOLVED, that the undersigned shareholder does hereby adopt, approve and consent to the aforementioned amendment and restatement of the Bylaws, as amended, a copy of which is attached hereto as EXHIBIT C and made a part hereof. 1 GENERAL AUTHORITY RESOLVED, that any and all actions heretofore taken by the officers of the Corporation within the terms of any of the foregoing resolutions are hereby ratified, approved and confirmed, and declared to be the valid and binding acts and deeds of the Corporation; and FURTHER RESOLVED, that the officers of this Corporation be and they hereby are authorized, directed and empowered to do all such other acts and things and to execute and deliver all such certificates or other documents and to take such other action as they deem necessary or desirable to carry out the purposes and intent of the above resolutions. Dated as of November __, 2001 SHAREHOLDER: ---------------------------------------- MAXTOR CORPORATION By: Glenn H. Stevens Its: Vice President and General Counsel 2 EXHIBIT A CONSENT OF THE BOARD OF DIRECTORS (see attached) 1 EXHIBIT B AMENDED AND RESTATED ARTICLES OF INCORPORATION (see attached) EXHIBIT C AMENDED AND RESTATED BYLAWS (see attached) EX-10.4 6 f76661orex10-4.txt EXHIBIT 10.4 EXHIBIT 10.4 PROMISSORY NOTE $12,273,650.11 September 2, 2001 1. Principal and Interest. MMC Technology, Inc. (the "Company"), a California corporation, for value received, hereby promises to pay to the order of Hynix Semiconductor America Inc. ("Payee") in lawful money of the United States at the principal office of the Company, the principal sum of Twelve Million Two Hundred Seventy Three Thousand Six Hundred Fifty Dollars and Eleven Cents ($12,273,650.11), payable as follows: (a) a principal amount of Five Million Dollars ($5,000,000.00) at the closing of the transactions contemplated in the Agreement and Plan of Reorganization dated as of August 17, 2001 to which the Company and the Payee are each a party (the "Closing"); and (b) following payment of the amount in Section 1(a), the outstanding principal balance hereunder in the amount of Seven Million Two Hundred Seventy Three Thousand Six Hundred Fifty Dollars and Eleven Cents ($7,273,650.11), on or before March 31, 2002; provided, however, that in the event that the principal amount set forth in this Section 1(b) is not paid in full on or before March 31, 2002, such unpaid principal amount shall thereafter accrue interest at a rate per annum equal to nine percent (9%) and all accrued and unpaid interest shall be due and payable on demand by Payee. Except as expressly set forth in this Section 1(b), this Promissory Note shall not bear any interest. 2. Attorneys' Fees. If the indebtedness represented by this Note or any part thereof is the subject of an action in bankruptcy, receivership or other judicial proceedings or if this Note is placed in the hands of attorneys for collection after default, Company agrees to pay, in addition to the due and unpaid principal and interest payable hereunder, reasonable and documented attorneys' fees and reasonable and documented costs incurred by Payee. 3. Prepayment. The indebtedness represented by this Note may be pre-paid by the Company at any time without penalty or any other charge or assessment. 4. Acceleration. The indebtedness represented by this Note shall become immediately due and payable if (i) the Company commences any proceeding in bankruptcy or for dissolution, liquidation, winding-up, or other relief under state or federal bankruptcy laws; or (ii) such proceedings are commenced against the Company, or a receiver or trustee is appointed for the Company or a substantial part of its property, and such proceeding or appointment is not dismissed or discharged within 60 days after its commencement. 5. Waivers. Company hereby waives presentment, demand for performance, notice of non-performance, protest, notice of protest and notice of dishonor. No delay on the part of Payee in exercising any right hereunder shall operate as a waiver of such right or any other right. This Note is being delivered in and shall be construed in accordance with the laws of the State of California, without regard to the conflicts of laws provisions hereof. MMC Technology, Inc. By: /s/ TAJ GUILAMANI ---------------------------- Its: Taj Guilamani --------------------------- VP Fin EX-10.5 7 f76661orex10-5.txt EXHIBIT 10.5 EXHIBIT 10.5 PROMISSORY NOTE In consideration of the receipt of two million United States dollars (U.S.$2,000,000.00) ("Principal"), Maker promises to pay to Holder on 12-31, 2001 ("Due Date") the entire Principal plus interest thereon accrued at the rate of nine percent (9.0%) per year ("Interest") from the date hereof to the date of payment (calculated by the actual over 360 method). Maker may prepay this note in whole or in part at any time or times and such prepayment(s) shall be applied first to any unpaid interest and then to any unpaid Principal. Maker waives presentment, notice, waiver and all other defenses and acknowledges that this is a general recourse obligation of Maker. This Promissory Note shall be subject to and construed by the laws of California as they apply to obligations made and performed therein by residents thereof. DATE: January 5, 2001 Hyundai Electronics America ("Maker") BY: /s/ Thomas J. Thomas -------------------------- PRINT: Thomas J. Thomas ----------------------- TITLE: V.P. Finance/CFO ----------------------- Accepted by: Maxtor Corporation ("Holder") BY: -------------------------- PRINT: ----------------------- TITLE: ----------------------- -----END PRIVACY-ENHANCED MESSAGE-----


(Mark one)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended September 29, 2001

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to


Delaware		77-0123732
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 McCarthy Blvd., Milpitas, CA		95035
(Address of principal executive offices)		(Zip Code)


PART I. FINANCIAL INFORMATION
	Item 1. Condensed Consolidated Financial Statements
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OF COMPREHENSIVE INCOME
		CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures about Market Risk
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 6. Exhibits and Reports on Form 8-K
	SIGNATURES
	EXHIBIT INDEX
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 10.4
EXHIBIT 10.5


		Page

PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements		2
	Condensed Consolidated Balance Sheets — September 29, 2001, and December 30, 2000		2
	Condensed Consolidated Statements of Operations and of Comprehensive Income — Three and nine months ended September 29, 2001, and September 30, 2000		3
	Condensed Consolidated Statements of Stockholders’ Equity — Nine months ended September 29, 2001		4
	Condensed Consolidated Statements of Cash Flows — Nine months ended September 29, 2001, and September 30, 2000		5
	Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		40
Item 6.	Exhibits and Reports on Form 8-K		41
Signature Page			42


			September 29,			December 30,
			2001			2000

ASSETS
Current assets:
	Cash and cash equivalents		$	375,014		$	193,228
	Restricted cash			98,594			—
	Marketable securities			171,477			182,949
	Accounts receivable, net of allowance for doubtful accounts $19,060 at September 29, 2001 and $15,148 at December 30, 2000			328,696			284,253
	Inventories, net			236,228			106,405
	Prepaid expenses and other			64,917			34,577

		Total current assets		1,274,926			801,412
Property, plant and equipment, net				387,391			165,926
Goodwill and other intangible assets, net				987,317			44,237
Other assets				28,245			13,344

		Total assets	$	2,677,879		$	1,024,919

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Short-term borrowings, including current portion of long-term debt		$	46,046		$	15,432
	Accounts payable			539,647			421,338
	Accrued and other liabilities			420,639			192,152

		Total current liabilities		1,006,332			628,922
Deferred taxes				196,218			—
Long-term debt, net of current portion				253,429			92,259
Other liabilities				144,806			—

		Total liabilities		1,600,785			721,181
Stockholders’ equity:
	Preferred stock, $0.01 par value, 95,000,000 shares authorized; no shares issued or outstanding			—			—
	Common stock, $0.01 par value, 525,000,000 shares authorized; 241,175,987 shares issued and outstanding at September 29, 2001 and 116,205,270 shares issued and outstanding at December 30, 2000			2,412			1,162
Additional paid-in capital				2,321,314			1,059,899
Deferred compensation				(6,163	)		—
Accumulated deficit				(1,244,282	)		(760,126	)
Cumulative other comprehensive income				3,813			2,803

		Total stockholders’ equity		1,077,094			303,738

		Total liabilities and stockholders’ equity	$	2,677,879		$	1,024,919



			Three Months Ended						Nine Months Ended

			September 29,			September 30,			September 29,			September 30,
			2001			2000			2001			2000

Net Revenues			$	1,045,020		$	619,314		$	2,717,408		$	1,977,674
Cost of revenues				963,931			556,379			2,469,366			1,706,592

	Gross profit			81,089			62,935			248,042			271,082
Operating expenses:
	Research and development			124,497			54,851			322,748			171,411
	Selling, general and administrative			53,607			23,269			188,992			75,264
	Amortization of goodwill and other intangible assets			63,265			2,520			127,671			7,560
	Purchased in-process research and development			400			—			95,140			—

		Total operating expenses		241,769			80,640			734,551			254,235

Income (loss) from operations				(160,680	)		(17,705	)		(486,509	)		16,847
Interest expense				(6,188	)		(3,435	)		(14,659	)		(10,405	)
Interest and other income				2,784			6,410			20,569			21,765
Other loss				(503	)		—			(1,109	)		—

Income (loss) before provision for income taxes				(164,587	)		(14,730	)		(481,708	)		28,207
Provision for (benefit from) income taxes				1,140			(737	)		2,448			1,410

Net income (loss)				(165,727	)		(13,993	)		(484,156	)		26,797
Unrealized gain (loss) on investments in equity securities, net of tax				1,613			(2,700	)		1,010			2,169

Comprehensive income (loss)			$	(164,114	)	$	(16,693	)	$	(483,146	)	$	28,966

Net income (loss) per share — basic			$	(0.69	)	$	(0.12	)	$	(2.46	)	$	0.23
Net income (loss) per share — diluted			$	(0.69	)	$	(0.12	)	$	(2.46	)	$	0.22
Shares used in per share calculation
	— basic			238,629,903			115,709,525			196,829,537			114,906,927
	— diluted			238,629,903			115,709,525			196,829,537			119,156,289


														Cumulative
		Common Stock				Additional								Other		Total
						Paid-In		Deferred			Accumulated			Comprehensive		Stockholders’
		Shares		Amount		Capital		Compensation			Deficit			Income		Equity

Balance, December 30, 2000			116,205,270	$	1,162	$	1,059,899	$	—		$	(760,126	)	$	2,803	$	303,738
	Issuance of stock under stock option plan		3,940,245		39		19,610		—			—			—		19,649
	Issuance of stock relating to Quantum HDD acquisition		121,030,472		1,211		1,229,466		—			—			—		1,230,677
	Deferred compensation relating to Quantum HDD acquisition		—		—		9,920		(9,920	)		—			—		—
	Stock compensation		—		—		2,419		3,757			—			—		6,176
	Change in unrealized gain on investments in equity securities		—		—		—		—			—			1,010		1,010
	Net loss		—		—		—		—			(484,156	)		—		(484,156	)

Balance, September 29, 2001			241,175,987	$	2,412	$	2,321,314	$	(6,163	)	$	(1,244,282	)	$	3,813	$	1,077,094


Value of securities issued			$	1,133.5
Assumption of Quantum HDD options				107.1

				1,240.6
	Transaction costs			28.8

		Total purchase price	$	1,269.4


Tangible assets:
	Cash and cash equivalents		$	315.3
	Restricted cash			93.9
	Accounts receivable			247.3
	Inventories			181.7
	Prepaid expenses and other current assets			124.6
	Property, plant and equipment			129.8
	Other noncurrent assets			28.3

		Total tangible assets			$	1,120.9

Intangible assets acquired:
	Core and other existing technology					286.1
	Assembled workforce					43.0
Deferred compensation						9.9
Goodwill						716.0
In-process research and development						94.7
Liabilities assumed:
	Accounts payable			231.4
	Accruals and other liabilities			195.4
	Deferred taxes			196.2
Long-term debt				132.4
Other long-term liabilities				142.0

		Total liabilities assumed				(897.4	)

Merger-related restructuring costs						(103.8	)

		Total purchase price			$	1,269.4


	Percent			Expected
	Completed			Technology Life

Self-servo Writer		85	%		3 years
High-end		40	%		4 years
Core Technology		44	%		6 years
Desktop		75	%		4 years
Other identified projects		55-80	%		4 years


Self-servo Writer	$	47.7
High-end		18.2
Core Technology		16.0
Desktop		8.9
Other identified projects		3.9

	$	94.7



	For the Nine Months Ended

	September 29,			September 30,
	2001			2000


	(In millions, except
	per share data)
Revenue	$	3,368.0		$	4,566.9
Net loss	$	(471.5	)	$	(155.7	)
Loss per share — basic and diluted	$	(1.98	)	$	(0.67	)


Cash paid		$	1.0
Forgiveness of loan consideration			16.0

		$	17.0
Transaction costs			0.9

	Total purchase price	$	17.9


		Total tangible assets		$	97.7
Existing technology					2.8
Goodwill					22.8
In-process research and development					0.4
Liabilities assumed:
	Accruals and other liabilities		30.6
	Capital lease obligations and debt		75.1

		Total liabilities assumed			(105.7	)

		Total purchase price		$	17.9


	Purchased In-process Research and Development (“IPR&D”)


	*Quantum HDD Acquisition*


	*MMC Technology, Inc. Acquisition*


	*Revenue and Gross Profit*


	Revenue


										Fair Value as of
										September 29,
Investment Portfolio	+150 BPS			+100 BPS			+50 BPS			2001		-50 BPS			-100 BPS			-150 BPS

Financial Instruments		169,385			170,075			170,778			171,477		172,184			172,899			173,620
% Change		(1.22	)%		(0.82	)%		(0.41	)%				0.41	%		0.83	%		1.25	%



	Valuation of Security							Fair Value as of		Valuation of Security
	Given X% Decrease							September 29,		Given X% Increase
	in the Security Price							2001		in the Security Price


% Change		(50	)%	(25	)%	(15	)%				15	%	25	%	50	%
Corporate equity investments		2,008		3,012		3,414			4,016		4,618		5,020		6,024


10.1		Lease Amendment and Novation Agreement made as of August 31, 2001, by and between FortuneFirst, LLC, Hynix Semiconductor America Inc., and MMC Technology, Inc.
10.2		Termination of Lease Agreement made effective as of September 20, 2001, by and between Pratt Land Limited Liability Company and Maxtor Corporation.
10.3		Guaranty made as of September 2, 2001, by Maxtor Corporation to and for the benefit of CIT Technologies Corporation.
10.4		$12,273,650.11 Promissory Note of MMC Technology, Inc. in favor of Hynix Semiconductor America Inc. and assumed by Maxtor Corporation dated September 2, 2001.
10.5		$2,000,000 Promissory Note of Hyundai Electronic America Inc. (n/k/a Hynix Semiconductor America Inc.) in favor of Maxtor Corporation dated January 5, 2001.


Exhibit
Number		Description

	10.1	Lease Amendment and Novation Agreement made as of August 31, 2001, by and between FortuneFirst, LLC, Hynix Semiconductor America Inc., and MMC Technology, Inc.
	10.2	Termination of Lease Agreement made effective as of September 20, 2001, by and between Pratt Land Limited Liability Company and Maxtor Corporation.
	10.3	Guaranty made as of September 2, 2001, by Maxtor Corporation to and for the benefit of CIT Technologies Corporation.
	10.4	$12,273,650.11 Promissory Note of MMC Technology, Inc. in favor of Hynix Semiconductor America Inc. and assumed by Maxtor Corporation dated September 2, 2001.
	10.5	$2,000,000 Promissory Note of Hyundai Electronic America Inc. (n/k/a Hynix Semiconductor America Inc.) in favor of Maxtor Corporation dated January 5, 2001.