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EXHIBIT 10.28
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON MAY 29,
1998 AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
CONDITIONS SET FORTH IN THE TERMINATION OF SUPPLY AGREEMENT AND LOAN AND
SECURITY AGREEMENT DATED AS OF MAY 15, 1998 AMONG THE ISSUER (THE "COMPANY") AND
SEAGATE TECHNOLOGY, INC., AND THE COMPANY RESERVES THE RIGHT TO REFUSE ANY
TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED WITHOUT
CHARGE TO THE HOLDER HEREON UPON WRITTEN REQUEST TO THE COMPANY.
THIS INSTRUMENT IS SUBJECT TO THE TERM OF A SUBORDINATION AGREEMENT IN FAVOR OF
FOOTHILL CAPITAL CORPORATION, AS AGENT FOR CERTAIN LENDERS, AND CANADIAN
IMPERIAL BANK OF COMMERCE, NEW YORK AGENT, AS AGENT FOR CERTAIN LENDERS, WHICH
SUBORDINATION AGREEMENT CONTAINS CERTAIN SUBORDINATION PROVISIONS AND IS
INCORPORATED HEREIN BY REFERENCE. NOTWITHSTANDING ANY CONTRARY STATEMENT
CONTAINED IN THIS INSTRUMENT, NO PAYMENT ON ACCOUNT OF THE PRINCIPAL, PREMIUM,
IF ANY, OR INTEREST HEREOF, OR ANY PROCEEDS OF COLLATERAL SECURING THE
INDEBTEDNESS EVIDENCED HEREBY, SHALL BECOME DUE OR BE PAID EXCEPT IN ACCORDANCE
WITH THE TERMS OF SUCH SUBORDINATION AGREEMENT.
CONVERTIBLE PROMISSORY NOTE
$5,000,000 Santa Clara, California
May 29, 1997
FOR VALUE RECEIVED, StorMedia Incorporated ("Debtor"), promises to pay to the
order of Seagate Technology, Inc. ("Seagate"), the principal sum of Five Million
Dollars ($5,000,000) and to pay interest on the outstanding principal of this
Convertible Promissory Note (this "Note"), in accordance with Section 2 of this
Note. This Note is delivered in connection with that certain Termination of
Supply Agreement and Loan and Security Agreement of even date (the "Loan
Agreement") between Debtor and Seagate. Initially capitalized terms not defined
herein shall have the meanings assigned to them in the Loan Agreement.
1. Maturity. To the extent permitted by the Subordination Agreement and
to the extent not previously converted in accordance with the Loan Agreement and
Section 5 hereof, Debtor will repay the unpaid principal outstanding balance
plus all interest accrued thereon as follows: (i) an amount equal to one third
of the total of the outstanding principal balance plus all interest accrued
thereon shall be due and payable on the date thirty-six (36) months after the
Effective Date (the "Repayment Commencement Date"), and (ii) the remaining
outstanding
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principal balance plus all interest accrued thereon in twenty four (24) equal
monthly installments of $176,635 (such amount to be adjusted pro rata in
connection with any partial conversion of this Note) with the first installment
due and payable on the one (1) month anniversary of the Repayment Commencement
Date and the remaining installments due and payable on each subsequent one (1)
month anniversary of the Repayment Commencement Date until the entire
outstanding principal balance has been repaid. Subject to the terms of the
Subordination Agreement, all payments received shall be applied first against
costs of collection (if any), then against accrued and unpaid interest, then
against principal. Without limiting in any way the remedies provided in Section
3.4 of the Loan Agreement, in the event that an installment has not been
received by Seagate within five (5) business days of the relevant Convertible
Installment Date, the full amount of such installment shall bear interest at the
Convertible Interest Rate from the missed Convertible Installment Date until the
date such payment is paid in full.
2. Interest. Interest on the unpaid principal balance of this Note will
accrue from the Effective Date at the rate of six percent (6%) per annum,
compounded quarterly, calculated on the basis of a 360 day year and actual days
elapsed; provided, however, that no such accrued interest shall be due and
payable prior to the Repayment Commencement Date.
3. Prepayment; Acceleration. The unpaid principal balance and all
accrued interest and any and all other sums payable to Seagate hereunder may be
prepaid prior to the Maturity Date. All prepayments so permitted shall be
applied in the order provided in Section 1. The unpaid principal balance of this
Note is subject to acceleration upon the occurrence of a Corporate Event, as set
forth in the Loan Agreement. Following any such acceleration, Seagate will have
full recourse, subject to the terms of the Subordination Agreement, against any
tangible or intangible assets of Debtor, and may pursue any legal or equitable
remedies that are available to it.
4. Default. Upon the occurrence of an Event of Default, Seagate may
declare Debtor to be in default hereunder and the unpaid principal balance of
this Note, together with all accrued interest thereon, will become immediately
due and payable. Following any such default, Seagate will have full recourse,
subject to the terms of the Subordination Agreement, against any tangible or
intangible assets of Debtor, and may pursue any legal or equitable remedies that
are available to it.
5 No Offset. Steagate will not have any right of offset or recoupment
and will not apply any amounts due and owing it by StorMedia under this Note
against any amounts due and owing StorMedia by it.
6. Optional Conversion. On and at any time after the earlier to occur
of: (a) one (1) year anniversary of the Closing Date, or (b) a Corporate Event,
Seagate may, at its option and in its sole discretion, convert some or all of
the outstanding principal balance on this Note plus any accrued interest to date
(or any portion thereof) into Common Stock at a valuation of the greater of
$5.00 per share or the average of the closing bid price for the five (5) trading
days immediately preceding the date of the Loan Agreement, subject to adjustment
for stock splits, reverse stock splits, recapitalization and similar events, by
delivering written notice of its intent
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to so convert to Debtor on or prior to such date. To convert this Note, Seagate
must deliver to Debtor written notice of its intent to convert containing the
dollar amount of the outstanding principal balance it wishes to convert and a
copy of this Note. As soon as practicable, but in no event later than the
seventh (7th) business day after the date such notice is given by Seagate,
Debtor shall deliver to Seagate a certificate for the number of full shares of
Common Stock issuable upon the conversion and cash in lieu of any fractional
share. In case of any partial conversion of this Note, Debtor shall cancel this
Note upon surrender hereof and shall execute and deliver a new promissory note
of like tenor and date for the balance of the outstanding principal balance.
7. Miscellaneous.
(a) Debtor hereby waives presentment, demand, protest, notice of
dishonor, diligence and all other notices, any release or discharge arising from
any extension of time, discharge of a prior party, release of any or all of any
security given from time to time for this Note, or other cause of release or
discharge other than actual payment in full hereof.
(b) Seagate shall not be deemed, by any act or omission, to have
waived any of its rights or remedies hereunder unless such waiver is in writing
and signed by Seagate and then only to the extent specifically set forth in such
writing. A waiver with reference to one event shall not be construed as
continuing or as a bar to or waiver of any right or remedy as to a subsequent
event. No delay or omission of Seagate to exercise any right, whether before or
after a default hereunder, shall impair any such right or shall be construed to
be a waiver of any right or default, and the acceptance at any time by Seagate
of any past-due amount shall not be deemed to be a waiver of the right to
require prompt payment when due of any other amounts then or thereafter due and
payable.
(c) Time is of the essence hereof. Upon any default hereunder,
Seagate may exercise all rights and remedies provided for herein and by law or
equity, including, but not limited to, the right to immediate payment in full of
this Note.
(d) The remedies of Seagate as provided herein, or any one or
more of them, or in law or in equity, shall be cumulative and concurrent, and
may be pursued singularly, successively or together at Seagate's sole
discretion, and may be exercised as often as occasion therefor shall occur.
(e) It is expressly agreed that if this Note is referred to an
attorney or if suit is brought to collect or interpret this Note or any part
hereof or to enforce or protect any rights conferred upon Seagate by this Note
or any other document evidencing or securing this Note, then Debtor promises and
agrees to pay all costs, including attorneys' fees, incurred by Seagate.
(f) If any provisions of this Note would require Debtor to pay
interest hereon at a rate exceeding the highest rate allowed by applicable law,
Debtor shall instead pay interest under this Note at the highest rate permitted
by applicable law.
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(g) This Note shall be governed by and construed in accordance
with laws of the State of California applicable to contracts wholly made and
performed in the State of California.
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IN WITNESS WHEREOF, Debtor has executed this Convertible Promissory Note
as of the date first above written.
STORMEDIA INCORPORATED
By: /s/
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Name:
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Title:
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