<PAGE>
As filed with the Securities and Exchange Commission on October 13, 1999
Securities Act File No. 333-74989
Investment Company Act File No. 811-09273
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 3 [X]
Post-Effective Amendment No.
and/or [_]
REGISTRATION STATEMENT UNDER THE [X]
INVESTMENT COMPANY ACT OF 1940
Amendment No. 3 [X]
(check appropriate box or boxes)
----------------
SANDISK PEPS TRUST
(Exact Name of Registrant as Specified in Charter)
----------------
C/O PUGLISI & ASSOCIATES
850 Library Avenue
Newark, Delaware 19715
(Address of Principal Executive Offices) Registrant's Telephone Number,
including Area Code: (302) 738-6680
----------------
Donald J. Puglisi
Puglisi & Associates
850 Library Avenue
Newark, Delaware 19715
(Name and Address of Agent for Service)
----------------
Copies to:
John Larson, Esq. Bruce K. Dallas, Esq. John A. Fore, Esq.
Timothy R. Curry, Esq. Davis Polk & Wardwell Andrew J. Hirsch, Esq.
Brobeck Phleger & 450 Lexington Avenue Wilson Sonsini Goodrich &
Harrison LLP Two New York, New York 10017 Rosati
Embarcadero Place 650 Page Mill Road
2200 Geng Road Palo Alto, CA 94304
Palo Alto, CA 94303
----------------
Approximate date of proposed public offering: As soon as practicable after
the effective date of this Registration Statement.
----------------
If any securities being registered on this form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act
of 1933, as amended, other than securities offered in connection with a
dividend reinvestment plan, check the following box. [_]
----------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+ +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued October 13, 1999
[SANDISK LOGO]
$200,000,000
SANDISK PEPS Trust
$ Premium Exchangeable Participating Shares-PEPS SM
(Subject to Exchange for Common Stock of SanDisk Corporation or Cash)
----------
The Trust
We are a newly created Delaware business trust. We will enter into a prepaid
forward purchase contract with Seagate Technology, Inc., one of the
stockholders of SanDisk Corporation, for the purchase of SanDisk common stock.
We will purchase U.S. Treasury securities to fund quarterly payments on the
PEPS.
The PEPS
Each PEPS represents an undivided beneficial interest in our assets. We will
make payments of $ per PEPS on February 15, May 15, August 15 and November 15
of each year, beginning on February 15, 2000, until November 15, 2002, from
funds we receive from our Treasury securities.
Number of Shares of SanDisk Common Stock or Amount of Cash You Will Receive for
Each PEPS
On November 15, 2002, Seagate Technology will deliver shares of SanDisk common
stock to us and we will distribute to you your proportionate share of such
property. If the average of the closing prices of the SanDisk common stock on
the 20 trading days immediately prior to November 12, 2002, is:
. greater than $ , you will receive 0. of a share per PEPS.
. greater than $ but less than or equal to $ , you will receive shares
worth $ , valued at the average closing price, per PEPS.
. less than or equal to $ , you will receive one share per PEPS.
At its option, Seagate Technology may deliver cash instead of shares of SanDisk
common stock.
Early or Delayed Settlement of PEPS
The forward purchase contract may be accelerated, and our trust may dissolve,
if there is a default under, or insufficient collateral securing, the forward
purchase contract. Seagate Technology will have the right to extend the
maturity of the forward purchase contract from November 15, 2002 to February
15, 2003 and may subsequently accelerate the settlement date if it elects to
finance the cash settlement of the forward purchase contract through a rollover
offering of new securities. Seagate Technology may only engage in a rollover
offering if its unsecured long-term debt has been given at least one rating
equal to or higher than B- by Standard & Poors Rating Services or B3 by Moody's
Investors Service, or their respective equivalents.
Trading of the PEPS
The PEPS have no history of public trading. We have applied to the Nasdaq
National Market to list the PEPS for trading under the symbol "SDKP." The
SanDisk common stock is listed on the Nasdaq National Market under the symbol
"SNDK." On October [ ], 1999, the closing price of the SanDisk common stock on
the Nasdaq National Market was $[ ] per share. SanDisk Corporation is not
affiliated with us. CLOSED-END FUND SHARES FREQUENTLY TRADE AT A DISCOUNT FROM
THE NET ASSET VALUE OF THE FUND. THIS RISK MAY BE GREATER FOR YOU IF YOU
ANTICIPATE SELLING YOUR PEPS SOON AFTER THIS PUBLIC OFFERING.
----------
The prospectus sets forth concisely the information about SanDisk PEPS Trust
that you should know before investing and should be retained for future
reference. Additional information about SanDisk PEPS Trust has been filed with
the Securities and Exchange Commission and is available upon written or oral
request and without charge. See "Where You Can Find More Information" on page
37 of this prospectus.
----------
Investing in the PEPS involves risks. See "Risk Factors" beginning on page 22.
----------
PRICE $ A PEPS
----------
<TABLE>
<CAPTION>
Price to Public Sales Load Proceeds to Trust
--------------- ---------- -----------------
<S> <C> <C> <C>
Per PEPS........................... $ None $
Total.............................. $ None $
</TABLE>
The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal offense.
We have granted the underwriters the right to purchase up to an additional
PEPS to cover over-allotments. Morgan Stanley & Co. Incorporated expects to
deliver the PEPS to purchasers on , 1999.
MORGAN STANLEY DEAN WITTER
October , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary Information Q&A............ 3
Fee Table.......................... 9
The Trust.......................... 9
Use of Proceeds.................... 10
Investment Objective and Policies.. 10
Investment Restrictions............ 21
Risk Factors....................... 22
Description of the PEPS............ 27
Management Arrangements............ 29
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Dividends and Distributions......... 31
Net Asset Value..................... 31
Certain Tax Considerations.......... 32
Underwriter......................... 35
Legal Matters....................... 37
Experts............................. 37
Where You Can Find More
Information........................ 37
Independent Auditors' Report........ F-1
Statement of Assets, Liabilities and
Capital............................ F-2
</TABLE>
In this prospectus, "SanDisk PEPS Trust," the "Trust", "we," "us" and "our"
each refers to SanDisk PEPS Trust.
----------------
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, PEPS only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this prospectus or of
any sale of the PEPS.
----------------
Until , 1999 all dealers that buy, sell or trade PEPS, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
2
<PAGE>
SUMMARY INFORMATION Q&A
This summary includes questions and answers that highlight selected
information from the prospectus to help you understand the PEPS. This summary
may not contain all of the information that you should consider before deciding
to invest in the PEPS. We urge you to read this entire prospectus carefully,
including the "Risk Factors" section. Some of the words we use to describe the
terms of the PEPS have very specific meanings. You should read the "Investment
Objectives and Policies--Forward Contract" to understand their exact meaning.
Except as otherwise noted, all information in this prospectus assumes no
exercise of the underwriter's over-allotment option. The following summary
assumes that on the exchange date described below the antidilution provisions
contained in the forward purchase contract will not have been triggered.
What are the PEPS?
Each PEPS represents an undivided beneficial interest in the U.S. Treasury
securities and the forward purchase contract with Seagate Technology that we
hold. Each PEPS will entitle the holder to receive distributions quarterly and
upon conclusion of the Trust in accordance with our investment objective. We
are offering PEPS at an initial offering price of $ per PEPS, which is
equal to the closing market price of the SanDisk Corporation common stock, par
value $0.001 per share, on the Nasdaq National Market on October , 1999,
through Morgan Stanley & Co. Incorporated. We have given the underwriter an
option to purchase up to an additional PEPS from us at the public offering
price within 30 days of the date of this prospectus in order to cover over-
allotments. See "Underwriter."
Who is the Trust?
We are a newly created Delaware business trust and will be registered as a
non-diversified closed-end management investment company under the Investment
Company Act of 1940. The trust will dissolve on or shortly after November 15,
2002, which we refer to as the exchange date because that is the date on which
your PEPS will be exchanged for SanDisk common stock or cash, unless Seagate
Technology exercises its rights to extend and, if it so chooses, subsequently
accelerates the exchange date. If Seagate Technology exercises these rights,
the exchange date will be such extended or accelerated exchange date. Our trust
may be dissolved earlier than the exchange date if there is a default under, or
insufficient collateral securing, our forward purchase contract with Seagate
Technology. See "The Trust" and "Investment Objective and Policies."
Who is SanDisk Corporation?
SanDisk Corporation designs, manufactures and markets flash memory storage
products that are used in a wide variety of electronic systems. SanDisk has
designed its flash memory storage solutions to address the storage requirements
of emerging applications in the consumer electronics and
communications/industrial markets. Its products are used in a number of rapidly
growing consumer electronics applications, such as digital cameras, personal
digital assistants, MP3 portable music players, digital video recorders and
smart phones, as well as in industrial/communications applications, such as
communications routers and switches, wireless communications, point-of-sale
terminals, transportation systems and medical instrumentation. SanDisk is the
world's leading provider of flash memory card storage products, with
approximately 35% market share in 1998, according to International Data
Corporation. In the quarter ended June 30, 1999, SanDisk shipped over one
million flash memory cards and flash chip sets.
SanDisk's products include removable CompactFlash cards, FlashDisk cards,
MultiMediaCard products, embedded FlashDrives and FlashChipSet products with
storage capacities ranging from 2 megabytes to 440 megabytes. These products
are designed to meet the storage requirements of emerging consumer electronics
and communications/industrial applications, including non-volatility, which is
the ability to retain information with the power supply turned off, small size,
high reliability, low operating power consumption and the capability
3
<PAGE>
to withstand high levels of shock and vibration and extreme temperature
fluctuations. In addition, SanDisk recently announced a collaboration with
Matsushita Electric Industrial Co., Ltd. and Toshiba Corporation under which it
will jointly develop and promote a next generation flash memory card called the
Secure Digital Memory Card.
Can you tell me more about SanDisk Corporation?
For more information about SanDisk and the shares of SanDisk common stock
that you may receive on the exchange date or the date that we earlier dissolve
see the accompanying prospectus of SanDisk Corporation. SanDisk is not
affiliated with us, will not receive any of the proceeds from this offering and
has no obligations with respect to the PEPS. We are providing the SanDisk
prospectus to you as a prospective purchaser of PEPS only as a convenience. The
SanDisk prospectus is not a part of this prospectus, and it is not incorporated
by reference into this prospectus. See "Investment Objective and Policies--
SanDisk."
What are the Trust's investment objectives and policies?
Our investment objective is to pay to you a quarterly cash distribution at
the rate of % of the issue price of the PEPS per annum, subject to certain
adjustments, on each February 15, May 15, August 15 and November 15. On the
exchange date, we will distribute a number of shares of SanDisk common stock,
cash or a combination of cash and SanDisk common stock according to a formula,
which is described below.
What will the Trust hold?
Our assets will consist of a series of zero-coupon U.S. Treasury securities
with face amounts and maturities that approximately correspond to the amounts
and payment dates of the quarterly distributions you will receive on your PEPS
through the exchange date, comprising approximately % of our initial assets,
and a forward purchase contract with Seagate Technology for the purchase of
SanDisk common stock, comprising approximately % of our initial assets. See
"Investment Objective and Policies."
When will I receive my quarterly distributions?
We will make quarterly distributions of $ per PEPS on each February 15,
May 15, August 15 and November 15, or on the next business day if the
distribution date is not a business day, if you are the holder of record as of
the preceding February 1, May 1, August 1 and November 1. You will receive the
first distribution of $ per PEPS on February 15, 2000 if you are the holder
of record on February 1, 2000. See "Dividends and Distributions."
What payment will I receive on the exchange date and can I receive a payment
before the exchange date?
For each PEPS you own, you will receive a number of shares of SanDisk common
stock on the exchange date based on the following formula. If the average of
the closing market prices of the SanDisk common stock on the 20 trading days
immediately prior to the second scheduled trading day prior to the exchange
date, is:
. greater than $ , which we refer to as the threshold appreciation
price, you will receive 0. of a share of SanDisk common stock per
PEPS.
. greater than $ , which we refer to as the initial market price, but
less than or equal to the threshold appreciation price, you will receive
shares of SanDisk common stock worth $ per PEPS.
. less than or equal to the initial market price, you will receive one
share of SanDisk common stock per PEPS.
4
<PAGE>
The forward purchase contract requires Seagate Technology to deliver to us
on the business day before the exchange date the number of shares of SanDisk
common stock or the amount of cash required to exchange all of the PEPS on the
exchange date.
Seagate Technology has secured its obligations under the forward purchase
contract by pledging to The Bank of New York, our collateral agent, the maximum
number of shares of SanDisk common stock required to be delivered under the
forward purchase contract. Seagate Technology may choose to substitute U.S.
government obligations as collateral.
The forward purchase contract may be accelerated to a date prior to the
exchange date if:
. Seagate Technology is declared bankrupt or insolvent or otherwise
defaults under the forward purchase contract; or
. the collateral supporting the forward purchase contract is insufficient.
If the forward purchase contract is accelerated, our trust will dissolve and
our assets, other than the forward purchase contract, will be liquidated. Upon
dissolution, our assets will include proceeds received from the liquidation and
any assets received under the forward purchase contract, less any expenses, and
will, after satisfaction of creditors as permitted by applicable law, be
distributed proportionately to you. See "Investment Objective and Policies--The
Forward Purchase Contract."
Can the exchange date be extended?
Seagate Technology will have the right, on 30 business days' notice to us,
to extend the exchange date from November 15, 2002 to February 15, 2003. If
Seagate Technology elects to extend the exchange date, and does not
subsequently accelerate the exchange date as described in the next paragraph,
then the number of shares of SanDisk common stock or the amount of cash that
you will receive will be based on the average of the closing market prices of
the SanDisk common stock on the 20 trading days immediately prior to the second
scheduled trading day prior to February 15, 2003, and your receipt of shares or
cash will be delayed until following February 15, 2003. Seagate Technology will
have the right to extend the exchange date only if at least one nationally
recognized statistical rating agency has rated Seagate Technology's unsecured
long-term equal to or higher than B- (if by Standard & Poor's Rating Services)
or B3 (if by Moody's Investors Service) or their respective equivalent.
If Seagate Technology elects to extend the exchange date, then Seagate
Technology will have the right to finance an all-cash settlement of the forward
purchase contract through a rollover offering of new securities priced on or
before January 15, 2003, which is the date that is 30 business days prior to
the extended exchange date. In connection with a rollover offering, Seagate
Technology will have the right, by notice to us by 4:00 P.M., New York City
time, on the date of pricing of the rollover offering, to accelerate the
exchange date from February 15, 2003 to the second business day following the
closing date of the rollover offering. If Seagate Technology accelerates the
exchange date in connection with a rollover offering, the amount of cash that
you will receive will be based on the closing market price of the SanDisk
common stock on the date of pricing of the rollover offering, rather than an
average of closing market prices.
If Seagate Technology extends or accelerates the exchange date, you will
receive an additional partial cash distribution on your PEPS on the extended or
accelerated exchange date. The amount of the cash distribution will be equal to
the regular quarterly distribution on the PEPS of $ , prorated to reflect the
number of days by which the exchange date is ultimately extended beyond the
original exchange date.
What protection will I have against dilutive events?
The amounts determined under the formula described above are subject to
adjustment under the antidilution provisions contained in the forward purchase
contract to protect you against some but not all of the dilutive
5
<PAGE>
events that could affect the SanDisk common stock, which may also result in
your receiving securities or property other than SanDisk common stock (which we
refer to as "reference property") instead of or in addition to shares of
SanDisk common stock. In any event, the value of the securities, other property
or cash you receive will be as determined under the formula described below.
You will receive cash for any fractional shares or other interests to which you
may be entitled. See "Investment Objective and Policies."
When will I receive cash instead of shares of SanDisk common stock?
Instead of delivering some or all of the shares of SanDisk common stock
deliverable under the forward purchase contract, Seagate Technology has the
option to deliver cash to us in an amount equal to the value, measured at the
average closing market price, of the shares otherwise deliverable, in which
case you will receive cash rather than shares of SanDisk common stock in
exchange for your PEPS.
Are distributions on the PEPS the equivalent of dividends on the SanDisk common
stock?
No. You will receive distributions on your PEPS at a rate of % of its
issue price per year. SanDisk has not paid any dividends on the SanDisk common
stock since its inception, and does not anticipate paying any cash dividends on
its common stock in the foreseeable future. SanDisk's board of directors has
absolute discretion to decide whether or not to pay dividends in the future.
Quarterly distributions on your PEPS will consist solely of the proceeds from
the treasury securities. Even if SanDisk's board of directors decide to pay a
dividend, you will generally not be entitled to receive the dividend unless the
applicable record date for determining stockholders entitled to receive
dividends occurs after you have received your SanDisk common stock in exchange
for your PEPS. See "Investment Objective and Policies" and "Risk Factors."
Owning a PEPS is not the same as owning a share of SanDisk common stock.
Cash distributions on the PEPS will be treated as a return of your basis in
your interest in the treasury securities we hold and will not result in a
separate income inclusion in addition to the recognition of original issue
discount on your interest in the treasury securities we hold. Your opportunity
to benefit from any appreciation in the price of SanDisk common stock by
investing in PEPS is less than you would have if you invested directly in
SanDisk common stock, because the number of shares of SanDisk common stock that
you will receive in exchange for your PEPS may decline by up to % if the
price of the SanDisk common stock rises.
What about federal income taxes?
We will be treated as a grantor trust for United States federal income tax
purposes. You will be treated for federal income tax purposes as the owner of
your proportionate share of the U.S. Treasury securities and the forward
purchase contract. Any income, including original issue discount, we realize
that is attributable to the PEPS you own will generally be treated as your
income.
The U.S. Treasury securities we hold will be treated for federal income tax
purposes as having "original issue discount," which will accrue over the term
of the U.S. Treasury securities. Whether you are on the cash or accrual method
of tax accounting, you must recognize currently as income original issue
discount on the U.S. Treasury securities as it accrues. However, each quarterly
cash distribution to you will be treated as a return of your basis in the
treasury securities and therefore will not result in a separate or additional
income inclusion. We anticipate that the amount of original issue discount
accrued by you will be substantially less than the amount of cash distributions
to you and expect that the amount of original issue discount you recognize will
decrease during the life of the Trust.
Under existing law, you will not recognize income, gain or loss upon the
execution of the forward purchase contract and you generally should not
recognize income on the forward purchase contract before its settlement. Upon
settlement of the forward purchase contract, you will recognize taxable gain or
loss if cash is delivered,
6
<PAGE>
but you should not recognize gain or loss if SanDisk common stock or other
securities are delivered. Assuming this treatment is respected, you will have a
basis in the SanDisk common stock or other securities received equal to the
proportionate share of your adjusted tax basis in the forward purchase contract
allocable to the reference property. Accordingly, you should consult your tax
advisers with respect to the tax consequences of the to your proportionate
share of the adjusted basis in the forward purchase contract allocable to that
property.
The law regarding the treatment of the PEPS for United States federal income
tax purposes is subject to some uncertainty. Although you should not recognize
taxable income with respect to your proportionate share of the forward purchase
contract prior to the settlement of the forward purchase contract, there are
alternative characterizations that could require you to recognize more income
than would be included under the analysis set forth above. Accordingly, you
should consult your tax advisers with respect to the tax consequences of the
purchase, ownership and disposition of the PEPS in light of your particular
circumstances, including the tax risks associated with possible alternative
characterizations of the PEPS. See "Certain Tax Considerations."
Will the PEPS be listed on a stock exchange?
We have applied to the Nasdaq National Market to list the PEPS for trading
under the symbol "SDKP." The SanDisk common stock is listed on the Nasdaq
National Market under the symbol "SNDK."
What are the risks associated with my investments?
We will not actively manage our portfolio. We have adopted a fundamental
policy that we may not dispose of the forward purchase contract during our term
and that, unless we dissolve earlier than the exchange date, we will not
dispose of the U.S. Treasury securities before their maturity dates. We will
continue to hold the forward purchase contract despite any significant decline
in the value of the SanDisk common stock or adverse changes in the financial
condition of SanDisk.
We are classified as a "non-diversified," closed-end, management investment
company under the Investment Company Act. Consequently, we are not limited by
the Investment Company Act in the proportion of our assets that may be invested
in the securities of a single issuer. Since the only assets we hold will be the
U.S. Treasury securities and the forward purchase contract, we may be subject
to greater risk than would be the case for an investment company with more
diversified investments.
You will bear the entire risk of declines in the value of the SanDisk common
stock between the date of this offering and the exchange date. The number of
shares of SanDisk common stock that you will receive when you exchange your
PEPS is not fixed, but depends on the market value of the SanDisk common stock
shortly before the exchange date. If the price of the SanDisk common stock
decreases, then the value of the shares of SanDisk common stock or cash that
you will receive in exchange for your PEPS will be less than what you paid to
purchase PEPS and you will lose money.
An investment in PEPS offers you less of an opportunity to realize any
appreciation in the value of SanDisk common stock over its current value than
does a direct investment in SanDisk common stock. The amount you receive when
you exchange your PEPS will be greater than the issue price you paid to
purchase your PEPS only if the value of the SanDisk common stock has
appreciated by more than % from the time of the offering of the PEPS. In
addition, even if it does appreciate by more than %, you are entitled to
receive only % of the additional appreciation.
The trading prices of the PEPS in the secondary market will be affected by
the trading prices of the SanDisk common stock. It is impossible to predict
whether the price of SanDisk common stock will rise or fall. Trading prices of
SanDisk common stock and the PEPS will be influenced by SanDisk's operating
results and future prospects and by economic, financial and other factors
beyond our control. SanDisk is vulnerable to significant fluctuations in its
operating results due to unpredictable demand for its products, adverse changes
in product and
7
<PAGE>
customer mix, difficulty in estimating its silicon wafer needs, growing
expenses, variability of average selling prices, gross margins and license fees
and royalties, among other factors. SanDisk must transition to new processes
and products in order to remain competitive, but faces production and market
acceptance risks in doing so. SanDisk is entirely dependent on third party
foundaries for the silicon wafers used in all of its products. The success of
SanDisk's business depends on emerging markets and new products and SanDisk may
not be able to maintain its market share if it cannot increase its production
volumes accordingly. SanDisk's international operations also make it vulnerable
to changing conditions and currency fluctuations. See "Risk Factors" in the
accompanying prospectus of SanDisk.
A bankruptcy of Seagate Technology or the extension or acceleration of the
exchange date, each as described in this prospectus, could adversely affect the
timing of the exchange of the PEPS for the SanDisk common stock and the amount
you will receive. In addition, if Seagate Technology exercises its right to
accelerate the maturity of the forward purchase contract in connection with a
rollover offering, the amount of cash you will receive for your PEPS will be
based on a single closing market price of the SanDisk common stock, rather than
an average of closing market prices, and you will only receive notice of the
date on which the single closing market price will be determined on the
determination date.
For a more complete description of these and other risk factors that should
be considered prior to investing in the PEPS, see "Risk Factors" beginning on
p. 22.
How will the Trust be managed?
We will be internally managed by our trustees and we will not have an
investment adviser. Our portfolio will not be actively managed. The trustees
will oversee our administration and The Bank of New York will act as
administrator to carry out the day-to-day administration of our trust. The Bank
of New York will also act as custodian for our assets, as paying agent,
registrar and transfer agent for the PEPS and as collateral agent for Seagate
Technology's pledge of SanDisk common stock to us. The trustees have delegated
most of their operational duties to the administrator. The Bank of New York has
no other affiliation with us. For its services as collateral agent,
administrator, custodian and paying agent, registrar and transfer agent,
Seagate Technology will pay The Bank of New York at the closing of the offering
of the PEPS a one-time, up-front fee. See "Management Arrangements."
Will I have voting rights?
You will not have the right to vote any shares of SanDisk common stock
unless and until they are delivered to you in exchange for your PEPS. You will
have the right to vote on matters that affect the trust. See "Description of
the PEPS."
8
<PAGE>
FEE TABLE
Regulations of the SEC require the presentation of trust expenses in the
following format to help you understand the various costs you will bear in our
trust, either directly or indirectly. Because we will not have any ongoing
fees or expenses, you will not have any direct or indirect expenses. We will
be internally managed, so we will not pay a separate investment advisory fee.
Seagate Technology will pay the underwriter a sales load of $ per PEPS
(or %). Seagate Technology will also pay our organization costs in the amount
of $ , the costs associated with the initial registration and offering of the
PEPS estimated to be approximately $ , and approximately $ for anticipated
ongoing expenses over our term. Any unanticipated expenses will be paid by
Morgan Stanley & Co. Incorporated, which Seagate Technology will reimburse.
See "Management Arrangements--Estimated Expenses."
<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load (as a percentage of offering price)................. 0%
Automatic Dividend Reinvestment Plan Fees.............................. None
Annual Expenses (as a percentage of net assets)
Management Fees........................................................ 0%
Other Expenses (after payment of costs and expenses by Seagate
Technology, as described above)*...................................... 0%
----
Total Annual Expenses................................................ 0%
====
</TABLE>
- --------
* If we did not have these arrangements, our "Other Expenses" and "Total
Annual Expenses" would be approximately % of our net assets.
SEC regulations also require that closed-end investment companies present
an illustration of cumulative expenses (both direct and indirect) that you
would bear. Our term is three years; we have therefore not provided such
information on a 5- or 10-year basis.
<TABLE>
<CAPTION>
Example 1 Year 3 Years
------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) no annual expenses and (2) a 5%
annual return throughout the periods:................... $0.00 $0.00
</TABLE>
According to SEC regulations, our example assumes reinvestment of all
dividends and other distributions and uses a 5% annual rate of return, as the
SEC mandates. You should note that the assumption of a 5% annual return does
not accurately reflect the financial terms of the trust. In addition, we do
not permit the reinvestment of distributions.
THE TRUST
We are a newly created Delaware business trust and will be registering as a
non-diversified, closed-end management investment company under the Investment
Company Act of 1940, as amended. We were created on February 24, 1999 pursuant
to a Trust Agreement dated as of the same date and as amended and restated as
of August 17, 1999, and as subsequently amended and restated as of October ,
1999. The Trust will dissolve on or shortly after the exchange date, or
earlier if the forward purchase contract that we hold is accelerated as
described in this prospectus. We will be treated as a grantor trust for United
States Federal income tax purposes. See "Certain Tax Considerations." Our
principal office is located at 850 Library Avenue, Suite 204, Newark, Delaware
19715 and our telephone number is (302) 738-6680.
9
<PAGE>
USE OF PROCEEDS
We will receive approximately $ , or approximately $ if the underwriter
exercises its over-allotment option in full, from the offering of PEPS. We
will use the proceeds immediately to purchase a series of zero-coupon U.S.
Treasury securities with face amounts and maturities that approximately
correspond to the quarterly distributions to be made to you and to pay the
purchase price payable under the forward purchase contract to Seagate
Technology at the same time as the closing of this offering of PEPS.
INVESTMENT OBJECTIVE AND POLICIES
General
We will purchase and hold the treasury securities and the forward purchase
contract. Our investment objective is to pay to you the quarterly distribution
of $ per PEPS and to deliver to you on or shortly after the exchange date
the exchange amount of each type of reference property, or cash, in each case
as described below.
Our assets will consist primarily of the treasury securities and the
forward purchase contract. We may also make temporary investments. See "--
Temporary Investments." We have adopted a fundamental policy to invest at
least 65% of the portfolio's initial total assets in the forward purchase
contract. The forward purchase contract will comprise approximately % of our
initial assets. We have also adopted a fundamental policy that the forward
purchase contract may not be disposed of during our term and that, unless we
dissolve earlier than the exchange date, we will not dispose of the treasury
securities before their maturity dates. We cannot change these and other
fundamental policies without the vote of 100% of the outstanding PEPS. See
"Investment Restrictions."
The Forward Purchase Contract
General
The forward purchase contract requires Seagate Technology to deliver to us,
on the business day before the exchange date, that number or amount of each
type of reference property equal to the exchange amount determined in the
manner described below.
We use the following terms to describe the forward purchase contract and
the exchange provisions of the PEPS:
. ""exchange date" means November 15, 2002, except that if Seagate
Technology exercises its rights to extend the exchange date to February
15, 2003 or accelerate the exchange date as described under "--Extension
and Acceleration of the Exchange Date at the Option of Seagate
Technology" and "--Rollover Offering" below, the "exchange date" will be
the extended or accelerated exchange date.
. ""initial market price" means $ , which is the closing price per share
of the SanDisk common stock on the date we price the offering of PEPS
for sale to the public.
. ""reference property" initially means SanDisk common stock which, under
the circumstances described under "--Reference Property Adjustments,"
may change or be adjusted at any time until the business day before the
exchange date to add or substitute cash, securities and/or other
property. "Reference property per PEPS" means the number or amount of
each type of reference property relating to one PEPS, which is initially
one share of SanDisk common stock, subject to adjustment in the manner
described under "--Reference Property Adjustments." The reference
property that we are entitled to receive under the forward purchase
contract, and therefore that you will receive on or shortly after any
exchange date in exchange for your PEPS, may include a combination of
SanDisk common stock, other securities of SanDisk including rights or
warrants, cash, securities of another company and/or other property,
depending on the cause and nature of the change or adjustment. Reference
property does not include the treasury securities we hold to fund
quarterly payments on the PEPS.
10
<PAGE>
. ""reference property value per PEPS" means the aggregate then-current
value of the reference property per PEPS on the exchange date or, if
Seagate Technology elects to finance the cash settlement of the forward
purchase contract with the proceeds of a rollover offering, on the date
of pricing of the rollover offering.
. ""reference security" means any security, as defined in Section 2(1) of
the Securities Act of 1933, as amended, that is part of the reference
property, including the SanDisk common stock.
. ""then-current value" means, for any item of reference property as of
any date:
(a) if the item consists of cash, the amount of cash;
(b) if the item consists of a reference security, the average closing
market price per unit of the reference security on the 20 trading
days immediately prior to, but not including, the second trading
day preceding that date. If Seagate Technology elects to finance
the cash settlement of the forward purchase contract with the
proceeds of a rollover offering, however, then the then-current
value of a reference security will be determined in a different
matter, as described below under "--Rollover Offering;" and
(c) if the item consists of property other than cash or reference
securities, the fair market value of that property as of 10:00
A.M., New York City time, on the third business day preceding that
date. The fair market value will be determined by a nationally
recognized independent investment banking firm we retain for this
purpose.
. ""trading day" means, in relation to any reference security, a day on
which the reference security (A) is not suspended from trading on any
national or regional securities exchange or association or over-the-
counter market at the close of business and (B) has traded at least once
on the national or regional securities exchange or association or over-
the-counter market that is the primary market for the trading of that
reference security.
. ""threshold appreciation price" means $ , which represents a %
appreciation over the initial market price.
. ""exchange amount" means:
(a) if the reference property value per PEPS is greater than the
threshold appreciation price, % of the reference property per
PEPS;
(b) if the reference property value per PEPS is greater than the
initial price, but less than or equal to the threshold appreciation
price, a percentage of the reference property per PEPS, allocated
as proportionately as practicable, so that the aggregate then-
current value of your distribution on the exchange date equals $
per PEPS; and
(c) if the reference property value per PEPS is less than or equal to
the initial price, 100% of the reference property per PEPS.
Purchase Price
The purchase price under the forward purchase contract is equal to $ , or
$ if the underwriter exercises its over-allotment option in full. We will
pay the purchase price to Seagate Technology on or about October , 1999 and
we are not required to pay Seagate Technology anything other than the purchase
price. The purchase price was arrived at by arm's length negotiations between
ourselves and Seagate Technology, taking into consideration various factors
including the price, expected dividend level and volatility of the SanDisk
common stock, current interest rates, the term of the forward purchase
contract, current market conditions generally, the collateral pledged by
Seagate Technology, the value of other similar instruments and the costs and
anticipated proceeds of the offering.
11
<PAGE>
Settlement
The forward purchase contract requires Seagate Technology to deliver to us,
on the business day before the exchange date, that number or amount of each
type of reference property required to exchange all of the PEPS on the
exchange date. Seagate Technology has the option, upon twenty-six business
days, notice to us, to deliver cash instead of some or all of this reference
property. We refer to this option as the "cash settlement option." If Seagate
Technology elects the cash settlement option, it will deliver to us, on the
business day before the exchange date, cash in an amount equal to the
aggregate then-current value of the reference property Seagate Technology
would otherwise have delivered on the exchange date. If Seagate Technology
elects the cash settlement option, you will receive a proportionate share of
the cash delivered in lieu of reference property, or a combination of cash and
reference property, on or shortly after the exchange date.
Except as described below in connection with a rollover offering, on or
prior to the twenty-sixth business day before the originally scheduled
exchange date or, if Seagate Technology elects to extend the exchange date,
the extended exchange date, we will notify The Depository Trust Company, if
the PEPS are then held in book-entry form, and issue a press release to
Reuters Economic Services and Bloomberg Business News, stating whether you
will receive reference property or cash, or a combination of reference
property and cash, in exchange for your PEPS. At the time the press release is
issued, we will not have determined the reference property value per PEPS.
However, if Seagate Technology elects to finance the cash settlement of the
forward purchase contract with the proceeds of a rollover offering, the press
release will only provide notice of this fact, and of the fact that you will
receive cash in exchange for your PEPS, on the date of pricing of the rollover
offering. If Seagate Technology elects to deliver reference property other
than cash, you will be responsible for the payment of any and all brokerage
costs upon your sale of the reference property.
As an illustration only, the following table shows the number of shares of
SanDisk common stock that you would receive for each PEPS at various reference
property values per PEPS. The table assumes that there will be no adjustments
to the reference property so that on the exchange date the reference property
per PEPS will consist of one share of SanDisk common stock. There can be no
assurance that the reference property value per PEPS will be within the range
set forth below. Given the initial price of $ and the threshold appreciation
price of $ , you would receive on or shortly after the exchange date the
following number of shares of SanDisk common stock or, if Seagate Technology
elects the cash settlement option, the following amount of cash per PEPS:
<TABLE>
<CAPTION>
Reference Property Number of Shares of SanDisk
Value per PEPS common stock Amount of Cash
------------------ --------------------------- OR --------------
<S> <C> <C> <C>
$ $
$ $
$ $
$ $
$ $
$ $
</TABLE>
The table above illustrates potential outcomes on the exchange date with
respect to your investment in PEPS. If the reference property value per PEPS
is greater than $ (the threshold appreciation price), you will receive in
exchange for each PEPS % of the reference property per PEPS, resulting in
your receiving only % of the appreciation in value of the reference property
above $ . If the reference property value per PEPS is greater than $ (the
initial price) but less than or equal to $ (the threshold appreciation
price), you will receive in exchange for each PEPS only reference property
with an aggregate then-current value equal to $ , resulting in your receiving
none of the appreciation in value of the reference property. If the reference
property value per PEPS is less than or equal to $ (the initial price), you
will receive in exchange for each PEPS 100% of the reference property per
PEPS, regardless of the value of the reference property, resulting in your
realizing the entire loss on the decline in value of the reference property.
12
<PAGE>
Extension and Acceleration of the Exchange Date at the Option of Seagate
Technology
Seagate Technology will have the right under the contract, on 30 business
days' notice to us, to extend the exchange date to February 15, 2003. If
Seagate Technology elects to extend the exchange date, Seagate Technology will
then have the right in connection with a rollover offering, by notice to us by
4:00 P.M., New York City time, on the date of pricing of the rollover
offering, to accelerate the exchange date from February 15, 2003 to the second
business day following the closing date of the rollover offering. Accordingly,
a rollover offering must be priced not earlier than November 15, 2002 nor
later than February 9, 2003. Seagate Technology will have the right to extend
the exchange date only if at least one nationally recognized statistical
rating agency has rated Seagate Technology's unsecured long-term debt equal to
or higher than B- (if by Standard & Poor's Rating Services) or B3 (if by
Moody's Investors Service) or their respective equivalent.
If Seagate Technology elects to extend the exchange date, then the exchange
amount will be calculated as of the extended exchange date. If Seagate
Technology elects to extend and then accelerate the exchange date, then the
exchange amount will be calculated as set forth below under "--Rollover
Offering." In either case, your receipt of shares or cash (or a combination
thereof) will be delayed until following the extended or accelerated exchange
date, and you will receive an additional partial cash distribution on your
PEPS on the extended or accelerated exchange date.
The amount of the additional distribution on the PEPS will be equal to the
regular quarterly distribution on the PEPS of $ , prorated to reflect the
number of days by which the exchange date is ultimately extended beyond
November 15, 2002. For example, if the exchange date were extended to February
15, 2003 and then accelerated to January 15, 2003 (i.e., two-thirds of the
time between November 15, 2002, the originally scheduled exchange date, and
February 15, 2003), the additional distribution would be equal to $ , or two-
thirds of the regular quarterly distribution. If Seagate Technology elects to
extend the exchange date, Seagate Technology will be required to deliver to
the collateral agent additional treasury securities sufficient to fund the
additional distribution.
If Seagate Technology has elected to extend the exchange date, on or prior
to the twenty-sixth business day before the originally scheduled exchange
date, we will notify the Depositary, if the PEPS are then held in book-entry
form, and issue a press release to Reuters Economic Service and Bloomberg
Business News stating this fact.
Rollover Offering
If Seagate Technology elects to extend the exchange date, then Seagate
Technology will have the right to finance an all-cash settlement of the
forward purchase contract in whole or in part with the proceeds of a rollover
offering, provided that if this cash payment is financed only in part with the
proceeds of a rollover offering, not less than half of the payment will be so
financed. A "rollover offering" is an offering of securities in which all or a
portion of the proceeds are ultimately received by Seagate Technology. The
securities offered in any rollover offering may be substantially similar to
the PEPS.
If Seagate Technology elects to finance the cash settlement of the forward
purchase contract in whole or in part with the proceeds of a rollover
offering, then the "reference property value per PEPS" will equal the then-
current value of the reference property per PEPS on the date of pricing of the
rollover offering and, if the reference property includes any reference
security, the then-current value of the reference security for the purpose of
determining the reference property value per PEPS will be the closing market
price per unit of the reference security on the date of pricing of the
rollover offering.
Reference Property Adjustments
The amount and type of reference property that we are entitled to receive
under the forward purchase contract, and therefore that you will receive on or
shortly after the exchange date, is subject to adjustment under
13
<PAGE>
the antidilution provisions in the forward purchase contract, which are
designed to protect Seagate Technology and you against the dilutive or
concentrative effects on any reference security of the following corporate
events, which we refer to as a "dilution event".
(1) If the "issuer" of any reference security subdivides or splits the
outstanding units of the reference security into a greater number of units,
combines the outstanding units of the reference security into a smaller
number of units or reclassifies the outstanding units of the reference
security into units of another of the issuer's securities, then the
reference property per PEPS will be adjusted to include the number of units
of the reference security or other security of the issuer that a holder of
the reference security would have been entitled to receive as a result of
the dilution event had the holder held, immediately prior to such dilution
event, the number of units of the reference security that were then part of
the reference property per PEPS. Every adjustment of the type described in
this paragraph (1) will be made successively.
(2) If the issuer grants rights or warrants to all holders of any
reference security entitling them to subscribe for or purchase any of its
securities or other property for a period ending before the fifteenth
calendar day following the exchange date (other than rights to purchase
reference security units pursuant to a plan for the reinvestment of
dividends or interest), then the reference property per PEPS will be
adjusted to include cash as follows. The amount of cash will equal the fair
market value of each right or warrant on the fifth business day after the
date the holders of the reference security receive their rights or warrants
(the "receipt date") multiplied by the product of (A) the number of rights
or warrants issued for each unit of the reference security and (B) the
number of units of the reference security that are part of the reference
property per PEPS immediately before the issuance takes place, without any
interest. To determine this fair market value, we will select the bid of
the recognized securities dealer in The City of New York that provides the
highest net bid as of approximately 10:00 A.M. (New York City time) on the
fifth business day after the receipt date, for settlement three business
days later, from among the bids of three such dealers (or less than three
if three such dealers are not providing bids) for the purchase by that
dealer of the number (the "aggregate number") of rights or warrants that a
holder of the reference security would have received if the holder held, on
the record date for determination of holders entitled to receive the rights
or warrants (the "record date"), a number of units of the reference
security equal to the product of (1) the aggregate number of outstanding
PEPS as of the record date and (2) the number of units of the reference
security that were part of the reference property per PEPS on the record
date. The fair market value of each right or warrant will be the quotient
of (x) such highest net bid divided by (y) the aggregate number. Each
adjustment of the type described in this paragraph (2) will become
effective on the fifth business day after the receipt date. If for any
reason we are unable to obtain the required bid on the fifth business day
after the receipt date, we will attempt to obtain bids at successive
intervals of three months thereafter and on the third business day before
the exchange date until we obtain the required bid or, if the PEPS are to
be exchanged on an earlier date, until the third business day before that
date. From the date of issuance of rights or warrants until the required
bid is obtained or those efforts end on the third business day prior to the
exchange date or any such earlier date, the reference property per PEPS
will include the number of those rights or warrants issued for each unit of
the reference security multiplied by the number of units of the reference
security that are part of the reference property per PEPS immediately
before the issuance of those rights or warrants, and those rights or
warrants constituting part of the reference property per PEPS will be
deemed for all purposes to have a fair market value of zero.
(3) If the issuer pays a dividend, makes a distribution to all holders
of any reference security of cash, securities or other property, issues
rights or warrants to subscribe for or purchase any of its securities or
other property (each, a "distributed asset"), then the reference property
per PEPS will be adjusted to include the number and amount of each type of
distributed asset received for each unit of the reference security
multiplied by the number of units of the reference security that are part
of the reference property per PEPS immediately before the dividend,
distribution or issuance. However, no adjustment of the type described in
this paragraph (3) shall be made for (a) any cash dividend on any reference
security consisting of capital stock, which dividend is required by the
terms of such security or is not an extraordinary cash dividend (as defined
below), (b) any payment of interest on any reference security consisting of
an evidence of
14
<PAGE>
indebtedness, (c) any dividend or distribution referred to in clause (1) or
(2) above and (d) distributed in connection with a reorganization event.
An "extraordinary cash dividend" means, with respect to any reference
security consisting of capital stock, any cash dividend on the reference
security that, together with all cash dividends on the reference security
occurring in the preceding 12-month period (or, if the reference security was
not outstanding at the commencement of that 12-month period, occurring in the
shorter period during which the reference security was outstanding) exceeds on
a per share basis 10% of the then-current value of the reference security on
the date the dividend was declared. However, the amount of cash dividends paid
on a per share basis will be appropriately adjusted to reflect the occurrence
during that 12-month period (or the shorter period during which the reference
security was outstanding) of any dilution event with respect to such reference
security.
If any of the following events, which we refer to as a "reorganization
event," shall occur:
(A) any consolidation, merger or conversion of an issuer with or into
another entity (other than a consolidation, merger or conversion in which
the issuer is the continuing corporation and in which the units of each
reference security of that issuer outstanding before the consolidation,
merger, or conversion are not exchanged for cash, securities or other
property of the issuer or another entity),
(B) any sale, transfer, lease or conveyance to another corporation of
the property of an issuer as an entirety or substantially as an entirety,
(C) any statutory exchange of securities of an issuer with another
entity (other than in connection with a merger or acquisition), or
(D) any liquidation, dissolution, winding up or bankruptcy of an issuer,
then the reference property per PEPS will be adjusted to include, in lieu of
the number of units of each reference security of the issuer that were part of
the reference property per PEPS immediately before the effective date of the
reorganization event, cash in an amount equal to the then-current value, as of
the exchange date, of the amount or number of any cash, securities and/or
other property owned or received in the reorganization event for each unit of
the reference security multiplied by the number of units of the reference
security that were part of the reference property per PEPS immediately before
the effective date of the reorganization event. However, if any marketable
securities are received by holders of any reference security in a
reorganization event, Seagate Technology may, at its option, elect to include
those marketable securities in the reference property per PEPS in lieu of
cash. The number of units of those marketable securities included in the
reference property per PEPS will be equal to the number owned or received in
the reorganization event for each unit of the reference security multiplied by
the number of units of the reference security that were part of the reference
property per PEPS immediately before the effective date of the reorganization
event, and those marketable securities will be included in the reference
property per PEPS in lieu of an amount of cash equal to the then-current
value, as of the exchange date, of the marketable securities so included.
"Marketable securities" means shares of common equity securities listed on a
U.S. national securities exchange or any foreign securities exchange or quoted
on the National Market System of the Nasdaq Stock Market.
If a reorganization event permits holders of a reference security to elect
to own or receive either marketable securities or cash and/or other securities
or property, or a combination, for purposes of determining the reference
property adjustments, we will assume that each holder of a reference security
has elected to own or receive the maximum possible amount of marketable
securities. You are responsible for the payment of any and all brokerage and
other transaction costs upon any sale of any marketable securities received by
you.
Within ten business days after the event that requires a reference property
adjustment (or as soon as practicable after we become aware of the event), we
are required to provide to you written notice of the event and a statement in
reasonable detail setting forth the amount or number of each type of reference
property per PEPS, as adjusted.
15
<PAGE>
We will not adjust the reference property per PEPS for other events,
including any offerings by SanDisk of SanDisk common stock for cash or in
connection with acquisitions. Likewise, we will not adjust the reference
property per PEPS for any sales of SanDisk common stock by Seagate Technology.
Collateral Arrangements; Acceleration
We have entered into a Security and Pledge Agreement with Seagate
Technology and The Bank of New York, as collateral agent, pursuant to which
Seagate Technology will secure its obligations under the forward purchase
contract by pledging to us the maximum number or amount of each type of
reference property that Seagate Technology may be required to deliver under
the forward purchase contract (initially shares of SanDisk common stock).
Unless Seagate Technology is in default of its obligations under the forward
purchase contract or the Security and Pledge Agreement, it will be permitted
to substitute short-term, direct obligations of the U.S. government for the
pledged reference property. Any U.S. government obligations pledged as
substitute collateral will be required to have an aggregate market value at
the time of substitution and at daily mark-to-market valuations thereafter of
not less than 150% of the aggregate then-current value of each type of
reference property that would otherwise be pledged. From and after any
insufficiency determination (as defined below), Seagate Technology must cure
the deficiency by 4:00 P.M., New York City time, on the fifth business day
following the day on which notice thereof is given.
The collateral agent will promptly pay over to Seagate Technology any
dividends, interest, principal or other payments it receives on any collateral
pledged by Seagate Technology, including any substitute collateral, unless
Seagate Technology is in default of its obligations under the forward purchase
contract or the Security and Pledge Agreement or unless the payment would
cause the collateral to become insufficient. Seagate Technology will have the
right to vote any pledged units of any reference security for so long as those
units are owned by it, unless Seagate Technology is in default of its
obligations under the forward purchase contract or the Security and Pledge
Agreement.
If the collateral agent makes an "insufficiency determination" that the
U.S. government obligations pledged as substitute collateral fail to meet the
valuation requirements described above or that Seagate Technology has failed
to pledge additional collateral that may be required as a result of an
adjustment to the reference property, and the failure is not cured by 4:00
P.M., New York City time, on the fifth business day following the day on which
the collateral agent gives notice of the insufficiency determination, then the
collateral agent will, if practicable, sell the U.S. government obligations
and use the proceeds to purchase each type of reference property in the
numbers or amounts necessary to cause the collateral pledged to meet the
requirements of the Security and Pledge Agreement. The collateral agent will
discontinue these sales and purchases if at any time a collateral event of
default has occurred and is continuing.
A "collateral event of default" means, at any time:
(A) if no U.S. government obligations are pledged as substitute
collateral, the collateral pledged does not consist of at least the maximum
number or amount of each type of reference property that Seagate Technology
may be required to deliver under the forward purchase contract (as adjusted
as a result of any dilution event or reorganization event); and
(B) if any U.S. government obligations are pledged as substitute
collateral, the U.S. government obligations do not have a market value at
that time of at least 105% of the difference between (x) the aggregate
then-current value of the maximum number or amount of each type of
reference property that Seagate Technology may be required to deliver under
the forward purchase contract (as adjusted as a result of any dilution
event or reorganization event) and (y) the aggregate then-current value of
the number or amount of each type of reference property then pledged as
collateral.
A "default," which means a collateral event of default or the bankruptcy or
insolvency of Seagate Technology, will automatically accelerate Seagate
Technology's obligations under the forward purchase contract. If there is a
default, Seagate Technology will be required to deliver a number or amount of
each type of reference
16
<PAGE>
property, allocated as proportionately as practicable, with an aggregate then-
current value as of the acceleration date equal to the aggregate acceleration
value, and Seagate Technology will not have the option to deliver cash in lieu
of reference property. The "aggregate acceleration value" will be based on an
"acceleration value" derived from quotations we receive from independent
dealers. Each independent dealer will quote an amount that it would require to
be paid to enter into an agreement with us that would have the effect of
preserving our rights to receive the number or amount of each type of
reference property under a portion of the forward purchase contract that
corresponds to 1,000 PEPS. We will request quotations from four nationally
recognized independent dealers on or as soon as reasonably practicable
following the acceleration date. If we receive four quotations, the
acceleration value will be the arithmetic mean of the two quotations remaining
after disregarding the highest and the lowest quotations. If we receive only
two or three quotations, the acceleration value will be the arithmetic mean of
all of the quotations. If we receive only one quotation, the acceleration
value will be that quotation. The aggregate acceleration value will be
computed by dividing the acceleration value by 1,000 and multiplying the
quotient by the number of outstanding PEPS. If no quotations are provided, the
aggregate acceleration value will be the aggregate then-current value on the
acceleration date of the aggregate number or amount of each type of reference
property that would be required to be delivered if the exchange date were the
acceleration date. If there is a default, the number or amount of each type of
reference property delivered to you will be based solely on the aggregate
acceleration value.
If there is a default, the collateral agent will distribute to us, and we
will distribute to you proportionately, reference property then pledged, or
cash generated from the liquidation of the U.S. government obligations then
pledged, or a combination, so that the aggregate then-current value of that
reference property or cash distributed equals the aggregate acceleration
value. In addition, if by the exchange date any substitute collateral has not
been replaced by sufficient reference property, the collateral agent will
distribute to us, and we will, after satisfaction of creditors as permitted by
applicable law, distribute to you proportionately, the reference property then
pledged plus cash generated from the liquidation of U.S. government
obligations then pledged with an aggregate then-current value equal to the
aggregate then-current value of the reference property required to be
delivered by Seagate Technology under the forward purchase contract. See "--
Trust Dissolution."
Fractional Interests Under the Forward Purchase Contract
Seagate Technology will not be required to deliver any fractional units of
any reference security. Instead of any fractional unit that would otherwise be
delivered to fulfill Seagate Technology's obligations under the forward
purchase contract, we will receive an amount in cash equal to the then-current
value of that fractional unit as of the exchange date.
To the extent it is practical to do so, Seagate Technology will deliver
fractional interests of any reference property other than cash or a reference
security. To the extent that it is not practical to do so, in lieu of
delivering any fractional interest that would otherwise be delivered, the
Trust will receive an amount in cash equal to the then-current value of that
fractional unit as of the exchange date.
Seagate Technology
Specific information about Seagate Technology's holdings of SanDisk common
stock and other relationships with SanDisk is included or incorporated by
reference in the accompanying SanDisk prospectus.
SanDisk Corporation
SanDisk Corporation designs, manufactures and markets flash memory storage
products that are used in a wide variety of electronic systems. SanDisk has
designed its flash memory storage solutions to address the storage
requirements of emerging applications in the consumer electronics and
communications/industrial markets. Its products are used in a number of
rapidly growing consumer electronics applications, such as digital cameras,
personal digital assistants, MP3 portable music players, digital video
recorders and smart phones, as well as in communications and industrial
applications, such as communications routers and switches, wireless
communications, point-of-sale terminals, transportation systems and medical
instrumentation. SanDisk is the
17
<PAGE>
world's leading provider of flash memory storage card products, with
approximately 35% market share in 1998, according to International Data
Corporation. In the quarter ended June 30, 1999, SanDisk shipped over one
million flash memory cards and flash chip sets.
SanDisk's products include removable CompactFlash cards, FlashDisk cards,
MultiMediaCard products, embedded FlashDrives and FlashChipSet products with
storage capacities ranging from 2 megabytes to 440 megabytes. These products
are designed to meet the storage requirements of emerging consumer electronics
and communications/industrial applications, including non-volatility, which is
the ability to retain information with the power supply turned off, small
size, high reliability, low operating power consumption and the capability to
withstand high levels of shock and vibration and extreme temperature
fluctuations. In addition, SanDisk recently announced a collaboration with
Matsushita Electric Industrial Co., Ltd. and Toshiba Corporation under which
it will jointly develop and promote a next generation flash memory card called
the Secure Digital Memory Card.
The SanDisk common stock is traded on the Nasdaq National Market under the
symbol "SNDK." The following table sets forth, for the periods indicated, the
reported high and low last sale prices of the shares of SanDisk common stock
on the Nasdaq National Market (adjusted for any stock splits or stock
dividends).
<TABLE>
<CAPTION>
Year Ended December 31, 1997: High Low
----------------------------- ---- ----
<S> <C> <C>
Quarter
First................................................. $13 1/4 $ 8 7/8
Second................................................ 14 1/2 9 3/4
Third................................................. 34 1/8 14 5/8
Fourth................................................ 39 5/8 18 7/16
<CAPTION>
Year Ended December 31, 1998: High Low
----------------------------- ---- ----
<S> <C> <C>
Quarter
First................................................. $25 7/16 $17 3/16
Second................................................ 24 7/8 13 3/8
Third................................................. 14 5/8 7 1/2
Fourth................................................ 14 7/16 5 7/8
<CAPTION>
Year Ended December 31, 1999: High Low
----------------------------- ---- ----
<S> <C> <C>
Quarter
First................................................. $ 37 $12 11/16
Second................................................ 44 1/2 19 1/4
Third................................................. 94 1/8 41 3/8
Fourth (through October [ ], 1999)................... [ ] [ ]
</TABLE>
As of August 6, 1999, there were 177 holders of record of the SanDisk
common stock, including Cede & Co., a nominee of The Depository Trust Company.
Cede & Co. holds shares of SanDisk common stock on behalf of an indeterminate
number of beneficial owners.
SanDisk has not paid any dividends since its inception. SanDisk's board of
directors has absolute discretion to decide whether or not to pay dividends in
the future. We anticipate that the board of directors' decision regarding
dividends will depend upon SanDisk's operating results, financial condition
and capital requirements, contractual restrictions, general business
conditions and any other factors SanDisk's board of directors believes to be
relevant.
Even if SanDisk's board of directors were to decide to pay a dividend, you
would generally not be entitled to receive the dividend unless you had already
exchanged your PEPS for SanDisk common stock. In addition, the applicable
record date for determining stockholders entitled to receive the dividend
would have to occur after
18
<PAGE>
you had received your SanDisk common stock. See "Risk Factors--You Will Have
No Shareholder Rights With Respect to any Reference Securities."
We are not affiliated with SanDisk. SanDisk will not receive any of the
proceeds from the offering, and has no obligations with respect to the PEPS.
This prospectus relates only to the PEPS being offered, and does not relate to
SanDisk or the SanDisk common stock. SanDisk has filed a registration
statement with the SEC to register the shares of SanDisk common stock that you
may receive when you exchange your PEPS. The registration statement contains
the SanDisk prospectus that includes information relating to SanDisk and the
SanDisk common stock, including risk factors relevant to an investment in the
SanDisk common stock. The SanDisk Prospectus is attached to this prospectus
and is being delivered to you only as a convenience. The SanDisk Prospectus is
not part of this prospectus, and it is not incorporated by reference into this
prospectus. See "Risk Factors--No Affiliation Between the Trust and SanDisk."
Enhanced Yield; Less Potential for Equity Appreciation than SanDisk Common
Stock; No Depreciation Protection
Owning a PEPS is not the same as owning a share of SanDisk common stock.
Cash distributions on the PEPS will be treated as a return of your basis in
your treasury securities and will not result in a separate income inclusion in
addition to the recognition of original issue discount on your treasury
securities. The PEPS will provide you with a current distribution yield that
is higher than the current dividend yield on the SanDisk common stock, which
currently does not pay any dividends. However, there can be no assurance that
the yield on the PEPS will be higher than the dividend yield on the SanDisk
common stock in the future. In addition, your opportunity to benefit from
appreciation in the price of SanDisk common stock by investing in PEPS is less
than you would have if you invested directly in SanDisk common stock, because
the value of the reference property you receive when you exchange your PEPS
will be greater than the issue price you paid to purchase your PEPS only if
the reference property value per PEPS is greater than the threshold
appreciation price of $ . Even if the reference property value per PEPS is
greater than the threshold appreciation price, because each PEPS will in that
case entitle you to receive only % of the reference property per PEPS, you
will receive only % (the percentage equal to the initial market price
divided by the threshold appreciation price) of any appreciation in the value
of the reference property above the threshold appreciation price. However, if
the reference property value per PEPS is less than the initial market price,
you will bear the entire decline in value of the reference property. See "Risk
Factors--PEPS Give You Less Opportunity for Equity Appreciation than SanDisk
Common Stock." Additionally, because the reference property value per PEPS is
generally determined based on a 20 trading day average, the value of a share
of SanDisk common stock or other reference property distributed in exchange
for your PEPS may be more or less than the reference property value per PEPS
used to determine the number or amount of reference property you will receive.
The U.S. Treasury Securities
We will purchase and hold the treasury securities, which will have face
amounts and maturities that approximately correspond to the amounts and
payment dates of the quarterly distributions you will receive on your PEPS. Up
to % of our total assets may be invested in these treasury securities. If
the forward purchase contract is accelerated as described under "--The Forward
Purchase Contract--Collateral Arrangements; Acceleration," we will liquidate
the treasury securities and, after satisfaction of creditors as permitted by
applicable law, distribute the proceeds, less expenses, to you
proportionately, together with other amounts distributed upon acceleration.
19
<PAGE>
If you acquired PEPS from the underwriter at the initial public offering
price on the date the PEPS were first offered for sale, the following table
contains information regarding your quarterly distributions, the portion of
each year's distributions that will constitute a return of capital for U.S.
federal income tax purposes and the amount of original issue discount accruing
on the treasury securities, assuming a yield-to-maturity accrual election for
short-term treasury securities. See "Certain Tax Considerations."
<TABLE>
<CAPTION>
Annual
Return
Annual Gross of
Annual Gross Distributions from Capital Annual Inclusion of
Distributions from Treasury Securities per Original Issue Discount
Year Treasury Securities per PEPS PEPS in Income per PEPS
- ---- ------------------- ------------------- ------- -----------------------
<S> <C> <C> <C> <C>
1999 $ $ $ $
2000
2001
2002
</TABLE>
We will make quarterly distributions of $ per PEPS on each February 15,
May 15, August 15 and November 15, or on the next business day if that date is
not a business day, beginning February 15, 2000, if you are the holder of
record as of the preceding February 1, May 1, August 1 and November 1. Our
quarterly distributions will consist solely of the cash we receive from the
proceeds of the treasury securities as they mature.
Temporary Investments
For cash management purposes, we may invest the proceeds of the treasury
securities and any other cash we hold in short-term obligations of the U.S.
government maturing no later than the business day before the next
distribution date.
Trust Dissolution
Our trust will dissolve on or shortly after the exchange date, or earlier
if the forward purchase contract is accelerated as described above. We have
adopted a fundamental policy that we will not dispose of the forward purchase
contract during our term, though under the circumstances described above the
forward purchase contract may terminate before the exchange date. If a default
occurs with respect to Seagate Technology, our Trust will dissolve and our
assets other than the forward purchase contract will be liquidated. Upon
dissolution, our assets will include proceeds received from the liquidation
and any assets received under the forward purchase contract, less any
expenses, which will, after satisfaction of creditors as permitted by
applicable law, be distributed proportionately to you. See "--The Forward
Purchase Contract--Collateral Arrangements; Acceleration."
Fractional Interests Upon Dissolution
We will not distribute to you on the exchange date any fractional units of
any reference security, or fractional interests of any reference property
other than cash or a reference security. All fractional units or interests to
which you would otherwise be entitled on the exchange date will be aggregated
and liquidated and, in lieu of the fractional units or interests to which you
would otherwise have been entitled, you will receive a proportionate share of
the proceeds from the liquidation, net of any brokerage or related expenses.
20
<PAGE>
INVESTMENT RESTRICTIONS
We have adopted a fundamental policy that we will not:
. purchase any securities or instruments other than the treasury
securities, the forward purchase contract and any reference security
received under the forward purchase contract and, for cash management
purposes, short-term obligations of the U.S. government;
. issue any securities or instruments except for the PEPS;
. make short sales or purchase securities on margin;
. write put or call options;
. borrow money;
. underwrite securities of other issuers;
. purchase or sell real estate and real estate mortgage loans, commodities
or commodities contracts;
. make loans;
. invest less than 65% of our portfolio in the forward purchase contract;
. take any action that would cause us not to be a "grantor trust" under
the Internal Revenue Code;
. dispose of the forward purchase contract during our term; and
. unless we dissolve earlier than the exchange date if a default occurs,
dispose of the treasury securities before their maturity dates.
We cannot change these fundamental policies without the vote of 100% of the
outstanding PEPS. Unless expressly designated as fundamental, all other
policies of the Trust may be changed by our trustees without your approval.
Because of the foregoing fundamental policies, our investments will be
concentrated initially in the flash memory storage industry, which is the
industry in which SanDisk currently operates. However, if in the future
SanDisk diversifies its operations into one or more other industries, or if
the reference property includes a reference security of an issuer that
operates in another industry, our investments will be less concentrated in the
flash memory storage industry. See "Risk Factors--Our Portfolio is Not
Diversified."
21
<PAGE>
RISK FACTORS
You should carefully consider each of the following risks and all of the
other information set forth in this prospectus and the accompanying SanDisk
Prospectus before deciding to invest in the PEPS.
We Will Not Actively Manage our Portfolio
Unlike a typical closed-end investment company, we will not have an
investment advisor to manage our portfolio. Instead, we will be internally
managed by our trustees. See "Management Arrangements." We have adopted a
fundamental policy that we may not dispose of the forward purchase contract
before our term expires. Similarly, unless a default occurs and we dissolve
earlier than the exchange date, we will not dispose of the treasury securities
before their maturity dates. As a result, we will continue to hold the forward
purchase contract despite any significant decline in the value of the SanDisk
common stock, or any other reference property, or any adverse change in the
financial condition of SanDisk or any other issuer.
Our Portfolio is Not Diversified
We are classified as a "non-diversified," closed-end, management investment
company under the Investment Company Act. Consequently, we are not limited by
the Investment Company Act in the proportion of our assets that may be
invested in the securities of a single issuer. Our assets will consist almost
entirely of the forward purchase contract and the treasury securities. As a
result, we may be subject to greater risk than would be the case for an
investment company with more diversified investments.
You Bear the Risk of Any Loss in the Value of SanDisk common stock
The PEPS are similar to ordinary equity securities in that the aggregate
value of the SanDisk common stock or other reference property or cash that you
will receive on or shortly after the exchange date is not fixed, but is based
on the value of the SanDisk common stock, or other reference property, which
may be more or less than the initial market price. See "Investment Objective
and Policies--The Forward Purchase Contract." If the reference property value
per PEPS is less than the initial market price, then you will receive assets
with a value less than the issue price you paid to purchase the PEPS, in which
case your investment in PEPS will result in a loss, and you will bear the
entire decline in value. Accordingly, you are assuming the risk that the
market value of the SanDisk common stock may decline, and that such decline
may be substantial. If SanDisk is insolvent or bankrupt when you receive
SanDisk common stock, you may lose your entire investment.
In addition, because the then-current value of any reference security is
determined over a 20 trading day averaging period, except in the case of a
rollover offering, the actual market price of SanDisk common stock or other
reference security that you receive on or shortly after the exchange date may
be less than the reference property value per PEPS. For example, if the value
of SanDisk common stock is continuously falling during the averaging period,
the actual market price on the exchange date of the SanDisk common stock that
you receive may be less than the reference property value per PEPS.
PEPS Give You Less Opportunity for Equity Appreciation than SanDisk Common
Stock
Owning a PEPS is economically different from owning a share of SanDisk
common stock. An investment in PEPS offers you less opportunity to realize any
appreciation in the value of SanDisk common stock over its current value than
does a direct investment in SanDisk common stock. The amount you receive when
you exchange your PEPS will be greater than the issue price you paid to
purchase the PEPS only if the reference property value per PEPS is greater
than the threshold appreciation price. The threshold appreciation price of $
represents an appreciation of % over the initial market price. In addition,
you are entitled to receive only % (the percentage equal to the initial
market price divided by the threshold appreciation price) of any appreciation
in the reference property value per PEPS above the threshold appreciation
price. See "Investment Objective and Policies--The Forward Purchase Contract."
22
<PAGE>
Trading Prices of the PEPS May Be Influenced by Many Unpredictable Factors
Many factors, all of which are beyond our control, will influence the value
of the PEPS. We expect that the market value of the SanDisk common stock will
affect the value of the PEPS more than any other factor. The trading price of
the SanDisk common stock may fluctuate significantly and experience
significant volatility. Factors that may affect the trading prices of the
SanDisk common stock and the PEPS include:
. the operating results and future prospects of SanDisk;
. the health of the industry in which SanDisk operates;
. economic, financial and political events that affect the capital markets
generally;
. sales of substantial amounts of SanDisk common stock after the offering
of the PEPS (which could occur, among other reasons, in connection with
hedging or arbitrage of investors' positions in the PEPS--see "--The
Issuance of the PEPS May Adversely Impact the Market for the SanDisk
Common Stock") or the perception that these sales could occur;
. the volatility (frequency and magnitude of changes in price) of the
SanDisk common stock;
. the dividend rate on the SanDisk common stock;
. interest and yield rates in the capital markets generally; and
. the time remaining until the exchange date.
The capital markets in general have experienced extreme volatility that
often has been unrelated to the operating performance of particular companies.
These broad market and industry fluctuations may cause declines in the value
of the SanDisk common stock and the PEPS regardless of the actual operating
performance of SanDisk.
The Issuance of the PEPS May Adversely Impact the Market for the SanDisk
common stock.
Investors' anticipation that Seagate Technology may deliver to us under the
forward purchase contract SanDisk common stock representing approximately %
of the currently outstanding shares of SanDisk common stock could cause the
price of the SanDisk common stock to be unstable or to fall. In addition, the
following events may occur as a result of the issuance of the PEPS, which
events may also adversely affect the price of the SanDisk common stock:
. sales of SanDisk common stock by investors who prefer to invest in
SanDisk by purchasing PEPS;
. short sales of SanDisk common stock by holders of PEPS who wish to hedge
their investment in SanDisk; or
. arbitrage trading activity between the PEPS and the SanDisk common
stock.
You Bear Some Market Risk if Seagate Technology Elects the Cash Settlement
Option
If Seagate Technology decides to exercise the cash settlement option, the
amount of cash we will receive in lieu of any reference security will be based
on the average of the closing prices of that reference security for the 20
trading day period ending immediately before the second trading day prior to
the exchange date (except in the case of a rollover offering). The price of
the SanDisk common stock or any other reference security that you may receive
as a result of dilution adjustments will be subject to market fluctuations
during that period. The amount of cash you receive on the exchange date may be
less than the value of the SanDisk common stock or other reference securities
that you would have received on the exchange date had Seagate Technology not
exercised the cash settlement option. For example, if Seagate Technology
elects to exercise the cash settlement option and the value of the SanDisk
common stock is continuously rising during the averaging period, the average
of the closing prices of the SanDisk common stock over the averaging period
may be lower than the value of the SanDisk common stock otherwise deliverable
on the exchange date.
23
<PAGE>
The forward purchase contract will be collateralized only by a pledge of
the maximum number or amount of each type of reference property that Seagate
Technology may be required to deliver under the forward purchase contract or,
at Seagate Technology's option, by U.S. government obligations. Therefore, you
bear the risk that Seagate Technology's obligation to deliver cash to us will
not be fully collateralized if it elects the cash settlement option and the
value of the SanDisk common stock or other reference securities falls during
the averaging period so that the value of the reference property pledged to us
is less than the amount of cash that Seagate Technology is obligated to
deliver to us under the forward purchase contract. See "Investment Objective
and Policies--The Forward Purchase Contract."
The Amount You Receive and the Timing of Exchange Will Be Affected If the
Contracting Stockholder Elects to Extend the Exchange Date or Engage in a
Rollover Offering
Seagate Technology will have the right under the forward purchase contract,
on 30 business days' notice to us, to extend the exchange date to February 15,
2003. Seagate Technology will have the right to extend the exchange date only
if at least one nationally recognized statistical rating agency has rated
Seagate Technology's unsecured long-term debt equal to or higher than B- (if
by Standard & Poor's Rating Services) or B3 (if by Moody's Investors Services)
or their respective equivalents. If Seagate Technology elects to extend the
exchange date, Seagate Technology will then have the right in connection with
a rollover offering, by notice to us by 4:00 P.M., New York City time, on the
date of pricing of the rollover offering, to accelerate the exchange date to
the second business day following the date of closing of the rollover
offering. If Seagate Technology elects to extend the exchange date, then the
exchange amount will be calculated as of the extended exchange date. If
Seagate Technology elects to extend and then accelerate the exchange date,
then the exchange amount will be calculated as set forth above under
"Investment Objective and Policies--The Forward Purchase Contract--Extension
and Acceleration of the Exchange Date at the option of the Contracting
Shareholder." In either case, your receipt of shares or cash or a combination
of shares and cash will be delayed until following the extended or accelerated
exchange date. Seagate Technology might elect to extend the exchange date if
the market price of SanDisk common stock were higher than its basis in the
common stock, or if it is contemplating a rollover offering (which will depend
on market conditions at the time). It is less likely that Seagate Technology
would elect to extend the exchange date if the market price of SanDisk common
stock were lower than at the time the forward purchase contract was entered
into. We will have no control over whether Seagate Technology will elect to
extend the exchange date or finance an all-cash settlement of the forward
purchase contract.
If Seagate Technology elects to finance an all-cash settlement of the
forward purchase contract in whole or in part with the proceeds of a rollover
offering, then the "reference property value per PEPS" will be equal to the
then-current value of the reference property per PEPS on the date of pricing
of the rollover offering and, if the reference property includes any reference
security, the "then-current value" of the reference security for the purpose
of determining the reference property value per PEPS will be the closing
market price per unit of the reference security on the date of pricing of the
rollover offering. Therefore, the number or amount of each type of reference
property or the amount of cash or a combination of reference property and cash
that you receive in exchange for your PEPS may be less than or greater than
the number or amount that you would have received if Seagate Technology had
not elected to extend or accelerate the exchange date or to engage in a
rollover offering. In addition, if Seagate Technology elects to finance the
cash settlement of the forward purchase contract with the proceeds of a
rollover offering, you will only receive notice of the rollover offering, and
of the fact that you will receive cash in exchange for your PEPS, on the
pricing date of the rollover offering.
In addition, if Seagate Technology engages in a rollover offering, the
amount of cash you will receive for your PEPS will be based on a single
closing market price for any reference security included in the reference
property, rather than an average of closing market prices, and you will only
receive notice of the date on which the single closing market price will be
determined on the determination date.
You Bear Some Risk if the Stockholder Becomes Bankrupt
We believe that the forward purchase contract constitutes a "securities
contract" for purposes of Title 11 of he United States Code--the "Bankruptcy
Code"). Therefore, we believe that if Seagate Technology becomes
24
<PAGE>
bankrupt, the forward purchase contract will not be subject to the automatic
stay provisions of the Bankruptcy Code. If, however, the forward purchase
contract was found not to constitute a "securities contract" for this purpose,
the forward purchase contract could become subject to the automatic stay
provisions of the Bankruptcy Code or otherwise affected by the bankruptcy
proceedings. This could adversely affect the timing of the exchange and the
amount of stock or other property that you receive in exchange for your PEPS.
We would be required to file a claim in bankruptcy court in order to complete
the exchange. This would delay the timing of the exchange and may result in
less stock or other property in the exchange than you would otherwise be
entitled to receive.
In addition, if Seagate Technology elects to extend the exchange date,
Seagate Technology will be required to deliver to us additional treasury
securities sufficient to fund the additional cash distribution that we will
make. If Seagate Technology becomes bankrupt after electing to extend the
exchange date but before the extended or accelerated exchange date, your
receipt of the additional cash distribution may be substantially delayed.
You Will Have No Shareholder Rights With Respect to any Reference Security
If you invest in PEPS, you will have no rights with respect to any
reference security, including voting rights and rights to receive any
dividends or other distributions on the reference security, unless you receive
the reference securities in exchange for your PEPS. You will have these rights
with respect to any reference securities that you receive in exchange for your
PEPS only if the applicable record date for determining stockholders entitled
to those rights occurs after you have received the reference securities.
Seagate Technology is not responsible for determining the amount you will
receive for your PEPS on or shortly after the exchange date. The forward
purchase contract is a commercial transaction and does not create any rights
in any third party and is not for the benefit of any third party, including
you.
The Number of Shares You Receive Will Not be Adjusted for Potentially Dilutive
Events
SanDisk or any other issuer of reference property is free to issue
additional shares of common stock or other securities during the term of the
PEPS. Similarly, any stockholder of SanDisk may decide to sell SanDisk common
stock at any time. Although the amount of reference property you receive will
be adjusted to protect you from the dilutive events specified under
"Investment Objective and Policies--The Forward Purchase Contract--Reference
Property Adjustments," it will not be adjusted if SanDisk offers SanDisk
common stock for cash or as consideration to make an acquisition or if a
stockholder sells shares of SanDisk common stock or if SanDisk or anyone else
makes a partial tender offer or partial exchange offer for the SanDisk common
stock. See "Investment Objective and Policies--The Forward Purchase Contract--
Reference Property Adjustments." Any of these issuances, sales or offers could
lead to declines in the value of SanDisk common stock and, because no
adjustment is made to the PEPS, in the value of your PEPS. Neither SanDisk nor
Seagate Technology has any obligation to consider your interests for any
reason.
Your Opportunity for Gain May be Diminished if the PEPS Expire Early
We are scheduled to dissolve on or shortly after the exchange date, but may
dissolve earlier and our assets, other than the forward purchase contract,
liquidated if Seagate Technology defaults under the forward purchase contract
or the collateral supporting the forward purchase contract is insufficient. On
dissolution, the value of the proceeds and assets you receive could be
substantially less than the value of what you would have received had we
dissolved on the exchange date.
PEPS May be Difficult to Resell
There may be little or no secondary market for the PEPS. The PEPS are a new
security and there currently is no secondary market for them. We have applied
to the Nasdaq National Market to list the PEPS for trading under the symbol
"SDKP," but we do not know whether active trading in the PEPS will develop and
continue even if they are so listed. If there is a secondary market for the
PEPS, it may not provide significant liquidity or it may not continue for the
life of the PEPS.
The PEPS may later be delisted or trading in the PEPS on the Nasdaq
National Market may later be suspended. If the PEPS are delisted or trading
suspended, we will apply to list the PEPS on another national
25
<PAGE>
securities exchange or for quotation on another trading market. If the PEPS
are not listed or traded on any securities exchange or trading market, or if
trading is suspended, you may find it more difficult to obtain pricing
information for the PEPS, and the price and liquidity of the PEPS may be
adversely affected.
The underwriter has told us that it currently intends to make a market in
the PEPS, although it has no obligation to do so.
PEPS May Trade at a Discount to Net Asset Value
We are a newly organized closed-end investment company with no previous
operating history. Our net asset value may decrease. In addition, shares of
closed-end investment companies frequently trade at a discount from their net
asset value. It is impossible to predict whether the PEPS will trade at, below
or above our net asset value. Since the PEPS are not redeemable, if you wish
to dispose of them prior to the exchange date, you must bear the risk that if
they do trade at a discount at the time you sell them, you would realize a
loss on your investment in the PEPS, regardless of our performance.
No Affiliation Between the Trust and SanDisk
We are not affiliated with SanDisk. We have no knowledge whether any of the
events described under "The Forward Purchase Contract--Reference Property
Adjustments" are currently being considered by SanDisk unless those events
have been publicly disclosed, and we also have no knowledge of any event that
would have a material adverse effect on SanDisk or on the price of the SanDisk
common stock. We have no ability to control these events and these events are
difficult to predict.
SanDisk has no obligations with respect to the PEPS or the forward purchase
contract, including any obligation to consider our needs or your needs for any
reason. SanDisk will not receive any of the proceeds from the offering.
SanDisk is not responsible for and has not participated in preparing this
prospectus or in determining the number amount or type of property you will
receive for your PEPS. SanDisk is not involved with the administration or
trading of the PEPS.
Uncertain Tax Treatment
The law regarding the treatment of the PEPS for United States federal
income tax purposes is subject to some uncertainty. Although you should not
recognize taxable income with respect to your proportionate share of the
forward purchase contract prior to partial or full settlement of the forward
purchase contract, there are alternative characterizations that could require
you to include more income than would be included under the analysis set forth
under "Certain Tax Considerations." Accordingly, you should consult your tax
advisers with respect to the tax consequences of the purchase, ownership and
disposition of the PEPS in light of your particular circumstances, including
the tax risks associated with possible alternative characterizations of the
PEPS. See "Certain Tax Considerations."
Year 2000 Risks
Many existing computer systems use only two digits to identify a year in
the date field. These systems, if not corrected, could fail or create
erroneous results by or at the year 2000. This "Year 2000" issue is believed
to affect virtually all companies and organizations. Although we will not
conduct any operations, we will be exposed to the risk that the trust
administrator, custodian under the collateral agreement and the transfer
agent, registrar and paying agent for the PEPS will be adversely affected by
the Year 2000 problem. We intend to assess whether such service providers are,
or will on a timely basis be, Year 2000 compliant.
Risks Factors relating to SanDisk
You should carefully consider the information in the SanDisk Prospectus,
including the risk factors relating to SanDisk beginning on page 7 of the
SanDisk Prospectus.
26
<PAGE>
DESCRIPTION OF THE PEPS
Each PEPS represents an undivided beneficial interest in our trust, and a
total of PEPS will be issued in the offering, assuming the underwriter does
not exercise its over-allotment option. You are entitled to your proportionate
share in our remaining assets available for distribution if we dissolve and
liquidate. PEPS have no preemptive, redemption or conversion rights. The PEPS,
when issued and delivered to you against payment of the purchase price, will
be fully paid and nonassessable undivided beneficial interests in our assets.
You are entitled to one vote for each PEPS you hold on all matters to be
voted on by holders of PEPS. You cannot cumulate your votes in the election of
trustees. We intend to hold annual meetings as required by the rules of the
Nasdaq National Market. You have the right, upon the declaration in writing or
vote of more than two-thirds of the outstanding PEPS, to remove any of our
trustees. The trustees will call a meeting for holders to vote on the removal
of a trustee upon the written request of the record holders of 10% of the
PEPS, or to vote on other matters upon the written request of the record
holders of 51% of the PEPS, unless substantially the same matter was voted on
during the preceding 12 months.
Book-entry System
The PEPS will be issued in the form of one or more "global securities"
deposited with Depository Trust Company, as Depositary, and registered in the
name of the Depositary's nominee.
The Depositary has informed us as follows. The Depositary is a limited-
purpose trust company organized under the laws of the State of New York, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to Section 17A of the Exchange Act. The Depositary was
created to hold securities for people who have accounts with them
("participants") and to facilitate the clearance and settlement of securities
transactions among its participants through electronic book-entry changes in
the participants' accounts. This book-entry system eliminates the need to
physically move certificates. These participants include securities brokers
and dealers, banks, trust companies and clearing corporations. Indirect access
to the Depositary's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
After a Global Security is issued, the Depositary or its nominee will
credit the PEPS represented by the Global Security to its participants'
accounts. The underwriter will designate the accounts to be credited. Only
participants or persons that hold interests through participants may
beneficially own the Global Securities. If you are a participant, the
Depositary or its nominee will maintain the records that show your beneficial
ownership in the Global Securities and effect any transfer of those beneficial
ownership interests among participants. If you hold through a participant, the
participant will maintain the records that show your beneficial ownership in
the Global Securities and effect any transfer of those beneficial interests
within the participant. The laws of some jurisdictions may require that
purchasers of securities take physical delivery of those securities in
definitive form. These laws may impair the ability to transfer beneficial
interests in a Global Security.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee will be considered the sole
owner or holder of the PEPS represented by that Global Security. Generally,
you will not be entitled to have PEPS registered in your name and will not
receive or be entitled to receive physical delivery of PEPS in definitive form
and will not be considered the owner or holder of the PEPS that you
beneficially own.
Because the Depositary or its nominee is the registered owner or the holder
of the Global Securities, we will pay the quarterly distributions and deliver
any reference property or any other consideration in connection with the PEPS
to the Depositary or its nominee. We expect that the Depositary or its
nominee, when it receives a payment or delivery, will immediately credit its
participants' account with amounts proportionate to their respective
beneficial interests in the Global Securities, according to its records. We
also expect that payments by
27
<PAGE>
participants to persons who hold through participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of the participants. None of us,
the underwriter, any of our trustees, the administrator (as defined below),
the paying agent (as defined below) or the custodian will have any
responsibility or liability for any aspect of the records relating to
beneficial ownership interests in a Global Security, or payments made on
account of beneficial ownership interests or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests.
A Global Security may not be transferred except as a whole by the
Depositary to a nominee or a successor of the Depositary. If the Depositary is
at any time unwilling or unable to continue as depositary and we do not
appoint a successor depositary within ninety days, we will issue PEPS in
definitive registered form in exchange for the Global Securities. In this
event, you will be entitled to receive PEPS in definitive form registered in
your name equal in number to your proportionate interest in the Global
Securities.
28
<PAGE>
MANAGEMENT ARRANGEMENTS
General
Our trustees consist of three individuals each of which we refer to as a
"trustee." None of the trustees is an "interested person" in us as defined in
the Investment Company Act. The trustees are responsible for the overall
supervision of our operations and perform the various duties imposed on the
trustees of management investment companies by the Investment Company Act.
The name of each trustee, his position and his principal occupation during
the past five years are set forth below:
<TABLE>
<CAPTION>
Name, Age and Address Title Principal Occupation During Past Five Years
--------------------- ----- -------------------------------------------
<S> <C> <C>
Donald J. Puglisi, 53.... Managing Trustee Professor of Finance University of Delaware
Department of Finance
University
of Delaware Newark, DE
19716
William R. Latham, I,
54...................... Trustee Professor of Economics University of Delaware
Department of Economics
University of Delaware
Newark, DE 19716
James B. O'Neill, 59..... Trustee Professor of Economics University of Delaware
Center for Economic
Education &
Entrepreneurship
University of Delaware
Newark, DE 19716
</TABLE>
Compensation of Trustees
Each trustee will be paid a one-time, up-front fee of $10,800 by Seagate
Technology. The managing trustee will also receive an additional up-front fee
of $3,600 for serving in that capacity. We will not compensate the trustees in
any manner, including any pension or retirement benefits. The trustees do not
receive any compensation for serving as a trustee or director of any other
affiliated investment company.
Portfolio Management and Administration
We will be internally managed by our three trustees and we will not have an
investment adviser. Our portfolio will not be actively managed. The trustees
will authorize the purchase of the forward purchase contract and the treasury
securities as directed by the Trust Agreement. We have a fundamental policy
that the forward purchase contract may not be disposed of during our term and
that, unless we dissolve earlier than the exchange date due to a default, we
will not dispose of the treasury securities before their maturity dates.
Seagate Technology and Morgan Stanley & Co. Incorporated will pay all
expenses we incur in our operations, including, among other things, accounting
services, expenses for legal and auditing services, taxes, costs of printing
proxies, listing fees, if any, stock certificates and shareholder reports,
charges of the administrator, the custodian and the paying agent, expenses of
registering the PEPS under federal and state securities laws, SEC fees, the
trustees' fees, insurance, interest, brokerage costs, litigation and other
extraordinary or non-recurring expenses and mailing expenses. See "Fee Table"
and "--Estimated Expenses."
Administrator
Our day-to-day affairs will be managed by The Bank of New York, as trust
administrator pursuant to an administration agreement dated as of October ,
1999. Under the administration agreement, the trustees have delegated most of
their operational duties to the administrator. These include the duties to:
. receive invoices for and pay all of our expenses;
29
<PAGE>
. with the approval of the trustees, engage legal and other professional
advisors (other than our independent public accountants);
. instruct the paying agent to pay any distributions on the PEPS;
. prepare and mail, file or publish all of our notices, proxies, reports,
tax returns and other communications and documents, and keep all of our
books and records;
. at the direction of the trustees, institute and prosecute legal and
other appropriate proceedings to enforce our rights and remedies; and
. make all necessary arrangements with respect to meetings of trustees and
any meetings of holders. The administrator will not, however, select our
independent public accountants or sell or otherwise dispose of our
assets except in connection with an acceleration of the forward purchase
contract as described under "Investment Objective and Policies--The
Forward Purchase Contract--Collateral Arrangements; Acceleration" or the
settlement of the forward purchase contract on the business day before
the exchange date.
The Administration Agreement may be terminated by us or the administrator
with 60 days prior written notice, but the agreement may not be terminated
until a successor administrator has been chosen and has accepted the
administrator's duties.
Except for its roles as our administrator, custodian, paying agent and
registrar and transfer agent and as collateral agent under the Security and
Pledge Agreement, The Bank of New York has no other affiliation with us, and
is not engaged in any other transactions with us.
The address of the administrator is 101 Barclay Street, New York, New York
10286.
Custodian
The custodian or our assets is The Bank of New York pursuant to a custodian
agreement dated as of October , 1999. Under the custodian agreement, all net
cash we receive will be invested by the custodian in short-term U.S.
government securities maturing on or shortly before the next quarterly
distribution date. If we terminate the custodian agreement or the custodian
resigns, we must engage a new custodian to carry out the duties of the
custodian.
The address of the custodian is 101 Barclay Street, New York, New York
10286.
Paying Agent
The transfer agent, registrar and paying agent for the PEPS is The Bank of
New York pursuant to a paying agent agreement dated as of October , 1999. If
we terminate the Paying Agent Agreement or the paying agent resigns, we must
engage a new transfer agent, registrar and paying agent to carry out the
duties of the paying agent.
The address of the paying agent is 101 Barclay Street, New York, New York
10286.
Indemnification
We will indemnify each trustee, the administrator, the paying agent and the
custodian with respect to any claim, liability, loss or expense including the
costs and expenses of the defense against any claim or liability that they may
incur in acting in that capacity, except in the case of willful misfeasance,
bad faith, gross negligence or reckless disregard of their respective duties
or where applicable law prohibits this indemnification. Morgan Stanley & Co.
Incorporated has agreed to reimburse us for any amounts we pay as
indemnification to any trustee, the administrator, the paying agent or the
custodian. Morgan Stanley & Co. Incorporated will in turn be reimbursed by
Seagate Technology.
30
<PAGE>
Estimated Expenses
At the closing of the offering, Seagate Technology will pay to each of the
administrator, the custodian and the paying agent a one-time, up-front amount
in respect of its fee and, in the case of the administrator, our anticipated
ongoing expenses over our term. Our organization costs in the amount of $ and
estimated costs in connection with the initial registration and public
offering of the PEPS in the amount of approximately $ will be paid by Seagate
Technology. See "Fee Table."
The amount payable to the administrator for our anticipated ongoing
expenses was determined based on estimates made in good faith on the basis of
information currently available to us, including estimates furnished by our
agents. Any unanticipated expenses will be paid by Morgan Stanley & Co.
Incorporated. Morgan Stanley & Co. Incorporated will in turn be reimbursed by
Seagate Technology.
DIVIDENDS AND DISTRIBUTIONS
We will make quarterly distributions from the proceeds of the treasury
securities, less any of our expenses. You will receive the first distribution
of $ per PEPS (in respect of the period from October , 1999 until February
15, 2000) on February 15, 2000 if you are the holder of record on February 1,
2000. After that, we will make quarterly distributions of $ per PEPS on each
February 15, May 15, August 15 and November 15, or on the next business day if
that date is not a business day, if you are the holder of record as of the
preceding February 1, May 1, August 1 and November 1.
NET ASSET VALUE
We will calculate the net asset value of the PEPS on a quarterly basis by
dividing the value of our net assets, which is the value of our assets less
our liabilities,) by the total number of PEPS outstanding. Our net asset value
will be published semi-annually as part of our semi-annual report to you and
at other times as the trustees may determine. The treasury securities will be
valued at the mean between the last current bid and asked prices or, if
quotations are not available, as we determine in good faith under the
direction of the trustees. Short-term investments having a maturity of 60 days
or less are valued at cost with accrued interest or discount earned included
in interest receivable. The forward purchase contract will be valued at the
mean of the bid prices we receive from at least three independent broker-
dealer firms who are in the business of making bids on financial instruments
similar to the forward purchase contract and with comparable terms.
31
<PAGE>
CERTAIN TAX CONSIDERATIONS
The following discussion sets forth the opinion of Davis Polk & Wardwell,
special tax counsel to the Trust, as to certain of the material United States
federal income tax consequences that may be relevant to the ownership of a
PEPS. This general discussion addresses only initial holders who purchase the
PEPS at the public offering price appearing on the cover of this prospectus,
and who hold the PEPS as capital assets within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"). The discussion set
forth below does not address all of the tax consequences that may be relevant
to you in light of your particular circumstances or if you are subject to
special treatment under federal income tax laws (e.g., rules which apply to
certain financial institutions, tax-exempt organizations, dealers in options
or securities, traders in securities that elect to mark-to-market, certain
former citizens or residents of the United States or persons who hold a PEPS
as a part of a hedging transaction or straddle or as part of a "conversion
transaction" or a "synthetic security" or other integrated transaction). It
also does not discuss the tax consequences of the ownership of the SanDisk
common stock.
The summary set forth below is based on the Code, administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this prospectus
may affect the tax consequences described in this prospectus. No ruling has
been requested from the Internal Revenue Service ("IRS") with respect to the
PEPS and our tax counsel has advised that, because of the lack of statutory,
judicial or administrative authority on point, there are uncertainties
regarding the United States federal income tax consequences of an investment
in the PEPS. Accordingly, you are urged to consult your tax advisors regarding
the United States federal income tax consequences of an investment in the PEPS
and with respect to any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction.
As used in this prospectus, the term "United States holder" means a holder
of PEPS that is, for United States federal income tax purposes,
. an individual citizen or resident of the United States;
. a corporation created or organized in or under the laws of the United
States or of any political subdivision thereof; or
. an estate or trust the income of which is subject to United States
federal income taxation regardless of its source.
The term "Non-U.S. holder" means a holder of PEPS that is, for United
States federal income tax purposes,
. a nonresident alien individual;
. a foreign corporation; or
. a nonresident alien fiduciary of a foreign estate or trust.
Tax Status of the Trust
We will be treated as a grantor trust for federal income tax purposes, and
income we receive will be treated as income of the holders in the manner set
forth below.
Tax Consequences to United States Holders
The following section applies to you if you are a United States holder.
Tax Basis of the Treasury Securities and the Forward Purchase Contract. You
will be considered the owner of your proportionate share of the stripped
treasury securities and the forward purchase contract in our Trust under the
grantor trust rules of the Code. The cost to you of your PEPS will be
allocated among the your
32
<PAGE>
proportionate share of the treasury securities and the forward purchase
contract, in proportion to the fair market values thereof on the date on which
you acquire your PEPS, in order to determine your tax bases. It is currently
anticipated that we will use % and % of the net proceeds of the offering to
purchase the treasury securities and as payment under the contract,
respectively.
Recognition of Original Issue Discount on the Treasury Securities. The
treasury securities in our Trust will consist of stripped treasury securities.
You will be required to treat your proportionate share of each treasury
Security in our trust as a bond that was originally issued on the date you
purchased your PEPS at an original issue discount equal to the excess of your
proportionate share of the amounts payable on that treasury security over your
tax basis therefor. You are required (whether you are on the cash or accrual
method of tax accounting) to include original issue discount (other than
original issue discount on short-term treasury securities, as defined in this
prospectus) in income for federal income tax purposes as it accrues, in
accordance with a constant yield method. The return on any short-term treasury
security (i.e., any treasury security with a maturity of one year or less from
the date it is purchased) we hold will also be required to be included in your
income as it is accrued. Unless you elect to accrue the return on a short-term
treasury security according to a constant yield method, the original issue
discount will be accrued on a straight-line basis. Your tax basis in a
treasury security will be increased by the amount of any original issue
discount included in your income with respect to that treasury security.
Treatment of the Forward Purchase Contract. You will be treated as entering
into a proportionate share of the forward purchase contract and, at the
exchange date, as receiving a proportionate share of the reference property or
cash delivered to us. You will not recognize income, gain or loss upon entry
into the forward purchase contract. You should not recognize income with
respect to the forward purchase contract prior to its settlement, except as
noted below.
Sale or Exchange of PEPS Prior to Settlement. Prior to the exchange date,
upon the sale or exchange of a PEPS, you will recognize taxable gain or loss
equal to the difference between the amount realized on the sale or exchange
and your adjusted tax basis in the PEPS. Any gain or loss should generally be
long-term capital gain or loss, as the case may be, if at that time the PEPS
has been held for more than one year.
Upon Settlement. On settlement of the forward purchase contract, you should
not recognize any gain or loss with respect to any reference property other
than cash received with respect to the forward purchase contract. Assuming
this treatment is respected, you will have an adjusted tax basis in the
reference property equal to the proportionate share of your adjusted tax basis
in the forward purchase contract allocable to the reference property. The
allocation of adjusted tax basis in the PEPS between cash received, if any,
and other reference property received should be based on the relative fair
market value, as of settlement, of the cash and the other reference property.
Your holding period for any reference property received upon settlement will
start on the day after the exchange date.
With respect to any cash received upon settlement, you will recognize gain
or loss, as the case may be, to the extent that your portion of the cash
differs from the proportionate share of your adjusted tax basis in the forward
purchase contract allocable to the cash received. The character of this gain
or loss generally should be capital rather than ordinary and long-term if you
have held the PEPS for more than one year. For purpose of this and the
preceding paragraphs, cash received on settlement of the forward purchase
contract shall not include any amount distributed on account of any extension
of the exchange date. The tax treatment of such distribution is discussed
below under "Extension of the Maturity of the Forward Purchase Contract."
Extension of the Maturity of the Forward Purchase Contract. If the maturity
of the forward purchase contract is extended, you will be entitled to receive
an additional cash payment upon settlement. Although the tax treatment of this
additional amount is uncertain, we believe that this additional amount should
be taken into account in determining the amount of capital gain or loss you
will realize upon settlement or other disposition of the PEPS. Accordingly, we
do not currently intend to report this additional amount separately as
ordinary income to you. The IRS may seek to treat this additional amount as
giving rise to ordinary income, however.
33
<PAGE>
Possible Alternative Tax Treatments of an Investment in the PEPS. It is
possible that the IRS would seek to impose tax consequences on you different
from those described above. The IRS could contend, for example, that you
should include imputed interest income over the term of the forward purchase
contract. The IRS could also argue that settlement of the forward purchase
contract is a taxable event and that gain realized on sale or exchange of a
PEPS should be treated as interest income rather than capital gain.
Tax Consequences to Non-U.S. Holders
You should consult your tax advisor regarding the tax consequences, which
could be different from those discussed below, that will apply if, for U.S.
federal income tax purposes,
. you hold PEPS in connection with the conduct of a trade or business in
the United States,
. you own more than 10% of the combined voting power of stock of Seagate
Technology,
. you are a "controlled foreign corporation" related to Seagate
Technology, or
. you are an individual who may be present in the United States for 183
days or more in any tax year in which you held PEPS.
Subject to the discussion below concerning backup withholding, any
distributions you receive from us and any gain you realize on the sale of your
PEPS generally will not be subject to U.S. federal income or withholding tax,
provided that the statement required by Section 871(h) or Section 881(c) of
the Code regarding your tax status has been furnished as discussed in the next
paragraph. Notwithstanding the foregoing, the IRS may assert that any cash you
receive at maturity of the forward purchase contract on account of its
extension are subject to U.S. federal withholding tax. At present, however, we
do not intend to withhold on any distributions.
In order to obtain an exemption from withholding tax, either you as the
beneficial owner of the PEPS, or a securities clearing organization, bank or
other financial institution that holds customers' securities in the ordinary
course of its trade or business (a "Financial Institution") and that is
holding the PEPS on your behalf, must file a statement with the Trust to the
effect that the beneficial owner of the PEPS is a Non-U.S. Holder. Under
temporary and final United States Treasury regulations, this requirement will
be fulfilled if you certify on IRS Form W-8 (or a successor form), under
penalties of perjury, that you are a Non-U.S. Holder and provide your name and
address, and any Financial Institution holding the PEPS on your behalf files a
statement with the Trust to the effect that it has received such a statement
from you and furnishes the Trust with a copy of it.
If you are an individual, your forward purchase contract may be treated as
part of your gross estate for United States federal estate tax purposes.
Backup Withholding and Information Reporting
You may be subject to information reporting and to backup withholding at a
rate of 31 percent of the amounts paid to you, unless you provide proof of an
applicable exemption or a correct taxpayer identification number, and
otherwise comply with the applicable requirements of the backup withholding
rules. If you are a Non-U.S. Holder and the statement regarding your tax
status is furnished as discussed above, you will not be subject to backup
withholding. The amounts withheld under the backup withholding rules are not
an additional tax and may be refunded, or credited against your United States
federal income tax liability, if you provide certain required information to
the IRS.
34
<PAGE>
UNDERWRITER
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date of this prospectus, Morgan Stanley & Co. Incorporated
has agreed to purchase, and we have agreed to sell to them, PEPS.
The underwriting agreement provides that the obligation of the underwriter
to pay for and accept delivery of the PEPS offered by this prospectus is
subject to the approval of certain legal matters by its counsel and to certain
other conditions. The underwriter is obligated to take and pay for all of the
PEPS offered by this prospectus, other than those covered by the over-
allotment option described below, if any such PEPS are taken.
The underwriter initially proposes to offer part of the PEPS directly to
the public at the public offering price set forth on the cover page of this
prospectus and part to certain dealers at a price that represents a concession
not in excess of $ per PEPS under the public offering price. The underwriter
may allow, and such dealers may reallow, a concession not in excess of $ per
PEPS to other underwriters or to certain other dealers. You will not pay any
sales load or underwriting commission. After the initial offering of the PEPS,
the offering price and other selling terms may from time to time be varied by
the underwriter.
We have granted to the underwriter an option, exercisable for 30 days from
the date of this prospectus, to purchase up to an aggregate of additional
PEPS at the public offering price set forth on the cover page of this
prospectus. The underwriter may exercise such option solely for the purpose of
covering over-allotments, if any, made in connection with the offering of PEPS
offered by this prospectus. To the extent such option is exercised, the
underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional PEPS as the number set
forth next to the underwriter's name in the preceding table bears to the total
number of PEPS set forth next to the names of all underwriters in the
preceding table. If the underwriter exercises its over-allotment option in
full, the total price to public will be $ and the total proceeds to the
trust will be $ .
Each of SanDisk and Seagate Technology has agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated, during the period ending
90 days after the date of this prospectus, it will not, directly or
indirectly:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of SanDisk common stock or any
securities convertible into or exercisable or exchangeable for SanDisk
common stock; or
. enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of
SanDisk;
whether any such transaction described above is to be settled by delivery of
the PEPS or such other securities, in cash or otherwise.
The restrictions described in the previous paragraph do not apply to:
. the sale of the PEPS to the underwriter and compliance with the terms of
the forward purchase contract, the security and pledge agreement and the
other agreements relating to the PEPS;
. the issuance by SanDisk of shares of SanDisk common stock upon the
exercise of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus of which the underwriter has
been advised in writing;
. the grant by SanDisk of options or the sale or other issuance of common
stock pursuant to existing benefit plans of SanDisk;
. transactions by any person other than SanDisk relating to shares of
common stock or other securities acquired in open market or other
transactions after the completion of the offering; or
35
<PAGE>
. the sale of a total of up to 3,450,000 shares of SanDisk common stock in
a registered public offering concurrently with this offering.
The SanDisk common stock is listed on the Nasdaq National Market under the
symbol "SNDK." We will apply to the Nasdaq National Market to list the PEPS
for trading under the symbol "SDKP."
In order to facilitate the offering, the underwriter may engage in
transactions that stabilize, maintain or otherwise affect the price of the
PEPS or the SanDisk common stock. Specifically, the underwriter may agree to
sell, or allot, more shares than the PEPS we have agreed to sell to it.
This over-allotment would create a short position in the common stock for the
underwriters' account. To cover any over-allotment or to stabilize the price
of the PEPS or the SanDisk common stock, the underwriter may bid for, and
purchase, PEPS or shares of the SanDisk common stock in the open market.
Finally, the underwriter may reclaim selling concessions allowed to an
underwriter or a dealer for distributing the PEPS in the offering, if the
underwriter repurchases previously distributed PEPS in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. The
underwriter has reserved the right to reclaim selling concessions in order to
encourage dealers to distribute the PEPS for investment, rather than for
short-term profit taking. Increasing the proportion of the offering held for
investment may reduce the supply of PEPS available for short-term trading. Any
of these activities may stabilize or maintain the market price of the PEPS or
the SanDisk common stock above independent market levels. The underwriter is
not required to engage in these activities, and may end any of these
activities at any time.
SanDisk and Seagate Technology have agreed to indemnify the underwriter
against certain liabilities, including liabilities under the Securities Act.
The underwriter has agreed to pay any of our unanticipated expenses and
Seagate Technology has agreed to reimburse us for such expenses.
The underwriter has in the past performed various banking services for
SanDisk or Seagate Technology, for which the underwriter received customary
compensation.
36
<PAGE>
LEGAL MATTERS
Davis Polk & Wardwell, New York, New York will pass upon certain legal
matters for us and for the underwriter. Richards, Layton & Finger, P.A.,
Wilmington, Delaware will pass upon certain matters of Delaware law. Wilson
Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto, California
will pass upon certain legal matters for Seagate Technology.
EXPERTS
The statement of assets, liabilities and capital of SanDisk PEPS Trust at
September 3, 1999, appearing in this Prospectus and Registration Statement has
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and is included in reliance upon
such report given on the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement on Form N-2 to register the PEPS with the
SEC. This prospectus is a part of that registration statement. As permitted by
SEC rules, this prospectus does not contain all the information you can find
in the registration statement or the exhibits to the registration statement.
You may read and copy any reports, statements or other information we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov."
37
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders
SanDisk PEPS Trust
We have audited the accompanying statement of assets, liabilities and
capital of SanDisk PEPS Trust as of September 3, 1999. This financial
statement is the responsibility of the Trust's management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets, liabilities
and capital is free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used and
significant estimates made by the Trust's management, as well as evaluating
the overall financial statement presentation. We believe that our audit of the
financial statement provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the financial position of SanDisk PEPS Trust, at
September 3, 1999 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
San Jose, California
September 3, 1999
F-1
<PAGE>
SANDISK PEPS TRUST
STATEMENT OF ASSETS, LIABILITIES AND CAPITAL
September 3, 1999
<TABLE>
<S> <C>
Assets
Cash................................................................ $ 1
---
Total Assets...................................................... $ 1
===
Liabilities...........................................................
Total Liabilities................................................. $ 0
===
Net Assets............................................................ $ 1
===
Capital............................................................... $1
===
</TABLE>
- --------
(1) The Trust was created as a Delaware business trust on February 24, 1999
and has had no operations other than matters relating to its organization
and registration as a non-diversified, closed-end management investment
company under the Investment Company Act of 1940, as amended. Offering
expenses and costs incurred in connection with the organization of the
Trust and ongoing administrative expenses will be paid (directly or
indirectly) by the contracting stockholder (Seagate Technology).
(2) The Trust proposes to sell Premium Exchangeable Participating Shares
(PEPS) to the public pursuant to a Registration Statement on Form N-2
under the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, as initially filed on March 24, 1999. The Trust
intends to use the proceeds to purchase a portfolio comprised of zero
coupon U.S. Treasury securities and to pay the purchase price of forward
contract relating to shares of common stock of SanDisk Corporation
currently owned by Seagate Technology Inc. SanDisk designs, manufactures
and markets flash memory storage solutions. The proceeds of the Public
Offering will be recorded in capital upon receipt by the Trust. All
offering costs of the Trust will be paid by Seagate Technology Inc.
Organizational costs of the Trust will be paid by Morgan Stanley & Co.
Incorporated or an affiliate thereof (and reimbursed by Seagate
Technology).
F-2
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
1. Financial Statements
Part A--Independent Auditors' Report
Statement of Assets, Liabilities and Capital as of September 3, 1999
Part B--None
2. Exhibits
(a)(1) Trust Agreement**
(1a) Amended Trust Agreement
(2) Certificate of Trust**
(2a) Certificate of Amendment to the Certificate of Trust
(3) Restated Certificate of Trust *
(4) Amended and Restated Trust Agreement *
(b) Not applicable
(c) Not applicable
(d) (1) Form of specimen certificate for PEPS*
(2) Portions of the Amended and Restated Trust Agreement of the
Registrant defining the rights of holders of PEPS*
(e) Not applicable
(f) Not applicable
(g) Not applicable
(h) Form of Underwriting Agreement*
(i) Not applicable
(j) Form of Custodian Agreement *
(k) (1) Form of Paying Agent Agreement*
(2) Form of Forward Purchase Contract*
(3) Form of Administration Agreement *
(4) Form of Security and Pledge Agreement*
(5) Form of Fund Expense Agreement*
(6) Form of Fund Indemnity Agreement*
(l) Opinion and Consent of Richards, Layton & Finger, P.A., special
Delaware counsel to the Trust*
(m) Not applicable
(n) (1) Consent of Ernst & Young LLP, independent auditors for the Trust*
(2) Tax opinion and consent of Davis Polk & Wardwell, counsel to the Trust*
(o) Not applicable
(p) Not applicable
(q) Not applicable
(r)Financial Data Schedule*
- --------
* To be filed by amendment.
** Previously filed.
II-1
<PAGE>
Item 25. Marketing Arrangements
See Exhibit (h) to this Registration Statement.
Item 26. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:
<TABLE>
<S> <C>
SEC Registration fees............................................. $ 79,925
Listing fee....................................................... 5,000
Printing (other than certificates)................................ 20,000
Fees and expenses of qualifications under state securities laws
(including fees of counsel)...................................... 5,000
Accounting fees and expenses...................................... 20,000
Legal fees and expenses........................................... 15,000
NASD fees......................................................... 29,250
Miscellaneous..................................................... 825
--------
Total........................................................... $175,000
========
</TABLE>
- --------
* To be furnished by amendment.
Item 27. Person Controlled by or under Common Control with Registrant
The Trust will be internally managed and will not have an investment
adviser. The information in the prospectus under the caption "Management
Arrangements" is incorporated herein by reference.
Item 28. Number of Holders of Securities
There will be one record holder of the PEPS as of the effective date of
this Registration Statement.
Item 29. Indemnification
The underwriting agreement, the administration agreement, the custodian
agreement and the paying agent agreement provide for indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be permitted to trustees, officers
and controlling persons of the registrant, pursuant to the foregoing
provisions or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission (the "Commission") such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a trustee, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such trustee, officer, or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be governed by the
final adjudication of such issue.
Item 30. Business and Other Connections of Investment Adviser
The registrant is internally managed and does not have an investment
adviser.
II-2
<PAGE>
Item 31. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
promulgated thereunder are maintained at the offices of the registrant
(Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19716)
and its paying agent The Bank of New York, 101 Barclay Street, New York, New
York 10286.
Item 32. Management Services
Not applicable.
Item 33. Undertakings
(a) The registrant hereby undertakes to suspend the offering of the PEPS
covered hereby until it amends its prospectuses contained herein if (1)
subsequent to the effective date of this Registration Statement, its net asset
value per share declines more than 10 percent from its net asset value per
share as of the effective date of the Registration Statement or (2) the net
asset value increases to an amount greater than its net proceeds as stated in
the prospectus.
(b) The registrant hereby undertakes that (i) for purpose of determining
any liability under the 1933 Act, the information omitted from the form of
prospectuses filed as part of this Registration Statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant under
rule 497(h) under the 1933 Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective, and (ii) for the purpose
of determining any liability under the 1933 Act, each post-effective amendment
that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the registrant has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Newark, State of Delaware, on the
8th day of October, 1999.
Sandisk Peps Trust
/s/ Donald J. Puglisi
By: _________________________________
Name: Donald J. Puglisi
Title:Trustee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Donald J. Puglisi Principal Executive Officer, October 8, 1999
By: _____________________________ Principal Financial Officer,
Principal Accounting
Officer,
and Trustee
</TABLE>
II-4
