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MEMORANDUM OF UNDERSTANDING
WHEREAS, Maxtor Corporation ("Maxtor" or the "Company"), a Delaware
corporation which manufactures, designs and markets magnetic and optical data
storage products, had, as of August 4, 1995, over 52,000,000 shares of common
stock outstanding held by 1,827 shareholders of record;
WHEREAS, on November 2, 1995, Maxtor entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Hyundai Electronics America, a California
corporation ("Hyundai America" or "HEA"), and Hyundai Acquisition, Inc., a
wholly owned subsidiary of HEA ("Hyundai Acquisition"), pursuant to which
Hyundai Acquisition would commence a cash tender offer (the "Offer") to purchase
all outstanding shares of the Company's Common Stock;
WHEREAS, following the completion of the Offer, upon the terms and subject
to the conditions of the Merger Agreement, Hyundai Acquisition will merge with
and into the Company (the "Merger"), and each share of the Company's Common
Stock not purchased in the Offer (other than any shares owned by the Company or
any of its subsidiaries, Hyundai Acquisition or any of its subsidiaries and any
dissenting stockholders) will be converted into the right to receive $6.70 per
share in cash, without interest;
WHEREAS, the following putative class action lawsuits challenging the Offer
and the Merger and the independence of the Board of Directors of Maxtor were
filed by stockholders of Maxtor ("plaintiffs") in the Court of Chancery of the
State of Delaware in and for New Castle County (the "Court of Chancery") on
behalf of unspecified classes of holders of Maxtor common stock:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, C.A. No. 14668 (Del. Ch.);
Barrington ▇. ▇▇▇▇▇, C.A. No. 14711 (Del. Ch.); and
▇▇▇▇▇▇ v. Maxtor Corp., C.A. No. 14708 (Del. Ch.)
(such lawsuits being collectively referred to herein as the "Actions") and the
following lawsuit was filed in California Superior Court in the County of Santa
▇▇▇▇▇;
▇▇▇▇▇▇▇▇▇▇ v. Maxtor Corp., C.A. No. CV753578 (such lawsuit being
referred to herein as the "California Action"); and
WHEREAS, on December 13, 1995, plaintiffs filed an Amended Consolidated
Complaint in Civil Action No. 14668, challenging the Offer and the Merger, the
independence of the Board of Directors of Maxtor and the adequacy of disclosures
made in connection with the Offer and the Merger (the "Consolidated Action"),
and a proposed Order of Consolidation consolidating the Actions into the
Consolidated Action and such Order was granted on December 14, 1995;
NOW, THEREFORE, after taking certain informal discovery and engaging in
extended arm's length negotiations, the parties to the Consolidated Action and
the California Action, by their respective attorneys, have reached an agreement
in principle providing for the settlement of the Consolidated Action and the
dismissal of the California Action on the terms and subject to the conditions
set forth below (the "Settlement"):
1. In full settlement of any and all claims whatsoever which have been or
could have been made in the Consolidated Action and the California Action, all
of which claims shall be released and discharged:
a. Subject to the various conditions set forth in para. 4 hereof,
Maxtor, HEA and Hyundai Acquisition have agreed to cause to be disseminated
to the stockholders of Maxtor the additional and supplemental disclosure
substantially in the form set forth in Exhibit A hereto, such disclosure to
be mailed to stockholders as soon as practicable.
b. Counsel for plaintiffs in the Consolidated Action have stated that
in the event the Court of Chancery approves the Settlement and the
dismissal of the Consolidated Action with prejudice, counsel for plaintiffs
in the Consolidated Action intend to petition the Court of Chancery for a
total award of attorneys' fees in an amount not to exceed $290,000 plus
expenses actually and reasonably incurred in the Consolidated Action in an
amount not to exceed $25,000. Defendants will not object to plaintiffs'
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application for fees and expenses, to be paid jointly by Maxtor and HEA, if
such application does not exceed the foregoing amount. Any attorneys' fees
and expenses awarded by the Court of Chancery to plaintiffs' counsel in the
Consolidated Action shall not be final or payable until the Effective Date
(as defined in paragraph 6, below) of the Settlement, and shall be
inclusive of any attorneys' fees and expenses otherwise awardable in the
California Action which, as set forth below, shall be dismissed with
prejudice and without any application for fees or expenses being made.
2. The parties to the Consolidated Action will use their best efforts to
complete the confirmatory discovery contemplated by paragraph 4 hereof and to
agree upon, execute and present to the Court of Chancery, on or before March 1,
1996, or such later date as the parties may agree to in writing, a formal
Stipulation of Settlement and such other documents as may be necessary and
appropriate in order to obtain the prompt approval by the Court of Chancery of
the Settlement and the dismissal with prejudice of the Consolidated Action and
the California Action in the manner contemplated herein and by the Stipulation
of Settlement. Pending the negotiation and execution of the Stipulation of
Settlement, all proceedings in the Consolidated Action and the California
Action, except for settlement-related proceedings pursuant to this Memorandum of
Understanding in the Consolidated Action, shall be suspended.
3. The Stipulation of Settlement expressly will provide, inter alia:
a. for the temporary and then final certification of the Consolidated
Action, for settlement purposes only, as a class action pursuant to
Chancery Court Rules 23(b)(1) and (b)(2), consisting of all holders of
common stock of Maxtor as of the close of business on February 3, 1994
through and including the date of execution of the Stipulation of
Settlement, including their successors in interest, legal representatives,
heirs, assigns or transferees, immediate and remote, and excluding
defendants and their affiliates (the "Class");
b. for the complete discharge, settlement and release of, all claims,
rights, demands, causes of action, suits, matters and issues, whether known
of unknown (collectively, "Claims"), that have been, could have been, or in
the future might be asserted in the Consolidated Action and the California
Action or in any court or proceeding (including but not limited to any
claims arising under federal or state law relating to alleged breach of any
duty, disclosure, nondisclosure, fraud, negligence or otherwise) by any
members of the Class, including individual, class, derivative,
representative, legal, equitable or any other type based upon or relating
in any manner to the allegations, transactions, matters or occurrences,
representations or omissions, or any series thereof, involved, set forth,
referred to in any way in the Consolidated Action or the California Action,
and including without limitation, any claims in any way related to the
Offer, the Merger and the Merger Agreement against any of the defendants in
the Consolidated Action or the California Action, their families, parent
entities, affiliates, associates or subsidiaries and each of their
respective present or former officers, directors, stockholders, agents,
employees, attorneys, representatives, advisors, investment bankers,
commercial bankers, trustees, general and limited partners and
partnerships, heirs, executors, personal representatives, estates,
administrators, successors and assigns (collectively, the "Settled
Claims");
c. that defendants have denied, and continue to deny, that any of
them have committed or have threatened to commit any violations of law or
breach of duty to the plaintiffs, the Class or anyone;
d. that defendants are entering into the Stipulation of Settlement
solely because the proposed Settlement would eliminate the distraction,
burden and expense of further litigation;
e. that plaintiffs' counsel, having made a thorough investigation of
the facts, believe that the proposed settlement is fair, reasonable,
adequate and in the best interests of plaintiffs and all members of the
Proposed Class;
f. subject to the Order of the Court of Chancery, pending final
determination of whether the Settlement provided for in the Stipulation of
Settlement should be approved, that plaintiffs and all members of the
Class, or any of them, agree not to commence, prosecute, instigate or in
any way participate in the commencing or prosecution of any of the Settled
Claims against any of the defendants; and
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g. that the plaintiff in the California Action will intervene in the
Consolidated Action prior to its dismissal and will seek the dismissal with
prejudice and without costs or attorneys' fees of the California Action
immediately upon the approval of the settlement by the Delaware Court of
Chancery.
4. The Settlement contemplated by this Memorandum of Understanding will
not be binding upon any party until, and is otherwise subject to:
a. the completion by plaintiffs in the Consolidated Action of such
documentary discovery and/or oral depositions or interviews as reasonably
are requested by them and agreed to by the respective party from whom
discovery is requested (the scope of such discovery having been discussed
generally by counsel prior to the execution of this Memorandum of
Understanding) to confirm the fairness of the proposed settlement;
b. a Stipulation of Settlement (and such other documentation as may
be required to obtain final approval by the Court of Chancery of the
Settlement) has been executed by counsel for the parties to the
Consolidated Action, which Stipulation of Settlement shall include a
provision permitting defendants to terminate the Settlement if, prior to
the Effective Date, any action is pending in any state or federal court
which raises any Settled Claims against any of the defendants in the
Consolidated Action;
c. the closing of the Offer and the Merger;
d. final approval by the Court of Chancery of the Settlement (and the
exhaustion of possible appeals, if any); the dismissal of the Consolidated
Action by the Court of Chancery with prejudice and without awarding costs
to any party (except as provided herein) having been obtained; and the
dismissal with prejudice of the California Action without the award of any
costs or fines whatsoever, and
e. plaintiffs providing a release executed by plaintiffs' counsel and
releasing all defendants in the Consolidated Action and the California
Action and releasing all Settled Claims.
5. This Memorandum of Understanding shall be null and void and of no force
and effect should any of the conditions set forth in paragraph 4 above not be
met or should plaintiffs' counsel in the Consolidated Action determine in good
faith that, based upon discovery pursuant to paragraph 4(a) hereof, the proposed
Settlement is not fair, reasonable and adequate; in such event, this Memorandum
of Understanding shall not be deemed to prejudice in any way the positions of
the parties with respect to the Consolidated Action or the California Action nor
to entitle any party to the recovery of costs and expenses incurred to implement
this Memorandum of Understanding.
6. The Effective Date of the Settlement shall be the date on which the
Order of the Court of Chancery approving the Settlement becomes final and no
longer subject to further appeal or review, whether by exhaustion of any
possible appeal, lapse of time or otherwise, except that for purposes of
determinating the date on which any Court awarded fee is due and owing to
plaintiffs' counsel (and for no other purpose), the Effective Date shall be the
later of the date the Settlement becomes final and no longer subject to further
review, five (5) days after the California Action is dismissed with prejudice
and without the award of any costs or attorneys' fees whatsoever, or five (5)
days from the date when the order of the Court of Chancery granting the
application of plaintiffs' counsel in the Consolidated Action for an award of
fees and expenses has become final and no longer subject to further appeal or
review, whether by exhaustion of any possible appeal, lapse of time or
otherwise.
7. Except as provided herein, defendants shall bear no other expenses,
costs, damages or fees alleged or incurred by any named plaintiffs, by any
member of the Class, or by any of their attorneys, experts, advisors, agents or
representatives.
8. Neither this Memorandum of Understanding nor the provisions contained
herein shall be deemed a presumption, concession or an admission by any
defendants in the Consolidated Action or the California Action of any default,
liability or wrongdoing as to any facts or claims alleged or asserted in the
Consolidated Action or the California Action, or any other actions or
proceedings, and shall not be interpreted, construed, deemed, invoked, offered,
or received in evidence or otherwise used by any person in the Consolidated
Action or the California Action or in any other action or proceeding, whether
civil, criminal or administrative.
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9. This Memorandum of Understanding constitutes the entire agreement among
the parties with respect to the subject matter hereof, and may not be amended or
any of its provisions waived except by a writing signed by all the signatories
hereto.
10. This Memorandum of Understanding and the Settlement contemplated by it
shall be governed by, and construed in accordance with, the laws of the State of
Delaware, without regard to conflict of laws principles.
11. This Memorandum of Understanding may be executed in counterparts by
any of the signatories hereto, and as so executed shall constitute one
agreement. Upon execution of this Memorandum of Understanding by plaintiffs and
defendants in the Consolidated Action and the California Action, such Memorandum
of Understanding shall be binding as to such parties.
12. The named plaintiffs and their counsel in the Consolidated Action and
the California Action represent and warrant that the named plaintiffs are each a
shareholder of Maxtor, and were shareholders at all times relevent hereto.
13. The named plaintiffs and their counsel in the Consolidated Action and
the California Action represent and warrant that none of plaintiffs' claims or
causes of action referred to in this Memorandum of Understanding have been
assigned, encumbered or in any manner transferred in whole or in part.
14. The named plaintiffs and their counsel in the Consolidated Action and
the California Action represent and warrant that they have not filed any other
litigation challenging any of the Settled Claims, and are not aware of any such
litigation.
15. The named plaintiffs and their counsel in the Consolidated Action and
the California Action have determined that the Delaware Court of Chancery is the
proper forum for the prosecution and settlement of this litigation.
16. This Memorandum of Understanding shall be binding upon and shall inure
to the benefit of the parties and their respective present or former parent
entities, affiliates, agents, executors, heirs and assigns.
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17. The parties to this Memorandum of Understanding agree (a) to use their
best efforts to achieve the expedited dismissal of the Consolidated Action and
the California Action in accordance with the terms of this Memorandum of
Understanding and (b) to cause the timely occurrence of all events,
transactions, or other circumstances described herein.
OF COUNSEL: ------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Wolf Haldenstein ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Chimicles ▇▇▇▇▇▇▇▇ & Tikellis
One ▇▇▇▇▇▇ Square
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Plaintiff
▇▇▇▇▇▇ ▇▇▇▇▇▇
Law Offices of Edlestein & Fasgenburg
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
OF COUNSEL: ------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Law Offices of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Rosenthal, Monhait, Gross & Goddess
First ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Plaintiffs
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Barrington
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Law Offices of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Plaintiff
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, Laytton & Finger
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Defendants
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇
One ▇▇▇▇▇▇ ▇▇▇▇▇▇, #▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
Attorneys for Defendants
Maxtor Corporation,
▇.▇. ▇▇▇▇, ▇.▇. ▇▇▇▇, ▇▇▇▇▇▇▇
▇. Belanson, and ▇.▇. ▇▇▇▇▇
OF COUNSEL: ------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
McCutchen, Doyle, ▇▇▇▇▇ & ▇▇▇▇▇▇▇
Three ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ Slate ▇▇▇▇▇▇▇ & ▇▇▇▇
One ▇▇▇▇▇▇ Square
P.O. Box 636
Wilmington, Delaware 19899
Attorneys for Defendant
Hyundai Electronics Industries
Co., Ltd., Hyundai Electronics America,
and Hyundai Acquisition, Inc.
Dated: December 18, 1995
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