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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 31, 1998
ARTECON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
0-22015 77-032-4887
(Commission File No.) (IRS Employer Identification No.)
6305 EL CAMINO REAL
CARLSBAD, CALIFORNIA 92009
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (760) 931-5500
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On March 31, 1998, Storage Acquisition Corp., a California corporation
("Merger Sub") and wholly owned subsidiary of Storage Dimensions, Inc., a
Delaware corporation (the "Registrant"), was merged with and into Artecon, Inc.,
a California corporation ("Artecon California" or the "Company"), pursuant to an
Agreement and Plan of Merger and Reorganization dated December 22, 1997, among
the Registrant, Merger Sub and the Company (the "Merger Agreement").
The merger of Merger Sub with and into the Company (the "Merger") became
effective at the time of the filing of an Agreement of Merger with the office of
the California Secretary of State on March 31, 1998 (the "Effective Time"). At
the Effective Time: (i) Merger Sub ceased to exist; (ii) the Company, as the
surviving corporation in the Merger, became a wholly owned subsidiary of the
Registrant; (iii) the Registrant changed its name to "Artecon, Inc."; (iv) the
Company changed its name from "Artecon, Inc." to "Artecon California"; (v)
subject to the provisions of the Merger Agreement relating to the payment of
cash in lieu of fractional shares, each share of Common Stock, no par value, of
the Company ("Company Common Stock") outstanding immediately prior to the
Effective Time was converted into the right to receive 2.185481 shares (the
"Exchange Ratio") of Common Stock, $.005 par value, of the Registrant
("Registrant Common Stock"); and (vi) each share of Preferred Stock and
Preferred B Stock, no par value, of the Company (collectively, the "Company
Preferred Stock") outstanding immediately prior to the Effective Time was
converted into the right to receive one share of Series A Preferred Stock,
$0.005 par value, of the Registrant ("Registrant Preferred Stock").
As a result of and immediately after the Merger, the former holders of
Company Common Stock held approximately 13,271,858 shares of Registrant Common
Stock constituting approximately 61% of the Registrant's Common Stock
outstanding immediately after the consummation of the Merger, and the holders of
Company Preferred Stock held 2,494,159 shares of Registrant Preferred Stock
constituting 100% of the Registrant Preferred Stock outstanding immediately
after the consummation of the Merger. Cash payments will be made for fractional
shares resulting from the conversion. The Registrant will use its current cash
resources to fund the payments for fractional shares.
James L. Lambert, the President, a director and former shareholder of
the Company and the President and a director of the Registrant as of the
Effective Time, and Mr. Lambert's spouse, Pamela L. Lambert, a former director
and the former Secretary of the Company, became entitled to receive in the
aggregate 3,470,817 shares of Registrant Common Stock pursuant to the Merger.
Mr. W.R. Sauey, the Chairman and a former shareholder of the Company and the
Chairman of the Registrant as of the Effective Time, together with certain of
his affiliates, became entitled to receive in the aggregate approximately
5,282,886 shares of Registrant Common Stock and 2,494,159 shares of Registrant
Preferred Stock pursuant to the Merger. Mr. Jason C. Sauey, a former director
and shareholder of the Company and a director of the Registrant as of the
Effective Time, became entitled to receive approximately 360,604 shares of
Registrant Common Stock pursuant to the Merger. Mr. Tesfaye Hailemichael, a
former
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officer and shareholder of the Company and the Vice President of Finance and
Chief Financial Officer of the Registrant as of the Effective Time, became
entitled to receive approximately 174,838 shares of Registrant Common Stock
pursuant to the Merger. Mr. Dana W. Kammersgard, a former director, officer and
shareholder of the Company and the Vice President of Sales and Marketing and
Secretary of the Registrant as of the Effective Time, became entitled to receive
approximately 1,381,291 shares of Registrant Common Stock pursuant to the
Merger.
The Registrant expects to incur a one-time charge against earnings of
approximately $14.5 million during the first calendar quarter of 1998 for
acquired in-process research and development. The Registrant also expects
inventory adjustments during the first calendar quarter primarily related to
consolidation of product lines of approximately $2 million to $3 million. These
amounts are preliminary estimates, and there can be no assurance that the
Registrant will not incur additional charges to reflect costs associated with
the Merger.
In connection with the Merger, the Registrant amended its Certificate of
Incorporation (i) to change its name from "Storage Dimensions, Inc." to
"Artecon, Inc.," (ii) to provide for a classified Board of Directors whereby the
directors are separated into three classes with members of each class serving
for a three-year term, (iii) to provide that a director may not be removed from
office without cause except, until the third annual meeting of the stockholders
of the Registrant following the Merger, by the affirmative vote of at least 80%
of the outstanding voting stock of the Registrant and by the affirmative vote of
at least 66-2/3% of the outstanding voting stock of the Registrant thereafter,
and (iv) to designate a new Series A Preferred Stock, consisting of 2,494,159
shares.
The Registrant designs, manufactures, markets and supports a broad range
of scalable, fully integrated data storage products for the open-systems
computing environment. A copy of the press release announcing the consummation
of the Merger is attached hereto as Exhibit 99.1.
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ITEM 4. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(a) Previous independent accountants
(i) On April 2, 1998, the Registrant dismissed Price Waterhouse
LLP ("Price Waterhouse") as its independent accountants.
(ii) The reports of Price Waterhouse on the Registrant's
financial statements as of December 31, 1996 and 1997 and for
each of the years in the three-year period ended December 31,
1997 contained no adverse opinion or disclaimer of opinion and
were not qualified or modified as to uncertainty, audit scope or
accounting principles.
(iii) On March 31, 1998, Registrant consummated the acquisition
of the Company as described in Item 2 above. Deloitte & Touche
LLP ("Deloitte & Touche") are the independent accountants of the
Company. The Registrant's audit committee recommended that the
Registrant dismiss Price Waterhouse and retain Deloitte & Touche
as the Registrant's independent accountants.
(iv) During the Registrant's two most recent fiscal years and
through April 2, 1998, there have been no disagreements with
Price Waterhouse on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or
procedure, which disagreements if not resolved to the
satisfaction of Price Waterhouse would have caused them to make
reference thereto in their report.
(v) During the two most recent fiscal years and through April 2,
1998, there have been no reportable events (as defined in
Regulation S-K Item 304(a)(1) (v)).
(vi) The Registrant has requested that Price Waterhouse furnish
it with a letter addressed to the Securities and Exchange
Commission (the "SEC") stating whether or not it agrees with the
above statements.
(b) New independent accountants
(i) The Registrant engaged Deloitte & Touche as its new
independent accountants as of April 3, 1998. During the two most
recent fiscal years and through April 2, 1998, the Registrant
has not consulted with Deloitte & Touche on items which (1) were
or should have been subject to Statement of Auditing Standard
No. 50 or (2) concerned the subject matter of a disagreement or
reportable event with the former accountants (as described in
Regulation S-K Item 304(a)(2)).
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
(i) Financial Statements of the Company at March 29, 1997
and December 31, 1997 and for the year ended March 29,
1997 and the nine-month periods ended December 31, 1997
and 1996, with an audit report by Deloitte & Touche LLP,
were previously reported on pages F-16 through F-30 of
Registrant's Registration Statement on Form S-4 (No.
333-47593), as amended (the "Registration Statement").
Financial Statements of the Company at March 30, 1996
and March 25, 1995 and for each of the years in the
two-year period ended March 30, 1996, with an audit
report by Ernst & Young LLP, were previously reported on
pages F-31 through F-40 of the Registration Statement.
Financial Statements of Falcon Systems, Inc. at December
31, 1996 and 1995 and at August 20, 1997 and for each of
the years in the two-year period ended December 31, 1996
and the period ended August 20, 1997, with an audit
report by Arthur Andersen LLP, were previously reported
on pages F-41 through F-48 of the Registration
Statement.
(B) PRO FORMA FINANCIAL INFORMATION.
The pro forma financial information at December 31, 1997, and
for the nine months ended December 31, 1997 were previously
reported on pages 16 through 22 of the Registration Statement.
(C) EXHIBITS.
2.1 Agreement and Plan of Merger and Reorganization dated
December 22, 1997 among the Registrant, Storage
Acquisition Corp. and Artecon, Inc.*
16 Letter dated April 6, 1998 from Price Waterhouse LLP,
the Registrant's former accountants, to the SEC.
99.1 Press release, dated March 31, 1998.
* Incorporated by reference to the Schedule 13D filed by the Company on
December 29, 1997.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARTECON, INC.
Dated: April 7, 1998 By: /S/ JAMES L. LAMBERT
--------------------------------
James L. Lambert
President
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INDEX TO EXHIBITS
2.1 Agreement and Plan of Merger and Reorganization dated December
22, 1997 among the Registrant, Storage Acquisition Corp. and
Artecon, Inc. *
16 Letter dated April 6, 1998 from Price Waterhouse LLP, the
Registrant's former accountants, to the SEC.
99.1 Press release, dated March 31, 1998.
* Incorporated by reference to the Schedule 13D filed by the Company on
December 29, 1997.
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EXHIBIT 16
LETTER OF PRICE WATERHOUSE LLP
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[PRICE WATERHOUSE LLP LETTERHEAD]
April 6, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
Artecon, Inc.
We have read Item 4 of Artecon, Inc.'s Form 8-K dated March 31, 1998 and are in
agreement with the statements contained in paragraph 4(a) therein.
Yours very truly,
/s/ PRICE WATERHOUSE LLP
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EXHIBIT 99.1
PRESS RELEASE
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ARTECON AND STORAGE DIMENSIONS SHAREHOLDERS APPROVE MERGER
CREATING OPEN SYSTEMS STORAGE LEADER FOR PC-LAN AND UNIX NETWORK MARKETS
MARCH 31, 1998 4:02 PM EST
SAN DIEGO--(BUSINESS WIRE)--March 31, 1998--
MERGER CREATES A NEW LEADER IN HIGH-AVAILABILITY NETWORK STORAGE
Artecon, Inc., a leading independent supplier of enterprise storage solutions
for the UNIX market, and Storage Dimensions, Inc. (NASDAQ:STDM), the leading
independent vendor of high-availability RAID storage systems for the PC-LAN
market, today announced that the shareholders of both companies have voted to
approve the previously announced merger of the two companies.
The merger, which closed today, creates one of the world's largest third-party
storage companies serving the combined PC-LAN and UNIX open systems network
computing markets. The name of the combined company is Artecon, Inc., and
effective April 1, 1998, its common stock will trade on the Nasdaq National
Market under the ticker symbol ARTE.
Speaking to shareholders in Carlsbad, Calif., Artecon President and Chief
Executive Officer James Lambert said: "The combination of Artecon and Storage
Dimensions creates a new leader in high-availability network storage. The
combined company will offer one of the industry's broadest line of server
storage solutions for the PC-LAN and UNIX markets, with core competencies in
server-attached storage, network-attached storage, enterprise storage
management, and tape backup. The Company will address customer needs across the
enterprise, scaling from the local LAN to the enterprise WAN.
"In addition to the greatly expanded product line, the combined sales force
should enable us to expand our presence worldwide while we grow a global service
and support organization. Combining the engineering and marketing talents of
both organizations will enhance our ability to proactively address the dynamic
requirements of our customers.
"There is no doubt that we have many challenges ahead of us, but we believe that
the union of Artecon and Storage Dimensions will create new business
opportunities. Artecon management is committed to leveraging the synergies of
this merger to build long-term shareholder value and customer loyalty."
Under the terms of the merger, first announced Dec. 23, 1997, approximately 13.3
million newly issued shares of Storage Dimensions common stock were exchanged
for all outstanding shares of Artecon common stock such that the former Artecon
shareholders will hold approximately 61% of the outstanding common stock of the
combined company.
In addition, Storage Dimensions issued 2,494,159 shares of its preferred stock,
which is convertible into a maximum of approximately 840,000 shares of Storage
Dimensions common stock at the option of Storage Dimensions or the Holder in
certain circumstances, in exchange for Artecon outstanding preferred stock. The
transaction will be accounted for as a purchase of Storage Dimensions, Inc. by
Artecon, Inc. for approximately 31.7 million, plus acquisition and related
costs.
As previously disclosed in the registration statement on Form S-4, Artecon
expects a one-time charge against earnings of approximately $14.5 million during
the first calendar quarter of 1998 for acquired in-process research and
development. Artecon also expects inventory adjustments during this quarter
primarily related to consolidation of product lines of approximately $2 million
to $3 million.
Because the merged company has been named Artecon, all Storage Dimensions stock
that has been issued on or before March 31, 1998 will be considered Artecon
stock. Stock that is issued after March 31, 1998 will be under the new company
name, which is Artecon.
As previously announced, James Lambert, president, chief executive officer, and
co-founder of Artecon, will assume the role of president and chief executive
officer of the expanded company. Dana Kammersgard, also a co-founder of Artecon,
will remain in his role as senior vice president of sales and marketing. Tesfaye
Hailemichael will continue as vice president of finance and chief financial
officer of the company.
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Other members of management from Artecon include: Bert van der Woning, general
manager of Artecon Europe, B.V.; Masatake Tachibana, vice president and general
manager of Nihon Artecon Ltd.; Michael Harman, vice president of TeleCom sales;
Fred Hanhauser, vice president of indirect/OEM sales; Michael Jensen, vice
president of engineering; John Santospirito, vice president of operations; and
Michael Mundun, vice president of customer support.
Continuing members of management from Storage Dimensions include: Eastman
McGovern, vice president of North American sales; Ted Chen, vice president of
marketing; Jim Canter, general manager of the Silicon Valley office and vice
president of software and test engineering; and Ralph Ciarlanti, vice president
of quality.
COMPANY PROFILES
Artecon has been an established supplier of open systems enterprise storage
products in the UNIX marketplace since 1984. Since embarking on major
development projects in 1991, its focus has been on world-class enterprise
storage solutions with high-end features, modular architecture, ruggedized
construction, and open systems standards. The company's EXTREME product line
includes NEBS (Network Equipment Building System)-certified, disaster-tolerant
RAID systems for telco Central Office and Internet applications.
For more information, contact Artecon at 6305 El Camino Real, Carlsbad, CA
92009, 800/872-2783, or visit http://www.artecon.com.
Founded in 1985, Storage Dimensions designs, manufactures, markets and supports
a broad family of disk and tape storage systems designed to satisfy the
high-performance, fault-tolerance, and high availability requirements of the
PC-LAN market. The company, which focuses on reducing the life-cycle cost of
ownership of network storage, also develops and supports selected products for
the UNIX market. Storage Dimensions' products are sold through its own field
sales force in combination with multi-tiered distribution channels.
For more information, contact Storage Dimensions at 1656 McCarthy Boulevard,
Milpitas, CA 95035, 408/954-0710, or visit http://www.storagedimensions.com.
This press release contains forward-looking statements. These forward-looking
statements include statements about expectations relating to the merger of
Artecon and Storage Dimensions and the resulting benefits in breadth of product
line and the ability to meet ongoing customer requirements; increased size and
worldwide coverage of the sales, service and support organizations resulting in
incremental business; and the ability to create new business opportunities
resulting in expanded revenues. Actual results may differ materially due to
factors including, but not limited to: the combined company's ability to develop
and ship products leveraging the developments of the individual entities; the
combined company's ability to retain and restructure qualified sales, service,
and support personnel through the merger; the combined company's ability to
recognize and capitalize on new business activities; the impact of competitive
products and pricing; the fluctuating demand for PC-LAN and UNIX server products
in general and storage systems in particular; demand from customers, which could
be impacted by the recent uncertainties in the Asian markets; and the risk that
anticipated synergies in the merger and cost savings from the merger may not
result. These and other risks are described in more detail in the Form S-4
registration statement filed by Storage Dimensions with the Securities and
Exchange Commission which may be accessed on the World Wide Web at
http://www.sec.gov.
