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The Hitachi Nomination Right will terminate (i) with respect to one of the Hitachi Designated Directors, at
the end of the second full calendar year following the Closing Date, (ii) in the event that Hitachi ceases to
beneficially own at least 50% of the shares of common stock it received in the Transaction, (iii) if Hitachi has
first sold at least 10% of the shares of common stock it received in the Transaction, in the event that Hitachi
ceases to beneficially own at least 5% of our total issued and outstanding common stock, (iv) upon Hitachi's
breach of the standstill or transfer restriction obligations of the Investor Rights Agreement, which are described
below, or (v) upon Hitachi's material breach of the Non-Competition Agreement (defined below).
Commencing with the Closing Date, Hitachi and its controlled affiliates became subject to customary
"standstill" restrictions limiting or prohibiting, among other things, directly or indirectly, the acquisition of
additional securities of the company or seeking or proposing a change of control transaction. The standstill
period runs until the earlier of (i) a change of control of the company or (ii) 90 days after the Hitachi Nomination
Right terminates. In addition, for a period of one year following the Closing Date, subject to limited exceptions,
Hitachi will be prohibited from, directly or indirectly, selling or otherwise transferring the shares of our common
stock it received in the Transaction. Pursuant to the Investor Rights Agreement, Hitachi will receive registration
rights with respect to the shares of our common stock it received in the Transaction, including shelf, demand and
piggyback registration rights. We are obligated under the Investor Rights Agreement to file and have declared
effective by the SEC a registration statement permitting the resale of the shares of our common stock owned by
Hitachi on or before March 8, 2013.
License Agreement.
On the Closing Date, we entered into a License Agreement with Hitachi (the "License
Agreement") under which (i) Hitachi granted to us a royalty-free license under certain patents of Hitachi, and
(ii) we granted to Hitachi a royalty-free license under certain of our patents. The term of such patent licenses runs
a minimum of five years from the Closing Date. Under the License Agreement, Hitachi has also granted to us a
royalty-free, perpetual license under its non-patent intellectual property that may be held by HGST. Further,
under the License Agreement, we and Hitachi each release the other party with respect to acts of infringement of
certain patents of such releasing party prior to the Closing Date.
Purchase of Production Materials, Equipment and Other Services.
We purchase production materials
from Hitachi. Total production materials purchased from Hitachi from the Closing Date through the end of fiscal
2012 totaled approximately $24 million. In addition, we purchase equipment and other services, including
facility and equipment maintenance, human resource services and information technology services from Hitachi
and its affiliates. These services primarily relate to the Transition Services Agreement we entered into with
Hitachi on the Closing Date that has a term expiring in March 2013. Total equipment and other services
purchased from Hitachi from the Closing Date through the end of fiscal 2012 totaled approximately $73 million.
Sales Transactions.
We sell certain of our products to Hitachi, including under a Customer Agreement
entered into with Hitachi at the Closing Date, which has a term expiring in March 2014. Revenue related to
products sold to Hitachi from the Closing Date through the end of fiscal 2012 totaled approximately $184
million.
R&D Services Agreement.
Hitachi provides research and development services to us, including under an
R&D Services Agreement entered into with Hitachi at the Closing Date, which has a term expiring in September
2013. The amount of research and development services provided by Hitachi from the Closing Date through the
end of fiscal 2012 totaled approximately $6 million.
Branding Agreement.
On the Closing Date, HGST and Hitachi entered into a Branding Agreement (the
"Branding Agreement") under which Hitachi permits HGST to continue to use certain trademarks of Hitachi
following the Closing Date while required to do so.
Non-Competition Agreement.
On the Closing Date, we and Hitachi entered into an Agreement Not to
Compete (the "Non-Competition Agreement"). Under the terms of the Non-Competition Agreement, Hitachi
may not compete for a period of ten years from the Closing Date in the hard disk drive field, including the
manufacture and sale of hard disk drive products and, subject to certain exceptions, research and development
that is related to any material aspect of the manufacture of hard disk drive products. In addition, during the
two-year period following the Closing Date, Hitachi may not solicit or hire key HGST technical research
employees.
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