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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________
SCHEDULE 13D
Under the Securities Exchange Act of 1934
STORMEDIA INCORPORATED
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(Name of Issuer)
CLASS A COMMON STOCK
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(Title of Class of Securities)
862221108
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(CUSIP Number)
Robert E. Patterson, Esq., Graham & James LLP
600 Hansen Way, Palo Alto, CA 94304-1043; (650) 856-6500
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
December 15, 1997
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(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom
copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section
of the Act, but shall be subject to all other provisions of the Act (however,
see the Notes).
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CUSIP No. 862221108
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(1) Names of Reporting Persons/S.S. or I.R.S. Identification Nos. of Above
Persons:
Kubota Corporation
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(2) Check the Appropriate Box if a Member of a Group (See Instructions)
(a)
(b)
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(3) SEC Use Only
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(4) Source of Funds (See Instructions)
OO
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(5) Check if Disclosure of Legal Proceeding Is Required Pursuant to Items
2(d) or 2(e)
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(6) Citizenship or Place of Organization
Japan
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Shares (7) Sole Voting Power 2,000,000
Beneficially --------------------------------
Owned by Each (8) Shared Voting Power 0
Reporting ------------------------------
Person With (9) Sole Dispositive Power 2,000,000
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(10) Shared Dispositive Power 0
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(11) Aggregate Amount Beneficially Owned by Each Reporting Person 2,000,000
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(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See
Instructions)
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(13) Percent of Class Represented by Amount in Row 11 14.3%*
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(14) Type of Reporting Person (See Instructions) CO
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* In calculating this percentage, 4,362,001 shares of outstanding StorMedia
Class B Common Stock (which are convertible into shares of Class A Common
Stock on a one-for-one basis) were not included as outstanding. Kubota will
hold 10.9% of the outstanding Class A and Class B Common Stock of StorMedia
together.
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Item 1. Security and Issuer:
This Statement relates to the Class A Common Stock of StorMedia
Incorporated, a Delaware corporation ("StorMedia"), $0.013 par value (the
"StorMedia Common Stock"), traded on the Nasdaq National Market System.
StorMedia's principal executive offices are located at StorMedia
Incorporated, 385 Reed Street, Santa Clara, California 95050. StorMedia's
telephone number is (408) 988-8417.
Item 2. Identity and Background:
(a-c) This Statement is filed by Kubota Corporation, a Japanese
corporation ("Kubota"). The principal business address of Kubota is
2-47, Shikitsuhigashi 1-chome, Naniwa-ku Osaka, 556 Japan. Kubota is a
diversified manufacturer of farm equipment, ductile iron pipe and cement
roofing materials, industrial castings, industrial machinery,
environmental-control facilities, electronics and other products. For the
year ended March 31, 1997 Kubota had net sales on a consolidated basis of
US$9.2 billion.
The attached Exhibit 1 identifies each director and executive officer
of Kubota. The principal business of the persons listed in Exhibit 1
is conducted within Kubota and the business address of each is
Kubota's business address set forth above.
(d) Neither Kubota nor, to the best of knowledge of any director or
executive officer of Kubota, has any individual named in Exhibit 1, during
the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors, if any).
(e) Neither Kubota nor, to the best of knowledge of any director or
executive officer of Kubota, was any individual named in Exhibit 1, during
the last five years, a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to
such laws.
(f) Each of Kubota's directors and executive officers set forth in
Exhibit 1 is a citizen of Japan.
Item 3. Source and Amount of Funds and Other Consideration.
At the closing of the Patent Purchase Agreement dated as of December
15, 1997 ("Patent Agreement"), Kubota will, in summary, in exchange for
2,000,000 shares of StorMedia Common Stock (the "Shares"), license to a
subsidiary of StorMedia, StorMedia International Ltd., a Cayman Islands
corporation ("SMIL"), and quit claim to StorMedia, certain patents,
patent applications and other intellectual property developed by Kubota
for the design, development, manufacture, sale, marketing and
distribution of thin film media and substrates (the "Intellectual
Property"). StorMedia will grant to Kubota a fully paid,
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royalty free, perpetual, worldwide, nonexclusive license to use the
Intellectual Property in the area of sputtering targets and other areas,
but excluding thin film media and substrates.
Item 4. Purpose of Transaction.
Kubota, StorMedia and certain affiliates of each entered three related
agreements effective December 15, 1997, by which StorMedia will
acquire Akashic Memories Corporation, a California corporation ("Akashic")
and an indirect subsidiary of Kubota, and the Intellectual Property in
exchange for the Shares and other consideration. StorMedia is an
independent supplier of thin film disks used in portable and desktop
computers, network servers and workstations. Akashic is an independent
supplier of substrates and thin film media for hard drive components of
computers.
Pursuant to the Patent Agreement between Kubota, StorMedia and SMIL,
StorMedia will sell the Shares to Kubota in exchange for the Intellectual
Property identified in Item 3 above.
The other two related agreements are the following: the Agreement and
Plan of Reorganization by and among StorMedia, StorMedia Acquisition
Corporation, a wholly-owned subsidiary of StorMedia ("Sub"), Akashic
International Inc., a California corporation indirectly wholly owned by
Kubota, and Akashic (the "Reorganization Agreement"); and the Kubota
Guaranty and Indemnification by and between Kubota and StorMedia (the
"Indemnification Agreement").
The Reorganization Agreement provides at its closing for AII to receive
US$10 million cash in exchange for its sale of all of the stock of Akashic,
AII's cancellation of long term debt of Akashic, and other consideration.
Sub will merge with and into Akashic. The Indemnification Agreement
provides that Kubota will guaranty to StorMedia the obligations of AII
under the Reorganization Agreement, Kubota will indemnify StorMedia with
respect to any claims by minority shareholders of Akashic, and Kubota will
extinguish or will cause the extinguishment of the long term debt of
Akashic in the course of the closing of the Reorganization Agreement. The
Patent Agreement, Reorganization Agreement and Indemnification Agreement
will close simultaneously upon the satisfaction of their respective
conditions to closing, which include termination or expiration of the
waiting period for the merger of Akashic and StorMedia's Sub by the Federal
Trade Commission and Department of Justice pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
The above summary of the terms of the Patent Agreement, Reorganization
Agreement and Indemnification Agreement does not purport to be complete and
is qualified in its entirety by reference to said agreements, copies of
which (without the appendices thereto) are attached hereto as exhibits.
Kubota presently intends to hold the Shares as a passive investor. Except
as discussed above in this Item 4, the undersigned has no plans or
proposals which relate to or would result in any of the following:
(a) The acquisition by any person of additional securities of
StorMedia or the disposition of securities of StorMedia;
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(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving StorMedia or any of its
subsidiaries, if any;
(c) A sale or transfer of a material amount of assets of StorMedia or
any of its subsidiaries;
(d) Any change in the present board of directors or management of
StorMedia, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of StorMedia;
(f) Any other material change in StorMedia's business or corporate
structure;
(g) Changes in StorMedia's charter, bylaws or instruments
corresponding thereto or other actions which may impede the acquisition or
control of StorMedia by any person;
(h) Causing a class of securities of StorMedia to be delisted from a
national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association;
(i) A class of equity securities of StorMedia becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Act; or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer
(a) Upon the closing of the Patent Agreement, Kubota will be the
record holder of the Shares, which will represent 14.3% of the outstanding
shares of StorMedia Class A Common Stock. In calculating this percentage,
4,362,001 shares of outstanding StorMedia Class B Common Stock (which are
convertible into shares of Class A Common Stock on a one-for-one basis)
were not included as outstanding. Kubota will hold 10.9% of the outstanding
Class A and Class B Common Stock of StorMedia together.
(b) Kubota will have the sole power to dispose of all of the Shares
and the sole power to vote the Shares.
(c) During the past 60 days, Kubota entered into another agreement by
which it would have acquired the Shares. StorMedia, Kubota and Kubota's
subsidiaries, AII and Akashic, entered a Stock and Patent Purchase
Agreement on November 28, 1997 ("SPPA") pursuant to which Kubota would have
acquired the Shares and US$10 million in exchange for the all of the
outstanding stock of Akashic and the Intellectual Property, upon the
satisfaction of the conditions to closing of the SPPA. The parties
terminated the SPPA December 15, 1997 at the same time the Patent
Agreement, Reorganization Agreement and Indemnity
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Agreement were entered and Kubota did not acquire any StorMedia Common
Stock pursuant to the SPPA. Neither Kubota nor the persons listed on
Exhibit 1 has effected any other transaction in the last 60 days with
respect to acquiring StorMedia Common Stock, other than the SPPA and the
Patent Agreement.
(d) Kubota will have the right to receive or the power to direct the
receipt of dividends from or the proceeds of sale of the Shares.
(e) Inapplicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
See Item 4 above.
Item 7. Material to be Filed as Exhibits.
Exhibit 1. Directors and Executive Officers of Kubota
Exhibit 2. Agreement and Plan of Reorganization, dated December 15, 1997
Exhibit 3. Patent Purchase Agreement, dated December 15, 1997
Exhibit 4. Kubota Guaranty and Indemnification, dated December 15, 1997
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Statement is
true, complete and correct.
Date: December 16, 1997
By: /s/
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Kunio Suwa
Signing as a Manager of Kubota
Corporation
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EXHIBIT 1
DIRECTORS AND EXECUTIVE OFFICERS OF KUBOTA CORPORATION
Name and Business Address Position/Occupation
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Shigekazu Mino Chairman and Representative Director, Kubota
Corporation
Kazutaka Iseki Vice Chairman and Representative Director,
Kubota Corporation
Kouhei Mitsui President and Representative Director, Kubota
Corporation
Katsuzo Tomita Executive Vice President and Representative
Director, Kubota Corporation
Osamu Okamoto Executive Managing Director, Kubota
Corporation
Kozo Iizuka Executive Managing Director, Kubota
Corporation
Fumio Nakada Executive Managing Director, Kubota
Corporation
Keizo Homma Executive Managing Director, Kubota
Corporation
Yoshikuni Dobashi Executive Managing Director, Kubota
Corporation
Hiroyuki Kisaka Managing Director, Kubota Corporation
Kazuji Hashimoto Managing Director, Kubota Corporation
Kiichiro Kawaguchi Managing Director, Kubota Corporation
Hiroshi Miyamoto Managing Director, Kubota Corporation
Hiroshi Wakita Managing Director, Kubota Corporation
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Name and Business Address Position/Occupation
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Tadao Fujimoto Managing Director, Kubota Corporation
Shohei Majima Managing Director, Kubota Corporation
Keizo Ohmori Managing Director, Kubota Corporation
Takeshi Oka Managing Director, Kubota Corporation
Yoshio Murozono Director, Kubota Corporation
Tomoyoshi Kariya Director, Kubota Corporation
Masamichi Tsuchiya Director, Kubota Corporation
Yukiyasu Nemoto Director, Kubota Corporation
Tomomi Soh Director, Kubota Corporation
Yoshihiro Kinugasa Director, Kubota Corporation
Masateru Kimura Director, Kubota Corporation
Kazuya Nakamura Director, Kubota Corporation
Mitsuku Yamamoto Director, Kubota Corporation
Mikio Kinoshita Director, Kubota Corporation
Takeshi Kubota Director, Kubota Corporation
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Name and Business Address Position/Occupation
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Toshio Kubo Director, Kubota Corporation
Shigenobu Inoue Director, Kubota Corporation
Toshi Tanaka Director, Kubota Corporation
Katsuro Konishi Director, Kubota Corporation
Tatsuo Arata Director, Kubota Corporation
Osamu Ikuta Director, Kubota Corporation
Masakatsu Yamamoto Director, Kubota Corporation
Okihiro Asada Director, Kubota Corporation
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is entered into on December 15,
1997, effective as of the 28th day of November 1997, by and among Akashic
International Inc., a California corporation and a indirect wholly-owned
subsidiary of Kubota Corporation ("AII"), Akashic Memories Corporation, a
California corporation and a subsidiary of AII ("Akashic"), StorMedia
Incorporated, a Delaware corporation ("Buyer"), and StorMedia Acquisition
Corporation, a California corporation and a wholly-owned subsidiary of Buyer
("Sub").
RECITALS
WHEREAS, Akashic, (a) is the owner and operator of a business consisting
of the design, development, manufacture, sale, marketing and distribution of
thin film media and substrates therefore which business has been operated at
facilities located in California and in Malaysia (the "Business") and (b)
owns the assets that are used in the Business.
WHEREAS, Buyer and AII agree that time is of the essence in the closing
of the transactions contemplated in this Agreement.
WHEREAS, AII has sought to sell the Business "as is" and to do so by
selling Akashic and Buyer understands and acknowledges that it is acquiring
Akashic on such basis.
WHEREAS, The Boards of Directors of Buyer, Sub, AII and Akashic believe
it is in the best interests of their respective companies and the
shareholders of their respective companies that Buyer acquire Akashic through
a statutory merger of Sub with and into Akashic (the "Merger") and, in
furtherance thereof, have approved the Merger.
WHEREAS, Pursuant to the Merger, among other things, all of the
outstanding shares of Akashic capital stock ("Akashic Capital Stock") shall
be converted into cash, at the rates set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement, the parties agree as follows:
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ARTICLE 1
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement, the Agreement
of Merger attached hereto as EXHIBIT A (the "Agreement of Merger") and the
applicable provisions of the California Corporations Code ("California Law"),
Sub shall be merged with and into Akashic, the separate corporate existence
of Sub shall cease and Akashic shall continue as the surviving corporation
and a wholly owned subsidiary of Buyer. Akashic as the surviving corporation
after the Merger is hereinafter sometimes referred to as the "Surviving
Corporation."
1.2 CLOSING; EFFECTIVE TIME. The Closing will take place at the offices
of Wilson Sonsini Goodrich & Rosati at 650 Page Mill Road, Palo Alto, CA on a
date mutually agreed to by the parties which the parties shall use reasonable
efforts to cause to be prior to December 31, 1997 (the "Closing"). Each of
the parties shall use their reasonable efforts to satisfy the closing
conditions set forth in Article 4 hereof and to consummate the transactions
contemplated hereby. In connection with the Closing, the parties hereto
shall cause the Merger to be consummated by filing the Agreement of Merger
with the Secretary of State of the State of California, in accordance with
the relevant provisions of California Law (the time of such filing being the
"Effective Time").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Agreement of Merger and
the applicable provisions of California Law. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Sub shall
become the debts, liabilities and duties of the Surviving Corporation and
Surviving Corporation shall become a wholly owned subsidiary of Buyer.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Restated Articles of Incorporation
attached as Exhibit I to the Agreement of Merger shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as
provided by California Law and such Articles of Incorporation.
(b) The Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without any
action on the part of Buyer, Sub, Akashic or the holders of any of the following
securities:
(a) CAPITAL STOCK OF SUB. All issued and outstanding shares of
capital stock of Sub shall be converted into one thousand shares of Common Stock
of the Surviving Corporation. Each
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stock certificate of Sub evidencing ownership of any such shares of Sub shall
evidence ownership of such shares of Common Stock of the Surviving
Corporation.
(b) CANCELLATION OF BUYER OWNED STOCK. All shares of Akashic
Capital Stock that are owned directly or indirectly by any subsidiary of
Akashic and any shares of Akashic Capital Stock owned by Buyer, Sub or any
other affiliate of Buyer shall be canceled and no stock of Buyer or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE OF AKASHIC CAPITAL STOCK FOR CASH. Each issued and
outstanding share of Akashic Preferred Stock and Common Stock (other than
shares to be canceled pursuant to Section 1.5(b) and shares, if any, which
shall then or thereafter constitute "dissenting shares" within the meaning of
Section 1300 of the California Corporation Code ("Dissenting Shares")) shall
be converted into the right to receive from Buyer in cash an amount per share
such that the aggregate amount paid for all shares of outstanding Akashic
Capital Stock is Ten Million U.S. Dollars ($10,000,000) (the "Aggregate
Conversion Price"), the per share price to be calculated as set forth in the
Agreement of Merger and in accordance with the liquidation preferences of
each class and series of such shares (the "Per Share Conversion Prices").
The Per Share Conversion Prices shall be calculated immediately prior to the
Effective Time of the Merger based on the total number of shares outstanding
and the relative liquidation preferences of such shares at such time.
(d) DISSENTERS' RIGHTS. If holders of Akashic Capital Stock are
entitled to dissenters' rights in connection with the Merger under Section
1300 of the California Corporation Code, any Dissenting Shares shall not be
converted into cash hereunder, but shall be converted into the right to
receive such consideration as may be determined to be due with respect to
such Dissenting Shares pursuant to the laws of the State of California.
(e) AKASHIC STOCK OPTION PLANS. At the Effective Time, Akashic's
1996, Stock Option Plan (the "Option Plan") and all options to purchase
Akashic Common Stock then outstanding under the Option Plan shall be
terminated and canceled in accordance with the terms of the Option Plan. No
options, warrants or rights to acquire Akashic Capital Stock shall survive
the Merger.
1.6 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Wilson Sonsini Goodrich & Rosati shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) BUYER TO PROVIDE CASH. At the Effective Time, Buyer shall make
available to the Exchange Agent for exchange in accordance with this Article
I, Ten Million U.S. Dollars ($10,000,000).
(c) EXCHANGE PROCEDURES. At the Effective Time, the Surviving
Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Akashic Capital Stock,
whose shares were converted into the right to receive cash pursuant to
Section 1.5, (i) a letter of
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transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon receipt of the
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as Buyer may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for cash.
Upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Buyer, together with such
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor the amount of cash payable based on the Per
Share Conversion Price of the class or series of the shares surrendered.
Each outstanding Certificate that, prior to the Effective Time, represented
shares of Akashic Capital Stock will be deemed from and after the Effective
Time, for all corporate purposes, to evidence only the right to receive,
without interest thereon, the amount of cash calculated based on the
applicable Per Share Conversion Price. All cash delivered upon surrender for
exchange of shares of Akashic Capital Stock in accordance with the terms
hereof shall be deemed to have been delivered in full satisfaction of all
rights pertaining to such shares.
1.7 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Sub or Akashic, the officers and directors of
Surviving Corporation are fully authorized in the name of the respective
corporations or otherwise to take, and will take, all such lawful and
necessary action, so long as such action is not inconsistent with this
Agreement.
1.8 DELIVERIES AT THE CLOSING. At the Closing, (i) the AII will deliver
to Buyer the various certificates, instruments, and documents referred to in
Section 4.1 below, and (ii) Buyer will deliver to AII the various
certificates, instruments, and documents referred to in Section 4.2
below.
ARTICLE 2
REPRESENTATIONS OF AII
AII and Akashic hereby represent to Buyer as follows:
2.1 ORGANIZATION. AII and Akashic are each corporations duly organized,
validly existing and in good standing under the laws of the jurisdiction of
their respective incorporation and each has all necessary corporate power and
authority to own and lease their respective properties and assets and to
carry on their respective businesses as now being conducted. Prior to the
Closing, Akashic shall deliver to Buyer a true and correct copy of its
Articles of Incorporation and Bylaws, as amended to date and shall not amend
such documents thereafter without the prior approval of Buyer.
2.2 AUTHORITY. AII and Akashic each have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each of
the AII and Akashic and the consummation by each of the AII and Akashic of
the transactions contemplated hereby have been duly authorized by all
necessary
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corporate action on the part of each of the AII and Akashic. This Agreement
has been duly executed and delivered by each of the AII and Akashic and
constitutes a valid and binding obligation of each of the AII and Akashic,
enforceable in accordance with its terms except as enforcement may be limited
by bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally, and subject to rules of law governing specific
performance, injunctive relief and other equitable remedies. Except for
certain third party consents which shall be obtained prior to the Closing,
the execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated hereby and compliance with the provisions
hereof will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time or both) under, or given rise to a
right of termination, cancellation or acceleration of any obligation or loss
of a material benefit under, any provision of the charter documents of
Akashic or either of the AII or any loan or credit agreement, note, bond,
mortgage, indenture, license, lease or other agreement or instrument, permit,
concession, franchise, judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Akashic or AII or any of them or the properties
or assets of Akashic.
2.3 GOVERNMENTAL APPROVALS. Subject to compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), no consent, approval, order or authorization of, or registration,
declaration or filing with any governmental authority is required by or with
respect to AII or Akashic in connection with the execution and delivery of
this Agreement by AII and Akashic or the consummation by AII and Akashic of
the transactions contemplated hereby.
2.4 COMPLIANCE WITH LAWS. Akashic has materially complied with, is not
in violation of, and has not received any notices of violation with respect
to, any federal, state or local statute, law or regulation with respect to
the operation of its business.
2.5 CAPITALIZATION. As of the date hereof, the authorized capital stock of
Akashic consists of 36,556,583 shares of Akashic Common Stock, par value $0.001
per share, and 31,756,583 shares of Preferred Stock, consisting of 19,200,000
shares of Series A Preferred Stock, par value $0.79828 per share, and 12,556,583
shares of Series B Preferred Stock, par value $0.001 per share. As of the date
hereof, 23,335 shares of Akashic Common Stock were validly issued, fully paid
and outstanding, and 19,200,000 shares of Series A Preferred Stock were issued
and outstanding, and 3,546,187 shares of Akashic Common Stock were reserved for
issuance upon exercise of stock options outstanding as of such date (the
"Akashic Options") under the Option Plan. Between the date hereof and the
Closing, any loan from AII to Akashic will be converted into Preferred Stock as
follows: (i) The outstanding loan in the principal amount of $100,000,000 will
be converted into 12,556,583 shares of Series B Preferred Stock, and (ii) new
loans made or to be made between the date hereof and the date of Closing in the
aggregate principal amount of up to $135,000,000 will be converted into up to
13,500,000 shares of newly created Series C Preferred Stock. All outstanding
shares of Akashic Capital Stock are, and any shares of Akashic Capital Stock
are, and any shares of Akashic Common Stock issued upon exercise of any Akashic
Option will be, when issued pursuant to exercise of any Akashic Option, validly
issued, fully paid and non-assessable and not subject to any preemptive rights.
All Akashic Options not exercised prior to the Effective Time, by their terms
shall terminate and cease to represent the right to acquire Akashic Common
Stock effective as of the Effective Time. After the date hereof, Akashic
shall not grant any options or rights to acquire Akashic Common
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Stock, shall issue Common Stock only in connection with the exercise of
Akashic Options outstanding as of the date hereof, and shall notify and
coordinate with Buyer concerning the issuance of any shares of Preferred
Stock. Following the Effective Time, there will be no outstanding options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require Akashic to
issue, sell, or otherwise cause to become outstanding any of its capital
stock. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to Akashic. There
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the Akashic Capital Stock.
2.6 FINANCIAL STATEMENTS. Prior to the Effective Time, AII has
delivered to Buyer the following financial statements (collectively the
"FINANCIAL STATEMENTS"): (i) audited consolidated balance sheets and
statements of income, changes in stockholders' equity, and cash flow as of
and for the fiscal years ended December 31, 1996, December 31, 1995 and
December 31, 1994 for Akashic and its subsidiaries; and (ii) unaudited
consolidated balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the eleven (11) months
ended November 30, 1997 (the "November Financial Statements") for Akashic and
its subsidiaries. The Financial Statements (including the notes thereto)
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered
thereby, present fairly the financial condition of Akashic and its
subsidiaries as of such dates and the results of operations of Akashic and
its subsidiaries for such periods, are correct and complete, and are
consistent with the books and records of Akashic and its subsidiaries (which
books and records are correct and complete); provided, however, that the
November Financial Statements are subject to normal year-end adjustments
(which will not be material individually or in the aggregate) and lack
footnotes and other presentation items. All material contingent liabilities
of Akashic known to Akashic are reflected in such Financial Statements.
2.7 DISCLOSURE. To the best of Akashic's knowledge, the materials
delivered to Buyer by AII and their representations disclose all material
facts about the business of Akashic and do not omit to state any material
facts necessary for an understanding of the material liabilities of Akashic.
2.8 ASSETS OF BUSINESS. To the best of Akashic's knowledge, Akashic
owns and has good title to all of the assets of the Business as described to
Buyer and there are no other assets, except the Itami IP (as defined in the
Patent Purchase Agreement between Kubota and Buyer of even date herewith (the
"Patent Purchase Agreement")), necessary to operate the Business as presently
conducted.
ARTICLE 3
REPRESENTATIONS OF BUYER
Buyer represents to AII as follows:
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3.1 ORGANIZATION. Buyer and Sub are each corporations duly organized,
validly existing and in good standing under the laws of the jurisdiction of
their respective incorporation and each has all necessary corporate power and
authority to own and lease all of its respective properties and assets and to
carry on its business as it is now being conducted.
3.2 AUTHORITY. Buyer and Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Buyer
and Sub and the consummation by Buyer and Sub of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Buyer and Sub. This Agreement has been duly executed
and delivered by Buyer and Sub and constitutes a valid and binding obligation
of Buyer and Sub, enforceable in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and subject to
rules of law governing specific performance, injunctive relief and other
equitable remedies. Except for certain third party consents which shall be
obtained prior to the Closing, the execution and delivery of this Agreement
will not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with or result in
any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, any
provision of the charter documents of Buyer or Sub or any loan or credit
agreement, note, bond mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Buyer or Sub or its
properties or assets, which has not been waived.
3.3 GOVERNMENTAL APPROVALS. Subject to compliance with the HSR Act, no
consent, approval, order or authorization of, or registration, declaration or
filing with any governmental authority is required by or with respect to
Buyer or Sub in connection with the execution and delivery of this Agreement
by Buyer and Sub or the consummation by Buyer and Sub of the transactions
contemplated hereby.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transaction to be performed by it in connection herewith is
subject to the satisfaction of the following conditions:
(a) REPRESENTATIONS. The representations set forth in Section 2
hereof shall be true and correct in all material respects as of the Closing.
(b) SHAREHOLDER APPROVAL. The Agreement and the Agreement of
Merger shall have been approved and adopted by the holders of the requisite
number of outstanding shares of
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Akashic Capital Stock in accordance with Akashic's Articles of Incorporation
and Bylaws and with the California Law.
(c) PATENT PURCHASE AGREEMENT. The transactions contemplated by
the Patent Purchase Agreement shall close simultaneously with the Effective
Time.
(d) CANCELLATION OF DEBT. Without creating taxable income to
Akashic, all long term debt and debentures of Akashic or its subsidiaries
(other than the loan from Western Digital Corporation) shall be extinguished,
and Buyer shall receive evidence satisfactory to Buyer that all such debt has
been extinguished. Notwithstanding the foregoing, Buyer acknowledges that
(i) Akashic, through its wholly owned subsidiary Akashic Kubota Technologies
Sdn. Bhd., a Malaysian corporation ("AKT") owes the aggregate principal
amount of U.S. $45,000,000 plus any accrued interest thereon through the
Closing in the approximate amount of U.S. $2,000,000 (the "Loan") to Sumitomo
Bank Ltd., Sanwa Bank Ltd., and Tokyo Mitsubishi Bank (the "Banks") and that
such Loan is guaranteed by AII's parent corporation, Kubota Corporation, a
Japanese corporation, ("Kubota") and (ii) that AII may not have received all
government approvals necessary to extinguish the Loan prior to the Closing.
In the event that such approvals have not been obtained prior to the Closing,
the parties agree that AII shall deposit with the Banks funds sufficient for
repayment of the Loans, along with irrevocable instructions that such funds
will be used to repay the Loan.
(e) REGULATORY APPROVALS. All applicable regulatory approvals,
authorizations and consents shall have been obtained.
(f) OFFICER'S CERTIFICATE. AII shall deliver a certificate to
Buyer executed by duly authorized officers certifying compliance with
subsections 4.1(a), (b), (d) and (e).
(g) KUBOTA GUARANTY AND INDEMNIFICATION. Kubota and Buyer shall
have executed the Kubota Guaranty and Indemnification.
4.2 CONDITIONS TO OBLIGATIONS OF AII. The obligations of AII and
Akashic to consummate the transactions to be performed by them in connection
herewith is subject to the satisfaction of the following conditions:
(a) PURCHASE PRICE. Buyer shall deliver to the Exchange Agent a
check in the amount of Ten Million U.S. Dollars ($10,000,000).
(b) REPRESENTATIONS. The representations of Buyer set forth in
Section 3 hereof shall be true and correct in all material respects as of the
Closing.
(c) SHAREHOLDER APPROVAL. The Agreement and the Agreement of
Merger shall have been approved and adopted by the holders of the requisite
number of outstanding shares of Sub's capital stock in accordance with Sub's
Articles of Incorporation and Bylaws and with the California Law.
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(d) PATENT PURCHASE AGREEMENT. The transactions contemplated by
the Patent Purchase Agreement shall close simultaneously with the Effective
Time.
(e) REGULATORY APPROVALS. All applicable regulatory approvals,
authorizations and consents shall have been obtained.
(f) OFFICER'S CERTIFICATE. Buyer shall deliver a certificate to
AII executed by a duly authorized officer certifying compliance with
subsections 4.2(b), (c) and (e).
ARTICLE 5
COVENANTS
5.1 PREPARATION OF FINANCIAL STATEMENTS. AII shall cooperate with Buyer
in the preparation of audited financial statements for Akashic and its
subsidiaries for the year ended December 31, 1997. Buyer shall cooperate
with AII to provide it with sufficient financial information to prepare its
consolidated tax returns for periods prior to the Closing.
5.2 AMENDMENT TO NAME. Prior to the Closing, AII and Akashic shall
change the name of Akashic's Malaysian subsidiary to delete the name "Kubota"
from its name.
5.3 BUSINESS OFFICE. Buyer shall make available to representatives of
Kubota and AII one business office at the principal office of Akashic in San
Jose, California for the period from the Closing through March 31, 1998.
5.4 PAYMENT OF BONUSES. AII shall pay or have paid "all transaction
bonuses" if implemented owing at the time of Closing or then promised to the
employees of Akashic; provided that if this transaction closes prior to the
payment of the performance bonuses, Akashic shall be left with sufficient
cash at Closing to cover the payment of such bonuses.
5.5 OPERATION IN ORDINARY COURSE. Except as set forth in Section 5.6
below, since November 30, 1997 and through the Effective Time, Akashic has
operated and will operate its business in the ordinary course consistent with
past practices including, without limitation, collections of accounts
receivable, payment of accounts payable and efforts to qualify its products
in new customer programs.
5.6 PLANT CLOSURE. AII shall pay or have paid all severance, withholding
taxes and PTO costs and expenses (the "Severance Costs") relating to the
employee layoff of approximately 900 employees scheduled to take place on or
about December 23, 1997 provided, however, that if such Severence Costs exceed
$6.0 million, then Buyer shall reimburse AII for such Severence Costs as are
demonstrated to have been expended beyond such $6.0 million. Buyer shall assume
and guarantee the leases of the Turquoise Facility, Tasmin Facility and
Gibraltar Facility. Buyer further agrees to
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move any and all equipment located in such facilities and to restore the
facilities such that they can be returned to the respective landlords.
5.7 TERMINATION OF TAX SHARING AGREEMENT. As of the Closing AII shall
release Akashic from any and all tax-sharing agreements with AII, if any, and
obtain for Akashic releases from AII's affiliates, if any, included in such
tax-sharing agreements.
ARTICLE 6
GENERAL PROVISIONS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California as applied to
contracts entered into and to be performed in the State of California.
6.2 NOTICES. All notices or reports permitted or required under this
Agreement shall be in writing and shall be delivered in person, mailed by first
class, registered or certified mail, postage prepaid, sent by overnight courier,
or sent by telex, telegram, telecopier or electronic mail to:
If to AII:
Akashic International Inc.
c/o Kubota Corporation
2-47 Shikitsuhigashi 1-chome,
Naniwa-ku Osaka, 556 Japan
Attn: Kunio Suwa
Fax: 06-648-3915
with a copy to:
Graham & James
600 Hansen Way
Palo Alto, CA 94304-1043
Attn: Robert E. Patterson
Fax: (650) 856-3619
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If to Akashic:
Akashic Memories Corporation
305 West Tasman Drive
San Jose, CA 95134
Attn: Ron Ritchie
Fax: (408) 325-3590
with a copy to:
Morrison & Forster LLP
755 Page Mill Road
Palo Alto, CA 94304
Attn: Michael Phillips
Fax: (650) 494-0792
If to Buyer:
StorMedia Incorporated
385 Reed Street
Santa Clara, California 95050
Attn: William J. Almon
Fax: (408) 727-4928
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attn: Judith M. O'Brien
Fax: 650-493-6811
By written notice to the other party, a party may change the address to which
notices and other communications shall be directed. Notice shall be deemed to
have been given upon the earlier to occur of (i) the third business day
following dispatch by one of the foregoing methods or (ii) actual receipt.
6.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. The
representations and warranties of the parties set forth in this Agreement or any
certificate or instrument delivered pursuant hereto shall survive the Closing.
6.4 ENTIRE AGREEMENT. The Agreement and the Patent Purchase Agreement
represents and constitutes the entire agreement between the parties, and
supersedes all prior agreements and understandings with respect to the matters
covered by this Agreement and the Patent Purchase
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<PAGE>
Agreement, and, except for the Patent Purchase Agreement, Confidentiality
Agreement and Kubota Guaranty and Indemnification, there are no other
agreements, warranties or representations which are not set forth herein.
6.5 WAIVER. Any of AII or Buyer may, by written notice to the other,
(i) waive any of the conditions to its obligations hereunder or extend the
time for the performance of any obligations or actions of the other, (ii)
waive any inaccuracies in the representations of the other contained in this
Agreement or any documents delivered pursuant to this Agreement, (iii) waive
compliance with any of the covenants of the other contained in this Agreement
and (iv) waive performance of any obligations by the other. The waiver of
one breach or default hereunder shall not constitute the waiver of any
subsequent breach or default.
6.6 EXPENSES. All expenses incurred by either party in connection with
the execution and performance of this Agreement shall be the obligation of
and shall be paid by such party (with any such fees or expenses of AII and
Akashic, including investment banking and finders fees, to be paid by Kubota).
6.7 DISPUTE FEES. In the event of a dispute arising under this
Agreement which results in arbitration or litigation, the prevailing party
shall be entitled to reimbursement of reasonable expenses, including but not
limited to reasonable attorneys' and expert witness fees incurred by it in
pursuing such dispute, as determined by the court in any such proceeding.
6.8 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
the parties and inure to the benefit of the successors, assigns, heirs and
legal representatives of the respective parties hereto; provided, however,
that this Agreement and all rights hereunder may not be assigned by any party
hereto except by or with the prior written consent of the other party, with
such consent not to be unreasonably withheld.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and date first above written.
Akashic Memories Corporation
By:
--------------------------------------
Title:
-----------------------------------
Akashic International Inc.
By:
--------------------------------------
Title:
-----------------------------------
StorMedia Incorporated
By:
--------------------------------------
William J. Almon
Title: Chairman of the Board and Chief
Executive Officer
StorMedia Acquisition Corporation
By:
--------------------------------------
William J. Almon
Title: President
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PATENT PURCHASE AGREEMENT
THIS PATENT PURCHASE AGREEMENT is entered into on December 15, 1997,
effective as of the 28th day of November 1997, by and between Kubota
Corporation, a Japanese corporation ("Kubota"), StorMedia Incorporated, a
Delaware corporation ("Buyer") and StorMedia International Ltd., a Cayman
Islands corporation ("SMIL").
RECITALS
WHEREAS, Akashic Memories Corporation, a California corporation ("Akashic")
is a subsidiary of Akashic International Inc., a California corporation ("AII")
which in turn is an indirect wholly owned subsidiary of Kubota. Akashic (a) is
the owner and operator of a business consisting of the design, development,
manufacture, sale, marketing and distribution of thin film media and substrates
therefore which business has been operated at facilities located in California
and in Malaysia (the "Business") and (b) owns the assets that are used in the
Business.
WHEREAS, Buyer, StorMedia Acquisition Corporation ("Sub"), Kubota, AII and
Akashic have entered into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") of even date herewith pursuant to which Buyer will
acquire Akashic through a merger (the "Merger") of Sub with and into Akashic
pursuant to an Agreement of Merger (the "Agreement of Merger") which shall occur
upon the filing of the Agreement of Merger with the California Secretary of
State (the "Effective Time").
WHEREAS, as of the date hereof Kubota owns certain patents, patent
applications and other intellectual property as developed for the Business at
the Itami laboratory, such patents and patent applications to be listed on
Exhibit A hereto ("Itami IP").
WHEREAS, immediately prior to the date hereof, for good and valuable
consideration, the receipt of which Kubota has acknowledged, Kubota shall have
granted an exclusive, perpetual, fully paid royalty free license of the Itami IP
to SMIL for exploitation and use of such Itami IP outside the U.S. (the "SMIL
License").
WHEREAS, Buyer desire to purchase the Itami IP subject to the SMIL
License.
WHEREAS, Buyer and Kubota agree that time is of the essence in the closing
of the transactions contemplated in this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth in this Agreement, Kubota and Buyer agree as follows:
<PAGE>
ARTICLE 1
CONSIDERATION AND CLOSING
1.1 PURCHASE PRICE. Buyer hereby agrees to purchase and Kubota hereby
agrees to sell to Buyer, the Itami IP subject to the to SMIL License. As
consideration for the Itami IP, Buyer agrees, subject to the terms, conditions
and limitations set forth in this Agreement, to pay, and Kubota agrees to
accept, as the "IP Purchase Price," 2,000,000 shares of Buyer's Class A Common
Stock. With respect to the payment for the SMIL License, SMIL has previously
paid adequate consideration to Kubota. Thereby, after the Closing, the entire
Itami IP shall have been acquired by Buyer and its affiliates.
1.2 CLOSING. The Closing will take place at the offices of Wilson Sonsini
Goodrich & Rosati at 650 Page Mill Road, Palo Alto, CA on a date mutually agreed
to by the parties which the parties shall use reasonable efforts to be prior to
December 31, 1997 (the "Closing"). Each of the parties shall use their
reasonable efforts to satisfy the closing conditions set forth in Article 4
hereof and to consummate the transactions contemplated hereby.
1.3 DELIVERIES AT THE CLOSING. At the Closing, (i) Kubota will deliver
to Buyer the various certificates, instruments, and documents referred to in
Section 4.1 below, and (ii) Buyer will deliver to Kubota the various
certificates, instruments, and documents referred to in Section 4.2 below.
ARTICLE 2
REPRESENTATIONS OF KUBOTA
Kubota hereby represents to Buyer as follows:
2.1 ORGANIZATION. Kubota is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary corporate power and authority to own and
lease its properties and assets and to carry on its businesses as now being
conducted.
2.2 AUTHORITY. Kubota has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Kubota and the
consummation by Kubota of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Kubota. This
Agreement has been duly executed and delivered by Kubota and constitutes a valid
and binding obligation of Kubota, enforceable in accordance with its terms
except as enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally, and subject to
rules of law governing specific performance, injunctive relief and other
equitable remedies. Except for certain third party consents which shall be
obtained prior to the Closing, the execution and delivery of this Agreement do
not, and the consummation of the transactions
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contemplated hereby and compliance with the provisions hereof will not,
conflict with, or result in any violation of, or default (with or without
notice or lapse of time or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, any provision of the charter documents of Kubota or
any loan or credit agreement, note, bond, mortgage, indenture, license, lease
or other agreement or instrument, permit, concession, franchise, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Kubota or the properties or assets of Kubota.
2.3 GOVERNMENTAL APPROVALS. Subject to compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and approval from Japan Ministry of Finance and the Bank of Japan, no
consent, approval, order or authorization of, or registration, declaration or
filing with any governmental authority is required by or with respect to
Kubota in connection with the execution and delivery of this Agreement by
Kubota or the consummation by Kubota of the transactions contemplated hereby.
ARTICLE 3
REPRESENTATIONS OF BUYER
Buyer represents to Kubota as follows:
3.1 ORGANIZATION. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of Delaware and has all necessary corporate
power and authority to own and lease all of its properties and assets and to
carry on its business as it is now being conducted.
3.2 AUTHORITY. Buyer has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Buyer and the
consummation by Buyer of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes a valid
and binding obligation of Buyer, enforceable in accordance with its terms except
as enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and subject to rules
of law governing specific performance, injunctive relief and other equitable
remedies. Except for certain third party consents which shall be obtained prior
to the Closing, the execution and delivery of this Agreement will not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, conflict with or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
loss of a material benefit under, any provision of the charter documents of
Buyer or any loan or credit agreement, note, bond mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Buyer
or its properties or assets, which has not been waived.
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<PAGE>
3.3 GOVERNMENTAL APPROVALS. Subject to compliance with the HSR Act, and
approval from Japan Ministry of Finance and the Bank Japan, no consent,
approval, order or authorization of, or registration, declaration or filing with
any governmental authority is required by or with respect to Buyer in connection
with the execution and delivery of this Agreement by Buyer or the consummation
by Buyer of the transactions contemplated hereby.
ARTICLE 4
CONDITIONS TO CLOSING
4.1 CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transaction to be performed by it in connection herewith is
subject to the satisfaction of the following conditions:
(a) REPRESENTATIONS. The representations set forth in Section 2
hereof shall be true and correct in all material respects as of the Closing.
(b) INTELLECTUAL PROPERTY. Kubota shall quit claim to Buyer,
Akashic or any affiliate of Buyer designated by Buyer prior to Closing all of
the Itami IP and Kubota and Buyer shall enter into an agreement pursuant to
which Buyer grants to Kubota and its affiliates a fully paid, royalty free,
perpetual, worldwide, nonexclusive license to the Itami IP for use in the
area of sputtering targets and other areas, but excluding thin film media and
substrates.
(c) REGULATORY APPROVALS. All applicable regulatory approvals,
authorizations and consents shall have been obtained including, without
limitation, HSR, the Japanese Ministry of Finance and the Bank of Japan.
(d) OFFICER'S CERTIFICATE. Kubota shall deliver a certificate to
Buyer executed by duly authorized officers certifying compliance with
subsections 4.1(a), (b) and (c).
(e) WITHHOLDING TAX. Kubota shall deliver to Buyer a check in the
amount of any withholding taxes payable by Buyer as a result of the
transactions contemplated hereby and shall indemnify Buyer against the
payment of any such withholding taxes hereafter determined by any
governmental agency to be owing by Buyer in connection with the transactions
hereunder.
4.2 CONDITIONS TO OBLIGATIONS OF KUBOTA. The obligation of Kubota to
consummate the transactions to be performed by it in connection herewith is
subject to the satisfaction of the following conditions:
(a) PURCHASE PRICE. Buyer shall deliver at Closing a certificate
representing 2,000,000 of shares of Buyer's Class A Common Stock registered
in the name of Kubota.
(b) REPRESENTATIONS. The representations of Buyer set forth in
Section 3 hereof shall be true and correct in all material respects as of the
Closing.
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<PAGE>
(c) REGULATORY APPROVALS. All applicable regulatory approvals,
authorizations and consents shall have been obtained, including, without
limitation, HSR, the Japanese Ministry of Finance and the Bank of Japan.
(d) OFFICER'S CERTIFICATE. Buyer shall deliver a certificate to
Kubota executed by a duly authorized officer certifying compliance with
subsections 4.2(b) and (c).
ARTICLE 5
COVENANTS
5.1 PATENT APPLICATIONS. Upon request, Kubota and its affiliates shall
cooperate with Akashic and Buyer at Akashic's expense after the Closing to
file any U.S. or foreign patents or patent applications with respect to the
Itami IP. Kubota shall not be obligated to translate any patents contained in
the Itami IP into English.
5.2 COVENANT NOT TO SUE. Kubota on behalf of itself and its affiliates
hereby agrees not to sue or bring any cause of action or proceeding against
Buyer, its affiliates, licensees or customers or Akashic alleging infringement
or improper use of any patents, patent applications or other intellectual
property owned by or licensed to Kubota or any of its affiliates as of the
Closing, with respect to Akashic's thin film media and substrate businesses.
5.3 LIST OF PATENTS. The parties agree to substitute an English
translation for Exhibit A prior to the closing, such list to include not less
than all patents described in Exhibit B hereto.
5.4 TRANSFER OF ITAMI IP. The parties acknowledge that it may not be
possible to complete all required paperwork to formally transfer all of the
Itami IP prior to the Closing. Kubota agrees to complete all such transfers and
make all necessary filings, at its expense, promptly following the Closing and
to cooperate with Buyer, upon request by Buyer, to complete such transfers. The
parties further agree and acknowledge that Buyer may request that certain rights
to the Itami IP which Kubota agrees to grant pursuant to Section 4.1(b) above be
granted to certain affiliates of Buyer and the parties agree to cooperate in
making such grants.
ARTICLE 6
GENERAL PROVISIONS
6.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California as applied to
contracts entered into and to be performed in the State of California.
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6.2 NOTICES. All notices or reports permitted or required under this
Agreement shall be in writing and shall be delivered in person, mailed by first
class, registered or certified mail, postage prepaid, sent by overnight courier,
or sent by telex, telegram, telecopier or electronic mail to:
If to Kubota:
Kubota Corporation
2-47 Shikitsuhigashi 1-chome,
Naniwa-ku Osaka, 556 Japan
Attn: Kunio Suwa
Fax: 06-648-3915
with a copy to:
Graham & James
600 Hansen Way
Palo Alto, CA 94304-1043
Attn: Robert E. Patterson
Fax: (650) 856-3619
If to Buyer OR SMIL:
StorMedia Incorporated
385 Reed Street
Santa Clara, California 95050
Attn: William J. Almon
Fax: (408) 727-4928
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attn: Judith M. O'Brien
Fax: 650-493-6811
By written notice to the other party, a party may change the address to which
notices and other communications shall be directed. Notice shall be deemed to
have been given upon the earlier to occur of (i) the third business day
following dispatch by one of the foregoing methods or (ii) actual receipt.
6.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. The
representations and warranties of the parties set forth in this Agreement or any
certificate or instrument delivered pursuant hereto shall survive the Closing.
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<PAGE>
6.4 ENTIRE AGREEMENT. The Agreement and the Reorganization Agreement
represent and constitute the entire agreement between the parties, and supersede
all prior agreements and understandings with respect to the matters covered by
this Agreement and the Reorganization Agreement, and, except for the
Reorganization Agreement, there are no other agreements, warranties or
representations which are not set forth herein.
6.5 WAIVER. Kubota or Buyer may, by written notice to the other,
(i) waive any of the conditions to its obligations hereunder or extend the time
for the performance of any obligations or actions of the other, (ii) waive any
inaccuracies in the representations of the other contained in this Agreement or
any documents delivered pursuant to this Agreement, (iii) waive compliance with
any of the covenants of the other contained in this Agreement and (iv) waive
performance of any obligations by the other. The waiver of one breach or
default hereunder shall not constitute the waiver of any subsequent breach or
default.
6.6 EXPENSES. All expenses incurred by either party in connection with
the execution and performance of this Agreement shall be the obligation of and
shall be paid by such party.
6.7 DISPUTE FEES. In the event of a dispute arising under this Agreement
which results in arbitration or litigation, the prevailing party shall be
entitled to reimbursement of reasonable expenses, including but not limited to
reasonable attorneys' and expert witness fees incurred by it in pursuing such
dispute, as determined by the court in any such proceeding.
6.8 BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon the
parties and inure to the benefit of the successors, assigns, heirs and legal
representatives of the respective parties hereto; provided, however, that this
Agreement and all rights hereunder may not be assigned by any party hereto
except by or with the prior written consent of the other party, with such
consent not to be unreasonably withheld.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and date first above written.
Kubota Corporation
By:
---------------------------------
Title:
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StorMedia Incorporated
By:
---------------------------------
Title:
------------------------------
StorMedia International Ltd.
By:
---------------------------------
Title:
------------------------------
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KUBOTA GUARANTY AND INDEMNIFICATION
THIS KUBOTA GUARANTY AND INDEMNIFICATION, dated as of December 15,
1997 (the "Guaranty"), is executed by KUBOTA CORPORATION., a Japanese
corporation ("PARENT"), in favor of STORMEDIA INCORPORATED, a Delaware
corporation ("STORMEDIA").
RECITALS
A. Pursuant to the Agreement and Plan of Reorganization, of even
date hereof (the "AGREEMENT"), between StorMedia, Akashic International Inc.,
an indirect wholly owned subsidiary of Parent ("AII") and Akashic Memories
Corporation, a subsidiary of Parent ("AKASHIC"), StorMedia has agreed to
acquire Akashic through a statutory merger of one of its subsidiaries with
and into Akashic (the "MERGER"). Unless otherwise defined herein, all other
capitalized terms used herein and defined in the Agreement shall have the
respective meanings given to those terms in the Agreement.
B. StorMedia's obligation to consummate the Merger is subject,
among other conditions to receipt by StorMedia of this Guaranty, duly
executed by Parent.
C. In addition, in the event AII is dissolved, Parent shall assume
all obligations and liabilities of every nature of AII now or hereafter
existing under the terms of the Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Parent hereby agrees with StorMedia as follows:
1. GUARANTY.
a. Parent unconditionally guarantees all obligations and
liabilities of AII now or hereafter existing arising in any manner in
connection with, as a result of or under the terms of the Agreement.
b. This Guaranty is absolute, unconditional, continuing and
irrevocable and if AII shall dissolve, liquidate or fail to pay or perform
any obligations to StorMedia as and when such payments or performance are due
under the Agreement which is subject to this Guaranty, Parent shall forthwith
pay to StorMedia when such payments or performance are due in the place of
AII.
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2. CONSENT TO DISSOLUTION. StorMedia agrees that at such time
that AII is dissolved or liquidated, it shall, at the request of Parent,
provide acknowledgment of AII's release of all obligations under the
Agreement, so long as Parent is then still obligated as guarantor and
indemnitor hereunder.
3. REPRESENTATIONS AND WARRANTIES. Parent represents and warrants
to StorMedia that (a) Parent is a corporation duly organized, validly,
existing and in good standing under the laws of its country of incorporation
and is duly qualified and in good standing in each jurisdiction where the
nature of its business or properties requires such qualification; (b) the
execution, delivery and performance by Parent of this Guaranty are within the
power of Parent and have been duly authorized by all necessary actions on the
part of Parent; (c) this Guaranty has been duly executed and delivered by
Parent and constitutes a legal, valid and binding obligation of Parent,
enforceable against it in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to or
affecting the enforcement of creditors' rights generally; (d) the execution,
delivery and performance of this Guaranty do not (i) violate any laws, rules
or regulations applicable to Parent or (ii) contravene any material
contractual obligation of Parent; and (e) no consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental authority or other person or entity (including, without
limitation, the shareholders of any Parent) is required in connection with
the execution, delivery and performance of this Guaranty, except such
consents, approvals, orders, authorizations, registrations, declarations and
filings that are so required and which have been obtained and are in full
force and effect.
4. INDEMNIFICATION. Parent will indemnify and hold harmless
StorMedia and the Surviving Corporation and its respective officers,
directors, agents and employees, and each person, if any, who controls or may
control StorMedia or the Surviving Corporation within the meaning of the
Securities Act of 1933, as amended (hereinafter referred to individually as
an "Indemnified Person" and collectively as "Indemnified Persons") from and
against any and all losses, costs, damages, liabilities and expenses arising
from claims, demands, actions, causes of action, including, without
limitation, reasonable legal fees arising out of or relating to claims by
minority shareholders, holders of Akashic Capital Stock or options to
purchase Akashic Common Stock of Akashic prior to the Merger (each a
"Minority Shareholder" and collectively the "Minority Shareholders") alleging
breach of fiduciary duty, fraud, misrepresentation or any other claim
relating to the Merger or the consideration (or lack thereof) received by
such Minority Shareholder(s) in the Merger or the termination of options or
rights to purchase Akashic Common Stock.
In the event the Buyer or the Surviving Corporation becomes aware of a
claim by a Minority Shareholder(s) which Buyer or the Surviving Corporation
believes has or may result in Damages, StorMedia shall notify Parent of such
claim and Parent shall either defend against such claim or settle such claim, in
each case at its expense and in a manner which results in no Damages being
incurred by either StorMedia or the Surviving Corporation and in both StorMedia
and the Surviving Corporation being unconditionally released from all future
liability with respect to such claim. In the event Parent fails to so defend
against or settle such claim, StorMedia and Surviving Corporation may defend
against or settle such claim and Parent shall reimburse promptly, as incurred,
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all expenses and damages incurred in connection therewith upon request for
such reimbursement by StorMedia or the Surviving Corporation, as applicable.
5. CANCELLATION OF DEBT. Parent shall extinguish, or cause to be
extinguished, without creating taxable income to Akashic, all long term debt
and debentures of Akashic or its subsidiaries (other than the loan from
Western Digital Corporation) (the "Debt"), and shall deliver evidence
satisfactory to StorMedia that all such Debt has been extinguished. To the
extent StorMedia incurs any losses, costs, damages or liabilities due to
Parent's failure to extinguish all Debt by Closing, Parent shall indemnify
StorMedia for any damages, costs, expenses or other liabilities incurred as a
result of such failure.
6. WAIVERS. Parent waives (a) any right to require StorMedia to
(i) proceed against AII or (ii) pursue any other remedy in StorMedia's power
whatsoever; (b) any setoff or counterclaim of AII or any defense which
results from any disability or other defense of AII or the cessation or stay
of enforcement from any cause whatsoever of the liability of AII; and (c) all
presentments, demands for performance, notices of non-performance, notices
delivered under the Agreement.
7. MISCELLANEOUS.
(a) All notices and other communications given to or made upon any
party hereto in connection with this Agreement shall be in writing
(including telexed, telecopied or telegraphic communication) and mailed (by
certified or registered mail), telexed, telegraphed, telecopied or
delivered to the respective parties, as follows:
If to Parent
Kubota Corporation
2-47 Shikitsuhigashi 1-chome,
Naniwa-ku Osaka, 556 Japan
Attn: Kunio Suwa
Fax: 06-648-3915
with a copy to:
Graham & James
600 Hansen Way
Palo Alto, CA 94304-1043
Attn: Robert E. Patterson
Fax: (650) 856-3619
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If to StorMedia:
StorMedia Incorporated
385 Reed Street
Santa Clara, California 95050
Attn: William J. Almon
Fax: (408) 727-4928
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304
Attn: Judith M. O'Brien
Fax: 650-493-6811
or in accordance with any subsequent written direction from either party to
the other. All such notices and other communications shall, except as
otherwise expressly herein provided, be effective when received; or in the
case of delivery by messenger or overnight delivery service, when left at
the appropriate address.
(b) NONWAIVER. No failure or delay on StorMedia's part in exercising
any right hereunder shall operate as a waiver thereof or of any other right
nor shall any single or partial exercise of any such right preclude any
other further exercise thereof or of any other right.
(c) AMENDMENTS AND WAIVERS. This Guaranty may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by Parent and StorMedia. Each waiver or consent under any provision
hereof shall be effective only in the specific instances for the purpose
for which given.
(d) ASSIGNMENTS. This Guaranty shall be binding upon and inure to
the benefit of Company and Guarantor and their respective successors and
assigns; PROVIDED, HOWEVER, that without the prior written consent of
StorMedia, Parent may not assign its rights and obligations hereunder.
(e) CUMULATIVE RIGHTS, ETC. The rights, powers and remedies of
StorMedia under this Guaranty shall be in addition to all rights, powers
and remedies given to StorMedia by virtue of any applicable law, rule or
regulation of any Governmental Authority or the Agreement, all of which
rights, powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing StorMedia's rights
hereunder.
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(f) PARTIAL INVALIDITY. If at any time any provision of this
Guaranty is or becomes illegal, invalid or unenforceable in any respect
under the law or any jurisdiction, neither the legality, validity or
enforceability of the remaining provisions of this Guaranty nor the
legality, validity or enforceability of such provision under the law of any
other jurisdiction shall in any way be affected or impaired thereby.
(g) GOVERNING LAW. This Guaranty shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of law rules.
(h) JURY TRIAL. EACH OF PARENT AND STORMEDIA, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY AS TO ANY ISSUE RELATING HERETO IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY.
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IN WITNESS WHEREOF, the parties have caused this Guaranty to be
executed as of the day and year first above written.
KUBOTA CORPORATION
By:
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Name:
Title:
STORMEDIA INCORPORATED
By:
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William J. Almon
Chief Executive Officer
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